Legislature(2011 - 2012)BUTROVICH 205

01/25/2012 03:30 PM RESOURCES

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03:34:53 PM Start
03:35:10 PM SB24
03:45:26 PM Department of Natural Resources (dnr) Overview
04:59:30 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
Moved Out of Committee 1/23/12
Heard & Held
Presentation by Commissioner Dan Sullivan,
Department of Natural Resources
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        January 25, 2012                                                                                        
                           3:34 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Joe Paskvan, Co-Chair                                                                                                   
Senator Thomas Wagoner, Co-Chair                                                                                                
Senator Bill Wielechowski, Vice Chair                                                                                           
Senator Bert Stedman                                                                                                            
Senator Lesil McGuire                                                                                                           
Senator Hollis French                                                                                                           
Senator Gary Stevens                                                                                                            
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
OTHER LEGISLATORS PRESENT                                                                                                     
Senator Cathy Giessel                                                                                                           
COMMITTEE CALENDAR                                                                                                            
PRESENTATION: Department  of Natural Resources (DNR)  Overview by                                                               
DNR Commissioner Dan Sullivan                                                                                                   
     - HEARD                                                                                                                    
SENATE BILL NO. 24                                                                                                              
"An Act establishing  the Sport Fishing Guide  Services Board and                                                               
licensing requirements for  sport fishing guide-outfitters, sport                                                               
fishing  outfitters, sport  fishing assistant  guides, and  sport                                                               
fishing transporters; making  conforming amendments; allowing the                                                               
Department of  Fish and  Game to  collect information  on guiding                                                               
services; and providing for an effective date."                                                                                 
     - HEARD & HELD                                                                                                             
SENATE BILL NO. 13                                                                                                              
"An Act providing  for the waiver of certain fees  and charges in                                                               
state parks for disabled veterans."                                                                                             
     - SB 13 MOVED OUT OF COMMITTEE ON 1/23/12                                                                                  
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB  24                                                                                                                  
SHORT TITLE: SPORT FISHING GUIDING SERVICES                                                                                     
SPONSOR(s): SENATOR(s) MCGUIRE                                                                                                  
01/19/11       (S)       PREFILE RELEASED 1/7/11                                                                                
01/19/11       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/19/11       (S)       RES, FIN                                                                                               
02/07/11       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/07/11       (S)       Heard & Held                                                                                           
02/07/11       (S)       MINUTE(RES)                                                                                            
02/19/11       (S)       RES AT 10:00 AM BUTROVICH 205                                                                          
02/19/11       (S)       Heard & Held                                                                                           
02/19/11       (S)       MINUTE(RES)                                                                                            
02/21/11       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/21/11       (S)       Heard & Held                                                                                           
02/21/11       (S)       MINUTE(RES)                                                                                            
10/10/11       (S)       RES AT 9:00 AM Anch LIO Conf Rm                                                                        
10/10/11       (S)       PUBLIC COMMENT                                                                                         
01/23/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
01/23/12       (S)       Heard & Held                                                                                           
01/23/12       (S)       MINUTE(RES)                                                                                            
01/25/12       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
MICHAEL PAWLOWSKI, Staff                                                                                                        
Senator Lesil McGuire                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, AK                                                                                                                      
POSITION STATEMENT: Discussed provisions in CSSB 24( ) version                                                                
AL CAIN                                                                                                                         
Division of Sport Fish                                                                                                          
Alaska Department of Fish and Game (ADF&G)                                                                                      
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Answered questions about provisions in CSSB                                                               
24( ) version I.                                                                                                                
DAN SULLIVAN, Commissioner                                                                                                      
Department of Natural Resources (DNR)                                                                                           
Juneau, AK                                                                                                                      
POSITION STATEMENT: Gave presentation on Alaska oil production                                                                
BILL BARRON, Director                                                                                                           
Division of Oil and Gas                                                                                                         
Department of Natural Resources (DNR)                                                                                           
Juneau, AK                                                                                                                      
POSITION STATEMENT: Commented on Alaska oil production issues.                                                                
BRENT GOODRUM, Director                                                                                                         
Division of Mining, Land and Water                                                                                              
Department of Natural Resources (DNR)                                                                                           
