Legislature(2005 - 2006)SENATE FINANCE 532
04/26/2005 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB174 | |
| SB97 | |
| SB171 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 171 | TELECONFERENCED | |
| + | SB 174 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 97 | TELECONFERENCED | |
AT EASE 9:57:47 AM / 10:01:02 AM Co-Chair Green chaired the remainder of the meeting. SENATE BILL NO. 171 "An Act amending the National Petroleum Reserve - Alaska special revenue fund; and establishing the Special Legislative Oil and Gas NPR-A Development Impact Review Committee and defining its powers and duties." This was the first hearing for this bill in the Senate Finance Committee. Co-Chair Wilken, sponsor of the bill, overviewed the documents contained in the bill packets provided to members [copies on file]. 10:02:11 AM Co-Chair Wilken read the sponsor statement into the record as follows. Senate Bill 171 examines the National Petroleum Reserve - Alaska (NPR-A) Mitigation Grant Program administered by the Department of Commerce, Community, and Economic Development (DCCED) and modifies the selection process to provide for active oversight by the legislature. The bounty of NPR-A is thought by many to match or exceed the oil and gas deposits found at Prudhoe Bay or Kuparuk. As was mentioned in the Anchorage Daily News, February 15, 2005, "(The) Bureau of Land Management estimates NPR-A northeast corner could hold more that 2 billion barrels of crude oil and 3.5 trillion cubic feet of natural gas." All Alaskans look forward to the time when they can enjoy the benefits of reasonable and responsible development of these natural resources. When members of the United State Congress authorized When members of the United State Congress authorized competitive leases in NPR-A in 1980, they recognized that competitive leases in NPR-A in 1980, they recognized that development in the petroleum reserve might severely impact development in the petroleum reserve might severely impact communities in or near the area. The federal legislation communities in or near the area. The federal legislation directed that the revenue generated through NPR-A development directed that the revenue generated through NPR-A development be used first to mitigate direct impacts, if any, to be used first to mitigate direct impacts, if any, to municipalities, and then by the rest of the State of Alaska. municipalities, and then by the rest of the State of Alaska. This federal directive in 1980 created two troubling issues This federal directive in 1980 created two troubling issues that today pose significant problems. that today pose significant problems. First, the federal legislation is in direct conflict with the First, the federal legislation is in direct conflict with the Alaska State Constitution. The State of Alaska receives from Alaska State Constitution. The State of Alaska receives from the federal government 50 percent of royalties and lease the federal government 50 percent of royalties and lease payments from the oil and gas development in NPR-A. As payments from the oil and gas development in NPR-A. As required by federal law, these funds are available, before required by federal law, these funds are available, before consideration of any other public purpose, to communities that consideration of any other public purpose, to communities that demonstrate impact from resource development in NPR-A. This demonstrate impact from resource development in NPR-A. This directive is at odds with Article IX, Section 15 of our directive is at odds with Article IX, Section 15 of our constitution. constitution. "At least twenty-five per cent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund." Senate Bill 171 recognizes this unsettling conflict, but does not overtly address or remedy the conflict between our State Constitution and federal law. This issue, while bothersome, is set aside for another day. Instead, this legislation speaks to the second troublesome issue of how the federal NPR- A payments are distributed to Alaska communities that may be severely impacted by oil and gas development within the National Petroleum Reserve. With the sizeable increase in NPR-A lease payments since 2000 and with the clear expectation of future and profitable growth, now is the time to revisit how the NPR-A payments are distributed and why. It is the charge of the legislature to devise a method to fairly allocate the financial benefits of NPR-A to all citizens of Alaska while, at the same time, recognize and mitigate the direct impact of development on certain communities as required by federal law. In response to a 1986 Alaska Superior Court decision, Senate Bill 171 sets in place a system to grant impact assistance