03/28/2006 08:00 AM House COMMUNITY & REGIONAL AFFAIRS
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| SB171 | |
| Adjourn |
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= bill was previously heard/scheduled
| + | SB 171 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE
March 28, 2006
8:02 a.m.
MEMBERS PRESENT
Representative Kurt Olson, Co-Chair
Representative Bill Thomas, Co-Chair
Representative Pete Kott
Representative Gabrielle LeDoux
Representative Mark Neuman
Representative Sharon Cissna
Representative Woodie Salmon
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 171(FIN)(efd fld)
"An Act amending the National Petroleum Reserve - Alaska special
revenue fund; and establishing the Special Legislative Oil and
Gas NPR-A Development Impact Review Committee and defining its
powers and duties."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 171
SHORT TITLE: NPR-A COMMUNITY GRANT PROGRAM
SPONSOR(s): SENATOR(s) WILKEN
04/12/05 (S) READ THE FIRST TIME - REFERRALS
04/12/05 (S) CRA, FIN
04/20/05 (S) CRA AT 1:30 PM BELTZ 211
04/20/05 (S) Heard & Held
04/20/05 (S) MINUTE(CRA)
04/22/05 (S) CRA AT 1:30 PM BELTZ 211
04/22/05 (S) Moved SB 171 Out of Committee
04/22/05 (S) MINUTE(CRA)
04/25/05 (S) CRA RPT 3DP
04/25/05 (S) DP: STEVENS G, WAGONER, STEDMAN
04/26/05 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/26/05 (S) Heard & Held
04/26/05 (S) MINUTE(FIN)
01/26/06 (S) FIN AT 9:00 AM SENATE FINANCE 532
01/26/06 (S) Heard & Held
01/26/06 (S) MINUTE(FIN)
02/01/06 (S) FIN RPT CS FORTHCOMING 4DP 2DNP
02/01/06 (S) DP: WILKEN, GREEN, BUNDE, DYSON
02/01/06 (S) DNP: HOFFMAN, OLSON
02/01/06 (S) FIN AT 9:00 AM SENATE FINANCE 532
02/01/06 (S) Moved CSSB 171(FIN) Out of Committee
02/01/06 (S) MINUTE(FIN)
02/03/06 (S) FIN CS RECEIVED TECH
TITLE CHANGE
02/16/06 (S) ENGROSSED
03/01/06 (S) TRANSMITTED TO (H)
03/01/06 (S) VERSION: CSSB 171(FIN)(EFD FLD)
03/01/06 (H) READ THE FIRST TIME - REFERRALS
03/01/06 (H) CRA, FIN
03/28/06 (H) CRA AT 8:00 AM CAPITOL 124
WITNESS REGISTER
SENATOR GARY WILKEN
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Spoke as the sponsor of SB 171.
ACTION NARRATIVE
CO-CHAIR BILL THOMAS called the House Community and Regional
Affairs Standing Committee meeting to order at 8:02:32 AM.
Representatives Thomas, Olson, LeDoux, Neuman, and Salmon were
present at the call to order. Representatives Kott and Cissna
arrived as the meeting was in progress.
SB 171-NPR-A COMMUNITY GRANT PROGRAM
8:02:42 AM
CO-CHAIR THOMAS announced that the only order of business would
be CS FOR SENATE BILL NO. 171(FIN)(efd fld), "An Act amending
the National Petroleum Reserve - Alaska special revenue fund;
and establishing the Special Legislative Oil and Gas NPR-A
Development Impact Review Committee and defining its powers and
duties."
8:03:17 AM
SENATOR GARY WILKEN, Alaska State Legislature, sponsor, informed
the committee that the committee packet should include the
sponsor statement, a sectional analysis, a PowerPoint
presentation, and the "National Petroleum Reserve-Alaska (NPR-A)
Impact Mitigation Grant Program" report from the Department of
Commerce, Community, & Economic Development. Senator Wilken
explained that SB 171 attempts to correct two problems that were
created in 1980 by an insertion in federal legislation having to
do with the leasing of NPR-A. The federal legislation put in
front of the permanent fund dividend any revenues that come from
NPR-A and thus most believe that 25 percent of the funds from
the NPR-A are deposited into the permanent fund dividend
account. However, that isn't the case. Back in 1980 a grant
program was created and the revenue stream from NPR-A is just
beginning to flow. The lack of attention to the grant program
has highlighted the need to make some changes. Therefore, this
legislation attempts to address the aforementioned by a creating
a priority that "steps in front of the permanent fund" and
establishing some objectivity with the grant program and spread
the wealth of NPR-A throughout Alaska rather than just one area
of the state.
