Legislature(2005 - 2006)BUTROVICH 205
04/19/2006 08:30 AM Senate JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| SB307 | |
| SB316 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 307 | TELECONFERENCED | |
| *+ | SB 316 | TELECONFERENCED | |
SB 316-COURT REVIEW OF STRANDED GAS DECISION
9:12:27 AM
CHAIR SEEKINS announced SB 316 to be up for consideration. He
said the committee has reviewed the legislative findings and are
familiar with the contents of the bill.
STEVE PORTER, Deputy Commissioner, Department of Revenue (DOR),
and LARRY OSTROVSKY, Assistant Attorney General, Department of
Law (DOL), introduced themselves.
9:13:29 AM
MR. PORTER said the administration supports the legislation and
the DOR has written a zero fiscal note because the bill is
primarily clarification of the department's responsibilities. He
advised that Mr. Ostrovsky would explain the details of the
legislation to the committee.
MR. OSTROVSKY directed the committee to AS 43.82.430(b) and said
under the original version of the Stranded Gas Development Act
(SGDA) it provided that the commissioner of the DOR present the
proposed contract to the public and the Legislature and after
comment and review, the commissioner had the power to execute
the contract. That decision would be a final agency decision and
would normally be subject to administrative review and
challengeable.
9:17:08 AM
CHAIR SEEKINS asked the procedure if someone were to challenge
the commissioner's final findings and determination after he has
executed the contract.
MR. OSTROVSKY referred to the DOR regulations and explained that
the challenge has to happen within 30 days of the decision. He
said additionally under appellate rule 602, an appeal may be
taken to superior court from an administrative agency within 30
days from the date that the decision is distributed.
9:18:48 AM
SENATOR FRENCH asked the kinds of documents and information that
the challenger would be entitled to in the course of discovery.
MR. OSTROVSKY said typically when there is an administrative
appeal the superior courts will order the agency to compile the
record and that would be all of the papers that were present and
considered. Once the record is compiled, the court sets the
briefing schedule.
SENATOR FRENCH speculated that the record would be composed of
the modeling, assumptions, fiscal terms, data, and every piece
of evidence that the commissioner took into account when finding
that the contract was in the long-term fiscal interest of the
state.
MR. OSTROVSKY said he did not have the particular rule but in
his experience, agencies typically have files and the court
orders the file put together. In the case of the SGDA there are
probably numerous relevant files. He said there would likely be
some discussion about where the record actually begins and ends
with respect to the contract.
CHAIR SEEKINS asked whether historically the person challenging
the contract would be appealing the finding or the contract or
both.
9:21:56 AM
MR. OSTROVSKY said both but most likely that person would be
appealing the finding as the basis for the contract. There are
various standards of review for appealing administrative
determinations. The court would look to see whether there was a
reasonable basis for the commissioner's findings.
CHAIR SEEKINS asked whether it would be right for appeal prior
to the signing of the contract.
MR. OSTROVSKY said it probably would. He used an analogy of a
lease sale by the Department of Natural Resources. They have had
many challenges to administrative determinations and they
usually occur directly before the lease sale. After the
commissioner has released his findings then he is empowered to
go forth and lease. "Under the original law, after the
commissioner issued the fiscal interest finding, the
commissioner would then be empowered to execute a contract, so
it would be after the finding," he said.
CHAIR SEEKINS asked how close in juxtaposition that would be.
MR. OSTROVSKY said under the original law it could be
sequentially.
9:24:12 AM
SENATOR FRENCH said the term "final findings and determination"
is a term of art and is a signal to the world that this is the
place to mount the challenge. Under the SGDA, the threshold
question is whether or not the gas is stranded and the chief
point of anyone challenging the decision would be that the gas
is not stranded. Since the department has all of the data and
modeling to prove that the gas is stranded, he asked whether it
would be reasonable to believe that a challenger would be able
to obtain all that data.
MR. OSTROVSKY said under the SGDA there are a number of factors
that the commissioner must weigh and balance. A challenger might
disagree on a number of issues, such as whether it is the best
project, whether it serves communities, or whether there is a
constitutional issue. He said a challenger would want anything
that was relevant to their claim.