to municipalities most directly or severely impacted by oil and gas activity within the National Petroleum Reserve - Alaska. First, the Department of Commerce, Community, and Economic Development shall review and conduct a preliminary evaluation of each grant application to determine whether the community can demonstrate "extraordinary municipal and educational operating expenditures attributable to oil and gas development in NPR-A that are beyond the municipality's reasonable capability to meet." (See SB 171, page 3, lines 3-6) The department will submit a list of all qualifying projects to the legislature. Second, the Special Legislative Oil and Gas NPR-A Development Impact Review Committee, composed of three Senate finance members and three House of Representative finance members, will review the submitted applications and within 45 days forward the committee's recommendation to the respective finance committees for possible funding. Third, twenty-five percent of the NPR-A payments will be deposited to the principal of the Alaska Permanent Fund and .5 percent to the Public School Trust Fund, as required in AS 37.14.110. If the amounts awarded to qualified municipalities as grants exceed the available money, each deposit in the previously mentioned funds and each grant will be reduce proportionately. And last, a successful grantee shall submit to the Department of Commerce, Community, and Economic Development a financial report and a copy of an independent audit or review covering any previous grants before any subsequent grants are awarded. I would appreciate your support for Senate Bill 171. 10:07:13 AM Co-Chair Wilken gave a presentation titled, "NPR-A Impact Mitigation Program" [copy on file] as follows. Page 1 "The duty imposed by the federal government ultimately falls upon the Alaska Legislature…" Barrow vs. State Judge Walter Carpeneti, March 18, 1986 10:07:31 AM Page 2 Alaska Constitution vs. Alaska Statute · Current Impact Mitigation Program · Importance of "Impact" · Senate Bill 171 Co-Chair Wilken outlined the topics that would be addressed in the presentation. 10:07:40 AM Page 3 National Petroleum Reserve - AK [Map of northern Alaska showing NPRA, the Alaska National Wildlife Refuge, the Trans-Alaska Pipeline, Native owned lands, certain oil fields and other points of reference] · 23.5 million-acre petroleum reserve (~ Indiana) · NW third of Alaska's arctic between the Brooks Range and the Arctic Ocean Co-Chair Wilken identified this area of conflict is approximately the size of the state of Indiana. 10:08:16 AM Page 4 The history of NPR-A 1923 President Warren Harding established the Navel Petroleum Reserve 1976 Dept. of Interior assumed jurisdiction and changed the name 1980 Congress addressed changes to National Petroleum Reserve - AK 10:08:36 AM Page 5 Changes in 1980 · Congress authorized competitive leases in NPR-A (42 U.S.C. Sec. 6508) · Federal law cleared the way for the private development of NPR-A resources · State of Alaska to receive 50% of the total revenue from NPR-A leases 10:08:54 AM Page 6 The legislature responded To the new federal law: "The State is required to give priority to communities 'most directly or severely impacted' by development." · Established an NPR-A Special Revenue Fund within the Department of Revenue (CS SB 835 am H, 1982) o Half of NPR-A receipts appropriated to communities affected by leasing o Other half available for state appropriation 10:09:19 AM Page 7 But Governor Hammond Vetoed "The dedication of such federal monies appears to be … inconsistent with the dedication of revenue to the Alaska Permanent Fund." Governor Hammond, Veto Message, June 24, 1982 Alaska State Constitution Article IX Section 15 Alaska Permanent Fund "At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund." (Adopted in 1976) Co-Chair Wilken submitted that few Alaskans are aware that four communities and one borough have "jumped ahead" of deposits into the Alaska Permanent Fund in receiving appropriations. Most Alaskans assume the royalties are shared equally. 