Anchorage, AK                                                                                                                   
POSITION STATEMENT: Commented on Alaska oil production issues.                                                                
ACTION NARRATIVE                                                                                                              
3:34:53 PM                                                                                                                  
CO-CHAIR  THOMAS WAGONER  called  the  Senate Resources  Standing                                                             
Committee meeting  to order at 3:34  p.m. Present at the  call to                                                               
order  were  Senators  Wielechowski,  Stevens,  French,  McGuire,                                                               
Stedman, Co-Chair Paskvan and Co-Chair Wagoner.                                                                                 
             SB  24-SPORT FISHING GUIDING SERVICES                                                                          
3:35:10 PM                                                                                                                    
CO-CHAIR  WAGONER announced  SB 24  to be  up for  consideration.                                                               
[CSSB 24( ), labeled 27-LS0278\I, was before the committee.]                                                                    
MICHAEL PAWLOWSKI, staff to Senator  Lesil McGuire, sponsor of SB                                                               
24, said  the Department  of Fish  and Game  representatives were                                                               
asked to  talk about  the enforcement  provisions in  the current                                                               
draft, in particular AS 08.57.220  on page 13, the responsibility                                                               
3:36:51 PM                                                                                                                    
AL CAIN,  Division of Sport  Fish, Alaska Department of  Fish and                                                               
Game  (ADF&G), explained  that section  (1) on  page 14  [Section                                                               
.220] makes the guide, outfitter  or transporter responsible when                                                               
a client  commits a  violation in their  presence. He  didn't see                                                               
any  culpable  mental  state  stated;  Section  .200,  the  civil                                                               
penalties provision,  would come into  play for that.  An example                                                               
would be  a client  on a  boat catching too  many fish  while the                                                               
guide wasn't paying attention. But  the guide could not be issued                                                               
a citation for  the same violation that the  client had committed                                                               
in those circumstances.                                                                                                         
Section  (2)  requires  that the  guide  expressly  (or  implied)                                                               
authorizes  an unlawful  act; in  that  case the  guide would  be                                                               
equally  responsible for  that violation.  He could  be sentenced                                                               
under Section .210, the criminal provisions.                                                                                    
3:39:46 PM                                                                                                                    
SENATOR STEDMAN  asked how  the guide or  the assistant  guide is                                                               
tied back to the outfitter. There  seems to be occasions when the                                                               
behavior  of the  guide is  condoned by  the people  that own  or                                                               
manage  particular lodges;  and then  they have  the tendency  of                                                               
claiming they are just hiring an individual contract worker.                                                                    
MR.  CAIN  said  he  didn't   see  any  provision  allowing  that                                                               
connection under Section  .210 in the bill. And  by outfitter, he                                                               
assumed that he meant the  actual guide; current law provides for                                                               
operators who  employ guides; those  premises change in SB  24 to                                                               
"a  guide who  employs  assistant guides."  He  asked if  Senator                                                               
Stedman meant  how the guide  who is not on  the boat but  who is                                                               
the employer of the assistant guide is made responsible.                                                                        
SENATOR STEDMAN said yes.                                                                                                       
MR. CAIN  said he  didn't see  a provision  that allows  for that                                                               
connection. Under Section .210 he  sees "a person who is licensed                                                               
under the  chapter who commits  or aides  in the commission  of a                                                               
violation  or permits  the client  to commit  a violation."  That                                                               
language infers  the guide or assistant  guide who is out  on the                                                               
boat and does not make the actual  guide who is back at the lodge                                                               
responsible. Current language in  AS 16.40.260 makes the operator                                                               
liable  for inappropriate  actions committed  by the  guides they                                                               
employ. At this time SB 24 doesn't capture that element.                                                                        
SENATOR  STEDMAN  suggested  they   look  at  strengthening  that                                                               
language, because  there are some  lodges that  condone egregious                                                               
violations  of  the  state's  fish   and  game  laws.  It's  very                                                               
difficult to go back to the  lodge owner from a guided sport boat                                                               
when he is not on the boat.                                                                                                     
3:42:53 PM                                                                                                                    
CO-CHAIR  PASKVAN  said  he  had  heard over  the  years  in  the                                                               
construction  trades a  general  contractor,  for example,  hires                                                               
sheetrock   workers  not   as   employees   but  as   independent                                                               
contractors, and  the question is  if a lodge operator  would use                                                               
an  artifice to  create  a  mechanism to  avoid  a liability  for                                                               
egregious conduct.                                                                                                              
CO-CHAIR WAGONER agreed that language  needed to be looked at and                                                               
thanked Mr. Cain for his testimony.                                                                                             
3:44:01 PM                                                                                                                    
CO-CHAIR  WAGONER said  he had  an amendment  to restrict  public                                                               
members  to current  commercial fishers  not one  person who  has                                                               
