Legislature(2003 - 2004)
02/25/2003 03:22 PM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HB 16-STRANDED GAS DEVELOPMENT ACT AMENDMENTS Number 0094 CHAIR KOHRING announced that the first order of business would be HOUSE BILL NO. 16, "An Act amending the standards applicable to determining whether, for purposes of the Alaska Stranded Gas Development Act, a proposed new investment constitutes a qualified project, and repealing the deadline for applications relating to the development of contracts for payments in lieu of taxes and for royalty adjustments that may be submitted for consideration under that Act; and providing for an effective date." [Before the committee, adopted at the 2/6/03 meeting, was Version H, 23-LS0101\H, Chenoweth, 2/6/03.] CHAIR KOHRING reminded members that there had been a public hearing on the bill, and that the public hearing was closed. [There was a motion to adopt Version H as a work draft, but it was already before the committee.] Number 0213 REPRESENTATIVE FATE, sponsor, requested adoption of Amendment 1 [the first of ten amendments on a two-page handout], which read [original punctuation provided]: Page 2 Line 6 of natural gas within or from the state to one or more.... REPRESENTATIVE FATE explained that this makes it clear that a gas or gas product can be used within the state or shipped outside the state. The committee took an at-ease from 3:25 p.m. to 3:27 p.m. Number 0356 REPRESENTATIVE CRAWFORD objected to Amendment 1 for discussion purposes. He noted that the original stranded gas Act was intended to get Prudhoe Bay natural gas to market. This, however, applies to virtually any project in the state, whether it exports gas out of state or uses it in Alaska. He asked whether the legislature wants to give this authority away indefinitely for any project of almost any size. He pointed out that 500 million cubic feet isn't a very large gas project. This could be for any natural gas project over 500 million cubic feet, including one at Prudhoe Bay, at Minto Flats, or Cook Inlet, for example. REPRESENTATIVE FATE indicated this is based on the "qualified project" under the stranded gas Act [AS 43.82], and the commissioner [of the Department of Natural Resources (DNR)] has the authority to determine [whether a project qualifies]. The committee took an at-ease from 3:30 p.m. to 3:31 p.m. Number 0609 REPRESENTATIVE FATE said any large enough project "that's on the line of this route" would be qualified, under the commissioner's parameters of qualifying the project. REPRESENTATIVE CRAWFORD asked where [the bill or Act] shows that it is limited to that route. REPRESENTATIVE FATE replied that it says the commissioner may qualify the project. REPRESENTATIVE CRAWFORD asked whether gas discovered in Norton Sound could qualify if the commissioner so decided. REPRESENTATIVE FATE affirmed that. REPRESENTATIVE CRAWFORD asked whether it doesn't have to be parallel to any route, then. REPRESENTATIVE FATE said this is the stranded gas Act. It isn't for new discoveries. He read [from AS 43.82.010], which says in part, "The purpose of this chapter is to (1) encourage new investment to develop the state's stranded gas resources by authorizing establishment of fiscal terms related to that new investment without significantly altering tax and royalty methodologies and rates on existing oil and gas infrastructure and production". [The definition of "stranded gas" under AS 43.82.900 read as follows: "(13) 'stranded gas' means gas that is not being marketed due to prevailing costs or price conditions as determined by an economic analysis by the commissioner for a particular project."] REPRESENTATIVE FATE, offering that he doesn't think there is stranded gas in Norton Sound, said that "wherever there is stranded gas that we know of", this Act [would apply]. Number 0775 REPRESENTATIVE CRAWFORD asked whether it couldn't apply to new discoveries in Minto Flats, for example. REPRESENTATIVE FATE replied no, that it would apply to stranded gas. He added, "Stranded gas is where you have an existing wellhead that has gas that has not been able to get to market." REPRESENTATIVE CRAWFORD asked whether Representative Fate's intent, then, is that [gas] won't be covered by this [legislation] if it hasn't been discovered yet. REPRESENTATIVE FATE replied that it isn't stranded gas if it hasn't been discovered yet. In response to a question regarding whether it ever would become stranded after discovery, he said, "It becomes stranded only when that gas is brought to the surface and lifted, and there's no market for it. At that point, it becomes stranded." In response to a suggestion by Representative Crawford that that could happen in Minto Flats, he said: This bill doesn't refer to those because it hasn't happened. It could, in other areas, of course; if it does, well, then, I'm sure there will be legislation appropriate to that particular situation. But this only applies to the present stranded gas that we have in the state. REPRESENTATIVE CRAWFORD said he was glad that was on the