10:10:08 AM Co-Chair Wilken noted that some would argue that the royalties are "received" after the four communities are allotted a portion. He contended that the funds should be considered "received" once the federal government appropriates them. 10:10:31 AM Page 8 And so the legislature… Without a specific state law on the books… · Received $48.6M during the early 1980s · Deposited half of the State's share into the Permanent Fund and .5% to the Public School Fund · Deposited the remainder of the funds in the General Fund 10:10:52 AM Page 9 Calculation by Alaska Constitution In 1982, the Legislature appropriated the NPR-A receipts according to the Alaska State Constitution NPR-A Receipts $48,600,000 50% of gross receipts to Perm Fund (24,300,000) .5 of gross receipts to Public School Trust (243,000) Available to General Fund for Impacted Communities 24,057,000 10:11:05 AM Page 10 But what about the federal law? · In 1985, the North Slope Borough and NPR-A communities sued the state · The plaintiffs wanted: 1. A "rational process" for communities to apply for the grants 2. Declaration that all NPR-A funds be automatically deposited into the special revenue fund and available for grants 3. A system to separately account the receipt of NPR-A funds and to reconstitute the special revenue fund Co-Chair Wilken emphasized the reference to a revenue fund as opposed to the Alaska Permanent Fund. The special revenue fund is not unlike the Alaska Mental Health Trust fund. 10:11:39 AM Page 11 The Superior Court said… Barrow v. State, Alaska Superior Court, Judge Walter Carpeneti, March 18, 1986 1. The State is required to establish a system to grant impact assistance to subdivisions most directly or severely impacted by NPR-A activity. 2. Automatic deposits into the Permanent Fund and General Fund violates the federal law. 3. Under the supremacy clause of the federal constitution, federal law controls. Co-Chair Wilken identified this as "tension" between the Alaska State Constitution and federal law. 10:12:14 AM Page 12 The legislature listened · Adopted legislation to implement the court findings (CS HB 491(FIN), 1986) o Established the Impact Mitigation Program o Authorized DCCED to adopt regulations setting eligibility criteria for NPR-A grants · Appropriated $24.5 million to the NPR-A special revenue fund Judge Carpeneti ruled that the NPR-A special revenue fund be reconstituted. The $24.5 million payment was in response to this ruling. 10:12:38 AM Page 13 Where did the money go? First and foremost, grants to four impacted communities After that… 1. 50 percent to the principal of the Perm Fund 2. .5 percent to the Public School Trust Fund 3. Remaining amounts to the General Fund Note: In 1999, HCS CS SB 157 (FIN) am H (1999) passed the legislature and requires a 25% deposit to the Permanent Fund and allows a deposit to the Power Cost Equalization fund before the General Fund. 10:12:57 AM Page 14 Calculation by Alaska Statute (AS 37.05.530(g)) Conforms with 1980 federal law which conflicts with our Alaska Constitution NPR-A Federal Receipts $31,623,800 Grants to NPR-A Communities (DCCED Rec) (24,706,500) Net NPR-A Receipts 6,917,300 25% of Net Receipts to Permanent Fund (1,729,300) .5% of Net Receipts to Public School Trust (34,600) Available Receipts for PCE (May be approp.) 5,153,400 Available for General Fund Remainder if any (Example uses requested FY 06 numbers) Co-Chair Wilken revealed that the premise that NPR-A receipts are "sacred to the Permanent Fund" is untrue. 10:14:00 AM Page 15 Comparison of Two Methods AK Constitution vs. AK Statutes AK Constitution AK Statutes Art. IX, Sec. 15 (per fed law) NPR-A Federal Receipts $31,623,800 $31,623,800 25% of Gross Rcpts to Perm Fund (7,906,000) .5% of Gross Rcpts to School Fund (158,100) Grants to Communities (DCCED Rec) (23,559,700) (24,706,500) 25% of Net Receipts to Perm Fund (1,729,300) .5% of Net Receipts to School Fund (34,600) Available Rcpts for PCE (May Approp) 0.0 5,153,400 Available Receipts for GENERAL FUND 0.0 Remainder if any Example uses requested FY 06 amount. Co-Chair Wilken remarked this demonstrates the conflict between the Constitution and statute. The affect is "shorting my grandkids by 80 percent" of the amount stipulated by the Constitution. "The future is being shorted by this federal law" that provides the Permanent Fund could receive NPR-A receipts only after the requests of four communities and one borough government are provided. He noted this issue is not addressed in this bill and is a matter for future consideration. 10:15:30 AM Page 16 NPR-A Impact Mitigation Program Alaska Constitution vs. Alaska Statute Current Impact Mitigation Program Importance of "Impact" Senate Bill 171 10:15:36 AM Page 17 The Current Mitigation Program Committee Substitute for House Bill 491 (FIN), 1986 U.S. Dept of Interior notifies Dept. of Commerce, Community and Economic Development regarding possible NPR-A Federal Receipts [Flow Chart demonstrating subsequent process as follows: NPR-A Communities 1. Public Notice & Request for Applications DCCED 2. Requests Review Committee 3. Evaluate & Recommend Proposals Legislature 4. Commissioner Requests Funding DCCED 5. OK Funding?] 