Legislature(2005 - 2006)CAPITOL 120

04/19/2006 01:00 PM House JUDICIARY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
+ HCR 4 METH WATCH PROGRAM TELECONFERENCED
Moved CSHCR 4(JUD) Out of Committee
+ SB 273 MOTOR VEHICLE SALES TELECONFERENCED
<Bill Hearing Postponed to 04/21/06>
*+ HB 502 COURT REVIEW OF STRANDED GAS DECISION TELECONFERENCED
Heard & Held
+ HB 240 BREWERY & BREWPUB LICENSES TELECONFERENCED
Moved CSHB 240(JUD) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= SB 20 OFFENSES AGAINST UNBORN CHILDREN TELECONFERENCED
Moved HCS CSSB 20(JUD) Out of Committee
HB 502 - COURT REVIEW OF STRANDED GAS DECISION                                                                                
                                                                                                                                
1:17:12 PM                                                                                                                    
                                                                                                                                
CHAIR McGUIRE announced that the  next order of business would be                                                               
HOUSE  BILL NO.  502, "An  Act amending  the Alaska  Stranded Gas                                                               
Development Act to eliminate the  opportunity for judicial review                                                               
of the findings and determination  of the commissioner of revenue                                                               
on which  are based  legislative review  for a  proposed contract                                                               
for  payments  in  lieu  of  taxes and  for  the  other  purposes                                                               
described in that Act; and providing for an effective date."                                                                    
                                                                                                                                
1:17:56 PM                                                                                                                    
                                                                                                                                
STEVEN   B.   PORTER,   Deputy  Commissioner,   Office   of   the                                                               
Commissioner,  Department  of  Revenue (DOR),  relayed  that  the                                                               
administration supports HB 502, and  that the DOR has submitted a                                                               
zero fiscal note  because it feels that the  bill simply provides                                                               
clarification  regarding  the   DOR's  responsibilities  as  they                                                               
relate to the Alaska Stranded Gas Development Act.                                                                              
                                                                                                                                
1:18:36 PM                                                                                                                    
                                                                                                                                
LARRY  OSTROVSKY, Chief  Assistant Attorney  General -  Statewide                                                               
Section  Supervisor, Oil,  Gas &  Mining Section,  Civil Division                                                               
(Anchorage), Department of Law (DOL),  indicated that he would be                                                               
presenting  the  bill  on  behalf   of  the  sponsor,  the  House                                                               
Judiciary Standing Committee.                                                                                                   
                                                                                                                                
REPRESENTATIVE GARA  opined that the  fiscal note should  at best                                                               
be  indeterminate because,  by losing  the right  to appeal,  the                                                               
public may lose the right to find  that a part of the contract is                                                               
costing the state  billions of dollars [in revenue].   To call it                                                               
a  zero  fiscal  note  is quite  inaccurate,  he  added,  because                                                               
[adoption of HB 502] might end up costing the state a lot.                                                                      
                                                                                                                                
MR.  OSTROVSKY   offered  his   understanding  that   during  the                                                               
legislative  process in  1998, the  legislation  that became  the                                                               
Alaska  Stranded Gas  Development  Act  - House  Bill  393 -  was                                                               
amended such  that the  legislature was  provided with  the final                                                               
authority  to  determine  whether  a contract  can  be  executed.                                                               
Originally  House  Bill  393 provided  the  commissioner  of  the                                                               
Department of  Revenue with the  authority to execute  a contract                                                               
if  he/she  determined that  it  was  in  the "long  term  fiscal                                                               
interests of the state," and that  that decision would be a final                                                               
agency  decision, which  are normally  subject to  administrative                                                               
appeal.    Amended  versions  of  House  Bill  393  provided  the                                                               
legislature  with  more  authority  regarding  a  contract;  that                                                               
language says:                                                                                                                  
                                                                                                                                
     The governor  may transmit  a contract  developed under                                                                    
     this  chapter  to  the   legislature  together  with  a                                                                    
     request for  authorization to execute the  contract.  A                                                                    
     contract developed  under this  chapter is  not binding                                                                    
     upon or enforceable against the  state or other parties                                                                    
     to the  contract unless the  governor is  authorized to                                                                    
     execute the contract  by law.  The state  and the other                                                                    
     parties  to  the  contract  may  execute  the  contract                                                                    
     within  60 days  after the  effective date  of the  law                                                                    
     authorizing the contract.                                                                                                  
                                                                                                                                
MR.  OSTROVSKY  said  that in  the  administration's  view,  this                                                               
language  allows  a  premature  challenge  because  the  contract                                                               
cannot  be executed  until  the legislature  authorizes  it.   He                                                               
characterized this  language as unusual  because by and  large in                                                               
all  other  statutes,  once  certain  findings  have  been  made,                                                               
commissioners are granted the authority to take an action.                                                                      
                                                                                                                                
