Legislature(2005 - 2006)CAPITOL 120

04/20/2006 01:00 PM JUDICIARY


Download Mp3. <- Right click and save file as

Audio Topic
01:17:03 PM Start
01:17:09 PM HB502
02:28:40 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Continued from 04/19/06 --
+= HB 502 COURT REVIEW OF STRANDED GAS DECISION TELECONFERENCED
Heard & Held
HB 502 - COURT REVIEW OF STRANDED GAS DECISION                                                                                
                                                                                                                                
[Contains brief mention of HB 71.]                                                                                              
                                                                                                                                
1:17:09 PM                                                                                                                    
                                                                                                                                
CHAIR McGUIRE announced that the  only 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."                                                                    
                                                                                                                                
CHAIR McGUIRE,  in response to  comments, relayed that  she would                                                               
be  holding HB  502  over but  would  not be  assigning  it to  a                                                               
subcommittee.                                                                                                                   
                                                                                                                                
REPRESENTATIVE COGHILL  noted that  members' packets  now contain                                                               
both the original version of  the Alaska Stranded Gas Development                                                               
Act - House  Bill 393 - and  a later version - CS  for House Bill                                                               
393(O&G).                                                                                                                       
                                                                                                                                
1:19:44 PM                                                                                                                    
                                                                                                                                
PAUL FUHS, Volunteer Lobbyist for  Backbone II, indicated that he                                                               
has some  suggestions for  the committee,  and then  offered some                                                               
historical information.   He relayed  his understanding  that one                                                               
of the points  stipulated in the Alaska  Stranded Gas Development                                                               
Act  is  that  the   legislature  shouldn't  [simultaneously]  be                                                               
negotiating  about  oil  [taxes],  because  the  state  will  get                                                               
leveraged against  its oil taxes for  a gas pipeline.   He added,                                                               
"The economic  limit factor  (ELF) wasn't  working, so  ... we're                                                               
not against looking at the  production profits tax (PPT); what we                                                               
are  against is  the stated  linkages to  a gas  [pipeline] every                                                               
time the  testimony is taken"  [because] that was one  thing that                                                               
wasn't supposed to happen.                                                                                                      
                                                                                                                                
MR. FUHS offered  his understanding that the  Alaska Stranded Gas                                                               
Development  Act also  stipulates that  it must  be shown,  via a                                                               
best  interest finding,  that the  gas is  stranded, which  means                                                               
that  the gas  would not  otherwise be  developed except  for the                                                               
provisions in  "this contract."   Furthermore, the  findings must                                                               
also contain  an economic analysis  which shows that  the project                                                               
is not economic without some changes  [to the tax laws].  If that                                                               
analysis isn't  done correctly  or is  performed "on  a political                                                               
basis," the  Alaska Stranded Gas Development  Act stipulates that                                                               
one can  go to court  and claim that the  contract is based  on a                                                               
faulty foundation.  That's what  the judicial review is about, he                                                               
opined,  that particular  element  of the  best interest  finding                                                               
that supposedly illustrates whether the gas is in fact stranded.                                                                
                                                                                                                                
MR. FUHS  suggested that these  guidelines were meant  to address                                                               
concerns  that   there  could  be  situations   arising  from  "a                                                               
complete,  political  free-for-all";  for  example,  a  situation                                                               
wherein  people from  the industry  begin  using their  extensive                                                               
economic resources - garnered from  developing Alaska's oil - for                                                               
the  purpose  of  taking  out  multimillion-dollar  ad  campaigns                                                               
designed  to  show  legislators  in  an  unflattering  light,  or                                                               
setting up  and paying for  front groups like  "Alaska's Future,"                                                               
or   threatening  the   Boy  Scouts   with  "taking   away  their                                                               
contributions," or "filling the  legislature" with more lobbyists                                                               
than  there  are legislators.    The  potential  to have  such  a                                                               
situation  is of  concern  to Backbone  II, so  if  some "of  the                                                               
rules" are  going to be changed,  at least keep "the  referee" in                                                               
the game  - the referee being  the judicial branch -  so that the                                                               
public has  some way to ensure  that the findings are  based on a                                                               
[firm] foundation.                                                                                                              
                                                                                                                                