been a commercial  fisherman. He also had an  amendment to delete                                                               
the waiver  for the Kenai  River Special Management area  that is                                                               
already in statute.                                                                                                             
CO-CHAIR WAGONER said SB 24 would be held for further work.                                                                     
^Department of Natural Resources (DNR) Overview                                                                                 
         Department of Natural Resources (DNR) Overview                                                                     
3:45:26 PM                                                                                                                    
CO-CHAIR WAGONER  invited Department  of Natural  Resources (DNR)                                                               
Commissioner Dan Sullivan to provide  the presentation Alaska Oil                                                               
Production Issues.                                                                                                              
3:47:09 PM                                                                                                                    
DAN SULLIVAN, Commissioner, DNR, said  a top priority for him and                                                               
the  Department of  Natural Resources  (DNR)  team is  to have  a                                                               
strong,   respectful  and   responsive   relationship  with   the                                                               
legislature.  He encourages  timely  responsive information  with                                                               
his team to help the  legislature and the administration do their                                                               
jobs.  He  said  he  would  give  an  overview  of  some  of  the                                                               
strategies,  activities and  results they  have focused  on since                                                               
the  end of  last session  and invited  them to  jump in  and ask                                                               
CO-CHAIR WAGONER  said he  wanted some  emphasis placed  on where                                                               
they are  in the permitting  process and cleaning up  the backlog                                                               
of permits.                                                                                                                     
COMMISSIONER SULLIVAN said  he would provide that.  He would also                                                               
mention  some   opportunities  and  challenges   including  their                                                               
thinking behind  the million  barrels a day  "road map."  In that                                                               
respect he tried  to focus their mission statement to  be more in                                                               
line with  Article 8, Section  1, of the Alaska  Constitution and                                                               
revamp their  core services to  more accurately reflect  what the                                                               
DNR actually does.                                                                                                              
SENATOR STEVENS asked how the mission statement is different.                                                                   
COMMISSIONER  SULLIVAN replied  that he  wanted the  department's                                                               
mission  statement to  be more  in line  with the  Constitution's                                                               
policy  statement.  There  was another  issue  from  an  internal                                                               
management perspective  focusing on providing a  mission that the                                                               
department  gets   behind.  Early   last  year  when   he  became                                                               
commissioner,  he  visited a  number  of  communities around  the                                                               
state and was surprised to hear that  in a number of areas one of                                                               
the  views of  DNR is  that  it was  "the department  of no"  and                                                               
locked  up resources,  particularly  in Fairbanks.  He wanted  to                                                               
make sure  that at least  people within the department  know this                                                               
was the  land of Alaska  people not the  land of DNR.  It doesn't                                                               
mean   they   are  not   focused   on   future  generations   and                                                               
conservation;  but  he  thought  it was  important  to  make  the                                                               
alignment closer to the directive in the Constitution.                                                                          
COMMISSIONER SULLIVAN  said it  came out  that writing  a mission                                                               
statement is actually a role  the legislature has in statute. But                                                               
he checked with the Department  of Law and from their perspective                                                               
that didn't preclude commissioners from reworking it.                                                                           
3:54:46 PM                                                                                                                    
SENATOR STEVENS said  some Senators have said it's  their job and                                                               
asked him to provide the committee with the legal explanation.                                                                  
COMMISSIONER  SULLIVAN said  language  says  the legislature  has                                                               
authority to  issue mission statements,  but it  doesn't preclude                                                               
commissioners from doing it.                                                                                                    
CO-CHAIR PASKVAN  asked if  a prior  legislature had  enacted the                                                               
mission statement.                                                                                                              
COMMISSIONER  SULLIVAN  replied  in  2003  the  legislature  last                                                               
issued a mission  statement and that the  DNR's mission statement                                                               
has changed a few times since then.                                                                                             
3:56:12 PM                                                                                                                    
CO-CHAIR  PASKVAN  repeated  that Senate  President  Stevens  was                                                               
indicating that he would like to see a legal analysis of that.                                                                  
COMMISSIONER SULLIVAN said okay.                                                                                                
SENATOR STEVENS said it would  be interesting to see a comparison                                                               
in writing of the old and the new mission statements.                                                                           
CO-CHAIR WAGONER asked him to proceed with his presentation.                                                                    
COMMISSIONER SULLIVAN  said since  the last  legislative session,                                                               
the  United States  Geological Survey  (USGS) came  out with  new                                                               
Cook Inlet  estimates reflected in  slide 9. Slide 10  showed the                                                               
very significant mineral  deposits. The key to what  he wanted to                                                               