MR.  OSTROVSKY  ventured  that everyone  would  agree  that  it's                                                               
appropriate that there  be judicial review if there  is a finding                                                               
that allows  a commissioner to take  an action.  In  the original                                                               
version of House Bill 393,  it made sense that the commissioner's                                                               
decision would give rise to  the right to appeal, because there'd                                                               
be  no  step  in  between the  commissioner's  decision  and  the                                                               
execution of  a contract.   But in  the amended version  of House                                                               
Bill  393, and  under current  law, the  fiscal interest  finding                                                               
itself doesn't enable either the  commissioner or the governor to                                                               
take an action  on the contract; instead, the  legislature has to                                                               
authorize the  contract, and therefore  people have  recourse via                                                               
the legislature  if they feel  that the contract isn't  any good,                                                               
or  that  there  isn't  sufficient factual  basis,  or  that  the                                                               
commissioner's analysis is faulty.                                                                                              
                                                                                                                                
MR. OSTROVSKY  said that although  [the language of  current law]                                                               
does remove an intermediate judicial  review, it replaces it with                                                               
an intermediate legislative review.                                                                                             
                                                                                                                                
1:24:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA  pointed  out,  though,  that  although  the                                                               
phrase,  "intermediate judicial  review"  implies  that there  is                                                               
judicial review  later on,  HB 502  [appears] to  get rid  of all                                                               
judicial review.                                                                                                                
                                                                                                                                
MR. OSTROVSKY offered  his belief that "there  is judicial review                                                               
under the [Alaska Stranded Gas  Development Act]; within 120 days                                                               
of  the  contract,  one   can  challenge  its  constitutionality.                                                               
Furthermore one  can always challenge the  constitutionality of a                                                               
statute.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  GARA  offered  his understanding,  however,  that                                                               
currently, judicial review is available  to determine whether the                                                               
contract is in  the state's best interest [and whether  or not we                                                               
gave away the  farm," and yet that provision will  be removed and                                                               
there will be no other judicial review if HB 502 passes.                                                                        
                                                                                                                                
MR.  OSTROVSKY posited  that there  will be  a different  kind of                                                               
judicial  review.   [Under  HB 502],  when  the legislature  goes                                                               
through  its  authorization  process, there  will  be  additional                                                               
facts developed, and so the  court won't necessarily look at only                                                               
the commissioner's  recommendations in isolation but  may instead                                                               
also look  at the entire record,  depending on the nature  of the                                                               
challenge.                                                                                                                      
                                                                                                                                
1:27:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA  asked  whether   under  the  bill,  on  the                                                               
question of  whether a contract  is in the state's  best interest                                                               
and gets "us" the best deal  possible, someone will still be able                                                               
to go to court and challenge the best interest finding.                                                                         
                                                                                                                                
MR. OSTROVSKY said, "I believe not."  He added:                                                                                 
                                                                                                                                
     I think the purpose of  the [bill] ..., and [under] the                                                                    
     language of the  [bill], it will be  very difficult for                                                                    
     somebody   to   come   in,   after   a   commissioner's                                                                    
     determination,  and  challenge that  determination  [by                                                                    
     saying],  "Well, they  didn't have  a reasonable  basis                                                                    
     for  it;  you can't  advance  it  to the  legislature,"                                                                    
     because this  [bill] says that decision  is not subject                                                                    
     to review, stay, or injunction by the court.                                                                               
                                                                                                                                
REPRESENTATIVE  GRUENBERG,  after  reading portions  of  existing                                                               
AS 43.82.430,  offered   his  understanding  that   the  language                                                               
currently in  AS 43.82.430(b) won't  be affected by  the language                                                               
in proposed  AS 43.82.430(c) of  HB 502.  Furthermore,  he noted,                                                               
existing AS 43.82.440 states:                                                                                                   
                                                                                                                                
     Sec. 43.82.440.   Judicial  review.   A person  may not                                                                  
     bring an action challenging  the constitutionality of a                                                                    
     law authorizing  a contract enacted under  AS 43.82.435                                                                    
     or the  enforceability of a  contract executed  under a                                                                    
     law authorizing  a contract enacted under  AS 43.82.435                                                                    
     unless the  action is commenced  within 120  days after                                                                    
     the date  that the contract  was executed by  the state                                                                    
     and the other parties to the contract.                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  pointed  out   that  that  statute  of                                                               
limitation and  ability to seek  judicial review of  the contract                                                               
itself  -  after  ratification  by the  legislature  -  won't  be                                                               
affected by HB 502 either.                                                                                                      
                                                                                                                                
MR. OSTROVSKY  acknowledged that perhaps [AS  43.82.430] could be                                                               
interpreted to mean that the  commissioner's determination of the                                                               
long-term  fiscal  interests  of  the state  is  not  subject  to                                                               
judicial review but the final  finding and determination that the                                                               
contract is consistent with the statute is.                                                                                     
                                                                                                                                
REPRESENTATIVE  GRUENBERG  predicted   that  such  language  will                                                               
engender litigation.   He  suggested that  they should  make sure                                                               
that  the language  is written  correctly  as a  whole; in  other                                                               
words,  they  should draft  the  language  so  that there  is  no                                                               
question of the intent - once that intent is decided upon.                                                                      
                                                                                                                                
1:33:50 PM                                                                                                                    
                                                                                                                                
MR. OSTROVSKY  suggested changing  proposed AS  43.82.430(c) such                                                               
that it applies to both (a) and (b) of AS 43.82.430.                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG  suggested adding  to AS  43.82.430(c) a                                                               
reference  to AS  43.82.440 as  well; "it  seems to  me that  you                                                               
might want  to put  everything involving  judicial review  in one                                                               
statute, and  make sure that there  is no way they  can't be read                                                               
congruently."                                                                                                                   
                                                                                                                                
