Legislature(2013 - 2014)

03/14/2014 10:16 AM FIN


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10:16:16 AM Start
10:16:40 AM SB138
12:29:36 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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."                                                                                                           
                                                                                                                                
10:16:40 AM                                                                                                                   
                                                                                                                                
Vice-Chair Fairclough  MOVED to ADOPT the  proposed committee                                                                   
substitute  for   SB  138   (FIN),  WORK  DRAFT   28-GS2806/R                                                                   
(Bullock, 3/12/14) as a working document.                                                                                       
                                                                                                                                
Co-Chair Kelly OBJECTED for the purpose of discussion.                                                                          
                                                                                                                                
10:18:41 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:19:19 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
JOE  DUBLER,  VICE PRESIDENT  AND  CHIEF  FINANCIAL  OFFICER,                                                                   
ALASKA     GASLINE      DEVELOPMENT     CORPORATION      (via                                                                   
teleconference),  discussed the  new Department of  Commerce,                                                                   
Community  and  Economic  Development   (DCCED)  fiscal  note                                                                   
appropriated  to the Alaska  Gasline Development  Corporation                                                                   
(AGDC).   He  referenced   the   AKLNG  Expenditure   Summary                                                                   
analysis on  page 4,  of the fiscal  note that contained  the                                                                   
projects total  expenditure summary during the  PreFEED (pre-                                                                   
front-end  engineering  and design  work)  stage. He  relayed                                                                   
that the  total appropriations  included expenditures  for FY                                                                   
14  through FY  17.  The expenditures  for  FY 16  and FY  17                                                                   
would  need  future legislative  appropriation.  He  reported                                                                   
that  the  expenditure   for  personal  services   was  $4.41                                                                   
million.                                                                                                                        
                                                                                                                                
Co-Chair  Kelly interjected  that  $66 million  of the  total                                                                   
appropriations  was  included   in  the  FY  14  supplemental                                                                   
budget.                                                                                                                         
                                                                                                                                
Mr. Dubler answered in the affirmative.                                                                                         
                                                                                                                                
Mr. Dubler  listed the  other project services  expenditures:                                                                   
$15.1  million for  contractual  services,  $2.4 million  for                                                                   
travel,  $988.2  thousand for  the  lease for  office  space,                                                                   
$582.6 thousand  for ADGC board  expenses, and  $230 thousand                                                                   
for capital  outlay. He turned  to the expenditure  for State                                                                   
Equity  Participation,   which   reflected  the  state's   25                                                                   
percent  interest in  the LNG  facility  [$57.8 million].  He                                                                   
moved  to the  State  40 percent  Option  on TransCanada  for                                                                   
$42.25 million  and detailed that  the state negotiated  a 40                                                                   
percent  buyout  on TransCanada's  midstream  operations.  He                                                                   
defined "midstream"  as including  the North Slope  treatment                                                                   
facility and  the main pipeline  from the North Slope  to Big                                                                   
Lake.  He   identified  the   expenditure  for  the   State's                                                                   
Guarantee of TransCanada  [$70.1 million] and noted  that the                                                                   
state negotiated  the reimbursement for all  of TransCanada's                                                                   
midstream expenses  plus an interest  rate of 7.1  percent if                                                                   
the  project  was  terminated   for  any  reason  other  than                                                                   
TransCanada's  voluntary  withdrawal   from  the  project  as                                                                   
contained in the  Memorandum of Agreement (MOU).  The project                                                                   
total was $194 million.                                                                                                         
                                                                                                                                
Mr. Dubler  drew attention to page  2 of the fiscal  note and                                                                   
read the following:                                                                                                             
                                                                                                                                
     This  bill expands  the purpose  of  the Alaska  Gasline                                                                   
     Development  Corporation  (AGDC)  by authorizing  it  to                                                                   
     participate  in advancing  an  Alaska liquefied  natural                                                                   
     gas  project (AKLNG)  while  continuing  to advance  the                                                                   
     in-state natural gas pipeline project…                                                                                     
                                                                                                                                
Mr. Dubler related  that AGDC would continue  to advance both                                                                   
projects  while   avoiding  intermingling  or   conflicts  of                                                                   
interest.  He  listed  the  additional  positions  that  AGDC                                                                   
would need to hire for the AK LNG project:                                                                                      
                                                                                                                                
     1 - VP, $410.0 annual burdened salary ($250.0 +                                                                            
     benefits)                                                                                                                  
     1 - Program Manager, $410.0 annual burdened salary                                                                         
     ($250.0 + benefits)                                                                                                        
     1 - Contract Compliance Officer, $196.8 annual                                                                             
     burdened salary ($120.0 + benefits)                                                                                        
     1 - Senior Accountant, $164.0 annual burdened salary                                                                       
     ($100.0 + benefits)                                                                                                        
     2 - Administrative Assistant, each at $106.6 annual                                                                        
     burdened salary ($65.0 + benefits)                                                                                         
                                                                                                                                
Mr.  Dubler  noted   that  AGDC  would  engage   in  contract                                                                   
negotiations    for   approximately    50   contracts.    The                                                                   
TransCanada transactions  and AK  LNG project billings  would                                                                   
require  an  additional accountant.  The  two  administrative                                                                   
assistants were necessary for staff support.                                                                                    
                                                                                                                                
Mr.   Dubler   communicated  that   other   project   related                                                                   
expenditures   were   necessary   in  support   of   personal                                                                   
services. The  majority of  the project related  expenditures                                                                   
were  for contractual  services. The  corporation planned  to                                                                   
hire  as  many  contractors  as   possible  to  maintain  the                                                                   
flexibility  to  add or  remove  staff according  to  project                                                                   
needs.  He related  that AGDC  anticipated  hiring two  legal                                                                   
contractors  full   time  for  approximately  two   years  at                                                                   
approximately  $600,000  in  annual  salaries  (approximately                                                                   
$300 per hour) to support AGDC's efforts  in deal origination                                                                   
and  negotiation. He  indicated  that AGDC  would hire  three                                                                   
commercial  contractors  to  assist in  negotiations  on  gas                                                                   
marketing and  gas distribution.  He noted that  the pipeline                                                                   
would  contain five  off  take points  along  the route.  The                                                                   
corporation  would need  to work with  communities along  the                                                                   
pipeline  route   in  order   to  ensure  participation   and                                                                   
adequate infrastructure  for gas  delivery. He reported  that                                                                   
AGDC would  hire three  full time  gas marketing  contractors                                                                   
focused  on  marketing   LNG  gas  overseas  at   a  cost  of                                                                   
approximately $400 thousand per year.                                                                                           
                                                                                                                                