record. Number 0811 REPRESENTATIVE CRAWFORD withdrew his objection. CHAIR KOHRING asked whether there was any further objection. Hearing none, he announced that Amendment 1 was adopted. Number 0839 REPRESENTATIVE FATE brought attention to Amendment 2, which read [original punctuation provided]: Add new Section 2 *Sec 2 AS 43.82.110(D) is amended to read Sec. 43.82.110. Qualified sponsor or qualified sponsor group. (D) has a net worth equal to at least [33] 15 percent of the estimated cost of constructing a qualified project; REPRESENTATIVE FATE explained the reasoning behind the 15 percent, noting that the figure has been shown to the people involved, including "the governor's oil and gas people." He said it was chosen to try to allow sponsors who otherwise couldn't meet a [33] percent net worth standard to qualify. With a $9-billion project, for example, few corporations in Alaska or elsewhere could participate if the net worth, under the old scenario, must be 33 percent of that project cost. This is a way to get others into the pipeline, and yet is a high enough hurdle that it doesn't dissipate the profitability for major companies that will carry the majority of the financing. REPRESENTATIVE FATE called it a good attempt to try to get more involvement in construction of the qualified project or the gas pipeline, to spread out risk among those deemed qualified by the commissioner, and to help induce exploration and development of the maturing fields on the North Slope by companies other than the three major ones of today. He acknowledged that negotiations over access still will be required. Number 1075 CHAIR KOHRING sought confirmation that lowering it to 15 percent wouldn't put a prospective owner of the line in a financially weak position to where that company wouldn't be strong enough to be an owner. REPRESENTATIVE FATE said it shouldn't affect that at all. CHAIR KOHRING offered his understanding that this doesn't force negotiations between existing and prospective owners of any gas line. REPRESENTATIVE responded no, this spells out in law what that bar would be. Number 1131 REPRESENTATIVE KOHRING asked whether there were questions or comments with regard to Amendment 2. Hearing none, he announced that Amendment 2 was adopted. Number 1155 REPRESENTATIVE FATE brought attention to Amendment 3, which read [original punctuation provided]: Page 2 Line 12 Delete (2) Add (3) Number 1160 REPRESENTATIVE ROKEBERG objected. AN UNIDENTIFIED SPEAKER said it is to renumber [paragraph] (2). REPRESENTATIVE ROKEBERG informed the committee that he had an amendment that deletes Section 2 [of Version H] and subsumes Amendments 3-7 [on the two-page handout provided by Representative Fate]. He recommended addressing his amendment first and then [including the renumbering] in Representative Fate's next amendment. The committee took an at-ease from 3:39 p.m. to 3:40 p.m. Number 1271 REPRESENTATIVE FATE withdrew Amendment 3. Number 1279 REPRESENTATIVE ROKEBERG moved to adopt new Amendment 3, which read [original punctuation provided]: Pg. 2, line 12 through Pg. 3, line 6: DELETE ALL MATERIAL REPRESENTATIVE CRAWFORD objected, requesting an explanation. He referred to [paragraph] (5), which Amendment 3 would delete. [Section 2 of Version H amended AS 43.82.200 by adding a new paragraph (5) as an item that may be included in the contract that the commissioner may develop.] Paragraph (5) read: (5) terms regarding an equity or other participating interest in a project by one or more Alaska-based corporations or businesses; the terms developed under this paragraph may authorize the holding of equity or other participating interests not to exceed 10 percent of the estimated cost of constructing a qualified project; REPRESENTATIVE CRAWFORD said removing [paragraph (5)] would remove his support for the legislation because he believed it was probably the best part of the bill, allowing small players into the project. REPRESENTATIVE ROKEBERG, noting that it had been discussed at the previous bill hearing, explained that [limiting] the amount of equity interest to 10 percent narrows the opportunities for Alaskan businesses to participate. He said there is no commercial interest in [having that cap], and asked why the state should dictate who the parties to the commercial contract could be. He pointed out that the [Act] being reauthorized has no prohibition about the size of the entity. He suggested the language in [proposed paragraph (5)] works against Representative Crawford's desire to allow Alaskan businesses to participate and have an equity interest in the pipeline, and hence he should support the amendment because it deletes the cap. He said anybody who brings value to table can be an equity partner in the contract with the state, and that there's no limitation on it [if Amendment 3 is adopted]. Number 1474 REPRESENTATIVE CRAWFORD offered his belief that the three "majors" could take the project over and not allow others in, even if those others brought 10 percent to the project. He said he thought it was