MR. OSTROVSKY said that as a  general rule, courts prefer to take                                                               
up  final decisions.    Otherwise, for  example,  in a  situation                                                               
involving  the Alaska  Stranded Gas  Development Act,  if someone                                                               
challenges  the fiscal  interest  finding, it  might  not yet  be                                                               
known  how   the  legislature  will  ultimately   deal  with  the                                                               
contract; conversely,  if the legislature authorizes  a contract,                                                               
it  will be  after considerable  testimony and  deliberation, and                                                               
thus the facts  and circumstances surrounding a  contract will be                                                               
more  developed  than  before   the  commissioner  makes  his/her                                                               
decision.                                                                                                                       
                                                                                                                                
MR.  OSTROVSKY suggested  that  if someone  were  to challenge  a                                                               
commissioner's decision  on the basis that  the economic analysis                                                               
that  formed the  commissioner's  decision was  faulty, it  could                                                               
well be that  ultimately the legislature would come  to that same                                                               
conclusion.  Under  the change proposed by HB 502,  the court, in                                                               
such a situation,  will look at the whole record;  whereas if the                                                               
court were to  look only at the  commissioner's determination, it                                                               
would  not  have  the  benefit  of being  able  to  look  at  any                                                               
additional work  that the legislature  could chose  to undertake.                                                               
House  Bill  502 merely  takes  away  the  step that  allows  for                                                               
judicial review  in the middle  of the process, he  remarked, and                                                               
puts  in  a  step,  that  is not  normally  there,  allowing  for                                                               
legislative review.   The [administration] would  prefer that any                                                               
judicial review take place after  the process is completed rather                                                               
than in the middle of it.                                                                                                       
                                                                                                                                
REPRESENTATIVE GARA offered his  understanding that under HB 502,                                                               
no one will be able challenge the best interest finding.                                                                        
                                                                                                                                
MR. OSTROVSKY  concurred.   Without the adoption  of HB  502, the                                                               
court could  find itself inserted  into the  relationship between                                                               
the executive  branch and the  legislature, whereas  normally one                                                               
can't challenge either the administration  or the legislature for                                                               
proposing  something.   Under current  law, when  the legislature                                                               
reserved  the power  to  authorize a  contract  under the  Alaska                                                               
Stranded  Gas  Development  Act,  this  normal  relationship  was                                                               
changed; essentially,  the administration is simply  submitting a                                                               
recommendation  to  the  legislature   not  much  different  than                                                               
submitting proposed  legislation, and so without  the adoption of                                                               
HB  502, a  person  would be  allowed  to come  in  and stop  the                                                               
process.                                                                                                                        
                                                                                                                                
CHAIR McGUIRE said  she believes that it is in  the best interest                                                               
of  the  people   of  Alaska  to  have  the   issue  before  [the                                                               
legislature]  to decide.   In  the end,  the legislature  may not                                                               
approve  a  particular  contract;  it  may  decide,  for  various                                                               
reasons,  that  it  wants  to challenge  different  parts  [of  a                                                               
contract].  But  if the process includes the  possibility that an                                                               
injunction can  be filed,  then it can  become difficult  for the                                                               
legislature to  decide when  and how to  deal with  the contract.                                                               
She opined that  there is role for the judicial  branch, but that                                                               
it  should  be  at a  different  point  in  time  - at  the  end.                                                               
Furthermore,  the  legislative  should  also  play  a  role,  she                                                               
remarked, surmising that the legislature,  back in 1998, felt the                                                               
same  way and  so interjected  itself  into the  process via  the                                                               
changes it  made to House  Bill 393.   She offered her  hope that                                                               
legislators will listen  to the electorate and  then take actions                                                               
that reflect its wishes.                                                                                                        
                                                                                                                                
1:42:10 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG mentioned that  perhaps Section 1 of the                                                               
bill is  unnecessary.   With regard  to Section 2  of HB  502, he                                                               
suggested that perhaps  they could change it such  that it simply                                                               
says that  except for a constitutional  challenge, "this" process                                                               
isn't  ripe  for  review  "until  it's over."    In  response  to                                                               
comments and a  question, he remarked on the  concept of judicial                                                               
economy;  because things  can change,  courts don't  normally get                                                               
involved until  the process  is complete  - this  is a  very well                                                               
established legal principle  as well as sound public  policy.  If                                                               
faced with a challenge before  the process is complete, one ought                                                               
to be  able to ask  the court for  a stay  on the basis  that the                                                               
situation is not ripe for review.                                                                                               
                                                                                                                                
MR. OSTROVSKY concurred.                                                                                                        
                                                                                                                                
CHAIR McGUIRE pointed out, though,  that in including itself as a                                                               
real player  in the process,  the legislature neglected  to state                                                               
how  it felt  about  judicial review  of a  final  finding.   She                                                               
posited that changing the current  language as HB 502 proposes to                                                               
do   is  a   way  for   the  legislature   to  say,   "These  are                                                               
recommendations; these are  not a final finding; and  we want the                                                               
legislative process  to take its  normal course, to not  have the                                                               
court intervene."                                                                                                               
                                                                                                                                
