Legislature(2013 - 2014)SENATE FINANCE 532

03/11/2014 05:00 PM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 138 GAS PIPELINE; AGDC; OIL & GAS PROD. TAX
Heard & Held
= SB 64 OMNIBUS CRIME/CORRECTIONS BILL
Heard & Held
SENATE BILL NO. 138                                                                                                           
     "An Act relating to the  purposes of the Alaska Gasline                                                                    
     Development Corporation to advance  to develop a large-                                                                    
     diameter  natural   gas  pipeline   project,  including                                                                    
     treatment  and  liquefaction  facilities;  establishing                                                                    
     the large-diameter  natural gas pipeline  project fund;                                                                    
     creating  a  subsidiary  related  to  a  large-diameter                                                                    
     natural gas  pipeline project, including  treatment and                                                                    
     liquefaction facilities;  relating to the  authority of                                                                    
     the  commissioner  of  natural resources  to  negotiate                                                                    
     contracts related to North  Slope natural gas projects,                                                                    
     to enter into confidentiality  agreements in support of                                                                    
     contract negotiations  and implementation, and  to take                                                                    
     custody  of  gas  delivered  to   the  state  under  an                                                                    
     election  to pay  the  oil and  gas  production tax  in                                                                    
     kind; relating  to the sale,  exchange, or  disposal of                                                                    
     gas delivered  to the  state under  an election  to pay                                                                    
     the oil  and gas  production tax  in kind;  relating to                                                                    
     the  duties of  the commissioner  of revenue  to direct                                                                    
     the   disposition  of   revenues   received  from   gas                                                                    
     delivered to the state in  kind and to consult with the                                                                    
     commissioner of  natural resources  on the  custody and                                                                    
     disposition  of gas  delivered to  the  state in  kind;                                                                    
     relating  to  the  authority  of  the  commissioner  of                                                                    
     natural resources to  propose modifications to existing                                                                    
     state oil  and gas  leases; making  certain information                                                                    
     provided  to the  Department of  Natural Resources  and                                                                    
     the Department  of Revenue exempt from  inspection as a                                                                    
     public record;  making certain tax  information related                                                                    
     to an  election to pay  the oil and gas  production tax                                                                    
     in  kind exempt  from  tax confidentiality  provisions;                                                                    
     relating  to   establishing  under  the  oil   and  gas                                                                    
     production tax  a gross  tax rate  for gas  after 2021;                                                                    
     making  the  alternate  minimum  tax  on  oil  and  gas                                                                    
     produced north of 68 degrees  North latitude after 2021                                                                    
     apply only  to oil;  relating to  apportionment factors                                                                    
     of  the  Alaska  Net  Income  Tax  Act;  authorizing  a                                                                    
     producer's election  to pay the oil  and gas production                                                                    
     tax  in  kind  for  certain gas  and  relating  to  the                                                                    
     authorization;   relating    to   monthly   installment                                                                    
     payments of  the oil and  gas production  tax; relating                                                                    
     to  interest payments  on monthly  installment payments                                                                    
     of  the  oil  and   gas  production  tax;  relating  to                                                                    
     settlements  between producers  and royalty  owners for                                                                    
     oil  and   gas  production  tax;  relating   to  annual                                                                    
     statements  by  producers  and explorers;  relating  to                                                                    
     annual  production   tax  values;  relating   to  lease                                                                    
     expenditures;  amending the  definition of  gross value                                                                    
     at the  'point of production'  for gas for  purposes of                                                                    
     the  oil and  gas  production  tax; adding  definitions                                                                    
     related to  natural gas  terms; clarifying  that credit                                                                    
     may not  be taken against  the in-kind levy of  the oil                                                                    
     and  gas production  tax for  gas for  purposes of  the                                                                    
     exploration incentive  credit, the oil or  gas producer                                                                    
     education credit,  and the film production  tax credit;                                                                    
     making  conforming  amendments;  and providing  for  an                                                                    
     effective date."                                                                                                           
                                                                                                                                
Vice-Chair Fairclough MOVED to ADOPT the proposed committee                                                                     
substitute for CS SB 138 (FIN), Work Draft 28-GS2806\Y                                                                          
(Bullock, 3/9/14).                                                                                                              
                                                                                                                                
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
5:23:11 PM                                                                                                                    
                                                                                                                                
BRUCE CAMPBELL, STAFF, SENATOR PETE KELLY, discussed the                                                                        
Proposed Changes in the Work Draft (copy on file):                                                                              
                                                                                                                                