Mr. Dubler  expected that  AGDC would  hire five  engineering                                                                   
contractors   for  the  following:   North  Slope   facility,                                                                   
pipeline, LNG facility,  and two subject matter  experts. The                                                                   
project  engineers  would oversee  the  work that  was  being                                                                   
done  by  the  AK  LNG  project.  He  referenced  the  travel                                                                   
expenses of  $2.4 million  on page 3  of the fiscal  note. He                                                                   
stated  that  most  of  the  meetings  that  AGDC  held  were                                                                   
located  in  Anchorage,  Seattle,   Washington  and  Houston,                                                                   
Texas.  Extensive  and  frequent   travel  expenses  will  be                                                                   
incurred  by senior  corporate staff.  He moved  to the  AGDC                                                                   
board appropriation  and anticipated that its  board meetings                                                                   
would run  once per month and  would take up to  several full                                                                   
days due  to the increased  responsibilities from the  AK LNG                                                                   
project [$582.6  thousand]. He pointed to the  capital outlay                                                                   
expenses  of  $230  thousand  for  communications  equipment,                                                                   
Information Technology,  and furnishings for  expanded staff.                                                                   
He  discussed   the  Capital  Investment   and  Participation                                                                   
Expenditures. He  reported that AGDC's share of  the pre-feed                                                                   
LNG  facility  technical  costs  set  at  25  percent  equity                                                                   
participation  were estimated  at $42.5  million of the  $170                                                                   
million   total.   The  corporation   anticipated   that   an                                                                   
additional  $2  million  will  be required  to  cover  AGDC's                                                                   
share  of  nontechnical  project costs  that  included  items                                                                   
such as public outreach for a subtotal of $44.5 million.                                                                        
                                                                                                                                
10:29:25 AM                                                                                                                   
                                                                                                                                
Vice-Chair  Fairclough  referred  to  Mr.  Dubler's  comments                                                                   
that government  lobbying was prohibited from  AGDC's portion                                                                   
of the nontechnical project costs.                                                                                              
                                                                                                                                
Mr. Dubler  confirmed the  statement and acknowledged  AGDC's                                                                   
restriction   on  spending   state  funds   to  lobby   state                                                                   
government.                                                                                                                     
                                                                                                                                
Vice-Chair Fairclough  inquired whether AGDC could  lobby the                                                                   
federal government for the export permit.                                                                                       
                                                                                                                                
Mr.  Dubler answered  that the  application  process for  the                                                                   
export permit was not considered a lobbying effort.                                                                             
                                                                                                                                
Vice-Chair Fairclough  wanted to ensure that the  language in                                                                   
the  CS allowed  the state  to  apply to  the Federal  Energy                                                                   
Regulatory Commission (FERC) for the export permit.                                                                             
                                                                                                                                
Co-Chair Kelly  requested that  Mr. Dubler  follow up  on the                                                                   
concern.                                                                                                                        
                                                                                                                                
Mr. Dubler agreed.  He continued to speak to  the fiscal note                                                                   
and  related that  AGDC  included  a 30  percent  contingency                                                                   
[$13.3  million]. He  explained  that the  estimated  project                                                                   
total  of  $435  million  was   a  rough  approximation  that                                                                   
initially was  as high as $450  million to $550  million. The                                                                   
contingency  would allow  AGDC to  continue participating  in                                                                   
the  project  if  a  "cash  call"   for  expended  funds  was                                                                   
required  by  the lead  participant.  If  AGDC did  not  have                                                                   
adequate  funds  the  corporation  would be  in  default  and                                                                   
barred  from  the  project.  He  pointed  to  the state's  40                                                                   
percent  buy-out option  on TransCanada  midstream  interests                                                                   
of $26.5 million.  If exercised, TransCanada was  entitled to                                                                   
a reimbursement  for all  of its  non-technical costs  on the                                                                   
40  percent  of  its midstream  interest  estimated  at  $6.0                                                                   
million  subtotaling   $32.5  million.  In  addition,   a  30                                                                   
percent contingency  of $9.75 million  was added for  a total                                                                   
of $42.25 million.                                                                                                              
                                                                                                                                
Mr.  Dubler  drew attention  to  the  TransCanada  Investment                                                                   
Return Guarantee  expenditure on page  4 of the  fiscal note.                                                                   
He communicated  that if  TransCanada failed  to progress  to                                                                   
the FEED  stage of  the project,  the MOU  between the  State                                                                   
and TransCanada  required the  state to include the  Pre-FEED                                                                   
costs of 15  percent on TransCanada's midstream  share of the                                                                   
total  project   costs  amounting  to  $265   million,  which                                                                   
totaled   $39.75   million   plus   any   non-technical   and                                                                   
developmental  cost  allocations   estimated  at  $9  million                                                                   
subtotaling  $48.75  million.  In addition,  the  30  percent                                                                   
contingency  of $14.625  million and the  7.1 percent  return                                                                   
on  the investment  AFUDC (allowance  for  funds used  during                                                                   
construction) of  $6.749 million were included  for the total                                                                   
buy-out  costs of  $70.124 million.  He  reiterated that  the                                                                   
total FY  14 supplemental  costs associated  with the  fiscal                                                                   
note total appropriation was $66.726 million.                                                                                   
                                                                                                                                
Co-Chair Kelly  inquired whether  the request in  the current                                                                   
year was  $66.726  million and  that all of  the fiscal  note                                                                   
expenditures  would  take  place  between  enactment  of  the                                                                   
legislation and the FEED stage.                                                                                                 
                                                                                                                                
Mr. Dubler replied in the affirmative.                                                                                          
                                                                                                                                
Co-Chair  Kelly  questioned whether  the  remaining  $194.018                                                                   
million required future legislative appropriation.                                                                              
                                                                                                                                
Mr. Dubler  replied in  the affirmative  and relayed  that at                                                                   
the same  time the legislature  could choose to  exercise the                                                                   
40 percent TransCanada midstream buy-out option.                                                                                
                                                                                                                                
Co-Chair Meyer  inquired whether  30 percent  was a  usual or                                                                   
customary amount  for a contingency fee. He  thought that the                                                                   
amount was excessive.                                                                                                           
                                                                                                                                