cover  here  was  looking  back   on  the  year  since  the  last                                                               
legislative session  when the state  government was  very focused                                                               
on a  vision and a  strategy to address the  TransAlaska Pipeline                                                               
System (TAPS) throughput and to get  it up to 1 million barrels a                                                               
4:00:06 PM                                                                                                                    
He and his  team focused on implementing all five  parts of their                                                               
   · Enhance Alaska's global competitiveness and investment                                                                     
  · Ensure the permitting process is structured and efficient                                                                   
   · Facilitate and incentivize the next phases of North Slope                                                                  
   · Unlock Alaska's full resource development potential through                                                                
     partnerships with key stakeholders.                                                                                        
   · Promote Alaska's resources and positive investment climate                                                                 
     to world markets                                                                                                           
COMMISSIONER SULLIVAN said part two  is focused on permitting and                                                               
Brent Goodrum, Director, Division of  Mining, Land and Water, who                                                               
is a retired Marine and recon  and infantry officer and has a lot                                                               
of  experience  in  systems  management,  has  been  leading  the                                                               
charge.  Since the  last session  the  number of  people in  that                                                               
division   increased  (as   part  of   the  increment   from  the                                                               
legislature) and  31 of  36 vacancies  were filled.  New employee                                                               
training was conducted  for over 50 employees.  They have focused                                                               
on  a new  IT system  within  the division  as part  of the  same                                                               
increment. At the same time, they  have made a 20 percent dent in                                                               
the 2,500 permit backlog.                                                                                                       
Additionally, they are  looking at an entire  area of regulations                                                               
and potential statutory  changes in a package  they would present                                                               
to  the  legislature  for permitting  efficiencies  in  terms  of                                                               
certainty and  coordination. They  have listened  to stakeholders                                                               
and other agencies  and have held public  meetings throughout the                                                               
state  to get  input while  also  trying to  coordinate with  the                                                               
federal government. They have been  anticipating and planning for                                                               
permitting the next phases of  resource development such as shale                                                               
oil  and  underground coal  gasification,  and  he reported  that                                                               
progress had been made.                                                                                                         
4:04:00 PM                                                                                                                    
COMMISSIONER SULLIVAN said  there are signs that some  of this is                                                               
bearing  fruit and  they are  going  to have  a busy  exploration                                                               
season this winter  and spring. Similarly they had  a North Slope                                                               
lease  sale  in  December  that  was  successful.  He  said  they                                                               
"really, really,  beat the  pavement" to get  a lot  of companies                                                               
interested in it;  some didn't show at the last  minute, but they                                                               
got diverse  companies. Shell,  Repsol and  ConocoPhillips picked                                                               
up additional acreage,  any he is asking the  other companies why                                                               
they didn't show. For some of them it was the tax issue.                                                                        
SENATOR  FRENCH  asked if  he  knew  the  status  of any  of  the                                                               
explorations wells.                                                                                                             
COMMISSIONER SULLIVAN deferred those answers to Mr. Barron.                                                                     
4:05:47 PM                                                                                                                    
BILL BARRON,  Director, Division  of Oil  and Gas,  Department of                                                               
Natural  Resources (DNR),  reported that  Repsol had  started its                                                               
activities; most  of the ice roads  and ice pads had  been built.                                                               
The season looks  to be favorable, but from where  they were four                                                               
or  five months  ago  thinking it  was  going to  be  one of  the                                                               
largest  ever they  are looking  at somewhere  between 10  and 16                                                               
wells to be  drilled this year, which is the  normal average over                                                               
the last 10  or 15 years. It  still looks like a  good season but                                                               
it didn't play out as good as expected.                                                                                         
SENATOR FRENCH said this is  the "reality check" they wanted from                                                               
the division  as the season is  upon them. He asked  if he sensed                                                               
that the North Slope is "rig constricted."                                                                                      
MR. BARRON agreed that is part  of the problem. Only so many rigs                                                               
are  available and  that  causes a  bottleneck  with the  limited                                                               
timeframe of winter only on ice roads and ice pads.                                                                             
SENATOR FRENCH  said that  Repsol is  actually sticking  to their                                                               
plan  (a five-rig  exploration  program), and  asked  if that  is                                                               
because they are bigger and more sophisticated.                                                                                 
MR.  BARRON answered  that Repsol  realized what  the limitations                                                               
were  and were  aggressive; they  dropped one  rig that  is being                                                               
picked up by Savant for exploration work out of Badami.                                                                         
4:07:45 PM                                                                                                                    