     Title                                                                                                                  
     Page 1, lines 2-5                                                                                                        
     The  CS   adds  title  language  related   to  the  new                                                                    
     direction   to    the   Alaska    Gasline   Development                                                                    
     Corporation  (AGDC)  to  advance  an  Alaska  liquefied                                                                    
     natural  gas project,  and sets  up a  new fund  within                                                                    
     AGDC for  that purpose.  Also, conforming  changes were                                                                    
     added related to expedited review  by state agencies of                                                                    
     AGDC  proposals.  Creation  of  a  new  subsidiary  was                                                                    
     removed.                                                                                                                   
                                                                                                                                
     Page 2, line 21, to page 3, line S                                                                                       
     The CS adds  direction to the governor  to establish an                                                                    
     advisory board  on municipal  involvement in  an Alaska                                                                    
     liquefied natural gas project;  and direction to Alaska                                                                    
     Energy   Authority   (AEA)   to   develop   an   energy                                                                    
     infrastructure plan.                                                                                                       
                                                                                                                                
     Page 3, line 6                                                                                                           
     Finally,  the  title  reflects the  addition  of  local                                                                    
     governments and  Native corporations  to those  who may                                                                    
     be  able,  along  with  Alaskans,  to  own  part  of  a                                                                    
     pipeline  project through  a plan  to  be developed  by                                                                    
     Department of Revenue.                                                                                                     
                                                                                                                                
     Intent Language                                                                                                        
     Page 4, line 24                                                                                                          
     The  CS modifies  the intent  language added  in Senate                                                                    
     Resources. On  page 4,  line 21 and  line 24,  the word                                                                    
     "maximum"  is removed  before  "benefit", for  clarity.                                                                    
     Also, the  term "project  labor agreements"  is amended                                                                    
     to read "labor agreements." (SENATE AMENDMENT)                                                                             
                                                                                                                                
5:24:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Kelly remarked that the language concerning labor                                                                      
agreements would be removed and replaced with a letter of                                                                       
intent.                                                                                                                         
                                                                                                                                
Mr. Campbell continued:                                                                                                         
                                                                                                                                
     AGDC Sections                                                                                                          
     The  CS  makes  extensive  changes  relating  to  AGDC,                                                                    
     including   removal   of   language  creating   a   new                                                                    
     subsidiary corporation  to do  a liquefied  natural gas                                                                    
     project, giving that duty instead to AGDC.                                                                                 
                                                                                                                                
5:25:37 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:26:24 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Mr. Campbell continued to discuss the changes:                                                                                  
                                                                                                                                
     Page 4, line 30, to page 5, line 9                                                                                       
     Adds  new overall  direction to  AGDC, giving  AGDC the                                                                    
     primary  state role  in advancing  an Alaska  liquefied                                                                    
     natural gas  project. Clarifies that  AGDC's overriding                                                                    
     mission is  to develop projects that  benefit the state                                                                    
     and   Alaskans,  including   delivering  gas   instate,                                                                    
     providing economic  benefits, and providing  revenue to                                                                    
     the  state.  Also,  adds that  AGDC's  work  developing                                                                    
     projects should  assist the  Department of  Revenue and                                                                    
     Department  of Natural  Resources  in  their duties  to                                                                    
     maximize the value of the state's royalty gas and                                                                          
     gas delivered as production tax.                                                                                           
                                                                                                                                
     Page 5, lines 18-25                                                                                                      
     Modifies  original  direction   to  participate  in  an                                                                    
     Alaska liquefied  natural gas  project; adds  that AGDC                                                                    
     can't charge a state entity  more for gas services than                                                                    
     it costs to provide those services.                                                                                        
     Page 6, lines 7-8                                                                                                        
     Adds to AGDC's  structure that it is created  to act in                                                                    
     the best interests of the state, based on its purpose.                                                                     
                                                                                                                                
     Page 6, lines 24-28                                                                                                      
     In clarifying  the relationship between AGDC  and state                                                                    
     departments also  directly involved  in a  gas project,                                                                    
     prohibits  the  commissioners  of Revenue  and  Natural                                                                    
     Resources from serving on  AGDC's board. Originally, HB                                                                    
     4  prohibited  the  commissioners  from  board  service                                                                    
     while  AGIA  (Alaska  Gasline Inducement  Act)  was  in                                                                    
     effect.                                                                                                                    
                                                                                                                                