MR.  FUHS said  that  although  members of  Backbone  II are  not                                                               
lawsuit  happy, if  this  type  of legislation  winds  up with  a                                                               
provision that  takes away  the right of  the people  to petition                                                               
their  government  regarding  this  contract,  it  probably  will                                                               
engender a  lawsuit, notwithstanding  the likelihood that  such a                                                               
lawsuit could  result in  another delay  of a  gas pipeline.   He                                                               
then remarked:                                                                                                                  
                                                                                                                                
     If  you're going  to change  all the  rules and  you're                                                                    
     going to take  the referee out, you have to  ask:  "Why                                                                    
     would  [we]   even  have   the  [Alaska   Stranded  Gas                                                                    
     Development Act]?", "What does  it even mean anymore?",                                                                    
     [and] "Why  would you do that?".   If you do  that, you                                                                    
     should just  pass a gas  law of  general applicability,                                                                    
     where you  can make amendments  to it - where  it's not                                                                    
     an up or  down vote, [and where] you can  put in proper                                                                    
     credits and incentives like you're  doing with the PPT.                                                                    
     And ... then also look at  this [HB 71] ... which would                                                                    
     give  an administration  the tools  that  it needed  to                                                                    
     actually go after the leases  if there was a refusal to                                                                    
     develop them,  or for [the administration]  ... to sell                                                                    
     [the leases] ...  to somebody else.  And  I think those                                                                    
     are the items  which would put the state  in a stronger                                                                    
     negotiation position,  and also apply some  truth serum                                                                    
     to this whole process. ...                                                                                                 
                                                                                                                                
1:27:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  COGHILL  indicated  that he  is  considering  the                                                               
questions of  whether the  "referee" is in  the right  place, and                                                               
whether the discovery timeframe is appropriate and sufficient.                                                                  
                                                                                                                                
MR. FUHS noted  that the Senate is considering  [those issues] as                                                               
well,  to  the  point  of   considering  an  amendment  to  place                                                               
[judicial  review] at  the  end  of the  process;  this would  be                                                               
appropriate  as long  as one  is still  allowed to  challenge the                                                               
best interest finding, which goes  back to the rules of discovery                                                               
because  the "line-level"  people in  the administration  will be                                                               
asked  things  like:    how   did  they  do  the  analysis,  what                                                               
instructions were  they following, what  was the scope,  what was                                                               
the analysis  they came up  with, and  were they asked  to change                                                               
it.                                                                                                                             
                                                                                                                                
REPRESENTATIVE COGHILL  questioned whether that  process properly                                                               
belongs  where  it  currently  is,  and  whether  the  amount  of                                                               
discovery under a judicial review will be more in depth.                                                                        
                                                                                                                                
MR. FUHS said that by passing HB  502, one could never get to the                                                               
discovery  process because  the Alaska  Stranded Gas  Development                                                               
Act  specifically says  that  the  only things  that  can be  the                                                               
subject  of  the  court  order is  whether  the  application  was                                                               
complete and  correct or  whether the  best interest  finding was                                                               
legitimately met.   He posited that this  stipulation is intended                                                               
to  keep somebody  from  filing  a lawsuit  on  the grounds,  for                                                               
example, that  the gas will be  used to develop the  tar sands in                                                               
Canada and  thereby pollute the  air.   In other words,  the only                                                               
lawsuits will be those challenging the economics of the finding.                                                                
                                                                                                                                
1:30:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG, in response  to a question, offered his                                                               
belief  that  the legislature  has  the  power to  subpoena  both                                                               
records and people.   He suggested that in addition  to using its                                                               
subpoena  power, [the  legislature]  should  also have  witnesses                                                               
testify under oath occasionally.                                                                                                
                                                                                                                                
REPRESENTATIVE  COGHILL offered  his  belief  that the  discovery                                                               
process is not really that public,  though the public may be able                                                               
to  get  information.   However,  the  legislature,  through  its                                                               
process, could ensure  that information becomes very  public.  He                                                               
indicated  that the  legislature  could  investigate whether  the                                                               
project  is  economically  possible or  even  economically  right                                                               
under stranded gas conditions.   He suggested going cautiously on                                                               
this issue,  and that the legislature  might be the best  body to                                                               
ensure that  the public gets the  information it needs.   He also                                                               
pondered  the  question of  whether  the  administration and  the                                                               
legislature  might end  up being  subject to  the court's  fiscal                                                               
finding.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GRUENBERG said:                                                                                                  
                                                                                                                                