10:16:12 AM Page 18 Where are the Communities? [Map of NPRA and surrounding area with four communities identified as follows: City of Barrow Population - 4,351 Median Household Income - $67,097 City Responsibilities - Bingo, Community Center, Roller and Ice Rink, Teen and Recreation Center, Housing, City Hall, Little Dribblers, Taxis, Summer Youth Employment, Gravel Sales City of Wainwright Population - 531 Median Household Income - $54,722 City Responsibilities - None listed City of Nuiqsut Population - 430 Median Household Income - $48,036 City Responsibilities - Community Hall, Dock, Cable TV City of Atqasuk Population - 218 Median Household Income - $66,607 City Responsibilities - Bingo, Room Rentals, Community Center, Recreation, Cable TV Source: DCCED and Alaska Municipal League - Alaska Municipal Officials Directory] 10:17:01 AM Page 19 Total Distribution to Date …and FY 07 projections [Bar graph showing Amount of the Grant Awards in amounts between $0 and $50,000 for the years 1980 through 1986 and FY 87 through FY 08. A notation states: FY 06 is the requested amount. FY 07 is the projected amount from the proposed NPR-A summer lease sales.] Since 1980, a total of $117,249,388 has been awarded to 4 communities. (Total includes the FY 06 requested amount of $24,706,500) (FY 87 and FY 91 include 5 communities) Co-Chair Wilken noted the years with significantly higher distributions. The amount for FY 05 is expected to be almost $50 million and future distributions would increase further. 10:18:15 AM Page 20 A Perspective in Statewide Terms What if … the FY 06 requested grant amount was computed on a per person basis, what would that mean for other AK communities on 7/1/05? Anchorage Population - 277,498 $1.2 billion Fairbanks Population - 84,979 $379.7 million NW Arctic Borough Population - 7,306 $32.6 million Bethel Population - 5,888 $26.3 million Sitka Population - 8,805 $39.4 million The FY 06 requested amount, $24,706,539, is divided by the total population of NPR-A grant recipients, 5,530, for a per person amount, $4,468. Co-Chair Wilken commented that this demonstrates the imbalance. A large area of the State with a small population has "jumped in front of the Permanent Fund" and has benefited from a system that "is far above the spirit of the law." Although following the "letter of the law", the current practice does not reflect "the spirit of the law." This is big money. 10:19:55 AM Page 21 NPR-A Impact Mitigation Program Alaska Constitution vs. Alaska Statute Current Impact Mitigation Program Importance of "Impact" Senate Bill 171 10:20:02 AM Page 22 Where is NPR-A O&G Activity? [Map of northern Alaska showing NPRA, the Alaska National Wildlife Refuge, the Trans-Alaska Pipeline, Native owned lands, certain oil fields and other points of reference] Proximity to Current NPR-A Oil and Gas Activity Wainwright - 220 miles Barrow - 160 miles Nuiqsut - 6 miles Atqasuk - 160 miles Co-Chair Wilken noted on map. 10:20:39 AM Page 23 And the main O&G Activity? [Map showing area of North Slope Oil and Gas Activity between the eastern boundary of the National Petroleum Reserve - Alaska and the western boundary of the 1002 Area of ANWAR. Highlighted are: Units, Drill Pad, Town Location, Dalton Highway, Trans-Alaska Pipeline, Oil Accumulations, and Gas Accumulations.] 10:21:28 AM Page 24 Today "IMPACT" is rated as a minimum consideration FY 01 NPR-A Impact Mitigation Program Basis for Recommendation Description - 15 points Impact - 50 points Budget - 15 points Readiness - 15 points Capability - 5 points FY 03 NPR-A Impact Mitigation Program Basis for Recommendation Description - 30 points Impact - 30 points Budget - 20 points Sustain - 15 points Capability - 5 points FY 05 NPR-A Impact Mitigation Program Basis for Recommendation Description - 25 points Impact - 25 points Budget - 20 points Sustain - 20 points Capability - 10 points As administered by the Department of Commerce, Community and Economic Development Co-Chair Wilken stated that the federal government requires that a community must be impacted to receive these grants. This slide demonstrates the point system applied for grant applications. He noted that in FY 01, one-half of the criteria was based on impact compared to current standards, in which impact accounts for only 25 percent. In 1980, the federal government established that impact is the "bar that must be passed". This legislation addresses how to define and determine impact. 