     Page 6, line 29 to page 7, line 6                                                                                        
     Adds a  new subsection  directing AGDC's board,  to the                                                                    
     maximum extent possible, to  maximize the efficient use                                                                    
     of  state   resources  and  to   establish  appropriate                                                                    
     firewalls  and separations  within  the corporation  to                                                                    
     protect commercially sensitive information.                                                                                
                                                                                                                                
     Page 7, Section 6                                                                                                        
     Makes conforming  changes. The prior version  created a                                                                    
     subsidiary to  work on an Alaska  liquefied natural gas                                                                    
     project. This  version removes creation of  a statutory                                                                    
     subsidiary,  and  instead  directs the  corporation  to                                                                    
     work  on an  Alaska liquefied  natural gas  project and                                                                    
     adds    distinctions     in    AGDC's     duties    and                                                                    
     responsibilities   between  an   instate  natural   gas                                                                    
     pipeline   and  an   "Alaska   liquefied  natural   gas                                                                    
     project."                                                                                                                  
                                                                                                                                
     Page 9, lines 6-7                                                                                                        
     Conforming; adds the new  "Alaska liquefied natural gas                                                                    
     project fund."                                                                                                             
                                                                                                                                
     Page 9, lines 18-24                                                                                                      
     Adds  a new  ability to  ACDC to  acquire an  ownership                                                                    
     role  in  an  Alaska  liquefied  natural  gas  project,                                                                    
     including liquefaction  facilities. Later, on  page 10,                                                                    
     lines  7-10, adds  a new  subsection  that restricts  a                                                                    
     part of  AGDC working on  an instate gas  pipeline from                                                                    
     exercising  the new  powers related  to a  liquefaction                                                                    
     project.                                                                                                                   
                                                                                                                                
     Page 9, lines 26-27                                                                                                      
     Conforming;  only  an   instate  natural  gas  pipeline                                                                    
     regulated  by the  Regulatory Commission  of Alaska  is                                                                    
     required to  hold an open  season. An  Alaska liquefied                                                                    
     natural gas  project would  not have  to, and  so would                                                                    
     not have to disclose results.                                                                                              
                                                                                                                                
     Page 10, lines 11-15                                                                                                     
     Adds  a  new  subsection   directing  AGDC  to  provide                                                                    
     information relevant  to royalty and tax  paid with gas                                                                    
     contracts to  DNR and  DOR, subject  to confidentiality                                                                    
     agreements.                                                                                                                
                                                                                                                                
     Page 11, lines 27-30                                                                                                     
     Clarifies   that    AGDC   can    create   subsidiaries                                                                    
     incorporated as nonprofits, or otherwise.                                                                                  
                                                                                                                                
     Page 12, section 13                                                                                                      
     Conforming; adds  the new Alaska liquefied  natural gas                                                                    
     project   fund  explicitly   to   AGOC's  annual   fund                                                                    
     reporting requirements under the Executive Budget Act.                                                                     
                                                                                                                                
     Page 12, line 29, to page 13, line 31                                                                                    
     Removes changes  to the definition of  "instate natural                                                                    
     gas  pipeline."   Adds  new  term,   "Alaska  liquefied                                                                    
     natural gas project," and defines  it in the same terms                                                                    
     as in the Heads of Agreement for the AK LNG project.                                                                       
                                                                                                                                
Mr. Campbell noted a possible typo in the outline.                                                                              
                                                                                                                                
5:30:55 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:31:27 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
5:31:32 PM                                                                                                                    
                                                                                                                                
Mr. Campbell announced that the outline did not contain a                                                                       
mistake. He continued to discuss the proposed changes:                                                                          
                                                                                                                                
     Page 56, line 14                                                                                                         
     Repeals  31.25.080(f), which  previously directed  AGDC                                                                    
     to   accommodate   a    larger   project   on   certain                                                                    
     infrastructure.  As this  direction is  now more  fully                                                                    
     articulated in  AGDC's purpose and  the new  Section 5,                                                                    
     31.25.080(f) is no longer required.                                                                                        
                                                                                                                                
     DNR authority sections                                                                                                 
     Page 15, lines 7-8                                                                                                       
     Clarifies  that agreements  to be  entered into  by the                                                                    
     Department of  Natural Resources  Commissioner include,                                                                    
     but   are  not   limited   to,  balancing,   marketing,                                                                    
     disposition   of    gas,   and    offtake   agreements.                                                                    
     (FAIRCLOUGH AMENDMENT)                                                                                                     
                                                                                                                                
