Legislature(1993 - 1994)
02/28/1994 09:15 AM Senate FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SB 308 - ADMIN ACTION RE LAND/RESOURCES/PROPERTY
Co-chair Pearce directed that SB 308 be brought on for
discussion and advised of a statewide teleconference link.
JIM EASON, Director, Division of Oil and Gas, Dept. of
Natural Resources, came before committee, directing
attention to February 28, 1994, correspondence from the
department which he explained corrects inaccuracies in
public comments made at a prior hearing on the bill. He
referenced comments indicating that had the department been
willing to consider closure of the Cook Inlet fishing
corridor, sale 78 litigation would have been avoided. The
record is contrary to that comment. Mr. Eason next cited
areas of dispute raised by litigants. There is nothing in
the record that suggests that exclusion of the corridor
would have appeased all objections to the sale.
KODIAK
WAYNE COLEMAN, director, Regional Citizens Advisory Council
for Prince William Sound; and member of the executive
committee, RCAC, testified to need for maximum public input.
As a main reviewer of oil contingency plans, RCAC has been
an active participant in efforts to resolve procedural
problems regarding plan review. The organization has great
respect for the process of getting industry, local
government, agencies and the public together to resolve
complex issues. The proposed bill deals with a complex
issue that requires additional time for review and
consideration.
Mr. Coleman next expressed the following specific concerns:
1. That the fiscal implications of the bill have not been
fully
explored:
A. What are the possible costs to the state if it
becomes embroiled in a buy-back situation due to
provisions of the bill?
B. How does the buy-back figure compare to income to
the
state at the lease sale stage?
C. Would there be cost savings if DEC rather than DNR
performed consistency reviews?
2. If the possibility of an oil spill is not examined at
the lease sale stage, at what stage will environmental and
economic costs of the bill be considered?
On behalf of the RCAC, Mr. Coleman urged that legal, fiscal,
and definitional questions be answered before the
legislation is finalized.
LINDA FREED, Community Development Director, Kodiak Island
Borough; acting borough mayor; and one of three local
representatives on the Alaska Coastal Management Planning
Working Group, voiced her belief that the proposed bill
would have significant negative fiscal impact for both state
and local governments. Costs will accrue as the state is
required to defend increasing numbers of lawsuits resulting
from disposals under the legislation.
Ms. Freed next addressed the fiscal impact of "discrete
saving" language. As presently written, the language will
cost both applicants and the state "more money in the long
run." Early, comprehensive consideration of significant
issues relating to disposal of state interest in land and
resources must be more cost efficient and effective. It is
in the best interest of all parties to have an opportunity
to resolve conflicts early in the process. Ms. Freed
commented favorably upon processes used by the federal
government when it offered offshore oil and gas leases in
the early 1980s. It is in the state's best interest to
emulate that model process. Ms. Freed urged that action on
the bill be delayed to provide opportunity for testimony
from concerned residents, coastal districts, local
governments, state agencies and industry and to allow time
for those entities to meet together to strengthen the bill.
HOMER
PAUL SEATON, Homer Fisherman, next spoke in opposition to
the bill. He questioned the accuracy of both testimony and
correspondence from DNR regarding sale 78 and advised that
much of the public opposition to the sale is due to
inclusion of offshore tracts. Mr. Seaton suggested that
allowing DNR to determine what is significant and what
impacts will be considered is tantamount to elimination of
the coastal zone management plan.
Mr. Seaton directed attention to Sec. 2(b)(3) and questioned
the proposal to limit consideration of impacts to those
within the lease sale. Isolation to the lease area does not
make biological or economic sense since impact often spreads
far beyond the immediate locality.
TOBY TYLER voiced opposition to the bill and said that it
bypasses citizen input. He explained that when DNR refused
to withdraw "the Ninilchik portions of lease 78, the die was
cast which led to the lawsuit . . . ." Throughout that
process, the voices of local citizens were heard. The
present system of checks and balances is working well.
Mr. Tyler next advised that some residents filed complaints
with the Ombudsman. The Ombudsman identified three
allegations wherein DNR failed to uphold present statutes.
The proposed legislation appears to bypass citizen
involvement. That is unwarranted. Mr. Tyler suggested that
the legislature drop the proposed bill and get on with more
important issues. The legislature is the balance of power
interposed between the administration and the courts. Mr.
Tyler urged, on behalf of landowners and fishermen on the
"southern Kenai," that the legislature side with the courts
and Ombudsman on behalf of Alaska's citizens.
ANCHORAGE
BECKY GAY, Executive Director, Resource Development Council,
spoke in support of changes to Title 38, which she explained
would improve efficiency and clarity. She voiced RDC
support for an orderly oil and gas leasing program and need
to send a clear signal to the judicial branch that the
legislature believes that oil and gas leasing and further
production is in the best interest of the state. Ms. Gay
voiced concern over use of the judicial system to slow down
or circumvent an orderly leasing program. The proposed bill
would provide clarity and direction to the division of oil
and gas and reduce conflicts and confusing language.