     That's called scope of review,  and the question of the                                                                    
     scope of review involves what  deference you make, as a                                                                    
     court, to either  the agency finding, which  is what it                                                                    
     normally  is, or  in this  case a  legislative finding.                                                                    
     And you  can say such  things as  ... that it  shall be                                                                    
     affirmed unless  it's clearly  erroneous -  which means                                                                    
     that  the  review  in  court is  left  with  a,  quote,                                                                    
     "definite and  firm conviction that  a mistake  of fact                                                                    
     has  been made"  - [or]  you can  limit it  even beyond                                                                    
     that.  But what we can  deal with in this is broadening                                                                    
     it or  narrowing it  down as  we choose.   But  I think                                                                    
     that you're right,  ... that one of the  issues that we                                                                    
     need to address is what the scope of review is.                                                                            
                                                                                                                                
MR.  FUHS said  it seems  that  it would  be better  to have  the                                                               
finding  declared sound  before the  legislature takes  action on                                                               
it.  One  option might be to simply limit  the timeframe in which                                                               
someone  can  bring  a  challenge; another  option  might  be  to                                                               
provide some way of expediting the proceedings.                                                                                 
                                                                                                                                
1:35:32 PM                                                                                                                    
                                                                                                                                
MR.  FUHS,  in   response  to  a  question,   surmised  that  the                                                               
legislature has the  same power as the court  when using subpoena                                                               
power,  and suggested  that the  question  the legislature  would                                                               
want  to have  answered to  its satisfaction  is whether  the gas                                                               
would not otherwise  be economical, rather than  there just being                                                               
a  finding that  the oil  industry won't  undertake this  project                                                               
unless it gets everything it wants.                                                                                             
                                                                                                                                
CHAIR McGUIRE  questioned whether judges will  have the expertise                                                               
necessary  to  determine  whether  the  gas  is  truly  stranded.                                                               
Therefore, perhaps the legislature might  be the better venue for                                                               
review, because of the varied backgrounds of its members.                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG said  that  is part  of  this issue  of                                                               
scope of  review, as  is the deference  that the  reviewing court                                                               
would make to the lower finding,  and it would depend on the kind                                                               
of finding  that's reviewed.   For example,  if it's  a technical                                                               
finding, a  court of  law would  give a lot  of deference  to the                                                               
agency or  the legislature because  it would lack  the expertise,                                                               
and an  economic finding would  normally be  subject to a  lot of                                                               
deference.  Also,  it is only one judge that's  doing the initial                                                               
reviewing if  the challenge  goes to  the Alaska  Superior Court,                                                               
although the legislature could expedite  such cases by creating a                                                               
statute  that says  such challenges  must go  immediately to  the                                                               
Alaska Supreme Court.   Two of the main issues,  he surmised, are                                                               
scope of review and speed of review.                                                                                            
                                                                                                                                
CHAIR  McGUIRE  noted  that  the question  of  which  court  such                                                               
challenges  should   go  to  first   has  been  the   subject  of                                                               
discussions,  and suggested  that perhaps  they could  merge that                                                               
issue into  this bill.   It's important,  she remarked,  that the                                                               
committee have a  view of how the whole process  is going to look                                                               
- what's the  timeline in which a challenge can  be made, to what                                                               
court  will  a  challenge  be  made,  to  what  extent  does  the                                                               
legislature's  authority reach,  and  where  does that  authority                                                               
come in  - because  it will  be harder for  the public  to digest                                                               
what's being done if it's done piecemeal.                                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG mentioned  that for  many years  he had                                                               
served   on  the   "Supreme   Court   Appellate  Rules   Advisory                                                               
Committee," and that  there is a real  question regarding whether                                                               
it's  really a  good idea  to  have the  [Alaska] Superior  Court                                                               
sitting as a  court of appeal; this is because  "they" don't give                                                               
any  deference  to  the  [Alaska]   Superior  Court,  either  its                                                               
interpretation of law or its  interpretation of factual finding -                                                               
the  only time  it  really makes  a difference  would  be if  the                                                               
[Alaska] Superior Court  were to remand.   Therefore, he relayed,                                                               
he would  suggest that they  have such challenges go  directly to                                                               
the [Alaska] Supreme Court.                                                                                                     
                                                                                                                                