1:46:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  suggested simply  changing the  bill to                                                               
say that "the process" should  not be considered a final decision                                                               
and ripe for review until after the legislature has approved it.                                                                
                                                                                                                                
MR.   OSTROVSKY  said   that  captures   the  intention   and  is                                                               
consistent.                                                                                                                     
                                                                                                                                
CHAIR McGUIRE  relayed that they would  hold the bill over  so as                                                               
to provide members with more time  to consider some of the issues                                                               
raised.                                                                                                                         
                                                                                                                                
REPRESENTATIVE GRUENBERG  suggested that interested  parties meet                                                               
with  him before  the  bill  is heard  next  for  the purpose  of                                                               
developing alternative language.                                                                                                
                                                                                                                                
AN  UNIDENTIFIED  SPEAKER  indicated  that  the  administration's                                                               
representatives would make themselves available.                                                                                
                                                                                                                                
REPRESENTATIVE  GARA  said his  question  is  whether, under  the                                                               
bill, one  would be able  to challenge  whether a contract  is in                                                               
best  interests of  the state  even at  the end  of the  process.                                                               
Having judicial review  at the end of the process  would be fine,                                                               
he remarked, but he wants  to ensure that people aren't precluded                                                               
altogether from challenges regarding the best interest findings.                                                                
                                                                                                                                
REPRESENTATIVE  COGHILL questioned  whether  they  really want  a                                                               
challenge  regarding the  best interest  findings to  occur after                                                               
both the administration and the  legislature have acted - perhaps                                                               
such a challenge should be precluded altogether.                                                                                
                                                                                                                                
MR. OSTROVSKY, in response to a question, said:                                                                                 
                                                                                                                                
     The legislature  has powers to determine  what's in the                                                                    
     best interest  of the state, [though]  it can't perform                                                                    
     unconstitutional   acts.     And   a  commissioner   is                                                                    
     sometimes empowered by [the]  legislature ... to make a                                                                    
     best  interest  finding, and  a  court  will review  it                                                                    
     under [the] standards of  review that it's articulated.                                                                    
     It's  different,  however,  [if]  ...  the  legislature                                                                    
     determines  something's in  the  best  interest of  the                                                                    
     state before it  takes an action. ... In  a sense, it's                                                                    
     really   implicit   in   all  legislative   actions   -                                                                    
     everything  the  legislature  does  is  because,  as  a                                                                    
     collective body, it believes  it's in the best interest                                                                    
     of  the state.   And  that's normally  not a  basis for                                                                    
     challenge of legislative action.                                                                                           
                                                                                                                                
     So I think  Representative Gara is correct  that if the                                                                    
     commissioner  makes  a  determination  [and]  then  the                                                                    
     legislature looks at [it] ...  - and does whatever it's                                                                    
     going  to  do with  the  contract  ...  - and  makes  a                                                                    
     determination  to  pass  that  contract,  that  there's                                                                    
     probably not a  viable claim that it's not  in the best                                                                    
     interest of  the state, because the  legislature is the                                                                    
     ultimate determiner of what's  in the best interests of                                                                    
     the  state.     However,  somebody  might   claim,  for                                                                    
     example,  that  notwithstanding that  legislature,  you                                                                    
     can't  have a  tax  contract or  the contract  violates                                                                    
     another constitutional provision.                                                                                          
                                                                                                                                
     So,  in my  opinion, there  wouldn't be  a basis  for a                                                                    
     challenge  [of] either  the  commissioner's finding  or                                                                    
     ...  the best  interest [finding]  because that's  what                                                                    
     the  legislature will  determine, and  the court  would                                                                    
     look at  the whole  record.   And the  courts generally                                                                    
     ...  won't  second-guess  that   because  that  is  the                                                                    
     essential legislative function. ...                                                                                        
                                                                                                                                
CHAIR McGUIRE suggested that in  addition to a "process problem,"                                                               
there  is  also  the  fundamental policy  question  of  what  the                                                               
appropriate role  of the  legislature is and  what did  it intend                                                               
when  it  amended the  Alaska  Stranded  Gas Development  Act  to                                                               
include legislative  authorization.  She offered  her belief that                                                               
the legislature  intended to insert  itself in the process  so as                                                               
to  be in  the  position  of making  the  best interest  finding,                                                               
because,  as   representatives  of  the  people   of  the  state,                                                               
legislators were  better suited  than the  courts for  that task.                                                               
She characterized  HB 502 as  providing clean up language  in the                                                               
sense  that no  one  understood  at the  time  that the  judicial                                                               
branch  was  being  left  in  along side  of  the  legislature  -                                                               
seemingly  to duplicate  the process  that  the legislature  [and                                                               
administration  were] supposed  to  be doing;  HB  502 is  merely                                                               
further  effectuating the  legislature's intent  in included  the                                                               
provision regarding  legislative authorization.  She  stated that                                                               
she would  not support  a proposal that  authorizes the  court to                                                               
duplicate  all the  work done  by  the legislature,  or one  that                                                               
would  allow a  person to  challenge the  legislature's decision-                                                               
making; such a proposal would  raise constitutional separation of                                                               
powers issues for her.                                                                                                          
                                                                                                                                