9:27:51 AM
MR. OSTROVSKY continued in March of 1998, the Legislature
amended the original version of the Stranded Gas Act. He
referred the committee to AS 43.82.435 and said the Legislature
retained the ultimate authority to authorize execution of the
contract. "This is an unusual statute and quite frankly I've not
seen one like it," he stated.
9:30:20 AM
Under the old Act, the place for the challenge is appropriate
because it is directly after the final agency decision. In the
amended version, the commissioner's fiscal interest finding
doesn't enable the commissioner to execute the contract; rather
the Legislature must authorize it first. People who normally
might oppose it and have no recourse under the fiscal interest
finding, now have recourse to the Legislature because that is a
step that happens between the fiscal interest finding and
authorization. That is a step that doesn't exist in other cases.
9:32:41 AM
One issue with the current law is that it could lead to a
premature court case before all of the facts are disclosed, and
it could put the court of law in between the legislative and
executive branches. As a general rule courts like to take up
final decisions because they don't want to take up something
until there is finality. The risk is that all the facts and
circumstances won't be in front of the court and also there is a
risk that the case might be moved.
A legal challenge set before the Legislature has the opportunity
to consider and debate the contract would prevent the court from
seeing whether there are aggrieved parties and also prevent the
court from taking into consideration the full facts underlying
the contract. The practical implications are that it puts the
court squarely between the flow of the executive and legislative
branches, Mr Ostrovsky stated. Normally the governor proposes
bills and the Legislature acts on the bills and the court
doesn't get involved until somebody challenges a bill that has
been enacted. He offered to answer questions.
9:38:06 AM
CHAIR SEEKINS referred to the flowchart comparison of the
original SGDA version and the current Act. He said in either
case, the contract is subject to judicial review.
SENATOR THERRIAULT asked Mr. Ostrovsky if the legal challenge
were at the end of the chain of events, would the court be able
to review the findings that the contract was predicated on to
determine whether the commissioner has "struck the right
balance" or would they be precluded to only looking at the
constitutional challenges to the words of the contract itself.
MR. OSTROVSKY responded there is a remedy for when people do not
agree with the balance that the commissioner struck and that is
to go to the Legislature and prove that the commissioner's
reasoning was faulty. If the process goes through and the
Legislature passes it and somebody challenges it, the court
would look at what led to the contract and also what developed
in the Legislature.
SENATOR THERRIAULT asked whether it is constitutionally
allowable for the Legislature to have a roll in the SGDA. In the
original version of the SGDA, the administration saw no role of
the Legislature in the function, he said.
MR. OSTROVSKY said that might be a potential separation of
powers issue since the Legislature isn't in the business of
negotiating contracts. The legislative history on the SGDA is
skimpy and there doesn't seem to be much discussion through the
process of the bill. Regardless, if the court found that the
Legislature had no role in the development of the contract then
that contract would only be based on the findings of the
commissioner.
9:48:26 AM
CHAIR SEEKINS read AS 43.82.430(a):
(a) Within 30 days after the close of the public comment
period under AS 43.82.410(4), the commissioner of revenue shall
(1) prepare a summary of the public comments received in
response to the proposed contract and the preliminary findings
and determination;
(2) after consultation with the commissioner of natural
resources, if appropriate, and with the pertinent municipal
advisory group established under AS 43.82.510, prepare a list of
proposed amendments, if any, to the proposed contract that the
commissioner of revenue determines are necessary to respond to
public comments;
(3) make final findings and a determination as to whether
the proposed contract and any proposed amendments prepared under
(2) of this subsection meet the requirements and purposes of
this chapter.
CHAIR SEEKINS asked, "Isn't that what would be appealed under
the current law?"
MR. OSTROVSKY stated yes. The difference is under the old law
the commissioner would then sign the contract.
CHAIR SEEKINS asked, "Isn't it the determinations that the
proposed contract and the amendments prepared meet the
requirements of the Chapter?"
MR. OSTROVSKY stated yes.
CHAIR SEEKINS said, "So his final determination is everything in
this proposed contract meet the requirements of the chapter and
is in the fiscal interest of the state."