CHAIR McGUIRE and REPRESENTATIVE GARA concurred.                                                                                
                                                                                                                                
1:41:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA noted that former  Governor Hickel and former                                                               
Attorney General Cole have done a  lot of work on this issue, and                                                               
asked  whether  Mr.  Cole  would   be  available  to  assist  the                                                               
committee with creating language for HB 502.                                                                                    
                                                                                                                                
MR. FUHS indicated that Mr. Cole  might be available though he is                                                               
not directly affiliated with Backbone II.                                                                                       
                                                                                                                                
REPRESENTATIVE GARA offered his  understanding that currently the                                                               
commissioner comes  up with  a best  interest finding,  a finding                                                               
that a  particular project will  be in  the best interest  of the                                                               
state.  However, what's relevant to  him, he relayed, is not that                                                               
the court gets  to make that determination, but  rather that that                                                               
determination - whether a project is  in the best interest of the                                                               
state - governs what documents  are made available to the public.                                                               
And  so once  the  issue becomes  one  of, is  this  in the  best                                                               
interest  of the  state, in  the  court system  that [means]  all                                                               
documents relevant  to whether a  project is in the  state's best                                                               
interest  become available  to the  parties  or the  public.   He                                                               
asked,  therefore,  whether,  if  he wants  to  ensure  that  all                                                               
documents  relevant  to that  issue  are  made available  to  the                                                               
public, getting rid  of the best interest finding  would also get                                                               
rid of the public's right to access those relevant documents.                                                                   
                                                                                                                                
MR. FUHS offered  his understanding that HB 502  wouldn't do away                                                               
with the best  interest finding, but would raise  the question of                                                               
whether  the public  would really  have access  to what  actually                                                               
went into making the best  interest finding - for example, access                                                               
to the models and inputs.                                                                                                       
                                                                                                                                
REPRESENTATIVE  GARA offered  his  understanding that  it is  the                                                               
public's right  to challenge the  best interest finding  in court                                                               
that gets them  access to the documents, but the  bill takes away                                                               
that  right, thus  also taking  away the  public's access  to the                                                               
documents.                                                                                                                      
                                                                                                                                
1:44:45 PM                                                                                                                    
                                                                                                                                
MR. FUHS characterized that summation  as correct, but noted that                                                               
the  legislature  could  still   compel  those  documents  to  be                                                               
brought,  and  he encouraged  the  legislature  to do  just  that                                                               
regardless of what happens to HB 502.                                                                                           
                                                                                                                                
REPRESENTATIVE ANDERSON asked whether a challenge is eminent.                                                                   
                                                                                                                                
MR. FUHS  pointed out that  Backbone II is concerned  that "these                                                               
lawsuits" will be filed and further delay the project.                                                                          
                                                                                                                                
REPRESENTATIVE ANDERSON suggested that  the public could be given                                                               
too much latitude regarding discovery  and the right to challenge                                                               
the project.                                                                                                                    
                                                                                                                                
MR. FUHS offered  his belief, however, that everyone  wants a gas                                                               
pipeline, and so  if it's a real  deal, no one will  try to block                                                               
it.   The  biggest  factor  that people  are  concerned about  is                                                               
whether the  contract will  really compel  the industry  to build                                                               
the project, or  whether it will merely be a  way of delaying the                                                               
project further.                                                                                                                
                                                                                                                                
REPRESENTATIVE GARA  clarified that his concern  pertains to what                                                               
documents  will be  made available  to the  public.   The current                                                               
process makes  the documents available  to the public, and  so if                                                               
that  process is  not  replaced with  some  meaningful method  of                                                               
ensuring public access  to the documents, the public  won't get a                                                               
change to provide meaningful input.  He added:                                                                                  
                                                                                                                                