10:22:40 AM Page 25 What does the law say? · Federal Law - 42 U.S.C. 6508 o In allocation of the NPR-A funds, the State shall give priority to use by subdivisions of the State most directly or severely impacted by the development of oil and gas leased in NPR-A. · Alaska State Law - AS 37.05.530 o A municipality may use the NPR-A funds only for services to alleviate the impact of oil and gas development within NPR-A. · Alaska Regulations - 3 AAC 150.050 o Impact means an effect reasonably attributable to NPR-A oil and gas activities under 42 U.S.C. 6508. Co-Chair Wilken pointed out the language provides that the impact must result from oil and gas activities in NPR-A and not activities on the North Slope or Prudhoe Bay. 10:23:22 AM Page 26 Rags Define Impact to Mean Reasonably attributable to NPR-A oil and gas activities on the following (3 AAC 150.050): · Population · Employment · Finances · Social/Cultural Values · Air & Water Quality · Fish & Wildlife Habitat · Ability to Provide Services · Other Demonstrable Important Things Co-Chair Wilken commented to the broadness of these criteria, remarking that there is not any activity that could not be attributed to a category in some manner. 10:23:46 AM Page 27 Impact is the First Criteria [Flow chart following a project request as follows. Impacted??: Municipality? Directly or severely impacted? Reasonably attributable to…? No - Application Rejected Yes - Scored Description Budget Sustainability Capability No - Request not Funded Yes - Funded Appropriation by the Legislature] The State shall give priority to subdivisions of the State most directly or severely impacted (42 U.S.C. 6508) Co-Chair Wilken explained that SB 171 proposes to rearrange how project requests are considered. 10:24:47 AM Page 28 An example for review Wainwright Lagoon Boat Launce - $525,000 - To replace or renovate the Wainwright Lagoon Boat Ramp "Impact" on Population Applicant "Construction of the oil production infrastructure and pipeline has driven up the growth of population." But… The population of Wainwright has increased from 492 to 546 in 1990 - 2000. "Impact" on Employment and Finances Applicant "Due to decline in property tax revenues from aging oil and gas infrastructure, the Borough cannot financially help the community." But… The reduction in revenue is not due to NPR-A development. In fact, NPR-A development will increase the borough revenues. Co-Chair Wilken clarified the "but" represents his interpretation. The population increase of Wainwright is negligible. 10:25:57 AM Page 29 …and to continue Wainwright Lagoon Boat Launch - $525,000 "Impact" on Social and Cultural Values Applicant "The social disruption prompted by oil and gas development affects many traditional activities." But… Wainwright is 220 miles from NPR-A development. "Impact" on Fish and Wildlife Habitat Applicant "Access to hunting areas would change in oil development reduces the availability of subsistence resources." But… Past experience at Prudhoe Bay has shown that O&G activities and wildlife can co-exist. Question: Were the listed impacts reasonably attributable to oil and gas development within NPR-A? A review committee of three rated "Impact" only 20 points out of 100, the project was recommended. Co-Chair Wilken concluded that the impact of NPR-A was not significant to warrant this project. 10:26:34 AM Page 30 And another example… City of Barrow Impound and Disposal Site Project - $174,389 "Impact" on Visual Resources Applicant "Many of the abandoned vehicles that the City of Barrow has allowed people to dump on city land were brought to Barrow during the oil boom in the last quarter of the 20th century." But… The "oil boom" discussed was outside NPR-A. The impact must be "reasonably attributable" to oil and gas development within NPR-A. No other impact was stated by the applicant Question: Was the listed impact reasonably attributable to oil and gas development within NPR-A? The review committee rated "Impact" between 20 - 24 points out of 100; the project was recommended. 10:27:00 AM Page 31 And another one… Roller Rink Renovation Feasibility Study - $63,556 - to identify the costs to renovate the Barrow Roller Rink "Impact" on Employment Applicant "Although an estimated 4.000 jobs exist on the N. Slope in the O&G industry only a fraction are held by Inupiat." But… The vast majority of the jobs in the O&G industry are not reasonably attributable to NPR-A development. "Impact" on Unemployment Applicant "As the economic benefits of O&G development begin to decline, it leaves members less able to survive…" But… The decline in O&G development is not in NPR-A; this petroleum reserve is just beginning to be explored. 10:27:37 AM Page 32 …and to continue City of Barrow Roller Rink Renovation Feasibility Study - $63,556 "Impact" on Social and Cultural Values Applicant "The decline in subsistence resources due to NPR-A O&G development negatively impacts the Inupiat culture." But… Studies are currently undertaken to determine the impact to wildlife, if any, to Barrow residents 160 miles from Alpine. "Impact" on Public Services Applicant Although the population has had a small, net loss in the previous five years, the burden on the City of Barrow has not been reduced. But… Most of the workers connected with NPR-A development reside on the oil company's production sites and not in local towns. Question: Were the listed impacts reasonably attributable to oil and gas development within NPR-A? A review committee of three rated "Impact" between 15 - 25 points out of 100; the project was recommended. Co-Chair Wilken suggested that the roller rink project was not qualified to receive NPR-A funds. 