     Page 15, lines 21-23                                                                                                     
     Conforming to legislative  drafting style; re-words the                                                                    
     requirement   that    the   commissioner    may   share                                                                    
     confidential information  with the legislature  only in                                                                    
     executive    sessions    or    under    confidentiality                                                                    
     agreements.                                                                                                                
                                                                                                                                
     Page 18. line 8, to page 20. line 9                                                                                      
     Re-works   sections  18   and   19   (related  to   the                                                                    
     commissioner's  ability to  modify leases)  for greater                                                                    
     clarity, (ADMINISTRATION AMENDMENT)                                                                                        
                                                                                                                                
     Page 18, lines 29-31                                                                                                     
     Modifications to  net profit  shares and  sliding scale                                                                    
     royalty rates have  to yield a value to  the state that                                                                    
     is  no  less  than  the  value  the  state  would  have                                                                    
     received before  a modification. Previously,  the lower                                                                    
     threshold for  modifications was  set at  12.5 percent.                                                                    
     (ADMINISTRATION AMENDMENT)                                                                                                 
                                                                                                                                
     Page 20,  lines 14-15; 23-24;  and 30-31, and  page 21.                                                                  
     lines 9-11                                                                                                               
     Conforming changes for clarity.                                                                                            
                                                                                                                                
     Page 21, lines 23-28                                                                                                     
     Adds  and defines  new  term,  "initial project  term."                                                                    
     (ADMINISTRATION AMENDMENT)                                                                                                 
                                                                                                                                
     Page 22, line 4-24                                                                                                       
     Adds three new sections  with conforming changes. House                                                                    
     Bill  369 of  2010 gave  special treatment  to permits,                                                                    
     authorizations and  rights-of-way issued to  an instate                                                                    
     natural gas  pipeline project.  The changes  make those                                                                    
     provisions   apply   to   any   project   under   AGDC.                                                                    
     (ADMINISTRATION AMENDMENT)                                                                                                 
                                                                                                                                
     Public information sections                                                                                            
     No changes                                                                                                                 
                                                                                                                                
     DOR authority sections                                                                                                 
     Page 28-MISSING SECTION, MISSING (15)                                                                                      
     Tax sections                                                                                                           
     Page 28, line 9. to page 29, line 5                                                                                        
     The original  bill amended  the extraction  factor used                                                                    
     in calculating corporate income  tax to accommodate the                                                                    
     new  concept  of taking  gas  as  production tax.  This                                                                    
     section is new,  and amends the sales  factor, which is                                                                    
     also  used  in  calculating corporate  income  tax,  to                                                                    
     incorporate    the   new    tax    as   gas    concept.                                                                    
     (ADMINISTRATION  AMENDMENT)  (Currently  duplicated  as                                                                    
     drafting error  as new section  34, page 29, line  6 to                                                                    
     page 30, line 1- this needs                                                                                                
     to be deleted.)                                                                                                            
                                                                                                                                
     Page 30, line 10 and lines 19-20                                                                                           
     Clarifies  that  reinjected  gas  is  not  included  in                                                                    
     calculations for determining corporate income tax due.                                                                     
                                                                                                                                
     Page 31, line 11                                                                                                           
     Increases  the  tax on  gas  from  10.5 percent  to  13                                                                    
     percent (KELLY AMENDMENT)                                                                                                  
                                                                                                                                
     Page 33, line 6                                                                                                            
     Removes the  qualifier "irrevocable" from  the election                                                                    
     a  producer  can  make  to pay  tax  with  gas.  (KELLY                                                                    
     AMENDMENT)                                                                                                                 
                                                                                                                                
5:36:37 PM                                                                                                                    
                                                                                                                                
     Page 33, line 12 and line 15                                                                                               
     Conforms to the prior change  increasing the gas tax to                                                                    
     13 percent.                                                                                                                
                                                                                                                                
     Page 34, line 21, to page 35, line 3                                                                                       
     Conforming  change related  to  the conforming  changes                                                                    
     already   in  the   prior   version   related  to   the                                                                    
     educational tax credit.                                                                                                    
                                                                                                                                
     Page 42, line 11                                                                                                           
     Conforming to the new 13 percent gas tax.                                                                                  
                                                                                                                                
     Page 56, lines 6-7                                                                                                         
     The   bill  changes   the  definition   of  "point   of                                                                    
     production." As the term is  used in the Alaska Gasline                                                                    
     Inducement  Act, this  new  section  57 clarifies  that                                                                    
     point of production for purposes  of AGIA is defined as                                                                    
     it   was  when   AGIA   was  enacted.   (ADMINISTRATION                                                                    
     AMENDMENT)                                                                                                                 
     Technical sections                                                                                                     
     Page 56, lines 15-25                                                                                                       
     Adds  new direction  to the  governor  to establish  an                                                                    
    advisory board on municipal involvement in a North                                                                          
     Slope gas project. (OLSON AMENDMENT)                                                                                       
                                                                                                                                