     I'm  not  going to  trust  that  the administration  is                                                                    
     going to  give me the  documents I want to  see because                                                                    
     they haven't even  let me see the  contract; if they're                                                                    
     not  forthcoming with  the contract  ever, after  three                                                                    
     months  of people  saying, "Let  us see  the contract,"                                                                    
     how  are we  going to  trust that  they're going  to be                                                                    
     forthcoming  with the  documents  that we  want to  see                                                                    
     that backs up the findings.                                                                                                
                                                                                                                                
REPRESENTATIVE  WILSON raised  the  issue of  protecting the  oil                                                               
companies from discovery with regard to trade secrets.                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG responded:                                                                                             
                                                                                                                                
     There are two different questions.   Number one is what                                                                    
     is  produced to  this  committee, and  number two  [is]                                                                    
     what  is  made  available  to  the  public.    And  the                                                                    
     subpoena,  for  example,  could  require  that  certain                                                                    
     classes  of documents  be produced  to this  committee,                                                                    
     and then  presumably the entity that  was producing the                                                                    
     documents   would   either,   in  advance,   submit   a                                                                    
     memorandum requesting  a protective  order, or,  at the                                                                    
     time, do so and say, "We  would like an order from this                                                                    
     committee" under  such and such a  statute or something                                                                    
     "that  these  documents  are  only  reviewable  by  the                                                                    
     committee in  a confidential  setting," and you  sign a                                                                    
     confidential  agreement,  and  potentially  [documents]                                                                    
     ... could even  be given back at the end  of that time.                                                                    
     But that is easily solvable.                                                                                               
                                                                                                                                
MR. FUHS added that what one would  expect is to not need to have                                                               
that proprietary information; rather,  what the legislature would                                                               
be looking  at is a  finding regarding profitability in  order to                                                               
come to  the conclusion that the  gas is in fact  stranded and is                                                               
therefore not economic  unless there are changes in  the tax laws                                                               
- that's what would justify the tax changes.                                                                                    
                                                                                                                                
1:51:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE COGHILL noted that AS 43.82.400(a) says:                                                                         
                                                                                                                                
          (a) If the commissioner develops a proposed                                                                           
     contract   under   AS   43.82.200  -   43.82.270,   the                                                                    
     commissioner shall                                                                                                         
          (1) make preliminary findings and a determination                                                                     
     that the  proposed contract terms are  in the long-term                                                                    
     fiscal interests of the state  and further the purposes                                                                    
     of this chapter; and                                                                                                       
          (2) prepare a proposed contract that includes                                                                         
     those  terms  and  shall submit  the  contract  to  the                                                                    
     governor.                                                                                                                  
                                                                                                                                
REPRESENTATIVE    COGHILL    surmised,   therefore,    that    AS                                                               
43.82.400(a)(2) could  be amended if  they wished to  ensure that                                                               
the contract is also delivered to the legislature.                                                                              
                                                                                                                                
REPRESENTATIVE   GRUENBERG  concurred,   pointing  out   that  AS                                                               
43.82.410(2) already  states that the commissioner  shall provide                                                               
copies  of  the  contract  and supporting  documentation  to  the                                                               
legislature.                                                                                                                    
                                                                                                                                
MR. FUHS  remarked these are  the rules that the  legislature set                                                               
out for itself  - these are not rules imposed  on the legislature                                                               
by either the court system or the executive branch.                                                                             
                                                                                                                                
1:54:54 PM                                                                                                                    
                                                                                                                                
LORI BACKES  said she has  great concern  with HB 502  because it                                                               
would  remove  a very  important  piece  of a  carefully  crafted                                                               
process that  is the  Alaska Stranded Gas  Development Act.   She                                                               
went on to say:                                                                                                                 
                                                                                                                                