MR. OSTROVSKY stated yes.
CHAIR SEEKINS said:
So isn't it now under the new law part of the
responsibility of the Legislature in its review, to
make sure or to become satisfied that the contract and
the proposed amendments that are forwarded by the
governor to us meet the requirements of the Chapter?
MR. OSTROVSKY stated yes.
CHAIR SEEKINS asked, "And isn't that determination challengeable
at the point where we say the governor can now sign it?"
MR. OSTROVSKY stated:
Because the Legislature writes the laws, the
Legislative determination that the facts that are
developed are consistent with the law would not likely
survive a challenge. But what would survive a
challenge is if somebody believes that the Legislature
[or the commissioner] violated the Constitution.
9:53:48 AM
CHAIR SEEKINS countered if the Legislature reviewed the contract
and determined that it meets the requirements of the bill, they
would be making the determination that the facts are consistent
with the law and with the fiscal interest of the state.
MR. OSTROVSKY said that is right and that is something that
doesn't normally exist. People normally do not have recourse to
the Legislature.
CHAIR SEEKINS said:
Otherwise what purpose does the legislative review
have? When I look at the new law, it says the governor
can transmit the contract to us and it is not binding
or enforceable unless the governor has authorized to
execute the contact.
MR. OSTROVSKY agreed.
CHAIR SEEKINS said it seems that at the end of the process,
after the Legislature has reviewed the contract, there is still
the ability to challenge the conclusion that it does not meet
the requirements of the Chapter.
MR. OSTROVSKY said people would still be able to challenge the
constitutionality. It would be difficult to challenge the
Legislature's determination that the commissioner's finding was
sufficient because it is not necessarily required to do a fiscal
interest finding.
CHAIR SEEKINS asked whether, based on the fiscal interest
finding, could a person still bring a challenge if that fiscal
interest finding did not comply with Article 8, paragraph 2 of
the Alaska State Constitution.
MR. OSTROVSKY responded the person could challenge the ultimate
contract.
9:57:30 AM
SENATOR FRENCH pointed out that the exchange between the
Chairman and Mr. Ostrovsky highlights the concerns that he has
heard regarding the bill. The question is whether SB 316 is
about where to make the challenge or whether a person could make
a challenge at all. He said that is his concern. It is quite
possible that a court would say that the Legislature's findings
are not challengeable.
MR. OSTROVSKY said,
In the original bill, and in most processes in the
state that concerns a best interest finding, the best
interest finding is the end of the story and that is
the distinction. When the contract is signed, the
court would look at the whole story. And the whole
story is both the commissioner's determination and the
legislative findings and that is why I believe that
the findings would likely be important but not viewed
in isolation.
SENATOR FRENCH concluded the fact is that the bill would
restrict a challenge strictly to constitutional grounds. What is
completely taken away is a person's right to challenge that the
contract is in violation of the SGDA or the law. That is a far
more difficult challenge to win.
MR. OSTROVSKY insisted conversely one would have access to the
Legislature that they normally don't have.
SENATOR FRENCH expressed concern that aggrieved parties would
not have access to the entire record in order to bring their
case to the Legislature.
10:00:51 AM
MR. OSTROVSKY argued that one remedy that the Legislature always
has is they can reject the contract if they feel there is
insufficient information in front of it.
SENATOR GUESS said:
What gives us the authority on the findings? It seems
like why have the findings at all, honestly? You said
that we have the authority to approve the findings,
well, we have the contract in front of us, we don't
have the findings and determination necessarily in
front of us and we don't necessarily have all the
background information, nor are we always successful
in getting all the background information for what is
in front of us.
She said the bill seems to take the consideration of whether a
contract serves the long-term interest of the state and whether
the contract complies with the SGDA off the table. She
questioned the purpose of the bill and questioned the approach
to the bill. She said she does not understand the intent and she
does not "buy the whole delay issue." Historically speaking, and
especially on initiatives, the courts wait to see if it passes
before they deal with it and in this situation the court would
wait to see if the Legislature passed the contract and would
then go back to look at the findings.
