Legislature(2011 - 2012)BARNES 124

03/05/2012 03:15 PM LABOR & COMMERCE

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03:18:08 PM Start
03:18:24 PM HB358
03:52:43 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved Out of Committee
<Bill Hearing Canceled>
                HB 358-ANWR ADVERTISING CONTRACT                                                                            
3:18:24 PM                                                                                                                    
CHAIR OLSON announced that the only order of business would be                                                                  
HOUSE BILL NO.  358, "An Act relating to  an advertising campaign                                                               
in support  of opening  the Arctic  National Wildlife  Refuge for                                                               
3:19:30 PM                                                                                                                    
REPRESENTATIVE  LANCE PRUITT,  Alaska  State Legislature,  stated                                                               
that HB 358 is an advertising  campaign in support of the opening                                                               
the  Arctic National  Wildlife  Refuge (ANWR).    The bill  would                                                               
direct the state  to contract with a  qualified trade association                                                               
to advertise  and support opening  the coastal plain of  ANWR for                                                               
oil and  gas exploration  and development.   In 1980,  the Alaska                                                               
National Interest Lands Conservation  Act (ANILCA) prohibited the                                                               
leasing  and  any  other  development  that  would  lead  to  the                                                               
production  of oil  and  gas on  the ANWR.    However, today  the                                                               
domestic demand for oil is  going up while domestic production is                                                               
going down.  Thus the U.S.  must import more from sources outside                                                               
the U.S.  He related that  new technology developed in Alaska has                                                               
reduced  the environmental  impact for  development on  the North                                                               
Slope.  He  remarked that if Prudhoe Bay was  developed today the                                                               
footprint would  be as small  as 1,526  acres.  He  applauded the                                                               
ability  of industry  to develop  the technology  to this  point.                                                               
Additionally,  oil   and  gas  development  has   proven  it  can                                                               
successfully  coexist in  Alaska's Arctic.   The  Central caribou                                                               
herd has  grown from  3,000-5,000 at the  time of  development to                                                               
66,000 now.   He acknowledged  that several caribou  herds exist,                                                               
but they  have all  grown since development  started.   While the                                                               
Alaska  legislature  understands  these impacts,  people  in  the                                                               
Lower  48  don't  necessarily  know   these  facts.    He  shared                                                               
statistics  that  indicate  Lower  48 residents  think  about  15                                                               
percent of Alaskans  want ANWR to be developed  even though about                                                               
78 percent of Alaskans want to  see ANWR developed.  He explained                                                               
that  many Lower  48  residents think  by  lobbying the  Congress                                                               
against ANWR development they are  protecting Alaskans.  Further,                                                               
with  respect to  the  environmental impact  on  caribou herds  -                                                               
about 15  percent of people  believe the caribou  have increased,                                                               
but  the rest  of Lower  48  residents think  caribou herds  have                                                               
decreased.   He emphasized the  importance of  providing accurate                                                               
information  to  residents  in  the Lower  48,  which  will  help                                                               
Alaska's Congressional delegation whose  colleagues should not be                                                               
misinformed by  their constituents.  Alaska's  state revenues are                                                               
dependent on  resource development  so it makes  sense for  us to                                                               
promote  responsible  development  for  the  maximum  benefit  to                                                               
3:23:32 PM                                                                                                                    
DIRK  CRAFT, Staff,  Representative  Lance  Pruitt, Alaska  State                                                               
Legislature,  on  behalf  of the  sponsor,  Representative  Lance                                                               
Pruitt,  stated  that this  bill  is  modeled after  the  state's                                                               
tourism marketing contracts  under AS 44.33.125.   He referred to                                                               
Section  1,  subsection  (a), would  require  the  Department  of                                                               
Commerce, Community  & Economic  Development (DCCED)  to contract                                                               
with  a single  qualified trade  organization for  an advertising                                                               
campaign  advocating resource  development in  the 10-02  area of                                                               
ANWR.    The  bill  requires a  qualified  trade  association  to                                                               
provide matching funds  for the campaign and for  the campaign to                                                               
be approved by the department.   Subsection (b) would require the                                                               
contract  to   include  essential  provisions  required   by  the                                                               
department,   and   subsection   (c)   would   allow   additional                                                               
appropriated funds  to be  added to  contract and  the department                                                               
may require the association to match the additional funds.                                                                      
3:24:37 PM                                                                                                                    
MR.  CRAFT  reported  subsection (d)  identifies  that  materials                                                               
produced  under  a  contract  are   the  joint  property  of  the                                                               
association and  the department  and may only  be used  under the                                                               
contract terms.   The sponsor  initially questioned the  need for                                                               
this section,  but discovered these provisions  are modeled after                                                               