MICHAEL  PAWLOWSKI, DEPUTY  COMMISSIONER, STRATEGIC  FINANCE,                                                                   
DEPARTMENT  OF  REVENUE, replied  that  he  did not  have  an                                                                   
opinion on  the contingency fee  and stated that  the project                                                                   
manager would be better suited to answer the question.                                                                          
10:38:14 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
10:40:22 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Mr. Pawlowski observed  that the $70 million  expenditure for                                                                   
the investment  return guarantee  and the state's  40 percent                                                                   
buy-out  option with  TransCanada would  be a  "participatory                                                                   
decision"  with the  legislature. The  costs were  "outliers"                                                                   
that might or might not occur.                                                                                                  
                                                                                                                                
Co-Chair  Kelly   noted  that  members  were   questioning  a                                                                   
contingency  as  large  as  30  percent.  He  noted  that  30                                                                   
percent  was  probably  not excessive  considering  the  real                                                                   
possibility of  project cost increases  of up to  25 percent.                                                                   
He  requested  further  justification   for  the  30  percent                                                                   
contingency.                                                                                                                    
                                                                                                                                
Mr. Dubler  stated that  the project  was at the  "conceptual                                                                   
level" and  that accurate cost  estimations for a  three year                                                                   
period  was extremely  difficult. The  corporation felt  that                                                                   
the  current  estimates were  low  and  had included  the  30                                                                   
percent   contingency   to   allow   for   AGDC's   continued                                                                   
participation  in  the event  of  cost overruns.  He  relayed                                                                   
that  the producers  were  including contingencies  in  their                                                                   
cost  estimates  and  TransCanada supported  the  30  percent                                                                   
figure.                                                                                                                         
                                                                                                                                
Co-Chair  Kelly reminded  the committee  that the costs  were                                                                   
estimates  and  much  of  the   appropriation  would  not  be                                                                   
expended in  the current  budget cycle.  He supported  the 30                                                                   
percent  contingency  language.  He asked  Mr.  Pawlowski  to                                                                   
briefly   summarize   why   the   administration   felt   the                                                                   
relationship with TransCanada was a benefit to the state.                                                                       
                                                                                                                                
Mr. Pawlowski responded  that the benefit of  the TransCanada                                                                   
partnership,  beyond  its  expertise   and  support  for  the                                                                   
state,  was the  commitment of  capital;  if TransCanada  was                                                                   
not in  the position  of carrying  the state's  share in  the                                                                   
midstream    Pre-Feed   portion    of   the   project,    the                                                                   
appropriation  requests  would  be significantly  higher.  He                                                                   
pointed out that  the move by the committee to  take a larger                                                                   
share of  the gas and  a larger position  in the  project was                                                                   
supported  by the  partnership  with TransCanada  and in  the                                                                   
long term interest of the state.                                                                                                
                                                                                                                                
Co-Chair  Kelly  wanted  to discuss  the  new  Department  of                                                                   
Natural  Resources  (DNR)  fiscal   note  in  the  amount  of                                                                   
$8.961.7 million in FY 2015.                                                                                                    
                                                                                                                                
JOE BALASH,  COMMISSIONER, DEPARTMENT  OF NATURAL  RESOURCES,                                                                   
reported   that  the   department's   fiscal  note   remained                                                                   
unchanged from the  original version of the  legislation. The                                                                   
expenditures were  related to the department's  participation                                                                   
in developing  the upstream  and marketing agreements,  which                                                                   
included   contractual  spending   for   legal  counsel   and                                                                   
consultant expertise.                                                                                                           
                                                                                                                                
Senator  Bishop   wondered  whether   the  department   would                                                                   
encounter  difficulty  in  recruiting  consultants  with  the                                                                   
required expertise.                                                                                                             
                                                                                                                                
Commissioner Balash  thought that the opportunity  to be part                                                                   
of the  project would attract  the required caliber  of staff                                                                   
necessary to succeed.                                                                                                           
                                                                                                                                
Co-Chair  Kelly continued  with  the fiscal  notes. He  cited                                                                   
the  new zero  CCED fiscal  note appropriated  to the  Alaska                                                                   
Energy  Authority (AEA).  He  pointed to  a  new zero  fiscal                                                                   
note appropriated for Fund Capitalization.                                                                                      
                                                                                                                                
Co-Chair Meyer interjected  that the DCCED [AEA]  fiscal note                                                                   
contained a capital cost [$1.375. million].                                                                                     
                                                                                                                                
Co-Chair Meyer requested a summary of the fiscal notes.                                                                         
                                                                                                                                
Co-Chair Kelly  requested that additional information  on the                                                                   
AGDC fiscal  note was  sent to members  before the  bill went                                                                   
to the Senate floor for a vote.                                                                                                 
                                                                                                                                
Mr. Dubler agreed.                                                                                                              
                                                                                                                                
10:53:19 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
11:00:22 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair  Fairclough  observed  that  there were  two  AGDC                                                                   
fiscal notes  that both referenced  the $66.726.7  million FY                                                                   
14 supplemental cost and asked for clarification.                                                                               
                                                                                                                                
Mr.  Dubler explained  that the  first DCCED  fiscal note  he                                                                   
previously discussed  granted the  actual authority  to spend                                                                   
the fund.  The fund  source code  listed on  the fiscal  note                                                                   
(1178 temporary  code) was the  fund that the other  new Fund                                                                   
Capitalization fiscal  note created. The  Fund Capitalization                                                                   
fiscal note  transferred the $66.726  million into  the Large                                                                   
Diameter  Natural  Gas Pipeline  Fund  and the  DCCED  [AGDC]                                                                   
fiscal note authorized expenditures from the fund.                                                                              
                                                                                                                                
Vice-Chair Fairclough requested additional clarification.                                                                       
                                                                                                                                
Mr. Dubler replied  that the Fund Capitalization  fiscal note                                                                   
transferred  the  $66.726.7  million from  the  general  fund                                                                   
into   the  Large   Diameter   Natural   Gas  Pipeline   Fund                                                                   
established  in SB  138.  He recounted  that  once the  funds                                                                   
were  transferred into  the pipeline  fund  the DCCED  [AGDC]                                                                   
fiscal note authorized expenditures from the fund.                                                                              
                                                                                                                                
Mr. Pawlowski  communicated that  the other fiscal  notes had                                                                   
previously  been submitted  by  DOR and  that  there were  no                                                                   
changes from  the previous versions.  He delineated  that the                                                                   
DOR (FN  4 (REV)  fiscal note  appropriated $250 thousand  to                                                                   
the Department  of Law  for developing regulations  regarding                                                                   
the  new tax  provisions and  $500,000  was appropriated  for                                                                   
contracts  to upgrade  the tax  revenue management  system to                                                                   
reflect the tax  law changes in SB 138. He reported  that the                                                                   
new DOR  fiscal note  in the  amount of  $500 thousand  was a                                                                   
direct result  of an amendment  added in the  Senate Resource                                                                   
Committee  version  mandating DOR  to  undertake  a study  to                                                                   
determine  how   individual  Alaskans   can  invest   in  the                                                                   
pipeline project,  which was  expanded to municipalities  and                                                                   
regional corporations in the Senate Finance Committee.                                                                          
                                                                                                                                