     I  understand the  legislature's  interest in  removing                                                                    
     impediments  to a  gas  [pipeline]  project.   However,                                                                    
     with  this action,  I don't  believe you're  removing a                                                                    
     potential  unnecessary  delay  but in  effect  removing                                                                    
     legitimate judicial review of  whether the contract and                                                                    
     associated  findings  conform  to  the  intent  of  the                                                                    
     [Alaska Stranded Gas Development  Act].  I believe that                                                                    
     to  remove the  opportunity  for  judicial review  from                                                                    
     this step  in the process would  effectively render any                                                                    
     judicial  review   moot,  because,  for   example,  the                                                                    
     [Alaska  Stranded  Gas  Development  Act]  specifically                                                                    
     prohibits  including oil  taxes in  the gas  [pipeline]                                                                    
     contract  -  a  provision  deliberately  and  for  good                                                                    
     reason   included   in   the   act  -   and   yet   the                                                                    
     administration  has  ignored   that  provision  in  its                                                                    
     negotiations and is now insisting  that you take action                                                                    
     to change  it, [and  therefore] if the  legislature, in                                                                    
     the  passage  of one  or  more  pieces of  legislation,                                                                    
     approves the  contract and amends the  [Alaska Stranded                                                                    
     Gas Development  Act] to make  the law conform  to that                                                                    
     contract,  then any  judicial review  of that  would be                                                                    
     based on  the newly amended law  - not on the  law that                                                                    
     was in place during the negotiations.                                                                                      
                                                                                                                                
     The legislature and the public  accepted and obeyed the                                                                    
     terms  of the  [Alaska Stranded  Gas Development  Act],                                                                    
     yet the  governor excluded other proposals  that in his                                                                    
     opinion  did  not  strictly   conform  to  the  [Alaska                                                                    
     Stranded  Gas Development  Act] while  manipulating the                                                                    
     process  without  regard  to  compliance,  and  now  is                                                                    
     expecting    you    to   pass    legislation,    giving                                                                    
     responsibility for approving that  action to you.  It's                                                                    
     been said that there will  be plenty of opportunity for                                                                    
     public comment  prior to the legislature  taking action                                                                    
     on the  contract.  But public  comment, unlike judicial                                                                    
     review, can be ignored.   An aggrieved party that might                                                                    
     take issue  with the best  interest findings  would not                                                                    
     have any  legal recourse and,  in fact, would  not have                                                                    
     the  ability to  justify their  position because  there                                                                    
     would be  no mechanism  in place  to require  access to                                                                    
     the  documents  they would  need  and  the models  that                                                                    
     would be the basis for those findings.                                                                                     
                                                                                                                                
     It  doesn't make  sense for  this legislature  to amend                                                                    
     the  [Alaska Stranded  Gas  Development  Act] prior  to                                                                    
     seeing a contract, in order  to able to determine, with                                                                    
     full  information  and  input,   whether  this  or  any                                                                    
     amendment  is  truly  necessary   and  wise.    If  the                                                                    
     legislature   can  amend   the  [Alaska   Stranded  Gas                                                                    
     Development Act] to effectively  take away the public's                                                                    
     right  to  review  by  the court  in  order  to  remove                                                                    
     unnecessary  delay,  how  can  the  public  be  assured                                                                    
     [that]  the next  step won't  be to  remove the  30-day                                                                    
     public [comment period]  as well.  The  public does not                                                                    
     have a  lot of trust in  the way this process  has been                                                                    
     going so  far.  Therefore  you and the other  branch of                                                                    
     government,   the  judiciary,   are  really   ...  [the                                                                    
     public's] only hope.   I would caution you  not to risk                                                                    
     damage to  the public  trust that  you have  already by                                                                    
     removing  [the  public's]   ...  only  other  recourse.                                                                    
     Thank you.                                                                                                                 
                                                                                                                                
1:58:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA asked whether the governor could enter into                                                                 
a contract of this sort without the legislature's approval.                                                                     
                                                                                                                                
LARRY  OSTROVSKY, Chief  Assistant Attorney  General -  Statewide                                                               
Section  Supervisor, Oil,  Gas &  Mining Section,  Civil Division                                                               
(Anchorage), Department  of Law (DOL), relayed  that the governor                                                               
has said  he will  follow the  process set  out under  the Alaska                                                               
Stranded Gas  Development Act.   He also remarked  that sometimes                                                               
the court  will sever unconstitutional provisions  of legislation                                                               
from constitutional ones, and he  thinks that there is probably a                                                               
good argument  to be  made that when  the legislature  passed the                                                               
provision in  the Alaska Stranded  Gas Development  Act acquiring                                                               
legislative  approval,  that that  was  part  and parcel  of  the                                                               
package and  not some secondary, easily-severable  provision.  In                                                               
conclusion, he  offered his belief  that it is unlikely  that the                                                               
governor would sign a contract without legislative approval.                                                                    
                                                                                                                                