a good idea to have a cap so that smaller [companies] could get in. REPRESENTATIVE FATE put forth reasons for the 15 percent [in Amendment 2] at the same time this [cap] is being deleted [by Amendment 3]: it lowers the bar to allow more people in the game, although it's up to the commissioner to qualify those sponsor groups. He explained: We thought it was just better to get rid of it; that's one reason. And, also, ... there was shipped around here some discussion of 10 percent, which we didn't feel was in the best interest of the State of Alaska, to try to come up with some kind of a ... strict percentage that we'd heard in the halls here, very frankly. REPRESENTATIVE FATE said, therefore, that a better route was chosen, lowering the bar from 33 percent. He explained: It just makes a better condition for not only acceptance of this by the present producers and those people that are already exploring, but for future people that would like to get in, into that play of exploration, ... wherever the gas is, as you so adequately put when we started, whether it's on the North Slope or somewhere else where ... there could eventually be stranded gas. So we've really tried the best way we could to lower that bar, to get these people into this game. And this [limit of 10 percent] doesn't do the job. Number 1630 CHAIR KOHRING, noting that he and Representative Crawford had talked about this, said he appreciated where he was coming from and also would like to see as much diversification of ownership as possible. However, he disagreed philosophically, explaining one concern: if this provision is in the bill, government is more or less forcing ownership, rather than letting people work out financial arrangements among themselves. REPRESENTATIVE CRAWFORD proposed deleting the "10 percent" language but leaving what he believes is the operative language: "terms regarding an equity or other participating interest in a project by one or more Alaska-based corporations or businesses". He suggested that would make it possible for Alaska-based businesses to get into this game. REPRESENTATIVE ROKEBERG said he appreciated what Representative Crawford was saying and agreed philosophically that there shouldn't be a bar to Alaskan participation. With regard to the [10 percent] restriction, he inquired about an Alaska-based company that wants 100 percent ownership, for example. He suggested that leaving the wording proposed by Representative Crawford would be merely "jawboning" or "cheerleading." REPRESENTATIVE ROKEBERG therefore proposed perhaps having a letter of intent that says the intent is to encourage Alaska- based companies to take an equity position in the pipeline. He also suggested that Representative Fate's Amendment 2 was what was operative, opening the net-worth requirement by more than 50 percent and thereby opening the door to Alaskan businesses. Number 1794 CHAIR KOHRING asked whether there was any further objection to new Amendment 3. REPRESENTATIVE CRAWFORD indicated he was withdrawing his objection. CHAIR KOHRING announced that new Amendment 3 was adopted. [Written Amendments 4-7 were made unnecessary by the adoption of new Amendment 3.] Number 1852 REPRESENTATIVE FATE offered Amendment 4 [labeled Amendment 8 on the handout], which read [original punctuation provided]: Page 3 Line 7 Delete [*Sec. 3. AS 43.82.170 is repealed.] *Sec. 4 AS 43.82.170. Application Deadlines is amended to read: The commissioner of revenue or the commissioner of natural resources may not act on an application for a contract submitted under AS 43.82.120 unless the application is received by the Department of Revenue no later than June 30, 2004. The committee took an at-ease from 3:50 p.m. to 3:53 p.m. Number 1902 REPRESENTATIVE FATE, noting that it would now be Section 3, explained that this extends the [application deadline]. REPRESENTATIVE McGUIRE observed that Version H, Section 3, repeals [AS 43.82.]170, which is identical to [Amendment 4] except that it has a date of June 30, 2001. She asked why the decision was made to put it back in the bill but change the date, since the policy will be the same as for the existing statute. REPRESENTATIVE FATE replied that in conversations with the Division of Oil & Gas, it was determined that a definite date is better in order to spur activity. Without that, or if there is an extensive amount of time, he said, "people might use that to their advantage and not really come up to the plate." Suggesting it is in the state's best interest to have people apply as quickly as they can, he added, "This can always be renewed at a later date in subsequent legislative sessions." Number 1998 REPRESENTATIVE ROKEBERG expressed concern about the 2004 date, which may force the committee to take the bill up 12 months from now. He asked whether that is the sponsor's intention. REPRESENTATIVE FATE, again citing advice from the Division of Oil & Gas as the impetus, said this is a prod to get people to file an application if they want to get into the game. In further response, he affirmed that