Co-Chair  Meyer inquired  what  the total  FY 14  expenditure                                                                   
was.                                                                                                                            
                                                                                                                                
11:06:12 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
11:07:21 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair  Kelly  related  that   the  committee  was  in  the                                                                   
process of verifying the fiscal notes for the record.                                                                           
                                                                                                                                
11:07:48 AM                                                                                                                   
AT EASE                                                                                                                         
11:09:32 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Mr. Pawlowski  recounted  that in FY  15, the  appropriations                                                                   
for  DOR were  $750 thousand  and  $500 thousand.  The FY  15                                                                   
appropriation  for DNR  totaled $8.961.7  million and  $1.375                                                                   
million  in capital  costs that  were  appropriated for  AEA.                                                                   
The  total in  FY 15  was $11.586.7  million.  He added  that                                                                   
$1.394 million from  the AGDC fiscal note was  not counted in                                                                   
the  total  because the  money  was  coming  from the  FY  14                                                                   
appropriation of $66.726.7 million.                                                                                             
                                                                                                                                
Co-Chair Kelly  noted that the  $1.394 million was  a capital                                                                   
appropriation.                                                                                                                  
                                                                                                                                
Co-Chair  Meyer  wondered  what   the  fund  source  for  the                                                                   
funding was.                                                                                                                    
                                                                                                                                
Mr. Pawlowski  replied that the  fund source was  the general                                                                   
fund.                                                                                                                           
                                                                                                                                
Co-Chair Meyer  inquired if the  source of the  general funds                                                                   
was the Statutory Budget Reserve (SBR).                                                                                         
                                                                                                                                
Mr. Pawlowski responded in the affirmative.                                                                                     
                                                                                                                                
Co-Chair Kelly  requested that Commissioner Balash  provide a                                                                   
brief synopsis of  the Senate Finance Committee's  changes to                                                                   
SB 138.                                                                                                                         
                                                                                                                                
Commissioner Balash  communicated that the  committee enabled                                                                   
the process to  advance to the PreFEED phase  and develop the                                                                   
next round of  agreements. The legislation authorized  DNR to                                                                   
participate in  the project at  the 25 percent  threshold and                                                                   
provided  a process  for advancement  of  the project,  which                                                                   
included   briefing  legislative   committees  in   executive                                                                   
session.  Additionally,  the committee had  identified AGDC's                                                                   
role very  clearly in terms of  the agreements that  it would                                                                   
sign. He  emphasized that AGDC  would be the  signatories for                                                                   
the  equity agreements.  Consequently,  a midstream  services                                                                   
agreement between  DOR and DNR  was necessary. AGDC  would be                                                                   
the signatory  for the  agreements along  with the  producers                                                                   
and  TransCanada.  The  rest   of  the  agreements:  royalty,                                                                   
fiscal,  upstream   balancing,   off  take  agreements,   LNG                                                                   
marketing,  and  the  mid-stream  services  agreements  would                                                                   
require the  signatures of DOR  and DNR. He thought  that the                                                                   
committee    had   clearly   identified    the   roles    and                                                                   
responsibilities of  the departments and AGDC.  He added that                                                                   
AGDC was  authorized to promote  both the AK LNG  project and                                                                   
the  in-state  gas  pipeline  project  efficiently  with  the                                                                   
option to pursue either project in the future.                                                                                  
                                                                                                                                
11:15:38 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
11:15:59 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Kelly WITHDREW his OBJECTION. There being NO                                                                           
further OBJECTION, WORK DRAFT 28-GS2806/R (Bullock,                                                                             
3/12/14) was ADOPTED as a working document.                                                                                     
                                                                                                                                
11:16:07 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
11:45:11 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Kelly introduced Amendment 1.                                                                                          
                                                                                                                                
11:46:02 AM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
11:51:19 AM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Senator Bishop MOVED to ADOPT Amendment 1 28-GS2806\R.1,                                                                        
Nauman/Bullock 3/13/14 (copy on file):                                                                                          
                                                                                                                                
     Page 2, line 4, following "gas;";                                                                                          
     Insert "relating to the oil or gas producers education                                                                     
     credit;"                                                                                                                   
                                                                                                                                
     Page 30, line 19, following "programs,":                                                                                   
     Insert "equipment,"                                                                                                        
                                                                                                                                
     Page 30, line 20, following "school":                                                                                      
     Insert   ",  a   nonprofit   regional  training   center                                                                   
     recognized  by the  Department  of  Labor and  Workforce                                                                   
     Development,  and  an  apprenticeship   program  in  the                                                                   
     state  that   is  registered   with  the  United   State                                                                   
     Department  of Labor under  29 U.S.C. 50-  50b (National                                                                   
     Apprenticeship Act)"                                                                                                       
                                                                                                                                
     Page 31, line 1:                                                                                                           
     Delete "and"                                                                                                               
     Following "2012"                                                                                                           
     Insert "and sec. 36 of this Act"                                                                                           
                                                                                                                                
     Page 31, line 10-11:                                                                                                       
     Delete all material and insert:                                                                                            
     "(3)   for  vocational   education  courses,   programs,                                                                   
     equipment,   and   facilities  by   the   state-operated                                                                   
     vocational  technical education  and training  school, a                                                                   
     nonprofit  regional training  center  recognized by  the                                                                   
     Department  of Labor and  Workforce Development,  and an                                                                   
     apprenticeship program  in the state that  is registered                                                                   
     with  the United  State  Department  of Labor  under  29                                                                   
     U.S.C. 50-50b (National Apprenticeship Act); and"                                                                          
                                                                                                                                
Co-Chair Kelly OBJECTED for the purpose of discussion.                                                                          
                                                                                                                                
Senator  Bishop spoke  to Amendment  1. He  offered that  the                                                                   
intent  of the  amendment  was to  increase  and improve  the                                                                   
workforce  for the  15,000 direct  and  25,000 indirect  jobs                                                                   
that would  be created from  a gasline system.  He delineated                                                                   
that  roughly three  years ago  the Department  of Labor  and                                                                   
Workforce   Development  (DOL)   had   identified  about   15                                                                   
regional   training  centers   however,   the  centers   were                                                                   
ineligible  for the  education  tax credit  that was  enacted                                                                   
under previous oil  and gas legislation. He  pointed out that                                                                   
the  amendment qualified  the  training centers  for the  tax                                                                   
credit and included apprenticeship programs.                                                                                    
                                                                                                                                