REPRESENTATIVE GARA clarified that his  question is whether it is                                                               
still an open legal question as  to whether the legislature has a                                                               
constitutional right  to say yes  or no to a  contract negotiated                                                               
by the governor.                                                                                                                
                                                                                                                                
MR.  OSTROVSKY said,  "I think  it's a  unique statute  and there                                                               
might be unique issues."                                                                                                        
                                                                                                                                
REPRESENTATIVE GARA  noted that that response  doesn't answer the                                                               
question.                                                                                                                       
                                                                                                                                
MR. OSTROVSKY said he doesn't mean  to be evasive but it isn't an                                                               
issue he came prepared to talk about.                                                                                           
                                                                                                                                
2:05:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA offered  a hypothetical  situation in  which                                                               
the  court  determines  that the  legislature  doesn't  have  the                                                               
constitutional right to approve  the contract and the legislature                                                               
also passes legislation removing  judicial review.  Wouldn't that                                                               
leave no one, outside of  the governor's office, with the ability                                                               
to review whether the governor's  contract satisfies the terms of                                                               
the Alaska Stranded Gas Development Act?                                                                                        
                                                                                                                                
STEVEN   B.   PORTER,   Deputy  Commissioner,   Office   of   the                                                               
Commissioner,  Department of  Revenue (DOR),  characterizing that                                                               
as  a pretty  unique hypothetical  situation, offered  his belief                                                               
that someone  could still  make the claim  that the  contract was                                                               
not consistent with  the Alaska Stranded Gas  Development Act and                                                               
so all those questions could be addressed in that litigation.                                                                   
                                                                                                                                
REPRESENTATIVE  GARA disagreed,  and  pointed out  that the  bill                                                               
stipulates that  there will be  no court  review of that  type of                                                               
issue.                                                                                                                          
                                                                                                                                
MR.  PORTER agreed,  but opined  that someone  could still  bring                                                               
suit on the issue of the contract itself.                                                                                       
                                                                                                                                
REPRESENTATIVE  GARA  asked to  be  shown  the current  statutory                                                               
provision  that  describes what  issues  would  be left  for  the                                                               
public to challenge on.                                                                                                         
                                                                                                                                
MR. OSTROVSKY  offered his understanding  that there is  case law                                                               
that says administrative decisions are always reviewable.                                                                       
                                                                                                                                
REPRESENTATIVE GARA again  asked to be shown where  in the Alaska                                                               
Stranded  Gas Development  Act is  the  list of  the other  items                                                               
about which someone could challenge the contract.                                                                               
                                                                                                                                
MR. OSTROVSKY and MR. PORTER cited AS 43.82.440, which read:                                                                    
                                                                                                                                
     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.                                                                                                   
                                                                                                                                
MR. OSTROVSKY, in response to  questions, offered his belief that                                                               
currently   a   person   could   challenge   the   commissioner's                                                               
determination that  the gas  is stranded,  but not  if HB  502 is                                                               
adopted.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG  noted  that  if  a  challenge  is  not                                                               
brought on  either of  the two theories  listed in  AS 43.82.440,                                                               
then  that   provision  -  and   thus  its  120-day   statute  of                                                               
limitations - won't apply.                                                                                                      
                                                                                                                                
MR. OSTROVSKY offered his understanding  that there is also a 30-                                                               
day  statute  of limitations  on  challenges  of a  final  agency                                                               
determination.                                                                                                                  
                                                                                                                                
REPRESENTATIVE GRUENBERG  characterized that as a  typical appeal                                                               
period, and noted that AS  43.82.440 provides for four times that                                                               
amount of time.                                                                                                                 
                                                                                                                                