he'd considered [that the committee might have to address the provision again in a year]. He explained: If the filing of applications isn't what we expect, then we can extend that date, and ... really have a responsibility to assess that and extend that date a longer time ... at the next go-round. It would be a very simple fix; it's a simple amendment to the ... stranded gas Act. And if that's what we have to do, ... then we'll do it. But it does also send some signals that we really want to get cracking on the project, and I really think it's in the best interest to shorten the time, rather than extend it ad infinitum. Number 2133 REPRESENTATIVE McGUIRE inquired about the reason for the June 30, 2004 [deadline], which is after the legislature [adjourns]. REPRESENTATIVE FATE said he thought it had to do with "the expenditures and the turnover expenditures, and fiscal years' timing, so that some of the expenses incurred - which you will see a cap on later, that are reimbursable - fall under that accounting timeline." Number 2184 REPRESENTATIVE ROKEBERG offered that ongoing negotiations might not come to fruition before the end of the legislative session, and that the legislature wouldn't want to return for a special session in an election year to reauthorize an Act. Expressing doubt that an executive order could extend the Act, for example, he voiced concern about the timing and asked whether Representative Fate had considered these points. REPRESENTATIVE FATE replied that the process of filing an application, to his understanding, won't require that type of negotiation, for one thing, although a person "theoretically could get caught." Number 2252 REPRESENTATIVE ROKEBERG asked whether Representative Fate had considered an expiration date of April 1 of 2004 or, in the alternative, February 1 or May 1 of 2005. REPRESENTATIVE FATE indicated he hadn't thought about it with regard to the application process, or thought it necessary. However, this day's discussion had raised a "fairly valid point." He asked Representative Rokeberg to state it more clearly if he had an amendment in mind. REPRESENTATIVE ROKEBERG again expressed concern about the short time, particularly since federal action on any energy bill may affect deliberations regarding the sponsor group and push this into next winter, not allowing time for due deliberation, and because [the Act] would expire when the legislature [wasn't in session]. REPRESENTATIVE FATE deferred to Mr. Myers. Number 2356 MARK MYERS, Director, Division of Oil & Gas, Department of Natural Resources, specified that [June 30] 2004 refers to a date by which the commissioner of the Department of Revenue would have to receive the application. It doesn't limit the time of the negotiations. Rather, the applicant would have to file by that date in order to start the process. REPRESENTATIVE ROKEBERG agreed that's what the amendment says, but nonetheless said it doesn't give him much comfort because of the federal energy bill and the timeframe in which to put an application together. Observing that [what later became Amendment 5] allows for outside contractors to be paid up to $1.5 million "to read this application," he surmised that it isn't a two-page application and might take time to complete. Number 2426 REPRESENTATIVE ROKEBERG asked Representative Fate whether he would be open to [a deadline] of February or March 1 of 2005, for example. REPRESENTATIVE FATE said he'd have to consider it, noting that "a large part of this came through the desires of the administration to move forward on some of these projects." He recalled that there was no date in the first version of the bill [which never was considered by the committee] "because we just wanted to allow people to come in as they needed to." REPRESENTATIVE ROKEBERG said he appreciated that, but added, "I just want to make sure the administration knows that the legislature is here." Number 2457 CHAIR KOHRING asked Mr. Myers whether he had any opinion about perhaps modifying this to March 2005. MR. MYERS replied: I can't really speak for the administration because I don't think I've been party to those discussions. But just from the division's perspective, I don't think we'd have a problem with that. Again, I think ... Representative Fate's discussed the reason you want to have a finite date. The specifics of the timing of that date probably [aren't] as important as having ... a reasonable period of time ... to start the process, but not too long, [so] that you don't accelerate the ... project itself. Number 2498 REPRESENTATIVE ROKEBERG said he could either offer an amendment or defer to the chair of the House Resources Standing Committee [Representative Fate, co-chair] to take this issue up [in that committee]. REPRESENTATIVE FATE responded that he'd prefer to discuss it with some people he'd been dealing with in the administration. He said he had no real objection [to an amendment], except for wanting to speed up the process as much as possible. Suggesting it would be up to Chair Kohring whether to