Co-Chair  Kelly asked  what type  of apprenticeship  programs                                                                   
qualified for the credit.                                                                                                       
                                                                                                                                
Senator  Bishop  answered  that   union,  non-union,  jointly                                                                   
administered  trust,   and  single  employer   apprenticeship                                                                   
programs all qualified for the tax credit.                                                                                      
                                                                                                                                
Co-Chair  Kelly  WITHDREW  his   OBJECTION.  There  being  NO                                                                   
further OBJECTION, Amendment 1 was ADOPTED.                                                                                     
                                                                                                                                
Senator Hoffman  MOVED to  ADOPT Amendment 2,  28-GS2806\R.2,                                                                   
Bullock, 3/13/14 (copy on file):                                                                                                
                                                                                                                                
     Page 2, line 13, following "development;":                                                                                 
     Insert "establishing the rural capital energy fund;"                                                                       
                                                                                                                                
     Page 11, following line 26:                                                                                                
     Insert a new bill section to read:                                                                                         
     "*Sec. 13. AS  37.05 is amended by adding  a new section                                                                   
     to article 6 to read:                                                                                                      
     Sec. 37.05.610  Rural capital energy fund.(a)  The rural                                                                   
     capital energy  fund is created  as a special  amount in                                                                   
     the  general  fund.  The  fund consists  of  the  amount                                                                   
     determined and  deposited in the fund under  (b) of this                                                                   
     section  and interest  earned on  the fund balance.  The                                                                   
     purpose of  the fund is to  provide a source  from which                                                                   
     the  legislature   may  appropriate  money   to  develop                                                                   
     infrastructure to  deliver energy to areas  of the state                                                                   
     that  are not  expected to  have or do  not have  direct                                                                   
     access the a North Slope natural gas pipeline.                                                                             
          (b) The amount to be deposited in (a) of this                                                                         
     section is  30 percent of the revenue received  from the                                                                   
     state's royalty  gas transported in an  Alaska Liquefied                                                                   
     natural gas  project that  remains after the  payment to                                                                   
     the Alaska permanent fund under AS 37.13.010.                                                                              
          (c) The Legislature may make appropriations from                                                                      
     the   rural  capital   energy  fund   for  the   purpose                                                                   
     described in (a) of this section.                                                                                          
          (d) Nothing in this section creates a dedicated                                                                       
     fund.                                                                                                                      
          (e) In this section,                                                                                                  
               (1) "Alaska Liquefied natural gas project"                                                                       
               had meaning given in AS 31.25.390;                                                                               
               (2) "North Slope natural gas pipeline" has                                                                       
               the meaning given in AS 42.06.630."                                                                              
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 13, line 21:                                                                                                          
          Delete "sec. 13"                                                                                                      
          Insert "sec. 14"                                                                                                      
                                                                                                                                
     Page 17, line 11:                                                                                                          
          Delete "sec. 16"                                                                                                      
          Insert "sec. 17"                                                                                                      
                                                                                                                                
     Page 21, line 3:                                                                                                           
          Delete "sec. 26"                                                                                                      
          Insert "sec. 27"                                                                                                      
                                                                                                                                
     Page 24, line 27:                                                                                                          
          Delete "sec. 29"                                                                                                      
          Insert "sec. 30"                                                                                                      
     Page 52, line 31:                                                                                                          
          Delete "sec. 15"                                                                                                      
          Insert "sec. 16"                                                                                                      
                                                                                                                                
     Page 53, lines 18-19:                                                                                                      
          Delete "sec. 22"                                                                                                      
          Insert "sec. 23"                                                                                                      
                                                                                                                                
     Page 54, line 17:                                                                                                          
          Delete "sec. 13"                                                                                                      
          Insert "sec. 14"                                                                                                      
                                                                                                                                
     Page 55, line 29:                                                                                                          
          Delete "Sections 1-13, 15, 16, 22-26, 28, 29, 36,                                                                     
          38, and 54-61"                                                                                                        
          Insert "Sections 1-14, 16, 17, 23-27, 29, 30, 37,                                                                     
          39, and 55-62"                                                                                                        
                                                                                                                                
     Page 56, line 1:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
Co-Chair Kelly OBJECTED for the purpose discussion.                                                                             
                                                                                                                                
Senator  Hoffman   MOVED  to  ADOPT  Amendment   2  with  the                                                                   
following modification:                                                                                                         
                                                                                                                                
     Page 1, line 14:                                                                                                           
     Delete "30"                                                                                                                
     Insert "10"                                                                                                                
                                                                                                                                
Co-Chair Kelly  stated that the  motion needed to  be offered                                                                   
as  an  amendment  to Amendment  2  and  would  be  addressed                                                                   
later.                                                                                                                          
                                                                                                                                
TIM  GRUSSENDORF,  STAFF,  SENATOR LYMAN  HOFFMAN,  spoke  to                                                                   
amendment 2  and related that  the amendment's intent  was to                                                                   
respond to  members' concerns that  all regions of  the state                                                                   
would benefit  from the proposed  LNG pipeline.  He explained                                                                   
that  Section 59,  page  53 of  the  current  version of  the                                                                   
legislation  (CS   Work  Draft  SB  138   (FIN)  28-GS2806/R)                                                                   
directed  AEA and  Alaska Industrial  Development and  Export                                                                   
Authority   (AIDEA)    to   develop    a   plan    and   make                                                                   
recommendations  to the  legislature  by January  1, 2017  on                                                                   
infrastructure  needs  to develop  and  deliver  any type  of                                                                   
affordable  energy  to  all  regions  of  the  state  without                                                                   
direct  access  to  the  North  Slope  natural  gasline.  The                                                                   
amendment established  a fund  from the natural  gas pipeline                                                                   
royalties. He noted  that line 14 established the  rate of 30                                                                   
percent and  would be drawn on  the amount after  the deposit                                                                   
to the  permanent fund. He cited  line 18 (c)  that clarified                                                                   
that  the legislature  "may" authorize  the appropriation  in                                                                   
order not to  commit future legislatures. He  referenced line                                                                   
20 (d) that  specified that the fund would  not be dedicated.                                                                   
He  reported  that  the  rest   of  the  amendment  contained                                                                   
definitions and conforming changes.                                                                                             
                                                                                                                                