PETE NELSON, Land Manager, Alaska Region, Texaco
Incorporated, next spoke in support of the bill, saying that
the legislation is necessary to solidify statutory intent.
Current statutes provide the Dept. of Natural Resources, not
the Court System, with responsibility for development of
Alaska's natural resources. Texaco believes a full analysis
of all issues and concerns regarding oil and gas lease
sales, through the best interest finding process, is being
conducted in compliance with present statutes and
regulations. The scope of review must be defined during the
state's administrative review process rather than in the
courts. SB 308 will provide certainty and a scope of review
where recent court rulings have created uncertainty.
STEVE PORTER next testified on behalf of ARCO. He said that
the proposed legislation provides an opportunity to define
for the director, the public, and the courts, the scope of
review for disposal of state lands. Because of continuing
controversy over the scope of this review, the legislature
must provide much needed direction. Mr. Porter voiced
support for inclusion of areas specifically identified by
the legislature, areas identified by the director (through
review of available information), and all public comments.
The director must seriously consider all public comments and
respond in writing to their relevance. The proposed
legislation represents the department's attempt to reduce
the scope of review to writing. Mr. Porter suggested that
members of the public agree with above-expressed concepts
but do not agree with the way the department has expressed
the concepts in writing. He pointed to department
willingness to effect changes in the bill to clarify
misunderstood language. Mr. Porter recommended that those
opposed to the bill explain their concern and identify
specific language giving rise to that concern.
JERRY BOOTH, Vice President of Energy and Minerals, Cook
Inlet Region, Inc., next testified. He explained that CIRI
is one of the largest private landowners in Alaska with a
land base of 924,000 acres of subsurface estate and 1.6
million acres of surface estate. Mr. Booth voiced support
for SB 308 and its intent to provide certainty to the scope
of review and the best interest finding process. Current
statutes and regulations are intended to provide for full
analysis of all issues. However, recent court rulings have
created uncertainty. The state, rather than the courts,
should establish resource development policy. All public
comments should be part of the scope of review. Thorough
analysis of all valid, reasonably foreseeable,
nonspeculative information and data should be foremost, in
the process, to determine best interest findings. There are
ample opportunities for public and legislative input into
issues and concerns surrounding state lease sales. The
Commission should have ample discretion to ensure that
projects are in the state's best interest and consistent
with the Alaska Coastal Management Program.
MAUREEN McCREA, resident of Anchorage, next testified in
opposition to CSSB 308 (Res). She voiced her understanding
that the bill proposes to resolve problems recently
experienced by DNR when conducting offshore oil and gas
lease sales and issuing permits for mineral prospecting.
She then offered the following recommendations:
1. That the Senate Finance Committee retain jurisdiction
until proper language resolving current problems is
developed.
2. That the bill be referred to the Senate Judiciary
Committee. Judiciary review would allow for detection of
unintended consequences of the legislation, i.e.:
A. Application to resources other than oil and gas.
B. Impact on federal consistency issues.
Ms. McCrea voiced concern that jeopardizing state ability to
review federal actions for consistency would be a high price
to pay for the proposed legislation. Alaska fought hard to
gain influence over the federal leasing program. Residents
should know if that right might be diminished by proposed
statutory changes.
Ms. McCrea suggested that response to the proposed
legislation is reminiscent of response to the federal
offshore program. While narrowing state and public review
to influence lease sale decisions worked in the short term,
it had negative results in the long term. Major, potential
offshore deposits off the California coast are now
unavailable, and leases in Bristol Bay await funds to buy
them back. The current focus at the federal level is to
listen to states, coastal districts, and residents to create
effective mechanisms for working together. That approach is
recommended to DNR.
MARILYN CROCKETT, Assistant Executive Director, Alaska Oil
and Gas Association, voiced support for full analysis of all
issues and concerns for the best interest finding for each
lease sale. Current statutes and regulations are designed
to ensure that. However, uncertainty created by recent
court rulings gives rise to need for the proposed
legislation. AOGA supports certainty in the process so that
DNR's scope of review may be defined during the
administrative review process rather than by the courts.
Ms. Crockett suggested that the scope of review for the best
interest finding cover three things:
1. From information available to the director, the
director should determine those issues that should be
addressed during the review.
2. All public comments should be considered in determining
what the scope of the review should be.
3. The legislature has determined that items listed in AS
38.05.035(g) should be part of the scope of review. If the
director, the public, and the legislature do not consider an
issue to be of sufficient concern, the courts should not be
allowed to decide it should have been covered in the best
interest findings.