entertain an amendment, Representative Fate said he'd be willing to do so in the House Resources Standing Committee, "depending upon our discussions with the administration." REPRESENTATIVE ROKEBERG responded, given that, that he wouldn't offer an amendment to [Amendment 4] or object to the amendment itself. CHAIR KOHRING clarified, as chair of the House Special Committee on Oil and Gas, that he won't control whether amendments are submitted. Instead, he announced that anyone is welcome to attempt to modify any legislation. Number 2521 CHAIR KOHRING asked whether there was any objection to Amendment 4. There being no objection, Amendment 4 was adopted. Number 2590 REPRESENTATIVE FATE offered Amendment 5 [labeled Amendment 9 on the handout], which read [original punctuation provided but formatting changed]: New Section 5 *Sec. 5 AS 43.82.240 is amended to read Sec. 43.82.240. Use of an independent contractor. (a) The commissioner may use [an] independent [contractor] contractors to assist in the evaluation of an application or in the development of contract terms under AS 43.82.200. The commissioner may condition the development of a contract under AS 43.82.020 on an agreement by the applicant to reimburse the state for the expenses of [an] independent [contractor] contractors, not to exceed $1.5 million per application under this section. Number 2642 REPRESENTATIVE CHENAULT objected for discussion purposes. He requested confirmation that the new section would be Section 4, not Section 5. CHAIR KOHRING and REPRESENTATIVE FATE affirmed that. Number 2660 REPRESENTATIVE ROKEBERG requested the rationale behind the language "not to exceed $1.5 million". REPRESENTATIVE FATE explained that it caps the amount of reimbursable expenses. He said there are "differing scenarios of that amount," but that it's the amount the administration and the Division of Oil & Gas thought was fair. REPRESENTATIVE ROKEBERG asked whether Representative Fate had checked to see whether the private sector thought it was fair as well. REPRESENTATIVE FATE said he hadn't, although Jim [Pound] had. Number 2704 JIM POUND, Staff to Representative Hugh Fate, Alaska State Legislature, offered his understanding that the industry wanted some type of cap on it, "especially when we're dealing with multiple contractors." He said this "seemed to be an acceptable amount to them as far as a cap for a project of this size." Number 2721 REPRESENTATIVE ROKEBERG asked how many individual companies Mr. Pound had talked to. MR. POUND said he hadn't talked to them. "This was through the administration, through discussions they had with the industry," he explained. Number 2731 REPRESENTATIVE ROKEBERG said he wouldn't object to the amendment, but expressed hope that Representative Fate, as chair of the House Resources Standing Committee, would get some feedback on it. Number 2740 CHAIR KOHRING asked if this [$1.5-million cap] is for expenses the industry would occur in the course of the negotiation process that the state would reimburse. MR. POUND replied no. He said this deals with the contractors that the state would hire in order to negotiate. The statute says [the commissioner] may condition the contract in such a way that the industry actually reimburses the state for those contractors, he added. The committee took an at-ease from 4:11 p.m. to 4:13 p.m. Number 2774 CHAIR KOHRING began discussion of what would become the first amendment to Amendment 5. He proposed inserting "reasonable and nonredundant" before "expenses" and asked Ms. King of ConocoPhillips, who was on teleconference, whether it is prudent to do so. He also informed members that Roger Marks of the Department of Revenue was on line to answer questions. Number 2820 WENDY KING, ConocoPhillips, said ConocoPhillips would be supportive of using that kind of language in here, but asked where it would be inserted. CHAIR KOHRING, surmising that Ms. King didn't have a written copy, read Amendment 5, inserting the words "reasonable nonredundant" [no punctuation specified] before "expenses". MS. KING responded that ConocoPhillips would support that language. She explained: The key thing here would be that we would encourage the state to work as ... one entity and ensure that multiple contractors are not being hired to provide resource to the same particular issue so we're not incurring ... redundant work. And also we would just encourage that the costs quoted be reasonable. For example, ... we would support the idea of the limit; we do support that limit, but we want to ensure that the amount quoted is seen as a maximum, and not an endorsement of that actual amount. Number 2938 REPRESENTATIVE ROKEBERG asked whether it should read "reasonable or nonredundant". CHAIR KOHRING said he thought that would be prudent. He asked Ms. King what she thought about it, rather than having "reasonable, redundant" [comma specified]. MS. KING responded that it would be acceptable to ConocoPhillips. TAPE 03-9, SIDE B Number 2966 MR. MYERS agreed with "the concept of reasonable" with regard to