Co-Chair  Kelly   MOVED  to  AMEND   Amendment  2   with  the                                                                   
following change:                                                                                                               
                                                                                                                                
     Page 1, line 14:                                                                                                           
     Delete "30"                                                                                                                
     Insert "10"                                                                                                                
                                                                                                                                
There being NO OBJECTION, Amendment 2 was AMENDED.                                                                              
                                                                                                                                
Co-Chair Meyer  noted that  he liked  the amended version  of                                                                   
Amendment 2,  set at  10 percent instead  of 30 percent  much                                                                   
better,  but  thought  that the  project  would  benefit  the                                                                   
entire  state  of  Alaska.  He opined  that  "a  rising  tide                                                                   
raises  all  ships" and  thought  that  there would  be  more                                                                   
revenue coming into  the general fund, which  would result in                                                                   
more  funding   to  distribute   throughout  the   state.  He                                                                   
expressed concern  that the amendment was  potentially taking                                                                   
money from future  legislatures who might need  the money for                                                                   
Medicaid,  the unfunded  liability, or  education. He  stated                                                                   
that  the state  had  well over  one hundred  different  fund                                                                   
sources  and that the  amendment was  creating another  fund.                                                                   
He noted  that there  were already  several  funds set  up to                                                                   
address the  energy problems in  Rural Alaska. He  pointed to                                                                   
the  Power Cost  Equalization (PCE)  Fund and  noted that  it                                                                   
had  a large  endowment for  Rural Alaska.  He mentioned  the                                                                   
Low Income  Home Energy Assistance  Program (LIHEAP)  and the                                                                   
Renewable  Energy   Fund  and   related  that  most   of  the                                                                   
programs'  funding was  going  to rural  Alaska. He  believed                                                                   
that  Alaska  already  had  a lot  of  funds  that  addressed                                                                   
energy  needs  in  Rural Alaska,  but  understood  that  some                                                                   
needs were  not being  addressed. He  reiterated his  concern                                                                   
that  the consequences  of adopting  Amendment  2 would  take                                                                   
away  some flexibility  and  options for  future  legislators                                                                   
that might need the funding in the general fund.                                                                                
                                                                                                                                
11:59:18 AM                                                                                                                   
                                                                                                                                
Senator Hoffman offered  that the problem with  the high cost                                                                   
of energy in  Alaska was that people were  leaving Fairbanks,                                                                   
Rural  Alaska,  and the  state.  He  wondered what  good  the                                                                   
legislature  was  doing  developing energy  resources  if  it                                                                   
could not  address the energy  needs of Alaskans.  He thought                                                                   
that Alaska  needed to monetize  the gas, but that  it needed                                                                   
to  be  sure  that all  Alaskans  benefited  from  the  lower                                                                   
energy costs.  He felt that  Alaskans agreed with  his belief                                                                   
that  Alaskans   should  benefit   from  energy   development                                                                   
through reduced energy  costs. He related that  even with all                                                                   
of the  energy assistance  programs, people  in Rural  Alaska                                                                   
were  still  spending  40  percent to  60  percent  of  their                                                                   
disposable  income  on  energy  needs. He  believed  that  if                                                                   
people  were  paying  40  percent  to  60  percent  of  their                                                                   
disposable  income on energy  needs in  any urban  community,                                                                   
remedial action would be taken.                                                                                                 
                                                                                                                                
Senator Hoffman  furthered that  the effect of  the amendment                                                                   
would  not be  immediate. The  state  would have  to wait  at                                                                   
least  eighteen  years  before  the  pipeline  could  provide                                                                   
relief from  high energy  costs. He  felt that the  amendment                                                                   
gave hope to all Alaskans.                                                                                                      
                                                                                                                                
12:02:16 PM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
12:02:45 PM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Vice-Chair  Fairclough inquired  whether any effective  dates                                                                   
in the bill were altered by Amendment 2.                                                                                        
                                                                                                                                
Senator  Hoffman replied  that effective  dates would  not be                                                                   
affected by the amendment.                                                                                                      
                                                                                                                                
Vice-Chair Fairclough  requested clarification on  the record                                                                   
regarding  what the definition  of "rural"  was. She  pointed                                                                   
out that  her district had a  rural component even  though it                                                                   
was close to an urban center.                                                                                                   
                                                                                                                                
Senator Hoffman  stated that  for the  purposes of  the rural                                                                   
capital  energy  fund  the  amendment   specified  who  would                                                                   
benefit from the fund on line 12:                                                                                               
                                                                                                                                
     …areas of the state that are not expected to have or                                                                       
     do not have direct access to a North Slope natural gas                                                                     
     pipeline.                                                                                                                  
                                                                                                                                
Vice-Chair  Fairclough  appreciated   the  clarification  and                                                                   
noted that  there were many  different definitions  in Alaska                                                                   
statutes to describe "rural".                                                                                                   
                                                                                                                                
Co-Chair Kelly supported the language in the amendment.                                                                         
                                                                                                                                
Senator  Dunleavy supported  the amendment  and wanted  to be                                                                   
added  as  a sponsor  to  Amendment  2.  He offered  that  he                                                                   
represented  a  district  where  some areas  would  not  have                                                                   
direct access to the gas pipeline.                                                                                              
                                                                                                                                
Co-Chair   Kelly   commented   that  after   much   committee                                                                   
discussion he thought  that Senator Hoffman was  on the right                                                                   
track  offering the  amendment in  order to  ensure that  the                                                                   
entire state benefited from the project.                                                                                        
                                                                                                                                
Co-Chair Kelly WITHDREW his OBJECTION.                                                                                          
                                                                                                                                
Senator  Olson  wanted  the  public  to  be  aware  that  the                                                                   
committee was  looking out  for all of  the residents  of the                                                                   
state. He  disagreed with  Co-Chair Meyer's  comment that  "a                                                                   
rising tide raises  all ships." He believed  that the natural                                                                   
gas pipeline  would not benefit  isolated areas of  the state                                                                   
in Rural  Alaska. He pointed out  that Alaska was  an "owner"                                                                   
state  and  all   of  the  residents  of  Alaska   owned  the                                                                   
resource.   He wanted  to help  all of the  "disenfranchised"                                                                   
people  of the state  that pay  high energy  costs and  would                                                                   
not  benefit from  the  resource when  the  gas pipeline  was                                                                   
operational.  He thanked  the  committee for  its support  of                                                                   
the  amendment  especially  for   the  residents  that  would                                                                   
benefit from its adoption.                                                                                                      
                                                                                                                                