1:56:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  opined that the  real issue pertains  to the                                                               
legislature and  public's access  to information.   Currently, if                                                               
someone challenges  the best interest  findings, he/she  would be                                                               
entitled to all  the documents relevant to whether  a contract is                                                               
in the  best interest  of the  state.  He  offered an  example of                                                               
documentation  that might  prove that  the state  didn't need  to                                                               
offer  a particular  concession to  the  oil companies.   If  the                                                               
legislature gets  rid of the  right to challenge the  contract on                                                               
the basis of best interest, then  what right will anyone - public                                                               
member or legislator  - have to the necessary  documentation?  He                                                               
noted  that some  limitations regarding  access to  documentation                                                               
already  exist under  AS 43.82.310(e),  and indicated  that these                                                               
limitations  illustrate  the   legislature's  importance  in  its                                                               
current  roll  under the  Alaska  Stranded  Gas Development  Act.                                                               
Currently  under HB  502, he  opined,  the public  will lose  the                                                               
right to  access important documents,  documents that  will prove                                                               
whether a  contract is fair.   He said  that he wants  this issue                                                               
addressed  such that  a person  will have  the right  to look  at                                                               
documents regardless of whether  the administration approves such                                                               
disclosure.                                                                                                                     
                                                                                                                                
MR.  PORTER  said, "It  is  our  intent  to  provide a  full  and                                                               
complete record to assist both  the legislature and the public to                                                               
do the same evaluation that we  did."  In response to a question,                                                               
he offered his belief that HB 502 already stipulates this.                                                                      
                                                                                                                                
REPRESENTATIVE  GARA,  in  response   to  comments,  offered  his                                                               
understanding   that  what   Mr.   Porter  said   was  that   the                                                               
administration  is going  to provide  documents that  it believes                                                               
are  relevant.   Representative Gara  indicated that  his concern                                                               
pertains  to  what  happens  if   a  person  disagrees  with  the                                                               
administration  with   regard  to   what  documents   really  are                                                               
relevant.     He   again  offered   his  understanding   that  AS                                                               
43.82.310(e)  says that  it is  the administration  that gets  to                                                               
determine what documentation is relevant.                                                                                       
                                                                                                                                
REPRESENTATIVE   COGHILL   expressed   disagreement   with   that                                                               
interpretation.                                                                                                                 
                                                                                                                                
REPRESENTATIVE GARA argued  that it is not correct  to think that                                                               
AS  43.82.310(e)  would allow  a  legislator  to get  information                                                               
directly.   He  mentioned that  he  would support  a change  that                                                               
would  allow  a  legislator  to   request  information  from  the                                                               
administration.                                                                                                                 
                                                                                                                                
REPRESENTATIVE COGHILL  asked for clarification regarding  who is                                                               
considered to be the applicant under AS 43.82.310.                                                                              
                                                                                                                                
MR. OSTROVSKY  offered his belief  that the first sentence  of AS                                                               
43.82.310(e) ought  to contain  a comma  between the  words, "by"                                                               
and "request" so  that it is clear that a  legislator may request                                                               
information  directly.   Without  that comma,  the language  does                                                               
suggest  that  a   legislator  would  need  to   go  through  the                                                               
administration in order to request information.                                                                                 
                                                                                                                                
2:06:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG concurred,  but remarked  that if  that                                                               
comma were to be inserted  it would constitute a very substantive                                                               
amendment.                                                                                                                      
                                                                                                                                
REPRESENTATIVE GARA  expressed concern that even  if that problem                                                               
is  fixed  and  it  is   clear  that  a  legislator  can  request                                                               
documents, they  must be provided  in a  timely fashion -  as in,                                                               
"immediately" -  and even then  it will  be hard to  know exactly                                                               
which documents to request.                                                                                                     
                                                                                                                                
CHAIR McGUIRE  surmised that a  legislator could craft  a request                                                               
that  would be  similar to  a  discovery order  wherein it  would                                                               
apply to all  documentation related to a  particular subject, and                                                               
then,  if those  documents  aren't forthcoming,  that  in and  of                                                               
itself will  create serious  questions about  the contract.   She                                                               
reiterated that  HB 502 would  be set  aside in order  to address                                                               
members' concerns, and, in response  to a comment, indicated that                                                               
she would not be assigning the bill to a formal subcommittee.                                                                   
                                                                                                                                
REPRESENTATIVE GRUENBERG offered his  understanding that a letter                                                               
written  by  Jim  Clark  addresses   AS  43.82.310(f),  and  that                                                               
Representative Gara is  suggesting that a lawsuit  might be filed                                                               
as  a  means  of  discovery to  get  documents.    Representative                                                               
Gruenberg then  made remarks regarding  the issue of  privilege -                                                               
specifically, executive privilege and deliberative privilege.                                                                   
                                                                                                                                
CHAIR  McGUIRE  mentioned  that   she  would  be  keeping  public                                                               
testimony open on HB 502.                                                                                                       
                                                                                                                                
REPRESENTATIVE GARA  said that  at some point  he would  like the                                                               
administration to  describe what documents are  available and how                                                               
they  can be  obtained under  current law  as well  as under  the                                                               
bill.                                                                                                                           
                                                                                                                                
MR. PORTER agreed to provide that information.                                                                                  
                                                                                                                                
2:13:29 PM                                                                                                                    
                                                                                                                                
JIM SYKES said he opposes HB 502.  He elaborated:                                                                               
                                                                                                                                