10:28:23 AM Co-Chair Green asked if the project is to renovate the roller rink for a different function that would either provide increased employment or address cultural impact, etc. 10:28:48 AM Co-Chair Wilken replied that this project is intended to study the feasibility of renovating a roller rink. 10:29:00 AM Page 33 Additional Concerns · Grants are all funded as capital projects and the dollars do not lapse (AS 37.25.020) o But less than 40% of the grants are for capital projects (the majority of grants are for operating expenses) · Funds are approved before old grants for the same purpose are expended… o As an example of many grants, only 15% of an FY 04 group operating grant of $1,759,484 to survey wildlife is disbursed, but an FY 06 grant for $2,461,368 is recommended for the same purpose 10:29:45 AM Co-Chair Green asked if the two grants are intended to study wildlife in different areas. 10:29:50 AM Co-Chair Wilken responded that the description for the FY 06 grant is identical to that of the earlier request and that he could therefore not determine whether the surveys are intended for different geographical areas. 10:29:59 AM Page 34 To continue · Few grants follow timelines o Only 40% of grant funds scheduled for completion on 6/30/05 has been spent · Awards are not based on successful completion of previous grants FY 00 - Nuiqsut Cultural Center Construction $939,800 - Not Started as of 4/26/05 But FY 02 - Nuiqsut Cultural Center Operating $288,000 These grants funds will be used for new projects without notice to or approval from the legislature. Co-Chair Wilken remarked that this "speaks to" the requirement for oversight of the grant program. Page 35 NPR-A Impact Mitigation Program Alaska Constitution vs. Alaska Statute Current Impact Mitigation Program Importance of "Impact" Senate Bill 171 10:30:45 AM Page 36 Now is the time To listen to the Alaska Superior Court (Barrow v. State, March 18, 1986): "The duty imposed by the federal government ultimately falls upon the Alaska Legislature and it includes the duties to examine the claimed needs of the subdivisions arising from oil and gas development impacts, to evaluate them and, if the claimed needs are found to exist, to rate them in order of priority, and to meet them out of NPR-A revenues." Co-Chair Wilken stated that this legislation is based on this court opinion. 10:31:20 AM Page 37 Legislature has authority… 1. To examine the claims for financial assistance 2. To evaluate and rank the grant requests 3. To determine the appropriate amount of NPR-A revenue for use by impacted municipalities 4. To determine the specific projects that are funded Legal Services memorandum, March 18, 2005 10:31:38 AM Page 38 Senate Bill 171 "It is the intent of the legislature to provide temporary emergency financial assistance to municipalities for the purpose of meeting certain extraordinary operating and capital improvement expenditures necessitated by NPR-A oil and gas development." (Section 1. LEGISLATIVE INTENT in the proposed legislation. · Establishes a Legislative Impact Review Committee (composed of 3 finance members of each body) o Consults with DCCED and then approves and forwards grant recommendations to respective finance committees. Co-Chair Wilken explained the proposed review committee is modeled after the legislative conference committee process. Two members of the majority and one member of the minority party from each body would serve and two affirmative votes from each body would be required to fund an award. This standing committee would review all requests and submit recommendations to the full finance committees for inclusion in the annual capital appropriation. 10:32:15 AM Page 39 And to continue · Deposits to unique funds are based on the total federal NPR-A receipts o Perm Fund and Public School Trust · Grants are awarded for one year, unless otherwise noted · Lapse money is appropriated to the Permanent Fund, School Trust, or General Fund 10:32:44 AM Page 40 Now is the time… To consider SB 171 …and establish a method to fairly allocate the financial benefits of NPR-A to all Alaskans while, at the same time, mitigate the direct impact of development on certain communities as required by federal law. 10:33:11 AM Co-Chair Green asked if any language in this bill would amend current statute. 