JON ISAACS, Jon Isaacs and Associates, planning consultant,
next testified. He explained that he is working with a
group of districts evaluating proposed legislation. The
group takes the position that there is no process better
than coastal management for bringing everyone to the table
to resolve concerns and to proceed with the best possible
development. It gives municipalities a guarantee that the
state and federal governments will treat them as equals and
take their positions seriously. Coastal areas recognize the
importance of oil and gas lease sales to the state and the
local economy.
Mr. Isaacs concurred that the recent court decision on lease
sale 78 created a problem for the department in regard to
best interest findings and coastal management
determinations. Questions which must be resolved relate to:
1. What is a reasonable scope of analysis for a best
interest finding?
2. What levels of analysis are applied to disposal of
interest and to subsequent phases of development?
3. How should multiphased projects be addressed under the
coastal consistency determination?
Mr. Isaacs voiced appreciation for amendments incorporated
within CSSB 308 (Res) but said that the proposed bill is not
yet an acceptable solution. He spoke to ongoing efforts to
work with the department and the hope that language could be
developed to reduce problems faced by the state without
creating new problems for others. Mr. Isaacs stressed need
to refrain from rushing amendments to the table and
repeating the "inadequate public involvement problems that
have plagued this legislation to date."
NANCY WAINWRIGHT, Attorney at Law, next testified, advising
that for the past fifteen years her practice has been in
state and federal coastal zone management. She noted that
she could not address all the legal problems presented by
the proposed bill in the teleconference time allotted. She
voiced support for a working group to address problem areas.
Ms. Wainwright then confined her remarks to two issues:
1. Buy backs. The proposed bill will increase the
likelihood of state buy backs of leases because it is not
fair to sell property for a particular purpose and then
later tell the purchaser that he or she cannot "do anything
with it." As an example, Ms. Wainwright pointed to lease
sale 78 as well as past sales in Bristol Bay.
2. Public Process. Ms. Wainwright stressed that "This is
the only publically driven phase of the lease process." The
state is in control at this point. Following sale, the
lessee drives the process and restrictions on the public's
right to know develop. The department and the lessee are in
privity of contract and have a special financial
relationship whereby they meet without public presence to
develop plans.
End, SFC-94, #20, Side 1
Begin, SFC-94, #20, Side 2
Ms. Wainwright attested to past challenge to federal OCS
leasing because of lack of consideration of effects at the
lease sale stage. She then stressed that if consistency
review is to have any meaning, it must be applied at the
lease sale stage, when key decisions affecting use of
coastal resources are made. Alaska and other states
challenging federal leasing have prevailed, and Congress now
requires that all impacts: direct, indirect, cumulative, and
secondary be considered at the lease sale stage.
Ms. Wainwright noted that the federal government must
approve the proposed change to the ACMP. She then raised
questions concerning what the Clinton administration might
do when required to certify the change. After being sued by
the state over the scope of review of OCS lease sales, the
federal government will, in effect, be asked to confirm that
Alaska does not have to perform that same analysis for state
sales. If Alaska loses its federal CZMA certification, it
loses the federal money from the program as well as a say in
wetlands permits, clean water act permits, OCS leasing, and
ANWR. It would not be wise to sacrifice that authority.
The costs of the proposed bill are too great to rush it
through.
DARCY RICHARDS, Program Director, Aleutians West Coastal
Resource Service Area, next testified. She said that the
consensus building review process under ACMP is a most
effective means of having a local voice in resolving
resource-use conflicts. The proposed bill would limit that
local voice by giving greater discretion to DNR. Ms.
Richards urged that adequate time be provided to bring
industry, agencies, local districts, and the public together
to work out acceptable solutions. Time spent now will
reduce the chance of costly litigation or buy-backs later.
CORDOVA
DORN HAWXHURST next spoke from Cordova. She voiced her
belief that the focus of the division of oil and gas appears
to be exclusively on short-term opportunities for oil and
gas development. Legislative focus should be on short and
long-term ramifications of development on all competing
resources. The proposed bill appears to remove legislative
responsibility to balance competing industry groups. Ms.
Hawxhurst questioned the ramifications of favoring oil to
complete exclusion of tourism, fishing, mining, and other
industries. She cautioned against putting all of the
state's economic hopes "in one basket." The proposed bill
addresses a symptom of a problem rather than the problem
itself. The real problem is DNR's inability or
unwillingness to consider the probable cumulative impact of
all anticipated activities for each project. In her
concluding remarks, Ms. Hawxhurst urged that the legislature
retain its responsibility for balanced resource management.