     There  is a  process that  is established  - I've  been                                                                    
     through  it a  number of  times -  where, if  you don't                                                                    
     like a  decision [the  Department of  Natural Resources                                                                    
     (DNR) comes out with,  you can ask for reconsideration,                                                                    
     you can appeal  it, and you can appeal it  to court.  I                                                                    
     think where you're going with  this, in terms of trying                                                                    
     to write the legislature [in]  as the authority on this                                                                    
     because  you've had  all these  deliberations, I  don't                                                                    
     think that's likely  to stand up under  a separation of                                                                    
     powers test.   I  don't know how  many laws,  but there                                                                    
     have  been  perhaps  hundreds of  laws  passed  by  the                                                                    
     legislature that  have been successfully  challenged in                                                                    
     the  court   system,  and   [just]  because   you  have                                                                    
     deliberated  doesn't necessarily  mean  that you  found                                                                    
     all the  wisdom that was  there to be found  before the                                                                    
     law was  passed and signed  into law.   And so  I think                                                                    
     it's  very  important  to recognize  the  role  of  the                                                                    
     judiciary,  and it  probably  invites  a separation  of                                                                    
     powers kind of test, then, in  itself.  So you may wish                                                                    
     to consider that.                                                                                                          
                                                                                                                                
     In terms of the rest of  the bill, even if a court were                                                                    
     to  consider   what  the  legislature  has   done,  the                                                                    
     legislature  has  already  been provided  evidence,  by                                                                    
     it's  own contractors,  that  plainly  states that  the                                                                    
     [Alaska Stranded Gas  Development Act] probably doesn't                                                                    
     apply.    And  so   you've  already  got  [that]  legal                                                                    
     question  preceding  all of  what  is  taking place  up                                                                    
     until now.   And  so that's  certainly a  fair question                                                                    
     for any  court to consider  as part of the  record. ...                                                                    
     As has been  expressed in the past, I  don't think that                                                                    
     there [are]  a lot of  people out there  just intending                                                                    
     to scuttle the contract -  I think the public gives the                                                                    
     legislature a  great deal of deference  if they've done                                                                    
     something,  and gives  them the  benefit of  the doubt.                                                                    
     And so  if you come  up with something that's  a decent                                                                    
     contract,   if  you've   thoroughly  investigated   the                                                                    
     options and the alternatives  and shown the public that                                                                    
     you've  really prepared  what's available  and made  of                                                                    
     that deal,  I don't think  there's going to  be problem                                                                    
     with it.                                                                                                                   
                                                                                                                                
     But  this  has   the  appearance  to  me   of,  is  the                                                                    
     legislature trying to create  a greater role for itself                                                                    
     in  government  than it  deserves,  and  I don't  think                                                                    
     that's  going to  help  the process  of  getting a  gas                                                                    
     contract.   And so  - as everybody  knows, you  have to                                                                    
     choose your battles - I'd let  this one go. ... I'll be                                                                    
     happy to answer any questions if there are any.                                                                            
                                                                                                                                
2:16:17 PM                                                                                                                    
                                                                                                                                
MARK MYERS  said he would  like to second some  of Representative                                                               
Gara's concerns regarding  the ability of the  legislature to get                                                               
information.  A  third dynamic to also consider  is ensuring that                                                               
the public  gets the  information.  Part  of the  finding process                                                               
that has  been so critical,  particularly with regard  to royalty                                                               
oil sales,  is that  the public  comments are  meaningfully taken                                                               
and received,  and that the  finding adequately  addresses public                                                               
concerns.   Therefore, if the  public doesn't have access  to the                                                               
data  or  if the  public's  concerns  are  not addressed  in  the                                                               
finding and there  is no legal recourse available  to the public,                                                               
it  will  have  its  ability to  influence  the  process  greatly                                                               
diminished.                                                                                                                     
                                                                                                                                
MR. MYERS said he understands  the legislature's desire to be the                                                               
final  authority  on the  finding,  but  when one  considers  the                                                               
magnitude of the  finding and the issues,  the legislature simply                                                               
doesn't have the  expertise, necessarily, to look  at the finding                                                               
in  the  time   allotted.    That's  why   public  input  becomes                                                               
critically    important,    as    does    the    administration's                                                               
responsibility  to answer  questions  in an  unbiased manner  and                                                               
prove that the finding is in  the state's interest.  He mentioned                                                               
that a  couple of key issues  and concerns pertain to  whether it                                                               
can be  demonstrated that the gas  is actually stranded.   If the                                                               
administration,  in  its  finding,  chooses  not  to  go  into  a                                                               
quantitative  or  reasonable  analysis  of that  issue,  and  the                                                               
legislature  doesn't  [indisc] it,  the  public  will never  know                                                               
whether that standard was met.                                                                                                  
                                                                                                                                
MR. MYERS  pointed out that  another major issue  revolves around                                                               
the  question of  whether the  contract  was legally  negotiated,                                                               
legally in the  sense of occurring within  the constraints placed                                                               
on the administration by the  Alaska Stranded Gas Development Act                                                               
at that  particular point  in time.   Again, this  is information                                                               
that the [public]  needs to have and needs to  be able to comment                                                               
on,  and  those  comments  need  to  be  meaningfully  addressed.                                                               
Furthermore,  historically,  if  the state  has  made  procedural                                                               
errors in  its process, the  public "has  a bite of  that apple."                                                               
And yet  that [right] will be  taken away via the  adoption of HB
502.                                                                                                                            
                                                                                                                                