     Page 56, line 26, to page 57, line 16                                                                                      
     Adds new  direction to the  Alaska Energy  Authority to                                                                    
     develop  a  plan  to extend  energy  infrastructure  to                                                                    
     parts of  the state  without direct  access to  a North                                                                    
     Slope  natural gas  pipeline. AEA  is  to consult  with                                                                    
     AGDC,   AIDEA  and   the  Department   of  Revenue   in                                                                    
     developing the  plan, which is  due to  the legislature                                                                    
     in January 2017. (HOFFMAN AMENDMENT)                                                                                       
                                                                                                                                
     Page 57,  lines 19-20,  line 24, line  27, and  page 58                                                                    
     lines 4, 7-8, 11. 12 and 18                                                                                                
     In the  section requiring the Department  of Revenue to                                                                    
     develop a  plan for  Alaskans to participate  in owning                                                                    
     part of a  North Slope natural gas  pipeline, adds that                                                                    
     the plan should include  ways for local governments and                                                                    
     Native     corporations     to    also     participate.                                                                    
     (FAIRCLOUGH/OLSON AMENDMENTS)                                                                                              
                                                                                                                                
     Page 59. lines 4-5 and lines 7-8                                                                                           
     Makes conforming changes to the effective dates.                                                                           
                                                                                                                                
     Page 59, line 6                                                                                                            
     Sets an  effective date  of Jan.  1, 2021,  for section                                                                    
     40,  which is  the  conforming section  related to  the                                                                    
     education tax credit.                                                                                                      
                                                                                                                                
5:41:50 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:42:56 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Senator Kelly REMOVED his OBJECTION. There being NO further                                                                     
OBJECTION, the proposed committee substitute was adopted.                                                                       
                                                                                                                                
Senator Fairclough MOVED to ADOPT Amendment 10 (copy on                                                                         
file).                                                                                                                          
                                                                                                                                
     Page 6:                                                                                                                    
     Delete lines 18-28 (Section 4)                                                                                             
                                                                                                                                
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
JOE BALASH,  COMMISSIONER, DEPARTMENT OF  NATURAL RESOURCES,                                                                    
testified that  Page 6, line  18, section 4 was  a provision                                                                    
that  had not  been in  the  original bill.  He stated  that                                                                    
current  law  held that  the  board  of directors  for  AGDG                                                                    
should  be  comprised of  5  public  members and  2  cabinet                                                                    
members;  however there  was a  restriction on  DOR and  DNR                                                                    
employees  from serving  on the  board as  long as  the AGIA                                                                    
license was  in place.  The original  bill had  not included                                                                    
the proposed language because it  had been expected that the                                                                    
enabling  legislation would  pass,  the  AGIA license  would                                                                    
concluded,  and  the governor  would  have  full freedom  to                                                                    
appoint  to  the  AGDC board  whichever  cabinet  member  he                                                                    
wanted.  The  language  being  added   in  Section  4  would                                                                    
restrict   the  governor's   discretion  in   which  cabinet                                                                    
member's he permanently appointed to the board.                                                                                 
                                                                                                                                
Co-Chair Kelly REMOVED his OBJECTION  to Amendment 10. There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
5:46:35 PM                                                                                                                    
                                                                                                                                
Co-Chair  Kelly directed  committee  attention  to Page  18,                                                                    
lines  29-31, which  discussed modifications  to net  profit                                                                    
shares and sliding scale royalty rates.                                                                                         
                                                                                                                                
5:46:40 PM                                                                                                                    
                                                                                                                                
Commissioner Balash stated that  the section would allow for                                                                    
the  modification of  existing  leases;  in particular,  the                                                                    
switching  rights currently  enjoyed by  the department.  He                                                                    
noted additional  provision concerning the taking  of leases                                                                    
with a net profit share  component, or sliding scale royalty                                                                    
component,   and  developing   a  modification   that  would                                                                    
establish a fixed addition to the base royalty rate.                                                                            
                                                                                                                                
Co-Chair   Kelly  solicited   further  questions   from  the                                                                    
committee.                                                                                                                      
                                                                                                                                