Co-Chair  Kelly  believed  that the  legislature  would  look                                                                   
back at  Amendment 2 as a  legacy decision creating  a legacy                                                                   
fund.                                                                                                                           
                                                                                                                                
There being  NO further  OBJECTION, Amendment  2 was  ADOPTED                                                                   
as amended.                                                                                                                     
                                                                                                                                
Co-Chair  Kelly MOVED  to ADOPT  Amendment 3,  28-GS2806\R.3,                                                                   
Bullock, 3/13/14 (copy on file):                                                                                                
                                                                                                                                
     Page 8, line 22-24:                                                                                                        
     Delete ", but may not use money appropriated for the                                                                       
     purposes as described in AS 31.25.005(5)"                                                                                  
                                                                                                                                
     Page 9, lines 8-9"                                                                                                         
     Delete  ", but  the corporation  may not  use the  money                                                                   
     appropriated to  the fund for the purposes  described in                                                                   
     AS 31.25.005(4)"                                                                                                           
                                                                                                                                
     Page 9, line 20-23:                                                                                                        
     Delete  "A  subsidiary corporation  created  under  this                                                                   
     section  may  be  incorporated   under  AS  10.20.146  -                                                                   
     10.20.166,    or   other    law   applicable    to   the                                                                   
     incorporation  of  the subsidiary  corporation.  Subject                                                                   
     to the exceptions and"                                                                                                     
     Insert "Subject to the"                                                                                                    
                                                                                                                                
     Page 9, line 25, following "[":                                                                                            
     Insert  "A  SUBSIDARY  CORPORATION  CREATED  UNDER  THIS                                                                   
     SECTION  MAY  BE  INCORPORATED   UNDER  AS  10.20.146  -                                                                   
     10.20.166"                                                                                                                 
                                                                                                                                
12:11:15 PM                                                                                                                   
                                                                                                                                
BRUCE  CAMPBELL,   STAFF,  SENATOR   PETE  KELLY,   spoke  to                                                                   
Amendment  3.  He  relayed  that AGDC  had  operated  as  two                                                                   
distinct subsidiaries;  one in  the interest of  the in-state                                                                   
gas  pipeline and  another  in  the interest  of  the AK  LNG                                                                   
project. In  an effort to  create efficiencies,  the previous                                                                   
committee removed  the separation that caused AGDC  to act as                                                                   
two  subsidiaries.  However,  the  language  prohibiting  the                                                                   
corporation from  expending funding appropriated  to one fund                                                                   
for  the  purposes  of  another  remained  in  the  bill.  He                                                                   
expounded   that   the   amendment   maintained   the   funds                                                                   
separation but  removed the prohibition to  allow operational                                                                   
efficiency and avoid needing separate staff for each fund.                                                                      
                                                                                                                                
Co-Chair  Kelly  WITHDREW  his   OBJECTION.  There  being  NO                                                                   
further OBJECTION, Amendment 3 was ADOPTED.                                                                                     
                                                                                                                                
Co-Chair Kelly  moved to Amendment  4 and explained  that the                                                                   
amendment addressed  a change that the committee  included in                                                                   
the  current  version  of  the bill,  which  related  to  the                                                                   
restriction on  employment subsequent  to work on the  AK LNG                                                                   
project.  He indicated  that  the  language in  the  previous                                                                   
amendment  was  too  restrictive   and  may  have  unintended                                                                   
consequences.   The  language   already  existed  in   ethics                                                                   
statutes.                                                                                                                       
Co-Chair  Kelly MOVED  to ADOPT  Amendment 4,  28-GS2806\R.4,                                                                   
Bullock, 3/14/14 (copy on file):                                                                                                
                                                                                                                                
     Page 2, lines 5-7                                                                                                          
     Delete all material.                                                                                                       
                                                                                                                                
     Page 52, line, through page 53, line 8:                                                                                    
     Delete all material.                                                                                                       
                                                                                                                                
     renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 55, line 29:                                                                                                          
     Delete "54-61"                                                                                                             
     Insert "54-60"                                                                                                             
                                                                                                                                
     Page 56, line 1:                                                                                                           
     Delete "secs. 62 and 63"                                                                                                   
     Insert "secs. 61 and 62"                                                                                                   
                                                                                                                                
Co-Chair Meyer OBJECTED for the purpose discussion.                                                                             
                                                                                                                                
SUSAN  POLLARD, ASSISTANT  ATTORNEY  GENERAL,  OIL, GAS,  AND                                                                   
MINING  SECTION, DEPARTMENT  OF LAW,  discussed amendment  4.                                                                   
She described  how the Executive  Ethics Act affected  public                                                                   
officers   [employee]   and  employment   restriction   after                                                                   
leaving board  membership or  state employment. She  detailed                                                                   
that  the Amendment  related  to Section  57  in the  current                                                                   
version of  the bill  and referenced  the ethics act  located                                                                   
in  Title 39,  Chapter 25,  Section  100, which  specifically                                                                   
restricted  public employment  after  leaving state  service.                                                                   
The bill  did not  change the act  except for the  uncodified                                                                   
law that  related specifically  to the contract  negotiations                                                                   
in Section 13  of the bill. She elaborated  that AS 39.52.180                                                                   
limited a public  officer (employee) or a board  member "from                                                                   
accepting  compensation  for  services  after  leaving  state                                                                   
service  related  to  a matter."  "Matter"  was  specifically                                                                   
described  in   the  act  as   "includes  a  case   preceding                                                                   
application     contract    determination     proposal     or                                                                   
consideration  of   a  legislative  bill,  a   resolution,  a                                                                   
constitutional  amendment,  or   other  legislative  measure,                                                                   
proposal,  consideration, or  adoption  of an  administrative                                                                   
regulation."  She  added  that   "if  a  person  participated                                                                   
personally  and substantially  in  a particular  matter  they                                                                   
would  be limited  under  the  two year  time  period of  the                                                                   
Executive  Ethics   Act  from   acting  on  the   matter  for                                                                   
compensation" subsequent to leaving state service.                                                                              
                                                                                                                                
Senator Olson  referenced AS  39.52.010 regarding  the public                                                                   
officers  and employees  under  the Alaska  Executive  Branch                                                                   
Ethics  Act.  He  read:³(6)  no  code  of  conduct,  however                                                                   
comprehensive,  can anticipate  all situations…" He  believed                                                                   
the situation  was unique;  the state would  be a  partner in                                                                   
the largest  project in North  America. He wanted to  avoid a                                                                   
situation where  a former state  employee involved in  the AK                                                                   
LNG project  would work  for related  industry after  leaving                                                                   
state  employment.   He  shared  that  a   similar  situation                                                                   
happened in the past.                                                                                                           
                                                                                                                                