MR.  MYERS acknowledged  that  the legislature  could  make a  de                                                               
facto finding that  every contract it approves is in  fact in the                                                               
state's interest, but  in such instances, "the  whole question of                                                               
having a finding comes into question."  He added:                                                                               
                                                                                                                                
     Our  findings,  historically,  have been  the  public's                                                                    
     vehicle,  to comment  on  our  major policy  decisions;                                                                    
     unless [there is] some sort  of ability for the public,                                                                    
     if they're  unsatisfied, to get some  review beyond the                                                                    
     constitutional  issues, I  think  we  undermine a  fair                                                                    
     amount  of  public trust  -  we  also don't  place  the                                                                    
     administration in  the position of having  to write the                                                                    
     very best finding.                                                                                                         
                                                                                                                                
MR.  MYERS  opined  that  some  of  the  issues  that  should  be                                                               
thoroughly addressed and reviewed in  the finding are things like                                                               
whether the gas  is in fact stranded; whether,  compared to other                                                               
available alternatives, [the contract] is  in the interest of the                                                               
state;  and  whether  there  is   a  quantitative  comparison  of                                                               
alternatives.  If those issues  are not addressed in the finding,                                                               
what is  the public's  recourse to obtain  that information?   Or                                                               
should the public  rely totally on the  legislature's belief that                                                               
those areas of concern have been satisfied?                                                                                     
                                                                                                                                
2:20:15 PM                                                                                                                    
                                                                                                                                
CHAIR McGUIRE asked Mr. Myers to  comment on how he envisions the                                                               
situation playing out if HB 502 is not adopted.                                                                                 
                                                                                                                                
MR. MYERS said  that one must first consider what  the purpose of                                                               
the finding  is.  He  offered his belief  that if the  purpose of                                                               
the finding  is to  provide a vehicle  and justification  for the                                                               
contract, and  the public has a  role in that, then  there simply                                                               
must be  a way  for the public  to challenge  the decision-making                                                               
process regarding major issues:   major factual issues, omissions                                                               
and errors,  major procedural issues, and  constitutional issues.                                                               
If there  is no way  for the public to  do that, the  public will                                                               
never  have any  faith  or trust  in the  process.   Should  such                                                               
challenges occur later in the  process?  Possibly.  Public review                                                               
during the  best interest finding  process has not  only improved                                                               
the  administration's findings  but  has always  been a  critical                                                               
element of  public acceptance.   If issues  raised by  the public                                                               
during the process are not  addressed by the administration, then                                                               
the courts play a role.                                                                                                         
                                                                                                                                
MR. MYERS  said that if  the legislature  chooses to step  in and                                                               
play  the  role  [currently  handled by  the  courts],  then  the                                                               
legislature  will  have to  really  micromanage  the finding  and                                                               
research  whether the  issues raised  by the  public really  have                                                               
been adequately addressed by the  administration.  [Under HB 502]                                                               
the judicial  system can't  be used to  ensure that  the public's                                                               
best interest is  served.  Somewhere in the process  there has to                                                               
be the  ability to challenge  the contract - on  judicial issues,                                                               
on procedural issues, and on  constitutional issues - in order to                                                               
build  public confidence.   Again,  he remarked,  the ability  to                                                               
challenge  could occur  later  in the  process  and perhaps  that                                                               
makes  more sense,  but it  should  occur somewhere  or else  the                                                               
public trust won't be gained.                                                                                                   
                                                                                                                                
MR. MYERS said:                                                                                                                 
                                                                                                                                
     And I'll  give you  an example.   [In] the  shallow gas                                                                    
     leasing  program,   we  removed  the   finding  process                                                                    
     altogether, [and] the  legislature made a determination                                                                    
     that the shallow gas leases  were in fact [in] the best                                                                    
     interest of the  state.  That whole program  blew up on                                                                    
     us, and we ended up having  to spend all that time with                                                                    
     the  legislature  but  also  with  [the  Department  of                                                                    
     Natural  Resources'  (DNR's)]   public  process.    The                                                                    
     fundamental reason  it blew  up:   there was  no public                                                                    
     input into  a best interest  finding process.   So that                                                                    
     to me was  a living example, where fixing  it after the                                                                    
     fact  took  years  and   we  still,  probably,  haven't                                                                    
     totally regained public trust.                                                                                             
                                                                                                                                
2:23:37 PM                                                                                                                    
                                                                                                                                
CHAIR McGUIRE  asked Mr.  Myers to  suggest a  way to  change the                                                               
bill so that  it provides the public with the  assurance that the                                                               
best interest finding was really made.                                                                                          
                                                                                                                                