MR. OSTROVSKY responded that it was dangerous to opine about
legislative intent. The SGDA requires that the commissioner set
out findings with the contract and to answer certain questions
specifically dealing with that contract. Because of that, the
findings have an important purpose, he said. He agreed that
courts do not like to take up matters until there is finality
but indicated that it could if it felt there was adequate reason
for the challenge.
SENATOR GUESS asked whether it would void the contract if the
court ruled that the contract did not meet the requirements of
the chapter.
10:06:33 AM
MR. OSTROVSKY admitted that is untested terrain and it is
possible that the Legislature would take up the contract
regardless.
SENATOR GUESS said she did not see the tie between the findings
and the contract.
MR. OSTROVSKY responded the tie is there and there is an avenue
for challenge.
SENATOR GUESS challenged Mr. Ostrovsky to explain how the court
could prevent the governor from transmitting the contract, even
if somebody took the findings to court.
MR. OSTROVSKY said what would happen is the commissioner would
issue the final finding and a person would go to court with a
reasonable basis for challenge. The court would order a record
compiled and there would be arguments. The court would determine
whether the commissioner had a reasonable basis. If the court
found that the commissioner didn't, the court would remand it
back to the commissioner and make him redo the finding. So the
commissioner would not have the ability to then advance the
contract.
SENATOR THERRIAULT asked whether there could be clarifying
language that a challenge to the findings could be guaranteed.
The criticism that is being heard from the constituency is that
the process they normally have access to would be gone if SB 318
were to be enacted.
10:11:44 AM
MR. OSTROVSKY replied under the SGDA that could be a problem in
terms of finality since someone could challenge an intermediate
step in the process. He questioned how meaningful the
commissioner's findings would be at the final point. "It's only
one piece of the puzzle," he stated.
10:14:19 AM
MR. OSTROVSKY posed a hypothetical situation of a challenge
where the person said the commissioner did not consider a
certain economic aspect therefore the finding lacks a reasonable
basis. The Legislature comes to the same conclusion yet they
address it and fix it. There are facts that develop after the
fiscal interest findings that might take care of the original
reason for challenge.
CHAIR SEEKINS asked Mr. Ostrovsky to explain the difference
between the commissioner's final findings and determination and
a final agency decision.
10:16:34 AM
MR. OSTROVSKY replied the final agency decision is normally the
trigger for an administrative appeal under the appellate rules
and under the regulation.
CHAIR SEEKINS said if a person wanted to delay a consideration
by the Legislature by filing an action against the findings that
person could automatically ask for a stay on the contract.
MR. OSTROVSKY agreed. On the other hand if SB 316 is passed it
says to the court that the commissioner's finding and contract
are tantamount to proposing legislation.
CHAIR SEEKINS speculated that the Legislature would look at the
findings to make sure the commissioner served his or her due
diligence, which includes making sure that all of the public
comments have been compiled and addressed, and after consulting
with the commissioner of the DNR, ensures that the contract
meets the purposes of the chapter and that it also meets the
long-term fiscal interest of the state. It's more of a
recommendation than a final agency decision, he said.
MR. OSTROVSKY responded that is the way the Act reads since the
Legislature decided to retain the authority for the approval.
10:20:03 AM
CHAIR SEEKINS said he could not imagine that during the
committee process of looking at the contract that the
Legislature would not examine the challenge and look at the
findings. He asked Mr. Ostrovsky whether there was any record
during the consideration of the amended bill indicating if it
was the intent of the Legislature to obtain a judicial review at
the point of the final findings of the commissioner.
MR. OSTROVSKY said no and indicated that the legislative record
on the 1998 amendment of the SGDA was skimpy.
10:23:56 AM
MR. OSTROVSKY added the DOL believes the 1998 Legislature might
not have thought out the entire procedural process.
SENATOR FRENCH said he was not sure the committee has addressed
Senator Guess's concern regarding the likelihood of delay. He
said that potentially within minutes of releasing the final
findings, the commissioner would give the contract to the
Legislature. He said it was beyond the realm of possibility that
a court would at that time issue an injunction based on a
challenge to the findings.