SENATOR FRENCH  stated that is  fantastic news, because  he hated                                                               
to think  of where we would  be with no wells  drilled this year.                                                               
He  asked what  the practical  limit is  on the  North Slope  for                                                               
drilling exploration wells in the next five years.                                                                              
MR.  BARRON replied  while what  he  says is  true given  current                                                               
operating conditions  on the North  Slope, it wouldn't  take much                                                               
for some  of those operation  conditions to change.  Anything the                                                               
state  can do  -  for example,  roads to  resources  - to  extend                                                               
permanent roads  into those  areas that  would minimize  the need                                                               
for the  length of some of  the ice roads would  be an advantage.                                                               
And  if Repsol  and  Great Bear  have success,  there  will be  a                                                               
market-driven exercise to get more rigs up here.                                                                                
COMMISSIONER SULLIVAN  added that discussions with  all companies                                                               
indicate  that  a  lot  more  rigs  could  be  here  with  proper                                                               
SENATOR FRENCH said  Great Bear is a good example  of what can be                                                               
done in the summer time.                                                                                                        
MR. BARRON agreed  and said Great Bear  had a good idea  to go to                                                               
previously  disturbed  areas.  That  allowed the  division  do  a                                                               
resource evaluation  on existing  disturbed soils  and to  sign a                                                               
waiver from  the ice  road/pad stipulation  in the  best interest                                                               
finding to accommodate that.                                                                                                    
SENATOR  FRENCH remarked  that is  exactly the  kind of  thinking                                                               
they want to reward.                                                                                                            
MR. BARROIN clarified that the  Great Bear wells are not included                                                               
in  his numbers,  because they  will be  done out  of the  winter                                                               
SENATOR FRENCH  said the roads  to resources program is  the kind                                                               
of thing  Alaska could  do with  its oil wealth  to be  a partner                                                               
with the oil  industry. He said with lower taxes  they could hope                                                               
for more activity,  but a concrete proposal to  spend $90 million                                                               
for a road to  Umiat or double that could actually  open up a new                                                               
4:13:12 PM                                                                                                                    
SENATOR WIELECHOWSKI  said his understanding  is that  some wells                                                               
were denied permits by some local North Slope communities.                                                                      
COMMISSIONER  SULLIVAN replied  he wouldn't  call it  denied, and                                                               
explained that  Repsol, the State  of Alaska and the  North Slope                                                               
communities  collaborated over  a number  of weeks  to get  to an                                                               
optimal number of  wells that got support from  all the different                                                               
SENATOR WIELECHOWSKI asked if five wells were planned.                                                                          
COMMISSIONER SULLIVAN  replied five rigs for  about fifteen wells                                                               
and now that is down to four rigs.                                                                                              
SENATOR WIELECHOWSKI asked if the number of wells was decreased.                                                                
MR. BARRON replied yes; those were deferred until next year.                                                                    
SENATOR WIELECHOWSKI asked if that was the North Slope Borough.                                                                 
MR. BARRON replied yes.                                                                                                         
SENATOR WIELECHOWSKI asked  if that would that  have gone through                                                               
the Coastal Zone Management (CZM) program before.                                                                               
MR.  BARRON  replied  yes.  The issues  and  concerns  that  were                                                               
brought forward  by the  communities and  the borough  would have                                                               
been the same  ones that would have been  brought forward through                                                               
the  CZM  Act. But  it  allowed  the  DEC,  ADF&G and  the  local                                                               
communities  to  actually engage  in  a  "much more  healthy  and                                                               
direct dialogue."                                                                                                               
4:16:10 PM                                                                                                                    
COMMISSIONER  SULLIVAN   agreed  that  it  was   a  very  healthy                                                               
SENATOR  WIELECHOWSKI remarked  "although we  have less  rigs and                                                               
less wells being drilled now."                                                                                                  
COMMISSIONER  SULLIVAN said  if he  was implying  with CZM  there                                                               
would  have been  more  wells, that's  the  wrong conclusion.  He                                                               
explained that  the borough has  its own processes to  go through                                                               
and he was coordinating closely with them.                                                                                      
MR.  BARRON stated  ironically  the one  rig  being removed  from                                                               
Repsol's  program  actually gave  a  smaller  player, Savant,  an                                                               
opportunity to  drill this  winter. So,  there is  an exploration                                                               
program in an area they would not have had prior to this.                                                                       
4:17:59 PM                                                                                                                    
CO-CHAIR  PASKVAN  asked  in  a  global  context  if  any  permit                                                               
application  for a  significant activity  on the  North Slope  is                                                               
being held up by permitting activity.                                                                                           
COMMISSIONER SULLIVAN  answered probably no.  He said they  had a                                                               
very busy  November and December  because of the lease  sale, the                                                               
permitting requirements for a fairly  busy exploration season and                                                               