JOHN BOCCI next testified before committee. He suggested
that under the proposed bill, DNR appears to lessen the risk
for the developer while increasing the state's own risk of
financial liability due to potential lawsuits from bad
judgment by state employees. The legislation omits the
financial risk of other resource users in areas adjoining
potential lease sales. Mr. Bocci attested to impact of the
proposed bill upon municipalities and local residents whose
rights to participate and raise fiscal concerns are side-
stepped. He suggested that the courts are, perhaps,
attempting to send a message to DNR. The federal government
appears to be able to work within certain parameters, yet
the state does not appear able to do so. Mr. Bocci
suggested that if the department devoted as much time and
effort to "homework on lease sales" as it has to promoting
the proposed legislation, the present hearing might not be
necessary.
Mr. Bocci asked what guarantee would be made to the public
that it will be listened to after a project has been
started. Actions such as those in the proposed bill leave
public recourse through the courts alone. He suggested that
current problems be identified and worked on rather than
circumvented by changing the law. In his concluding
remarks, Mr. Bocci asked if lease sale 79 would be exempt
from the proposed legislation. He suggested that the
department is attempting to pass the bill before "79
commences."
RIKI OTT next testified in opposition to the bill on behalf
of the United Fishermen of Alaska. She said that the
legislation allows DNR to ignore resource-use conflicts,
transportation issues, and environmental issues during the
initial administrative review prior to disposal of land.
The bill is fiscally irresponsible. Multiphased projects
will cost the state because state and industry investments
in a project will bias DNR's analysis of later project
stages in favor of completion. Since buy-back of land, once
disposed, is not a fiscally realistic option, the
legislation will favor development regardless of cost to
competing resource users.
Ms. Ott suggested that Mr. Eason misrepresented the fiscal
impact of the bill. She then highlighted three scenarios
comparing the financial risk of initial versus multiphased
development. She stressed that multiphasing introduces a new
element of risk because it increases the likelihood of
erroneous land disposal. This financial risk should not be
borne by the state or the public. Ms Ott characterized as
untrue statements to the effect that the proposed bill poses
no additional risk to the state. The bill does not address
the additional risks to the state. UFA strongly believes
that the state should be required to conduct a thorough best
interest finding prior to a land disposal in every case in
which the necessary information is available to the state at
the time of initial administrative review. Multiphased
developments are not in the public's best interest. Because
the proposed bill would institutionalize multiphased
development, it does not protect the public.
Ms. Ott stressed the importance of the bill's impact on the
public review process, saying that "Timing is everything."
The proposed legislation takes away full public input at the
beginning of the lease sale or land disposal process. That
is a critical point. At the lease sale stage, DNR functions
as a public agency. It controls the conflict resolution
process with minimal bias because it does not, at that
point, have a vested interest in the project. After
disposal, the state and lessee work closely together through
contractual and financial obligations to which the public is
not privy. Public input at later stages does not carry the
same weight it would at the initial review stage.
Ms. Ott took exception to comments by Mr. Eason that the
proposed bill does not limit the scope of issues addressed
during review. She then directed attention to page 2, line
9, and noted use of the word "may." She suggested that in
order to ensure that the full spectrum of effects will be
covered during review, "may" should be changed to "shall."
Further, while the word "significant" has been substituted
for "nonspeculative," there is no definition for either
"significant" or "direct." It is impossible to determine if
the original intent of the word "nonspeculative"--to
severely limit the scope of issues raised--has changed.
In her concluding remarks, Ms. Ott said that Mr. Eason
misrepresented the ramifications of the bill to the state
and the public. That is a serious breach of public trust.
The proposed bill represents a radical shift in public
policy. As such, it is both unnecessary and undesirable.
Ms. Ott urged review by state attorneys and a working group
to determine whether current law "needs fixing." She
further requested that the legislation be referred to the
Senate Judiciary Committee in order to deal with issues of
constitutionality, conformity with the Coastal Zone
Management Act, just compensation, and potential state
liability for buy-backs.
DILLINGHAM
SUSAN FLENSBURG next testified, saying that she works with
the Bristol Bay CRSA Coastal Management Program. She voiced
support for slowing "things down" and sorting out the
issues. She further indicated support for a working group
and retention of the bill until issues of concern are
resolved. Ms. Flensburg noted need for referral of the bill
to Senate Judiciary Committee.
Senator Kerttula said that Senate Finance has long been the
committee of last resort. Often, issues cannot be clearly
separated from financial ramifications. Finance often
becomes involved in judicial, financial, and resource issues
in great depth. A Finance sub-committee often has more
responsibility and exerts more influence on legislation than
a standing committee. It is thus not unusual for
legislation to end up in Finance for ultimate decision
making and rewrite.
ANNOUNCEMENT
Co-chair Pearce announced that teleconference testimony on
SB 308 would be continued Wednesday morning. She requested
that those wishing to testify speak specifically to
language that needs to be revised and make proposed language
and amendments available.
ADJOURNMENT
The meeting was adjourned at approximately 10:25 a.m.
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