10:26:22 AM
SENATOR GUESS added that under the amendment, the findings could
only be evaluated as to the constitutionality since the bill is
taking out any relationship between, or any court review of, AS
43.82.440(a)(3). She added that there are supposedly twenty
amendments coming from the administration to the SGDA. One of
them is an amendment to the SGDA relating to the taxation of
oil. She said:
If we pass this [SB 316] it doesn't really matter,
does it? Probably it is still constitutional to have
oil and gas in the contract. It's probably not against
the [Alaska State] Constitution. It would be against
the statute of the Stranded Gas Act. But if we pass
this, it wouldn't matter so why do we even need to
amend the Stranded Gas Act and I even question why do
we even follow the Stranded Gas Act and don't just
follow the Constitution?
MR. OSTROVSKY responded he wasn't sure he understood the
question and indicated that there might or might not be
amendments to the SGDA. He said, "I think that is the purpose of
the Act. That the Legislature doesn't want just a contract, it
wants the due diligence too so it can make that determination."
SENATOR GUESS argued that the commissioner's "due diligence" is
just to ensure that the contract complies with the Act.
MR. OSTROVSKY stated, "Correct."
CHAIR SEEKINS said the two findings are that the contract meets
the terms of the Act and that it is in the long-term fiscal
interest of the state.
10:30:14 AM
SENATOR GUESS agreed but countered that the final findings are
just that the contract meets the requirements and the purposes
of the Act. The long-term interest is not reiterated; it is
implied.
CHAIR SEEKINS argued that it was in subsection (b).
SENATOR GUESS agreed but countered that subsection (b) is not a
final finding; only subsection (a) is. Really the entire bill is
about subsection (a), she said.
SENATOR GUESS asked Mr. Ostrovsky what happens if a contract is
passed that is in contradiction to the statute.
MR. OSTROVSKY said the governor's intention would be to follow
the statute.
10:32:05 AM
CHAIR SEEKINS referred to Article 8, paragraph 2 and said it
appears that a challenge to the contract, based on a
constitutional issue, would be that the findings of the
commissioner did not meet the requirement that natural resources
were to be developed for the maximum benefit of the people
because the findings were flawed.
MR. OSTROVSKY responded that if one brought that challenge to
the contract the court after it was approved by the Legislature,
the court would find that neither the commissioner's findings or
the legislative record was sufficient to meet that
constitutional provision because the court would have to look at
the whole record.
SENATOR THERRIAULT said under the long-term fiscal interest to
the state there are eight things listed that the commissioner
should look to. Under the pending contract, Alaska is aiming to
supply the market in the Midwest. He said the commissioner would
be limited to making a comparison with competition on that
particular project. He asked Mr. Porter whether he was at
liberty to say whether the commissioner, when making his
determination, was limiting himself to comparison of other
projects delivering into that market or whether he was able to
look at similar projects delivering into other markets.
10:36:38 AM
MR. PORTER responded that the commissioner would review the
competitiveness of both the North American and the International
markets. The fiscal interest finding though, would deal
specifically with the SGDA and all the elements within.
SENATOR THERRIAULT said the first item details that the
commissioner must look at whether the project under
consideration meets the competitiveness with other competing
projects for the specific market.
MR. PORTER stated that would certainly be addressed.
SENATOR THERRIAULT stated, "It would have to be addressed or
that will have to be modified."
MR. PORTER agreed.
CHAIR SEEKINS remarked that a contract forwarded to the
Legislature would have to comply with the elements of the SGDA.
Somebody who wanted to challenge whether or not the gas was
stranded would have to deal with the definition in the Act
itself. If the Legislature were to find that the definition of
stranded gas were outdated they have the prerogative to change
the definition.
SENATOR FRENCH said the bill severely restricts when the
challenge could be brought. He suggested there is a way to keep
"full public availability to the documents that led up to the
contract."
CHAIR SEEKINS said he believed that the way the SGDA is written
comes down to the Legislature authorizing that the final
findings and determination by the commissioner meets the
elements of the Act. The intent is to develop Alaska's natural
resources to the benefit of the people of the State of Alaska.
He held the bill in committee.
| Document Name | Date/Time | Subjects |
|---|