10:33:36 AM Co-Chair Wilken replied that as a result of a hearing on this bill by the Senate Community and Regional Affairs Committee, it was determined that a committee substitute would be necessary to provide "clean up". No subsequent changes are required. Co-Chair Wilken informed that some interested parties were unable to attend this meeting and desire to provide testimony to the Senate Finance Committee. Upon hearing these comments a new committee substitute could be drafted to incorporate suggestions. Valid suggestions were offered to the Senate Community and Regional Affairs Committee. 10:34:51 AM Senator Hoffman referenced page 20 of the presentation and commented that it represents the "wishful thinking" if all communities in the State were included in the NPR-A grant program. Co-Chair Wilken affirmed. 10:35:18 AM Co-Chair Green asked the communities located within a 220-mile circumference of the Alpine development. 10:35:48 AM Co-Chair Wilken offered to prepare such a map, referencing the map on page 22. 10:36:13 AM Co-Chair Green asked which additional communities would be included in such a radius. 10:36:27 AM Senator Olson responded that the area would be limited to the North Slope. He pointed out that the Brooks Range is not shown on the aforementioned map, which includes an area approximately 150-miles south of the Alpine development. Co-Chair Wilken demonstrated on the map the approximate 220-mile radius from the Alpine development. 10:37:29 AM Senator Stedman asked the intended timeframe for this legislation as it brings up concerns of local residents. He wanted to know if the bill would be reviewed over the legislative interim with recommendations implemented and passage expected in January or February 2006. 10:38:02 AM Co-Chair Wilken suggested that a subcommittee could be established comprised of Senator Stedman, Senator Dyson, Senator Olson and himself. It would be beneficial to have the Department overview the 24 grants awarded and the "thought process" as to how it was determined that the communities were impacted by NPR-A development. Whether changes are made to the allocation of the current $24.6 million is a discussion for the full Committee, after it understands the projects involved. Co-Chair Wilken characterized this legislation as a "marathon" rather than a "sprint" and that NPR-A receipts would provide a long-term funding source for the State. He wanted to ensure that all residents of Alaska benefit, not just a few. He did not expect this legislation would pass during the current year, but was confident it would pass during the second session of the Twenty- fourth Legislature. 10:39:20 AM Senator Olson remarked that the sponsor made a "compelling" presentation; however, he surmised, "there's more to the story". He noted the map on page 22 and argued that a community located 220- miles from a full production oil site is likely not significantly impacted. 10:40:13 AM Co-Chair Wilken relayed that oil and gas development activities are "reaching out" approximately 30 west of the current site of the Alpine development. Exploration is going no further because, if discoveries are made there is no infrastructure for developments. He indicated other areas within the NPR-A that have been surveyed, although the oil companies have not reported on any findings. Resources are expected to be present as far north as the City of Barrow. Co-Chair Wilken detailed the three-dimensional seismic survey process in which no explosives are used. A probe is set up during winter months and a "thumper" is used during summer months. This process has no impact on terrain. Caribou populations are reportedly growing exponentially since the 1970s. Oil and gas activities are assisting the caribou population. The survey activities are occurring in a small portion of the area depicted on the map. 10:42:55 AM Senator Olson disagreed with Co-Chair Wilken's assertion that the communities are not significantly impacted because of their distance from oil development. Senator Olson indicated a map [copy not provided] showing areas of seismic activities throughout the NPR-A area. He agreed that older technology was more harmful; however, the newer method involving thumping has an impact on land animals and a yet unmeasured impact on marine mammals and whales. Before a company spends millions of dollars on oil leases, it would intend to gather additional data and conduct more seismic testing. Senator Olson shared that he has flown over the affected areas and told of the "cat trains" and impact on vegetation throughout the entire NPR-A. He had no misconception that this would affect the residents of Wainwright. 