Co-Chair Kelly asked  whether the Executive Ethics  Act would                                                                   
cover the scenario and if the act applied to commissioners.                                                                     
                                                                                                                                
Ms.  Pollard explained  that according  to the  act, after  a                                                                   
public  officer  left  state   service  a  designated  ethics                                                                   
supervisor  would  determine   what  matters  the  individual                                                                   
would be  restricted from  working on.  The ethics  act would                                                                   
apply  to  a  commissioner  but   it  would  depend  on  each                                                                   
particular  situation  to determine  whether  the ethics  act                                                                   
specifically applied.                                                                                                           
                                                                                                                                
Co-Chair  Kelly  asked  whether   the  Executive  Ethics  Act                                                                   
envisioned  specific  scenarios   similar  to  the  situation                                                                   
Senator Olsen described.                                                                                                        
                                                                                                                                
Ms. Pollard  remarked that someone substantially  involved in                                                                   
a contract  negotiation  would be prohibited,  under the  act                                                                   
from other employment involved in that particular matter.                                                                       
                                                                                                                                
Vice-Chair  Fairclough wanted  to ensure  that any  effective                                                                   
date and section  number changes due to adoption  of multiple                                                                   
amendments would  be accurately revised in the  final version                                                                   
of the legislation.                                                                                                             
                                                                                                                                
Mr.  Campbell  responded  that  Section 37  had  a  different                                                                   
effective  date  of  January  1,  2021  and  Section  62  and                                                                   
Section 63 had  effective dates of January 1,  2015 and would                                                                   
be appropriately revised by Legislative Legal Services.                                                                         
                                                                                                                                
Co-Chair  Kelly  noted  that legal  services  had  orders  to                                                                   
conform all  of the  amendments to the  actions taken  by the                                                                   
committee.                                                                                                                      
                                                                                                                                
Co-Chair  Meyer  WITHDREW  his   OBJECTION.  There  being  NO                                                                   
further OBJECTION, Amendment 4 was ADOPTED.                                                                                     
                                                                                                                                
12:22:51 PM                                                                                                                   
AT EASE                                                                                                                         
                                                                                                                                
12:24:39 PM                                                                                                                   
RECONVENED                                                                                                                      
                                                                                                                                
Mr. Campbell spoke to the technical drafting corrections                                                                        
(copy on file):                                                                                                                 
                                                                                                                                
     1)  Page  16,  line  20:  Delete:  "form"  replace  with                                                                   
         "from"                                                                                                                 
                                                                                                                                
      2) Page 17, line 29: Delete: "form" replace with                                                                          
         "from"                                                                                                                 
                                                                                                                                
     3) Page 10, Lines] 5 & 16, Section 12, (7)(C). Style                                                                       
         issue, there appears to be an extra "and" or one                                                                       
         too many commas.                                                                                                       
                                                                                                                                
     4)  Page] 9, line 25, after "from state oil and gas",                                                                      
         insert: "and gas only" Conforms language to the                                                                        
         technically correct reference in DNR statutes, per                                                                     
         the convention throughout 38.05, which refers to                                                                       
         "oil and gas and gas only" leases.                                                                                     
                                                                                                                                
     5)   Page 52, line 31, after "enacted by section"                                                                          
          Delete: "15" insert "13"                                                                                              
                                                                                                                                
Mr.  Campbell turned  to the  "Summary  of Proposed  Changes"                                                                   
(copy  on  file). He  indicated  that  the changes  were  the                                                                   
amendments  drafted  into  the  current  version  from  prior                                                                   
committee actions.                                                                                                              
                                                                                                                                
Senator Bishop read the Letter of Intent (copy on file):                                                                        
                                                                                                                                
     Letter of Intent for SB 138                                                                                                
                                                                                                                                
     It is  the intent of  the Alaska State Legislature  that                                                                   
     the  Alaska  LNG  project   honor  the  commitments,  as                                                                   
     copied  below,  made in  "Article  11: Alaska  Hire  and                                                                   
     Content",  agreed to in  the Heads  of Agreement  by and                                                                   
     among  the  Administration   of  the  State  of  Alaska,                                                                   
     Alaska  Gas-line  Development  Corporation,  TransCanada                                                                   
     Alaska  Development Inc.,  ExxonMobil Alaska  Production                                                                   
     Inc.,  ConocoPhillips Alaska,  Inc., and BP  Exploration                                                                   
     (Alaska) Inc. through construction of the project.                                                                         
                                                                                                                                
     ARTICLE 11: ALASKA HIRE AND CONTENT                                                                                        
                                                                                                                                
     11.1  For  the  Alaska  LNG   Project,  the  Alaska  LNG                                                                   
     Parties will, within the constraints of law:                                                                               
     a.  Employ Alaska  residents  and  contract with  Alaska                                                                   
     businesses   to   the   extent   they   are   qualified,                                                                   
     available, ready, willing and cost competitive;                                                                            
     b.  Use,  as   far  as  practicable,  job   centers  and                                                                   
     associated  services operated  by  the State  Department                                                                   
     of Labor and Workforce Development;                                                                                        
     c. Participate  with the  State Department of  Labor and                                                                   
     Workforce  Development to update  the training  plan for                                                                   
     an LNG export project including main operations;                                                                           
     d. Advertise  for available  positions locally  and use,                                                                   
     as    far   as   practicable,    Alaska   job    service                                                                   
     organizations to notify the Alaska public; and                                                                             
     e.  Work  with   the  State  Department   of  Labor  and                                                                   
     Workforce   Development  and   other  organizations   to                                                                   
     provide training.                                                                                                          
                                                                                                                                
     11.2  Prior  to  construction, the  Alaska  LNG  Parties                                                                   
     commit to negotiate in good faith project labor                                                                            
                                                                                                                                
Senator Dunleavy requested clarification that the Letter of                                                                     
Intent was not codified law.                                                                                                    
                                                                                                                                
Co-Chair Kelly answered in the affirmative.                                                                                     
                                                                                                                                
Vice-Chair Fairclough  MOVED to  REPORT CSSB 138(FIN)  out of                                                                   
committee  as  amended with  individual  recommendations  and                                                                   
with the  accompanying fiscal  notes from the  Senate Finance                                                                   
Committee. There being NO OBJECTION, it was so ordered.                                                                         
                                                                                                                                
12:29:36 PM                                                                                                                   

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