the ones  used in  tourism marketing  contracts to  protect their                                                               
advertising strategy  from detractors  and other  competitors, as                                                               
well  as  protecting the  company's  proprietary  knowledge.   He                                                               
related  a scenario  in which  the company  may have  a marketing                                                               
blueprint that  works well  in South  Carolina or  another state.                                                               
This language  would protect the  company from  competitors using                                                               
their   blueprint.     Subsection   (e)   would  restrict   money                                                               
appropriated for  a contract, which  may not  be used to  lobby a                                                               
municipality or  the state, to  raise funds for that  purpose, or                                                               
be used for  administrative or overhead costs  which support this                                                               
specific type of effort.                                                                                                        
3:25:44 PM                                                                                                                    
MR.  CRAFT  referred  to  subsection  (f),  which  indicates  the                                                               
contract  is   not  subject  to   the  state   procurement  code.                                                               
Additionally,  a qualified  trade  association who  is awarded  a                                                               
contract  may  also award  a  subcontract  on a  competitive  bid                                                               
basis.  He  stated that subsection (g) defines terms  used in the                                                               
3:25:55 PM                                                                                                                    
REPRESENTATIVE  HOLMES  referred  to   page  2,  line  15,  which                                                               
identifies that  any materials produced  are not  public records.                                                               
She questioned  the reason for  this provision.  She  assumed the                                                               
amount  of money  expended  in  the contract  would  be a  public                                                               
MR. CRAFT answered she is correct.                                                                                              
REPRESENTATIVE HOLMES said  she needed to consider  this a little                                                               
MR.  CRAFT  said  this  bill is  modeled  after  state's  tourism                                                               
marketing statute.                                                                                                              
3:26:58 PM                                                                                                                    
REPRESENTATIVE  HOLMES  asked  what  entity would  be  likely  to                                                               
receive the  contract, noting  that at  times vendors  are known,                                                               
and while  a contract is not  limited to a specific  vendor it is                                                               
assumed certain vendors  will apply.  She inquired  as to whether                                                               
one entity  is likely or if  more than one entity  is expected to                                                               
bid on this contract.                                                                                                           
REPRESENTATIVE PRUITT  answered that there is  not one particular                                                               
entity anticipated to apply.  He  pointed out a letter of support                                                               
from the  Alliance in members'  packets.  He also  suggested that                                                               
the  Alaska   Oil  and  Gas  Association   (AOGA),  and  Resource                                                               
Development Council for Alaska, Inc.  (RDC) might also apply.  He                                                               
reiterated  that this  bill  was not  geared  for any  particular                                                               
3:28:08 PM                                                                                                                    
REPRESENTATIVE HOLMES  related her  understanding that  this bill                                                               
simply sets up  a mechanism.  Thus  it has a zero  fiscal note or                                                               
rather an indeterminate fiscal note.   She asked about the amount                                                               
of money that would likely be requested to fund this program.                                                                   
REPRESENTATIVE PRUITT answered that it  would depend on the trade                                                               
organization.   He  surmised  that  if the  Alliance  were to  be                                                               
awarded the  contract, he estimated  it might be  about $500,000,                                                               
but AOGA  may have an opportunity  for a larger amount.   He said                                                               
did not expect  $1 million would cover the whole  nation, but the                                                               
funds  may  help  with  a   targeted  campaign,  which  could  be                                                               
developed by  working with  Alaska's Congressional  delegation to                                                               
identify specific members who may be misinformed about ANWR.                                                                    
3:29:39 PM                                                                                                                    
REPRESENTATIVE HOLMES  asked how  this effort would  overlap with                                                               
the efforts  taken by Arctic  Power, which the  legislature funds                                                               
each year.   She further asked  how this mandate would  mesh with                                                               
Arctic Power's mandate.                                                                                                         
REPRESENTATIVE  PRUITT  pointed out  that  none  of this  funding                                                               
could be  used for lobbying  the Congress; however,  Arctic Power                                                               
is the mechanism  used to lobby members.  This  contract would be                                                               
geared  to   educate  the  public  and   would  communicate  with                                                               
constituents of members that Arctic Power will lobby.                                                                           
3:30:54 PM                                                                                                                    
REPRESENTATIVE SADDLER asked him  to distinguish between lobbying                                                               
and educating the public.                                                                                                       
REPRESENTATIVE PRUITT  offered his belief that  lobbying would be                                                               
actual  communicating   with  an   elected  body,   whereas,  the                                                               
marketing and education efforts would  be directed at the general                                                               