5:49:05 PM                                                                                                                    
Vice-Chair  Fairclough looked  at Page  18, line  28 of  the                                                                    
bill. She  noted that the  previously fixed number  had been                                                                    
replaced  with language  and requested  clarification as  to                                                                    
whether there was a 25 percent cap.                                                                                             
                                                                                                                                
Commissioner  Balash replied  that the  language crafted  by                                                                    
the Senate Resources Committee  had established 12.5 percent                                                                    
as the floor  and the concern had been  identified that some                                                                    
of the  leases in  question had a  higher royalty  rate than                                                                    
12.5 percent;  some Port Thomson  leases, in  particular. He                                                                    
shared  that establishing  12.5 percent  as the  floor would                                                                    
give the  department room  to lower  base royalty  rates and                                                                    
would not be in line with the intent of the legislation.                                                                        
                                                                                                                                
5:50:02 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  understood that there would  still be                                                                    
a combined rate cap of 25 percent under the legislation.                                                                        
                                                                                                                                
Mr. Pawlowski  responded that the  13 percent tax  rate that                                                                    
the  committee  substitute   amended;  in  combination  with                                                                    
section 18, would lead to the approximate 25 percent rate.                                                                      
                                                                                                                                
5:50:38 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough  looked at  page 56, and  wondered how                                                                    
the  definition of  point of  production  from the  previous                                                                    
committee substitute was different than under AS 43.55.900.                                                                     
                                                                                                                                
Mr. Pawlowski  stated that that  the substantive  changes to                                                                    
the point  of production  proposed in the  legislation could                                                                    
be found on Page 55, but  the section began on Page 54, line                                                                    
30. He noted that in  the calculation of the production tax,                                                                    
the expenditures upstream from  the point of production were                                                                    
deductible    lease    expenditures,   while    expenditures                                                                    
downstream  from  the  point of  production  were  recovered                                                                    
through tariffs  or fees on  the infrastructure.  The change                                                                    
on Page  55, line 12,  was to  push the point  of production                                                                    
upstream  to the  farthest upstream  of the  inlet than  any                                                                    
pipeline transporting the  gas to a gas  treatment plant. He                                                                    
said that setting  that point of production  as far upstream                                                                    
within the definition of the  Alaska LNG project as possible                                                                    
had been  key discussions in the  Senate Resource Committee.                                                                    
As the  project was  currently conceived,  the inlet  of the                                                                    
transmission line for Point Thomson  would be as the gas was                                                                    
leaving  Point  Thomson; in  Prudhoe  Bay  it would  be  the                                                                    
transmission line  from the  Prudhoe Bay  unit into  the gas                                                                    
treatment plant.  He explained that  expenditures downstream                                                                    
would not  be included as deductible  lease expenditures and                                                                    
would not have direct impact  on the upstream fiscal system.                                                                    
He  furthered   that  the  change   on  Page  56   had  been                                                                    
recommended by  legislative legal. Inducements  offered AGIA                                                                    
had been tied to the  point of production; the amendment was                                                                    
a clarifying amendment  generated by the change  made by the                                                                    
committee substitute.                                                                                                           
                                                                                                                                
Senator   Hoffman  WITHDREW   Amendment  1,   28-GS2806\Y.1,                                                                    
Nauman/Bullock,  3/9/14  (copy  on  file).  There  being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Senator   Olson   WITHDREW   Amendment   2,   28-GS2806\Y.2,                                                                    
Nauman/Bullock,  3/9/14  (copy  on  file).  There  being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Senator  Olson MOVED  to ADOPT  Amendment 3,  28-GS2806\Y.3,                                                                    
Nauman/Bullock, 3/9/14 (copy on file).                                                                                          
                                                                                                                                
     Page 3, line 7, following "project;"                                                                                       
     Insert "relating  to a restriction on  employment after                                                                    
     leaving  state   service  for  a  public   officer  who                                                                    
     negotiates a  contract or develops terms  for inclusion                                                                    
     in a  proposed contract  associated with a  North Slope                                                                    
     natural gas project;"                                                                                                      
                                                                                                                                