10:45:32 AM Co-Chair Wilken responded that the map Senator Olson referenced shows seismic testing done during the 1970s and 1980s. No further activities have occurred since. 10:45:53 AM Senator Olson noted the reference to the amount of money appropriated to the communities since the 1980s. He asked if all the funds had been expended or if any had lapsed and were returned to the State. 10:46:23 AM Co-Chair Wilken replied that data indicates $18.7 million has reverted to the State general fund over the life of the program. He qualified that the accounting of the funds allocated in the early 1980s is difficult to ascertain because funds were transferred between the North Slope Borough and the communities. 10:46:54 AM Senator Dyson remarked that the potential impact to marine mammals is a valid issue. He understood that all seismic activities occur during winter months and would therefore only impact those mammals present in the region at that time. Therefore, the whale population would not be impacted. Senator Dyson relayed the rhetoric that Alaska's wealth is mostly located in rural Alaska that that benefits should therefore be allocated only to rural communities. However, the State constitution stipulates that the resources are held in trust for all citizens, which results in some constraints. He commented to the premise that two sides exist to every story. He anticipated testimony from the Department of Commerce, Community and Economic Development and other parities. 10:49:08 AM Senator Stedman admitted to his limited experience with the oil industry. In the region of State he represents, noises created by jets and gunshots do not result in significant change in animal behavior. He qualified that the animals in Northern Alaska could react differently. 10:50:12 AM Senator Olson agreed that the resources must be held for the benefit of all Alaskans, but contended that the responsibilities must also be considered. For example, some villages have no water and sewer services. Senator Olson pointed out an acoustical difference in the impact of sound traveling through air compared to a different medium such as the ground or water. This could cause a greater impact. 10:51:11 AM Senator Stedman anticipated receiving information on the impact of oil development directly from the affected communities and the reasoning for the proposed projects. It is clear that the State must assist in mitigating the impacts to local residents. He surmised this legislation did not intent to ignore this obligation, rather to review the details of the grant program. 10:51:47 AM Co-Chair Wilken referenced the fiscal note of $20,000. The intent is that the proposed committee would travel to the four communities to experience the impact directly. No one should serve on that committee without having visited the areas. 10:52:19 AM Co-Chair Green noted the application process that declares the impact and the named project. She asked if the proposed project is required to have a relationship to the impact, or whether the funding source could be utilized for any purpose. 10:53:05 AM Co-Chair Wilken noted the NPR-A Grant Status Report as of 13/31/04 and stated the Members could review that grant applications and make their own conclusions as to the relationship of the projects to the impact from oil and gas development. He suggested that some have no relationship. Co-Chair Green intended that projects demonstrating a legitimate cause and affect from oil and gas activities should be granted. However, some of the projects "don't lend a great deal of confidence of what's been done in the past; therefore we have to worry about what's going to be done in the future." 10:54:04 AM Co-Chair Wilken agreed. Co-Chair Wilken then informed that to conduct seismic testing, a permit must be obtained from the North Slope Borough. He cited one such permit #LMR05142, and read the "seismic stipulations", which stipulate that operations must not interfere with subsistence activities and that fuel must be provided to hunters and trappers in the event they must travel to alternate hunting and trapping sites. The seismic activities are limited in the impact it could have on the tundra, must not interfere with polar bear or grizzly bear denning, and an observer must be present during testing. These stipulations ensure that seismic activities do not impact the resources of the area. Co-Chair Green asked if a fee is imposed for the permits. Co-Chair Wilken did not know. 10:55:56 AM Senator Olson requested the Department of Commerce, Community and Economic Development answer questions relating to this bill. 10:56:08 AM Co-Chair Green noted this hearing is the first segment of the process in considering this legislation. The bill was HELD in Committee.
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