MR.  MYERS  suggested  preserving   the  traditional  checks  and                                                               
balances and allow the public -  at that latter date - to address                                                               
not only  constitutional issues but  also substantive  issues and                                                               
procedural errors.  In other  words, provide a demonstration that                                                               
the  statutory  requirements   have  in  fact  been   met.    The                                                               
legislature sets a policy  by the way it writes a  law and by the                                                               
way  it  might  amend  the   law  before  the  process  is  done.                                                               
Therefore,  the  legislature must  make  sure  that the  contract                                                               
complies  with the  law,  and  the finding  is  the vehicle  that                                                               
pertains  to  substantive  issues  such as  whether  the  gas  is                                                               
actually stranded.  Though if that  is not the goal, then the law                                                               
should be  dramatically changed  such that  it doesn't  require a                                                               
demonstration  that  the  gas  is  stranded.    Also,  all  other                                                               
reasonable  alternatives should  be  looked at,  and a  balancing                                                               
test  performed on  them.   He  predicted that  during any  court                                                               
review, the court  will give the legislature a  lot of discretion                                                               
with regard to its determination.                                                                                               
                                                                                                                                
MR. MYERS, in conclusion, said that  the ability of the public to                                                               
challenge the administration forces  the administration to ensure                                                               
that the finding is very, very good.                                                                                            
                                                                                                                                
REPRESENTATIVE GARA  asked how long the  public has to look  at a                                                               
draft contract after it is released by the administration.                                                                      
                                                                                                                                
MR. OSTROVSKY and MR. PORTER said a minimum of 30 days.                                                                         
                                                                                                                                
REPRESENTATIVE GARA asked  how they could ensure  that the public                                                               
gets access to  the documentation it needs before  running out of                                                               
time to comment.                                                                                                                
                                                                                                                                
MR.  MYERS offered  that  the logical  time for  the  data to  be                                                               
released is at  the same time that the  preliminary best interest                                                               
finding comes  out.   Usually the public  comment period  is long                                                               
enough  to sufficiently  absorb the  data and  provide meaningful                                                               
input; this  should also gives  the administration  adequate time                                                               
to adjust the final contract appropriate to the comments.                                                                       
                                                                                                                                
REPRESENTATIVE  GARA asked  how much  time should  be allowed  in                                                               
this case once the documents are made public.                                                                                   
                                                                                                                                
MR. MYERS suggested a 90-day period at a minimum.                                                                               
                                                                                                                                
REPRESENTATIVE GARA asked Mr. Myers  whether he would be amenable                                                               
to a change that would provide for a 90-day public comment.                                                                     
                                                                                                                                
MR.  MYERS acknowledged  that  delaying  the legislative  process                                                               
could  be problematic  if the  contract engenders  early spurious                                                               
lawsuits.    He reiterated  the  need  for  the finding  and  its                                                               
supporting documentation  to be made  available to the  public at                                                               
the same time.                                                                                                                  
                                                                                                                                
2:31:02 PM                                                                                                                    
                                                                                                                                
MR. MYERS, in response to  a question, stressed the importance of                                                               
building the  public trust via  allowing public input and  of the                                                               
administration's  responsibility   in  addressing   the  public's                                                               
comments.  In the case of  the proposed gas contract, however, it                                                               
is going  to be very  difficult for  the public to  provide input                                                               
without first  seeing the  economic and  other analyses  that the                                                               
administration  and  its  consultants  have  performed.    Public                                                               
confidence  is  built  in  a robust  finding  process  where  the                                                               
public's input  has to be  considered and,  if it's failed  to be                                                               
considered, then there  is redress via the courts.   He mentioned                                                               
that the  aforementioned failed shallow  gas leasing  program had                                                               
to be repealed and replaced with  a program that had a meaningful                                                               
finding process.                                                                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG  characterized  that  as  an  important                                                               
point, offered his recollection of  what occurred when the Trans-                                                               
Alaska  Pipeline   legislation  was   passed  in   Congress,  and                                                               
suggested that  perhaps taking a  similar approach might  prove a                                                               
viable alternative.                                                                                                             
                                                                                                                                
REPRESENTATIVE  WILSON  questioned  whether  the  legislature  is                                                               
really  going  to get  enough  information  in  to order  make  a                                                               
decision.                                                                                                                       
                                                                                                                                
MR.  MYERS   remarked  on  the   Legislative  Budget   and  Audit                                                               
Committee's  arranging for  its members  to  be able  to see  the                                                               
confidential   contract   if   they  signed   a   confidentiality                                                               
agreement.  He  acknowledged that absorbing the  information is a                                                               
daunting  and challenging  task, and  pointed out  that currently                                                               
the  public has  almost no  information.   So what  is needed  is                                                               
either some  mechanism in  place to  release that  information or                                                               
some way  that the public  can engage  in a discovery  process of                                                               
some sort.   He acknowledged  that releasing  the data is  also a                                                               
difficult  process for  the administration  to undertake,  but in                                                               
order  for  a  member  of  the public  to  truly  understand  the                                                               
underlying   analyses,  he/she   must  be   provided  with   some                                                               
information from  all categories.   Under current  law, a  lot of                                                               
that  type of  information wouldn't  have to  be released  if the                                                               
administration chose not  to release it; therefore,  some form of                                                               
discovery process  might have  to occur in  order for  members of                                                               
the public or  legislature to be satisfied that  they have enough                                                               
data.                                                                                                                           
                                                                                                                                
CHAIR McGUIRE, in response to  a question, expressed a preference                                                               
for addressing  this bill separately  from any others  that might                                                               
be somewhat related.                                                                                                            
                                                                                                                                
[HB 502 was set aside.]                                                                                                         
                                                                                                                                

Document Name Date/Time Subjects