public, either in a specific state  or throughout the nation.  He                                                               
viewed the targeted group as the constituents of the Congress.                                                                  
REPRESENTATIVE SADDLER agreed.   He reiterated that  this bill is                                                               
modeled after  the tourism  marketing statutes.   He  related his                                                               
understanding  that the  goal  is to  communicate  a message  and                                                               
bridge  misinformation on  ANWR and  clarify any  concerns people                                                               
may have.                                                                                                                       
3:33:07 PM                                                                                                                    
REPRESENTATIVE SADDLER questioned the three-year timeline.                                                                      
REPRESENTATIVE  PRUITT responded  that the  timeframe would  give                                                               
the  legislature an  opportunity to  consider the  effectiveness.                                                               
He acknowledged  the value of  sunset legislation since  it gives                                                               
legislature  an  opportunity  review and  determine  whether  the                                                               
contract or program  is necessary and delete the  statutes if the                                                               
program is not being used.                                                                                                      
3:33:48 PM                                                                                                                    
REPRESENTATIVE SADDLER  asked for  clarification on the  scope of                                                               
the  advertising campaign  and if  the advertising  would include                                                               
radio or television advertising.                                                                                                
REPRESENTATIVE  PRUITT answered  that DCCED  would authorize  the                                                               
contract  and their  experts will  decide the  best communication                                                               
methods to use.                                                                                                                 
3:34:23 PM                                                                                                                    
REPRESENTATIVE  MILLER  recalled   some  high  level  advertising                                                               
campaigns  previously aired.   He  wondered  if the  participants                                                               
could be  kept local, and  whether some preference for  an Alaska                                                               
advertising company  or public relations  firm could  be included                                                               
in  the  bid   criteria.    He  has  often   heard  critiques  of                                                               
advertising  using Hollywood  actors or  photographs that  depict                                                               
Alaska, but the  ads were actually filmed in Canada.   He said he                                                               
favored Alaskans telling and showing Alaska's story.                                                                            
MR.  CRAFT  answered  that  the language  is  modeled  after  the                                                               
tourism   marketing  industry,   which  uses   actors,  but   the                                                               
advertising is filmed in Alaska.                                                                                                
CHAIR OLSON referred  to Wanetta Ayers to discuss  local hire and                                                               
bidder preference provisions.                                                                                                   
3:36:29 PM                                                                                                                    
REPRESENTATIVE  MILLER  further  asked whether  the  approval  or                                                               
recommendations for brainstorming would reside in the DCCED.                                                                    
MR. CRAFT answered yes.                                                                                                         
3:36:50 PM                                                                                                                    
REPRESENTATIVE  HOLMES   related  her  understanding   that  this                                                               
contract is  exempt from  procurement code  so she  was uncertain                                                               
whether an Alaska bidder's preference would apply.                                                                              
REPRESENTATIVE PRUITT deferred to the DCCED.                                                                                    
3:37:25 PM                                                                                                                    
REPRESENTATIVE CHENAULT referred to page  2, line, 7, and related                                                               
that the  DCCED may require  the association to  provide matching                                                               
funds  in  any  amount  for  additional  funds.    He  asked  for                                                               
clarification on the source of any additional funds.                                                                            
MR.  CRAFT  answered  that  this   specific  language  gives  the                                                               
department the  ability to require additional  participation from                                                               
the  qualified  trade  association  if the  legislature  were  to                                                               
appropriate additional funds.                                                                                                   
REPRESENTATIVE  CHENAULT  related   his  understanding  that  the                                                               
qualified  trade association  may or  may not  have to  match any                                                               
additional funds appropriated after initial funds were awarded.                                                                 
MR. CRAFT said that is correct.                                                                                                 
3:38:39 PM                                                                                                                    
REPRESENTATIVE CHENAULT emphasized that this  bill is needed.  He                                                               
recently spent  three days talking to  approximately 25 different                                                               
Congressional offices.   He said while this program  would not be                                                               
used to directly lobby the  Congress he discovered that people do                                                               
not have the facts about ANWR,  which was evident from a member's                                                             
tone or the tone of his/her staff.   He pointed out that ANWR has                                                               
not  been an  issue  in the  past  seven or  eight  years in  the                                                               
Congress.   He further  said that  most did  not know  much about                                                               