     Page 56, following line 14:                                                                                                
     Insert a new bill section to read:                                                                                         
     "Sec. 60. The uncodified law  of the State of Alaska is                                                                    
     amended by adding a new section to read:                                                                                   
     Restrictions on employment  after leaving state service                                                                    
     for  certain public  officers.  (a) Notwithstanding  AS                                                                    
     39.52.180, a  public officer  who leaves  state service                                                                    
     may  not, for  10  years after  leaving state  service,                                                                    
     represent, advise,  assist for compensation,  or accept                                                                    
     employment from  a person or  an affiliate of  a person                                                                    
     that was  a party  to a  contract negotiated  under the                                                                    
     authority of  AS 38.05.020(b)(11),  enacted by  sec. 15                                                                    
     of the Act, that  was under consideration or negotiated                                                                    
     by  the  administrative  unit  served  by  that  public                                                                    
     officer, and  in which the public  officer participated                                                                    
     personally  and substantially  through the  exercise of                                                                    
     official action.                                                                                                           
     (b)  This  section does  not  prohibit  an agency  from                                                                    
     contracting with  a former public  officer to act  on a                                                                    
     matter of on behalf of the state.                                                                                          
     (c) The  application of (a)  of the section may  not be                                                                    
     waived.                                                                                                                    
     (d) In  this section, "administrative  unit," "agency,"                                                                    
     and  public  officer" have  the  meanings  given in  AS                                                                    
     39.52.960."                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 59, line 4:                                                                                                           
     Delete "63"                                                                                                                
     Insert "64"                                                                                                                
                                                                                                                                
     Page 59, line 7:                                                                                                           
     Delete "secs. 64 and 65"                                                                                                   
     Insert "secs. 65 and 66"                                                                                                   
                                                                                                                                
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
5:55:56 PM                                                                                                                    
                                                                                                                                
Senator Olson  stated he  was open to  amending the  10 year                                                                    
time period.                                                                                                                    
                                                                                                                                
5:56:13 PM                                                                                                                    
                                                                                                                                
Vice-Chair Fairclough MOVED to AMEND Amendment 3:                                                                               
                                                                                                                                
     Line 12:                                                                                                                   
     Delete "10"                                                                                                                
     Insert "3"                                                                                                                 
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Vice-Chair Fairclough REMOVED her  OBJECTION to Amendment 3.                                                                    
There being  NO further  OBJECTION, Amendment 3  was adopted                                                                    
as amended.                                                                                                                     
                                                                                                                                
5:57:54 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
5:58:12 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair   Kelly   WITHDREW  Amendment   4,   28-GS2806\Y.4,                                                                    
Nauman/Bullock,  3/9/14  (copy  on  file).  There  being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
Co-Chair Kelly  gave a  brief explanation as  to why  he was                                                                    
withdrawing Amendment 4.                                                                                                        
                                                                                                                                
Co-Chair   Kelly   WITHDREW  Amendment   5,   28-GS2806\Y.5,                                                                    
Nauman/Bullock,  3/9/14  (copy  on  file).  There  being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
5:59:35 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:00:36 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Kelly  explained why  he was  withdrawing Amendment                                                                    
5.                                                                                                                              
                                                                                                                                
6:01:07 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:01:18 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
6:01:27 PM                                                                                                                    
                                                                                                                                
Co-Chair Kelly  MOVED to  ADOPT Amendment  6, 28-GS2806\Y.6,                                                                    
Nauman/Bullock, 3/9/14 (copy on file).                                                                                          
                                                                                                                                
     Page 6, line 29:                                                                                                           
     Delete "a new subsection"                                                                                                  
     Insert "new subsections"                                                                                                   
                                                                                                                                
     Pate 7, following line 6:                                                                                                  
     Insert a new subsection to read:                                                                                           
     "(d) The board shall appoint a program director for an                                                                     
     Alaska liquefied natural gas project. The program                                                                          
     director appointed under this section shall                                                                                
          (1) serve at the pleasure of the board; and                                                                           
          (2) report to the board and the executive                                                                             
          director of the corporation."                                                                                         
                                                                                                                                
Vice-Chair   Fairclough   OBJECTED   for  the   purpose   of                                                                    
discussion.                                                                                                                     
                                                                                                                                
Commissioner  Balash explained  that  the  provision was  an                                                                    
effort on the part of  the department to reconcile where the                                                                    
statutory  subsidiary had  begun  in the  original bill.  He                                                                    
felt  that specific  concerns had  been addressed;  however,                                                                    
the  work  that  AGDC  had be  narrowly  focused.  With  the                                                                    
amendment, AGDC  would continue  to pursue  that as-soon-as-                                                                    
possible effort  with the addition of  holding and investing                                                                    
the state's interest in liquefaction.                                                                                           
                                                                                                                                