some  big deals  closing  in  the Cook  Inlet.  His  team made  a                                                               
"Herculean effort" along with others in state government.                                                                       
CO-CHAIR  PASKVAN  said the  public  should  hear that  there  is                                                               
nothing  on  a permitting  basis  right  now that  is  inhibiting                                                               
activities on the North Slope.                                                                                                  
COMMISSIONER   SULLIVAN  responded   if   you're  talking   state                                                               
government that is correct.                                                                                                     
SENATOR WIELECHOWSKI  asked how  many permits are  backlogged and                                                               
if  there had  been any  delay in  any development  in the  state                                                               
because of it.                                                                                                                  
COMMISSIONER SULLIVAN  deferred that  answer to Mr.  Goodrum, but                                                               
added  that  because  of  this   backlog  somebody  somewhere  is                                                               
probably hurting. He  had to do triage based  on economic impacts                                                               
but his goal is to eradicate it. It's just not fair.                                                                            
4:20:25 PM                                                                                                                    
BRENT  GOODRUM, Director,  Division  of Mining,  Land and  Water,                                                               
Department  of  Natural Resources  (DNR),  reported  on June  30,                                                               
2,658 authorizations  were in a  backlog status; that  number had                                                               
grown from  the last legislative  session because they had  26 to                                                               
28 vacancies within his division.  Once they started hiring folks                                                               
(31  of 36  vacancies)  as  of December  30,  in  2011 the  total                                                               
backlog  was  2,095,  a  decrease of  563  authorizations  or  21                                                               
SENATOR WIELECHOWSKI  thanked him  for trying to  get rid  of the                                                               
backlog and asked who is hurting from it.                                                                                       
MR. GOODRUM  replied there are  various types  of authorizations;                                                               
over 600  are water  related. Permits are  shorter in  nature and                                                               
there  are around  200 from  throughout  the state.  He said  the                                                               
division has developed  tools for greater visibility  so they can                                                               
prioritize efforts to provide the most benefit to the state.                                                                    
COMMISSIONER SULLIVAN said they are  not just getting the backlog                                                               
down, but  they are trying to  reform the system to  make it more                                                               
efficient  through  technological changes  and  using  a kind  of                                                               
systems  approach,  but  also through  regulations  or  statutory                                                               
changes, some of which no longer make sense.                                                                                    
CO-CHAIR  PASKVAN asked  if he  expected  to see  the 20  percent                                                               
reduction continuing.   He thought  20 percent in six  months was                                                               
awesome and wanted to know what to expect in the future.                                                                        
MR.  GOODRUM  replied  when  the  commissioner  worked  with  the                                                               
legislature  last  year,  the  initial  three-year  timeline  was                                                               
ambitious. While  some permits  are easier  to obtain,  they also                                                               
hired  and  trained new  folks  and  identified tools  to  better                                                               
understand their  processes so they improve  continuously. To hit                                                               
20 percent was  great, but he couldn't anticipate  doing the same                                                               
next year. Some authorizations are  more complex, but the goal is                                                               
still to keep within the three-year commitment.                                                                                 
COMMISSIONER  SULLIVAN  said  that  in  2011  clearly  there  was                                                               
positive news  from Cook Inlet.  The USGS report came  out upping                                                               
the numbers significantly and the  department had one of its most                                                               
successful lease  sales in  about 30  years there.  A competitive                                                               
price  is   driving  this  as  well   as  competitive  investment                                                               
incentives. The  Inlet has significant players  - Apache, Hilcorp                                                               
and  diverse other  players -  as  a result  of this  committee's                                                               
actions. He emphasized  that they were very  vigilant with regard                                                               
safety with all the new players.                                                                                                
4:29:49 PM                                                                                                                    
In 2011,  a mining  exploration "boomlet" was  going on  and that                                                               
one-third of  all mineral  exploration and  investment in  the US                                                               
took  place  in  Alaska.  It's  not just  big  projects,  but  34                                                               
different exploration  projects worth  over $1 million  each. The                                                               
offshore  mineral leases  in  the  Nome area  obtained  a lot  of                                                               
interest and a significant amount of money for the state.                                                                       
COMMISSIONER  SULLIVAN said  the department  had a  summit called                                                               
the  Strategic and  Critical Minerals  Summit in  Fairbanks. They                                                               
tried  to get  high  level panelists,  participants and  industry                                                               
folks from  all over the country;  it was a sold  out event. Half                                                               
the people were  from out of state. At least  two big newspapers,                                                               
Bloomberg  and  Reuters, covered  it  and  talked about  Alaska's                                                               
He said  the department is  coordinating a  three-year assessment                                                               
of strategic  and critical  minerals in the  state with  the USGS                                                               
with a focus  on rare earth elements. Companies  think it's great                                                               