reimbursable expenses. With regard to "nonredundant", however, he said it is harder to quantify and becomes a more subjective standard: some areas clearly would be redundant, whereas others might have some overlap. He suggested there might be issues over whether something is or isn't a legitimate reimbursable expense with that language. From the division's perspective, rather than that of the administration, Mr. Myers said he would be a little concerned about the ability to determine what the reasonable costs are if the word "nonredundant" is added. Number 2935 REPRESENTATIVE ROKEBERG asked Mr. Myers if changing "contractor" to "contractors" [in Amendment 5 itself] was his recommendation. MR. MYERS offered his understanding, from talking with Mike Tibbles [legislative liaison with the Office of the Governor] that it was the administration's recommendation. Mr. Myers added, "That's mainly because there aren't really any firms that have the breadth of specialized technical expertise in the wide number of issues that could be negotiated under a gas contract." REPRESENTATIVE ROKEBERG agreed with that policy, but said: When they're going to add the multiple contractors here, there is a redundancy and overlap; then the burden should be on the state to draft their contracts and the scope of work so ... there shouldn't be the burden it has to be reimbursed by the applicant. So while I agree with the concept and the procedure here, ... they should be wary of nonredundant scope of activity, and if there is certain overlap, then they shouldn't penalize the applicant for it. Number 2882 CHAIR KOHRING asked Representative Rokeberg whether he would be amenable to inserting "reasonable" but not "nonredundant". REPRESENTATIVE ROKEBERG said he liked "reasonable or nonredundant". Number 2864 REPRESENTATIVE FATE concurred that "reasonable" is appropriate, but said "'nonredundant' could get everybody in trouble," resulting in litigation. He suggested that "reasonable ... and reasonable negotiation" would probably cover redundancy that might result if negotiations weren't in the best interest of both the state and the qualified sponsors. Number 2829 CHAIR KOHRING moved to adopt the first amendment to Amendment 5, inserting "reasonable or nonredundant". Citing the previous discussion, he explained that his preference is "for the reasons of clarity and strengthening the verbiage here." REPRESENTATIVE FATE objected. REPRESENTATIVE ROKEBERG surmised that the Division of Oil & Gas would be "invoicing the applicant for ... the contractor they retained." If the applicant determined there was a redundancy, he suggested, "then they would be able to make a complaint under basic administrative procedures." CHAIR KOHRING asked Mr. Myers to address that. Number 2768 MR. MYERS responded that one concern is that in negotiations, one clearly doesn't want to telegraph all areas of analysis or the results of the analyses, which a detailed invoice might give key indications about. With regard to the redundancy, he offered his belief that no one has intended to have overlapping experts who duplicate. However, in a "line of experts" there might be an overlap of 5, 10, or 15 percent. He asked: When is it arguable, significant redundancy? Furthermore, some points will come across on multiple issues, resulting in some redundancy. He suggested having some language of intent that it isn't "our ability to require them to pay for two nearly identical type of analyses." He added, "I think ... some of the clarity here might be somewhere in between. But ... my concern would be, chiefly, that you get into the issue of ... there's a 5- or a 10-percent overlap, which is inherent, again, in looking at different issues, and it may be inherent in those firms' expertise." REPRESENTATIVE ROKEBERG surmised that the committee would recognize that a 5- or 10-percent overlap regarding some issues might be reasonable. He suggested that Mr. Myers makes his [Representative Rokeberg's] case by saying one wouldn't want to reveal what is in the invoice. How would a firm know whether something was redundant unless a certain amount of detail was provided about what the firm was paying for? He suggested perhaps invoicing "after the fact rather than before the fact." Number 2656 REPRESENTATIVE CRAWFORD said he believes "reasonable costs" takes care of the language here. He said he believes, as does Representative Fate, that adding the "nonredundant" language would muddy the waters. Number 2626 REPRESENTATIVE McGUIRE said she believes it is important to clarify the costs to make sure they're reasonable and that there isn't overbilling or double billing or billing for the same thing to two different companies. At the same time, she said, in shifting the burden, she doesn't want to make it difficult for the state to have to wade through a series of documents and proof, for example, that will actually encumber the process and create more workload for state departments "that we want to be out there issuing permits and helping these guys get moving." She asked to