Vice-Chair Fairclough REMOVED her  OBJECTION. There being NO                                                                    
further OBJECTION, Amendment 6 was ADOPTED.                                                                                     
6:03:30 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:04:46 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Kelly  MOVED to  ADOPT Amendment  7, 28-GS2806\Y.7,                                                                    
Nauman/Bullock, 3/9/14 (copy on file).                                                                                          
                                                                                                                                
     Page 9, line 24, following "project":                                                                                      
     Insert ":                                                                                                                  
     (24)  after  consultation   with  the  commissioner  of                                                                    
     revenue  and  the  commissioner of  natural  resources,                                                                    
     enter into  contracts relating  to an  Alaska liquefied                                                                    
     natural gas  project, including contracts  for services                                                                    
     related  to operation,  marketing, transportation,  gas                                                                    
     treatment, marine terminal operation or liquefaction"                                                                      
                                                                                                                                
Vice-Chair Fairclough OBJECTED for discussion.                                                                                  
                                                                                                                                
6:05:04 PM                                                                                                                    
                                                                                                                                
Commissioner Balash  explained that the amendment  would add                                                                    
to  the list  of  powers  and duties  of  the corporation  a                                                                    
provision that, after consultation  with the commissioner of                                                                    
DOR and  the commissioner of  DNR, enter into  contracts for                                                                    
the Alaska LNG  project. He said that this was  in an effort                                                                    
to  flag  the role  that  DOR  and  DNR  would play  in  the                                                                    
arrangement.  He  stated  that  AGDC would  be  signing  the                                                                    
equity  agreements with  the  other  project sponsors,  that                                                                    
that  they  would   be  doing  so  on  behalf   of  the  two                                                                    
departments.   The   amendment   would  provide   that   the                                                                    
departments received proper consultation.                                                                                       
                                                                                                                                
Vice-chair Fairclough REMOVED her  OBJECTION. There being NO                                                                    
OBJECTION, Amendment 7 was ADOPTED.                                                                                             
                                                                                                                                
Co-Chair Kelly MOVED to ADOPT Amendment 8 (copy on file).                                                                       
                                                                                                                                
     Page 5, line 1:                                                                                                            
     Delete "that benefits the state and the"                                                                                   
     Insert "for the maximum benefit of the"                                                                                    
                                                                                                                                
Vice-Chair Fairclough OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair  Kelly stated  that the  amendment  would edit  the                                                                    
purpose  language   of  AGDC  to  match   the  Alaska  State                                                                    
Constitution, Article 8, section 2, "for the maximum                                                                            
benefit of the people."                                                                                                         
                                                                                                                                
Vice-Chair Fairclough REMOVED her OBJECTION. There being NO                                                                     
further OBJECTION, Amendment 8 was ADOPTED.                                                                                     
                                                                                                                                
6:06:26 PM                                                                                                                    
                                                                                                                                
Co-Chair Kelly MOVED to ADOPT Amendment 9 (copy on file).                                                                       
                                                                                                                                
     Page 3, line 10, through page 4, line 26:                                                                                  
     Section 1: Delete all                                                                                                      
    (This amendment would delete all intent language.)                                                                          
                                                                                                                                
Vice-Chair Fairclough OBJECTED for discussion.                                                                                  
                                                                                                                                
Co-Chair Kelly explained that the amendment would remove                                                                        
Section 1 and replace the section with a letter of intent.                                                                      
                                                                                                                                
Vice-Chair Fairclough REMOVED her objection. There being NO                                                                     
OBJECTION, Amendment 9 was ADOPTED.                                                                                             
                                                                                                                                
6:07:38 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:07:55 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
6:07:59 PM                                                                                                                    
                                                                                                                                
Co-Chair Kelly discussed housekeeping concerning SB 138.                                                                        
SB 138 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
6:10:50 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
6:15:14 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                

Document Name Date/Time Subjects
SB 64 SFIN CS for SB 64 version S.pdf SFIN 3/11/2014 5:00:00 PM
SB 64
CS SB138 work draft Version Y.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 3 11 14 White Paper_TC Participation.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 1 - Hoffman.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 2 - Olson.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 3 - Olson.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 6 - Kelly.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 7 - Kelly.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 8 - Kelly.docx SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 9 - Kelly.docx SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Amendment 10 - Fairclough.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138 Changes in CS versionY.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
SB138TechnicalDraftingCorrections2.pdf SFIN 3/11/2014 5:00:00 PM
SB 138
CS SB64 Changes in version S.pdf SFIN 3/11/2014 5:00:00 PM
SB 64
CS SB64 Sise by Side Comparison version D to version S.pdf SFIN 3/11/2014 5:00:00 PM
SB 64