because all the information will be made public.                                                                                
4:33:51 PM                                                                                                                    
He said  DNR has other areas  of responsibility; they had  a good                                                               
year  with  regard  to  agriculture   and  continue  focusing  on                                                               
promoting the  Alaska grown  program. The  Division of  Parks and                                                               
Outdoor Recreation  has the largest  park system in  the country,                                                               
and  the director,  Ben Ellis,  has  been doing  a fantastic  job                                                               
there  and has  new initiatives  like Arts  in the  Park and  the                                                               
boating safety program.                                                                                                         
COMMISSIONER SULLIVAN reported that  the Division of Forestry had                                                               
doubled the size  of the state forest. The  Governor's task force                                                               
made progress,  too. Alaska  had a  fire season,  but by  the end                                                               
they went down to help Texas put out its fires.                                                                                 
COMMISSIONER SULLIVAN said  finally they saw a bit of  a shift in                                                               
alignment  with  federal  government  with  regards  to  resource                                                               
development although the Point Thomson  EIS that has been delayed                                                               
one year. Fish  and Wildlife might want to bootstrap  some of the                                                               
ANWR values into state land, which he would oppose vigorously.                                                                  
SENATOR  WIELECHOWSKI   asked  how   many  federal   permits  are                                                               
COMMISSIONER SULLIVAN replied that he  didn't know, but would get                                                               
back to him on that.                                                                                                            
CO-CHAIR PASKVAN asked how he  felt the coordination with federal                                                               
government went on last fall's lease sale.                                                                                      
COMMISSIONER SULLIVAN replied  that it went great.  He has gotten                                                               
very good cooperation  from them on the Rare Earth  issue and the                                                               
lease sale.  The idea was to  hold the NPRA and  state lease sale                                                               
on  the same  day, so  a company  could think  more strategically                                                               
about the North Slope, and it would be great to do it again.                                                                    
CO-CHAIR PASKVAN  agreed that coordination between  the state and                                                               
federal government is good.                                                                                                     
COMMISSIONER  SULLIVAN said  that  was an  overview  of the  last                                                               
year,  but added  that there  are  significant challenges  ahead.                                                               
There are a  lot of good things to build  on. The TAPS throughput                                                               
issue remains  the most urgent  from their perspective. A  lot of                                                               
positive  progress has  been on  commercializing North  Slope gas                                                               
and he  pointed out that Alaska  is closer to Asia  than the Gulf                                                               
States and Qatar.                                                                                                               
4:39:40 PM                                                                                                                    
COMMISSIONER  SULLIVAN  said DNR  tries  every  day to  strike  a                                                               
balance between  responsible resource development and  being good                                                               
stewards of the environment.                                                                                                    
SENATOR  WIELECHOWSKI said  the  new mission  statement took  out                                                               
"conserve" and asked what the pressing need was to change that.                                                                 
COMMISSIONER  SULLIVAN replied  that he  was focused  on aligning                                                               
the mission  statement with  the policy  statement in  the Alaska                                                               
Constitution.  They  see  the  issues  of  conservation  and  the                                                               
public's future  use encompassed by  the term "within  the public                                                               
interest responsible development" and  he pointed out that entire                                                               
divisions  are  focused on  conservation,  like  the Division  of                                                               
Parks and others.                                                                                                               
SENATOR MCGUIRE said  it's predicted the state  will need 180,000                                                               
barrels  of oil  by 2016  in order  to keep  up with  the current                                                               
budget and  asked if he knew  of permits that would  be requested                                                               
that will help achieve that goal.                                                                                               
COMMISSIONER  SULLIVAN  replied  that  TAPS is  at  a  6  percent                                                               
decline right  now (he  estimated that's  about 36,000  barrels a                                                               
year) and that while the  exploration season is positive, getting                                                               
a discovery  on line  will take  more time  than 2016.  He wasn't                                                               
aware  of any  developments  that  would even  hold  the line  at                                                               
600,000  barrels unless  there is  more i-field  drilling in  the                                                               
legacy field.                                                                                                                   
SENATOR  MCGUIRE   said  Alaskans   want  the  state   to  remain                                                               
competitive with  its oil and  gas investments and have  asked if                                                               
there  isn't  a   way  to  link  a  tax   benefit  to  guaranteed                                                               
production.  She  tells them  no  and  recalls how  lowering  the                                                               
cruise ship  tax couldn't guarantee  that new cruise  ships would                                                               
come in. She  said she thought the Senate was  coming around, but                                                               
that they needed  data and his help to explain  to the public why                                                               
the formula is wrong. There is  a base rate and the progressivity                                                               
element;  trying to  understand how  every dollar  compounds into                                                               