ANWR, its location  or what it encompasses,  and many erroneously                                                               
believed most  Alaskans did  not support oil  and gas  develop in                                                               
ANWR.   He  cautioned members  that a  group opposing  ANWR is  a                                                               
vocal group.                                                                                                                    
3:39:56 PM                                                                                                                    
CHAIR OLSON  remarked that the  most compelling testimony  he has                                                               
ever  heard was  testimony given  by Congressman  Don Young.   He                                                               
related that Congressman Yong held up  a piece of white paper and                                                               
said, "This  is ANWR  in winter."   He went  on to  inform people                                                               
that ANWR  does not have  mountains or  valleys, but is  flat and                                                               
3:40:20 PM                                                                                                                    
REPRESENTATIVE  CHENAULT pointed  out that  advertising campaigns                                                               
are effective,  depending on the  campaign and the audience.   He                                                               
remarked that the legislature cares about the facts.                                                                            
3:40:40 PM                                                                                                                    
REPRESENTATIVE SADDLER  referred to  page 2,  line 28,  and asked                                                               
whether  the  amount of  money  that  can  be contracted  out  is                                                               
limited.    He further  asked  whether  it  is possible  for  the                                                               
qualified trade association to  pass-through funds to advertising                                                               
companies.  He suggested a  number of advertising companies would                                                               
likely be interested in this opportunity.                                                                                       
REPRESENTATIVE PRUITT deferred to the DCCED to better respond.                                                                  
3:41:19 PM                                                                                                                    
REPRESENTATIVE  SADDLER  asked  whether  the  bill  requires  the                                                               
advertising  efforts  be  coordinated with  those  undertaken  by                                                               
Arctic Power.                                                                                                                   
REPRESENTATIVE PRUITT answered that  HB 358 does not specifically                                                               
address  those  aspects, but  he  anticipated  a qualified  trade                                                               
association would  use Arctic Power's lobbyist  to understand the                                                               
audience that  should be targeted;  however, this  requirement is                                                               
not in the proposed bill.                                                                                                       
3:42:14 PM                                                                                                                    
REPRESENTATIVE SADDLER asked whether  the bill has any benchmarks                                                               
to determine the program's success.                                                                                             
REPRESENTATIVE  PRUITT answered  ultimately once  an ice  road is                                                               
built the efforts would be deemed successful.                                                                                   
3:42:58 PM                                                                                                                    
REPRESENTATIVE SADDLER said  he likes the idea of this  bill.  He                                                               
agreed the truth  and facts should be disseminated  to the public                                                               
and should trump innuendos.                                                                                                     
REPRESENTATIVE  THOMPSON  agreed  with  Representative  Saddler's                                                               
remarks.   He said  that the state  has viewed  substantial anti-                                                               
ANWR  advertising and  it is  time for  people to  get the  truth                                                               
about ANWR.                                                                                                                     
REPRESENTATIVE MILLER said we need  to move the Arctic plain, not                                                               
mountains.   He said he  was glad that Representative  Pruitt has                                                               
brought this bill forward.                                                                                                      
REPRESENTATIVE  CHENAULT said,  "We  do need  to move  mountains,                                                               
back to where they were originally  at in the film and not closer                                                               
to the  10-02.   We need  to move  them back  to where  they were                                                               
originally [located]."                                                                                                          
3:44:24 PM                                                                                                                    
WANETTA AYERS,  Director, Anchorage Office,  Economic Development                                                               
Section,   Department   of   Commerce,   Community   &   Economic                                                               
Development (DCCED) introduced herself.                                                                                         
3:44:51 PM                                                                                                                    
REPRESENTATIVE  HOLMES  questioned   whether  Alaskans  would  be                                                               
entitled  to  any bidder  preferences.    She further  asked  for                                                               
recommendations on language to add to the bill.                                                                                 
3:45:13 PM                                                                                                                    
MS.  AYERS  related that  the  DCCED  has previously  been  quite                                                               
successful  in   placing  work  with  Alaskan   firms  under  the                                                               
qualified trade association (QTA) model.   She offered her belief                                                               
that the  DCCED follows the  procurement code.   She acknowledged                                                               
while she  is not an  expert she has  been through the  process a                                                               
number of times.   She reported that the DCCED  must consider all                                                               
offers.   She recalled  previously when  the department  has used                                                               