2:17:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  reiterated that  he simply wants  the public                                                               
to  be able  to look  at all  of the  relevant documents  that it                                                               
needs to in  order to be able to provide  meaningful input during                                                               
the  public  comment period,  and  pointed  out that  passage  of                                                               
HB 502  will take  away the  public's right  to access  documents                                                               
through the court  process, and therefore he  wants something put                                                               
in its place.   He said he believes that  it is the legislature's                                                               
right to determine  whether the contract is a good  contract or a                                                               
bad contract,  but simply passing  HB 502  leaves no way  for the                                                               
public to  access documents other  than those  the administration                                                               
wants to let the public to see.                                                                                                 
                                                                                                                                
MR.  PORTER offered  his  belief  that passage  of  HB 502  won't                                                               
change the amount of information  the public can access, and that                                                               
a Public Records Act information  request could be used to obtain                                                               
that information  in the same  timeframe as the  judicial process                                                               
under current law.                                                                                                              
                                                                                                                                
REPRESENTATIVE GARA  argued that  such a  request would  take far                                                               
longer and result in less  documentation being accessed.  He said                                                               
he wants there to be a  provision of law that provides the public                                                               
with an  expedited method of  accessing the information,  as well                                                               
as an  expedited method of  appeal should the  administration not                                                               
produce the relevant information.                                                                                               
                                                                                                                                
MR. PORTER raised the issue of confidentiality.                                                                                 
                                                                                                                                
REPRESENTATIVE  GARA  asked  Mr.  Porter  and  Mr.  Ostrovsky  to                                                               
provide  the committee  with suggestions  for statutory  language                                                               
that will satisfy  his concerns - language that  will provide the                                                               
public with  quick and full  access to  the documents and  with a                                                               
meaningful review process.                                                                                                      
                                                                                                                                
MR. PORTER said he has staff  working full time trying to collect                                                               
every available  document used in making  the determination, that                                                               
his  staff  has been  doing  this  for  months,  and that  he  is                                                               
attempting to organize it in such  a way that the public can make                                                               
use of it.                                                                                                                      
                                                                                                                                
REPRESENTATIVE GARA asked the committee  to formally request from                                                               
the administration suggestions for new statutory language.                                                                      
                                                                                                                                
CHAIR McGUIRE agreed to have the committee make that request.                                                                   
                                                                                                                                
REPRESENTATIVE  GARA, in  response to  a question,  said that  if                                                               
current law  provides an  enforceable way for  the public  to get                                                               
access  to all  the relevant  documents in  time for  it to  make                                                               
public comment,  and a  way to resolve  all issues  regarding the                                                               
withholding  of   those  documents,  then  he   wants  substitute                                                               
language that will  also provide those things,  since adoption of                                                               
HB 502 is going to delete the current provisions.                                                                               
                                                                                                                                
CHAIR McGUIRE remarked  that the bill will look  different if and                                                               
when it passes from committee;  therefore, to the extent that the                                                               
administration wants to continue to be  a part of the process, it                                                               
should  consider providing  the  committee  with suggestions  for                                                               
change  that  the administration  can  support,  such as  perhaps                                                               
language that will modify the Public Records Act.                                                                               
                                                                                                                                
2:26:00 PM                                                                                                                    
                                                                                                                                
MR.  OSTROVSKY said  that it  is the  administration's intent  to                                                               
release relevant  documents, though he  also raised the  issue of                                                               
confidentiality.     However,  under  the  Alaska   Stranded  Gas                                                               
Development  Act,   once  a   proposed  contract   is  forwarded,                                                               
"documents  lose  the  protection"  of the  Alaska  Stranded  Gas                                                               
Development Act and all records  become public records subject to                                                               
all the normal  privileges.  He also remarked  that the timelines                                                               
under the  Public Records Act  information requests  are probably                                                               
the tightest  in law,  and thus it  is a very  fast process.   He                                                               
offered his believe  that there are adequate provision  in law to                                                               
ensure the  release of documents that  aren't otherwise protected                                                               
under a privilege, which is a point decided by a judge.                                                                         
                                                                                                                                
CHAIR McGUIRE reiterated  that that the bill  will look different                                                               
if and when  it passes from committee, and so  to the extent that                                                               
the administration  can assist the committee,  the more satisfied                                                               
it might be with the end product.                                                                                               
                                                                                                                                
[HB 502 was held over.]                                                                                                         

Document Name Date/Time Subjects