the .4  percent tax and  why that ends  of up acting  punitive is                                                               
very complex to explain.                                                                                                        
SENATOR  MCGUIRE said  she also  wanted a  good dialogue  between                                                               
Commissioner  Sullivan   and  the   co-chairmen  of   Finance  on                                                               
decoupling,  because  even though  it  was  vetoed last  year,  a                                                               
majority of the Senate members  believed decoupling was the right                                                               
way to  go. They are two  separated systems and it  was presented                                                               
to them  as a 6:1  ratio until the  discovery of shale  oil which                                                               
put that ratio  "way off the charts." They now  know at a minimum                                                               
those  two systems  ought to  be  separated. She  wanted to  hear                                                               
assurances he  would work with  the co-chairmen of  Finance about                                                               
it, because that is the only way they will get to a solution.                                                                   
4:50:07 PM                                                                                                                    
COMMISSIONER SULLIVAN  said there is  no doubt that  Alaska still                                                               
sits   on  a   world   class  hydrocarbon   basin;  it   includes                                                               
conventional  state and  federal, but  if  you start  to look  at                                                               
unconventional, USGS  is doing an  unconventional study  up there                                                               
and  they think  the  numbers are  going to  be  off the  charts.                                                               
Everybody recognizes that; that is not  the issue. The issue is a                                                               
lot  of people  think we're  at a  sustained high  price base  in                                                               
terms  of  oil   prices,  but  the  disturbing   thing  from  the                                                               
administration's perspective  is that  oil production  is booming                                                               
everywhere -  other states and countries  - but not in  the great                                                               
hydrocarbon  basin  of  North  America. Why?  That  is  a  hugely                                                               
important question  and it  has to  do with  costs. "There  is no                                                               
doubt  about it."  In the  state  of Alaska.  development on  the                                                               
North Slope is saddled with  certain costs that we're never going                                                               
to  get  rid  of:  remoteness  and  extreme  Arctic  climate  and                                                               
environment. How can these costs  be addressed? Road to resources                                                               
is one  thing, but he has  heard across the board  from companies                                                               
that  are looking  to come  here and  the ones  that are  already                                                               
here.  Even  Repsol said  they  are  exploring, but  they  aren't                                                               
promising  any development  because of  the high  taxes. What  he                                                               
heard  was focused  mostly on  the  marginal tax  rate at  higher                                                               
4:54:06 PM                                                                                                                    
He said the  Governor's concern with decoupling is  not having to                                                               
work  through it  twice,  but he  didn't say  "no"  at his  press                                                               
4:54:53 PM                                                                                                                    
SENATOR  STEDMAN said  he  didn't know  how  changing the  policy                                                               
statement  interties with  the legislature  and  he thought  that                                                               
should  be  checked  so everyone  understands  the  legislature's                                                               
responsibilities versus the executive branch's.                                                                                 
CO-CHAIR PASKVAN  said in discussions  he has had with  people on                                                               
development  of the  central North  Slope, he  has heard  about a                                                               
section 404  permit and  asked what application  that has  on the                                                               
North Slope region.                                                                                                             
COMMISSIONER  SULLIVAN  replied that  it  is  the wetlands  clean                                                               
water  related issue  that  provides a  "federal  hook" into  all                                                               
kinds of  different activities  even in the  state lands.  So, if                                                               
you have a federal government that is not being cooperative...                                                                  
CO-CHAIR  PASKVAN  asked what  the  experience  has been  in  the                                                               
central North  Slope and if  it will be  an issue with  shale oil                                                               
MR. BARRON answered the 404  permit for shale will undoubtedly be                                                               
an issue. Most of Great Bear's  acreage will be involved in a 404                                                               
CO-CHAIR  PASKVAN asked  if there  is any  history in  comparable                                                               
lands on the  central North Slope with respect to  how 404 issues                                                               
have been dealt with in Alaska.                                                                                                 
MR. BARRON replied almost all  of the developments on the greater                                                               
North Slope have had a 404  determination one way or another, and                                                               
the   companies  have   come  to   understand  what   those  time                                                               
constraints   are  and   plan  accordingly.   Federal  permitting                                                               
associated with wetlands  and their primacy is one  of the things                                                               
that has slowed development.                                                                                                    
CO-CHAIR   PASKVAN  asked   if  this   is  a   standard  business                                                               
application on the central North Slope.                                                                                         
MR. BARRON replied yes, and in the Cook Inlet.                                                                                  
4:59:30 PM                                                                                                                    
CO-CHAIR WAGONER  thanked everyone  and adjourned the  meeting at                                                               
4:59 p.m.                                                                                                                       

Document Name Date/Time Subjects
State of Alaska Opportunties 2012_Sullivan_Fairbanks DNM.pdf SRES 1/25/2012 3:30:00 PM
Sullivan_Presentation_SRES_1-25-12 (2).pdf SRES 1/25/2012 3:30:00 PM