the  procurement code  and was  able to  extend an  Alaska bidder                                                               
preference,  particularly   with  respect   to  cost,   that  the                                                               
preference has helped Alaskan firms secure those contracts.                                                                     
3:45:58 PM                                                                                                                    
REPRESENTATIVE  HOLMES pointed  out that  this contract  would be                                                               
exempt  from  the  procurement  code.    She  asked  whether  the                                                               
department has any flexibility to  provide a preference given the                                                               
language in the bill.                                                                                                           
MS. AYERS answered that she  does not have any experience letting                                                               
a contract  outside the procurement  code.  She offered  to check                                                               
with procurement officers and report back to the committee.                                                                     
3:46:35 PM                                                                                                                    
REPRESENTATIVE  SADDLER asked  for  an estimate  of  costs for  a                                                               
successful campaign of this type.                                                                                               
MS.  AYERS  offered  that  the   scope  of  the  public  advocacy                                                               
advertising  in  targeted  Congressional  districts  is  akin  to                                                               
effort  taken  on other  public  relations  campaigns to  deliver                                                               
targeted media  messages about commercial  development.   She did                                                               
not recall  any specific  figures, but  offered that  the tourism                                                               
marketing programs  have ranged from  $11 million to  $21 million                                                               
over the past  12-15 years.  She said that  obviously, the nature                                                               
of this  campaign is somewhat  more focused, so she  imagined the                                                               
cost would be significantly less  than that range.  Additionally,                                                               
she agreed with  Representative Pruitt that some of  this will be                                                               
contingent  on  the capacity  of  the  QTA to  generate  matching                                                               
dollars.  She imagined the fiscal  note would appropriate up to a                                                               
certain amount, which  would be dependent on  the matching funds.                                                               
She recalled that the match was  sometimes difficult to meet.  In                                                               
those instances  the match was  later adjusted for the  QTA model                                                               
in the tourism  industry.  She offered that 50  percent match was                                                               
problematic for the  tourism industry and had to  be reduced over                                                               
time in order to make it more attainable.                                                                                       
3:49:24 PM                                                                                                                    
REPRESENTATIVE   SADDLER  recalled   his   earlier  question   on                                                               
provisions for  the QTA to  subcontract out the advertising.   He                                                               
inquired as  to whether the  contractor could pass  through funds                                                               
and if it would be advisable to do so.                                                                                          
MS. AYERS  answered that typically  there is  some administrative                                                               
set aside or consideration for the  QTA.  She viewed that some of                                                               
these  details could  be  made  part of  bid  solicitation.   She                                                               
surmised  it  is  highly  likely   that  the  QTA  will  be  most                                                               
interested  in  directing as  much  funding  as possible  to  the                                                               
advertising campaign.     She stated it  is difficult  to predict                                                               
without knowing  the organization,  but it  does seem  that given                                                               
the  scope of  the  project most  of the  funds  would be  passed                                                               
through  to  a subcontractor  advertising  firm  to maximize  the                                                               
advocacy effort.                                                                                                                
3:50:57 PM                                                                                                                    
REPRESENTATIVE  SADDLER remarked  if  Alaskan subcontractors  are                                                               
used that  it would be nice  if they would lower  their markup in                                                               
the interests  of helping  Alaska's economy.   He  suggested they                                                               
may wish  to limit  their markup from  15-17 percent,  or perhaps                                                               
even lower.                                                                                                                     
MS.  AYERS  said  she  thought that  would  be  highly  unlikely.                                                               
Further, she  said she  would not dictate  any business  model or                                                               
cost to the private sector.                                                                                                     
3:51:51 PM                                                                                                                    
CHAIR  OLSON,  after first  determining  no  one else  wished  to                                                               
testify, closed  public testimony on  HB 358.  He  commented that                                                               
no one contacted his office.                                                                                                    
3:52:19 PM                                                                                                                    
REPRESENTATIVE JOHNSON  moved to report  HB 358 out  of committee                                                               
with    individual   recommendations    and   the    accompanying                                                               
indeterminate fiscal note.  There  being no objection, HB 358 was                                                               
reported from the House Labor and Commerce Standing Committee.                                                                  

Document Name Date/Time Subjects
HB358 ver M.PDF HL&C 3/5/2012 3:15:00 PM
HB 358
HB358 Sponsor Statement.pdf HL&C 3/5/2012 3:15:00 PM
HB 358
HB358 Supporting Documents-Letter Alliance 3-2-12.pdf HL&C 3/5/2012 3:15:00 PM
HB 358
HB358 Supporting Documents-Arctic Power 49 ANWR bullet points.pdf HL&C 3/5/2012 3:15:00 PM
HB 358