hear more testimony from Mr. Myers and Ms. King on how they believe this will play out in practical terms. Number 2552 MR. MYERS offered his view that "reasonable" covers a multitude of issues, since totally duplicative work probably would be considered unreasonable. However, there may be occasions when the state wants to confirm something as well, just to look from another angle. Overall, he said, there has to be reasonableness, so a strong reasonableness standard, to his belief, covers "a multitude of potential sins and keeps us on the straight and narrow" and would [cover] a substantial duplication of effort as well. He suggested it may be somewhat redundant to specify that it is nonduplicative in addition to requiring reasonableness. Number 2501 MS. KING, in response to Chair Kohring, said: First, I'd like to emphasize that ConocoPhillips [supports] the administration obtaining those experts that allow them to be fully informed going into this negotiation, and they need to be prepared to do that. "Reasonable" is acceptable to ConocoPhillips. REPRESENTATIVE McGUIRE asked to hear from Chair Kohring or Representative Rokeberg why they feel the word "redundant" is necessary. REPRESENTATIVE ROKEBERG replied that the state has requested multiple contractors, whereas the bill now refers to only one contractor. When there is more than one entity, there is an opportunity for redundancy that wasn't there before. He suggested it is incumbent on the state to make sure that the scope of work in the contracts doesn't overlap any more than it has to as a practical matter. Clearly, he said, there may be some overlap, which he suggested everyone recognizes. He said he didn't think it was that big a deal. CHAIR KOHRING said he wanted to stay with "the language as original proposed," including "nonredundant", for the reasons just stated by Representative Rokeberg. Number 2401 REPRESENTATIVE CRAWFORD said it seems reasonableness would include some reasonable redundancy. But adding the word "nonredundant" means that any nonredundancy would preclude paying the charges to the applicant. He again suggested that "reasonable" is the proper term to use, and that adding "nonredundant" will muddy the waters. REPRESENTATIVE ROKEBERG suggested taking out the "or", then. He said reasonableness is a standard of law that would be applied by the courts anyway, so that's highly redundant. He said the idea that there is reasonable nonredundancy seems to indicate there would be some level of redundancy allowed, but not an unreasonable amount. CHAIR KOHRING asked Representative Crawford whether he'd be amenable to that. [There was no audible reply.] REPRESENTATIVE McGUIRE responded, "That gets at it." She said she wants the state to have a second opinion if it needs one, for example, if one opinion comes in that leaves unanswered questions that are reasonable. She said she'd been concerned about having the language be too narrow, and likes the friendly amendment [proposed by Representative Rokeberg]. CHAIR KOHRING asked whether he was hearing that [Representatives Rokeberg, McGuire, and Crawford] preferred to return to his original amendment to [Amendment 5], which he said was "reasonable, nonredundant" [comma specified]. [There was no audible response.] REPRESENTATIVE FATE said he hadn't heard the original amendment to Amendment 5 that way, but thought it included the word "or". CHAIR KOHRING read Amendment 5 with his amendment included, specifying that it would insert "reasonable, nonredundant" [comma specified]. Number 2245 REPRESENTATIVE FATE indicated that in effect, therefore, it would be "reasonable" and then "absolutely nonredundant". REPRESENTATIVE ROKEBERG suggested removing the comma. REPRESENTATIVE FATE responded that it would, then, be "reasonable specific to nonredundancy," but not reasonable in any other category. He suggested that if there is a desire for reasonableness in any other category, it should say "reasonable and reasonable nonredundancy". Number 2213 CHAIR KOHRING, in response to a request, restated Amendment 5, adding his amendment, "reasonable nonredundant" [comma not specified]. He asked whether there was any objection. Hearing no objection, he announced that the amendment to Amendment 5 was adopted. Number 2187 REPRESENTATIVE ROKEBERG moved to adopt a second amendment to Amendment 5, below subsection (a) of Amendment 5, to add the words "renumber accordingly". There being no objection, it was so ordered. CHAIR KOHRING indicated the committee would consider Amendment 5, as amended. [A motion to report the bill from committee was made before the chair asked whether there was any objection. Amendment 5, as amended, was treated as adopted.] Number 2103 REPRESENTATIVE McGUIRE moved to report CSHB 16 [Version 23- LS0101\H, Chenoweth, 2/6/03], as amended, out of committee with individual recommendations and the accompanying [fiscal notes]. There being no objection, CSHB 16(O&G) was reported from the House Special Committee on Oil and Gas.
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