SENATOR WILKEN turned attention to the PowerPoint presentation
on which the first page relates the quote from Judge Walter
Carpeneti in the Barrow v. State case, as follows: "The duty
imposed by the federal government ultimately falls upon the
Alaska Legislature ...". He then turned to slide 1, which
highlights Article 9, Section 15, of the Alaska State
Constitution, which read:
Alaska Permanent Fund. At least twenty-five percent of
all mineral lease rentals, royalties, royalty sale
proceeds, federal mineral revenue sharing payments and
bonuses received by the State shall be placed in a
permanent fund, the principal of which shall be used
only for those income-producing investments
specifically designated by law as eligible for
permanent fund investments. All income from the
permanent fund shall be deposited in the general fund
unless otherwise provided by law.
SENATOR WILKEN explained that in order for the aforementioned to
be correct today the language ", except those from NPR-A" would
need to be inserted because currently the revenue is intercepted
from NPR-A by certain communities in the state prior to it
reaching the permanent fund. The aforementioned is coming to
light due to the revenue coming from the NPR-A over the last few
years. Senator Wilken informed the committee that since 1980
$167.6 million has come from NPR-A, although only 15 percent has
been deposited into the permanent fund to date. Therefore, the
question becomes: where did the money go. Senator Wilken then
drew attention to slide 4, which specifies how the half that's
state money was allocated from 1983 to 2006 and 2000 to 2006
with the largest percentage going to NPR-A community grants
during both time periods. He then reminded the committee that
NPR-A money is half federal money and half state money.
Clearly, the pie charts on slide 4 illustrate that the 6 percent
that went to the permanent fund in 2000-2006 is in violation of
the constitution, which requires 25 percent of these funds be
placed in the permanent fund. Those who believe the general
fund (GF) will benefit from NPR-A are wrong, he opined, as the
pie charts on slide 4 illustrate that no funds from NPR-A have
gone to the GF while 75 percent went to the North Slope.
SENATOR WILKEN then turned the committee's attention to slide 5.
He informed the committee that if last year's appropriation was
for $24.7 million in grant funds and if the aforementioned was
awarded on a per person basis in the North Slope, it would
amount to $4,400 [per person]. Under the per person basis,
Anchorage would receive a check for $1.2 billion while Fairbanks
would receive $380 million. "Wouldn't all of our communities
like to have grants such as that," he queried. He then moved on
to slide 6, which illustrates that next fiscal year there should
be about $50 million in NPR-A grant funds to distribute. He
related that NPR-A is expected to be a mega giant oil field that
could hold 10 billion barrels and thus the funds are expected to
climb. Therefore, it's important to address the problem with
NPR-A. He highlighted slides 9-10, which detail the four
communities and borough that have benefited from the monies from
NPR-A. Slide 10 also relates the distance from which the
communities sit from oil and gas development.
[8:14:50]
SENATOR WILKEN related the history of NPR-A, which is specified
on slide 11. He then pointed out that under federal law, as
highlighted on slide 12, there is a priority use of NPR-A funds
by the communities most directly or severely impacted by the
development of oil and gas within NPR-A. At that time the
legislature didn't have a state law on the books and decided to
protect the permanent fund and deposit the remainder in the GF.
However, the North Slope Borough disagreed with the
aforementioned and brought forth a suit in which Judge Carpeneti
said that automatic deposits into the permanent fund violate the
federal law. Judge Carpeneti also said that the state has a
mandatory duty to address NPR-A development-related impact needs
because the federal law trumps the state constitution.
Furthermore, Judge Carpeneti specified that the duty imposed by
the federal government ultimately falls upon the Alaska State
Legislature, which is the goal of SB 171.
SENATOR WILKEN moved on to slide 14, which provides a flow chart
of the process by which the impacted communities submit requests
to DCCED [Department of Commerce, Community, & Economic
Development] for impact grants. He noted that the [committee
packet] should include a listing of the grants that have been
funded. The legislature is only involved in the process at the
capital budget level. He then highlighted slide 15, which
specifies the federal and state laws as well as the
corresponding regulations. He then turned the committee's
attention to the term "impact" and explained that under SB 171
"impact is the threshold across which one must pass in order to
be considered for any sort of funding." However, that's not how
it has been handled, which has led to confusion as related in
the varying point assignments to impact as specified in slide
16. He then offered examples which he indicated weren't
[reasonably attributable to oil and gas development within NPR-
A]. For example, in fiscal year (FY) 06 the legislature was
asked to fund a $525,000 lagoon boat launch in Wainwright as
related on slide 17. The application merely said, "Construction
of the oil production infrastructure and pipeline has driven up
the growth of population." However, he refuted that and
informed the committee that over that time period the population
of Wainwright has increased from 492 to 546. With regard to the
impact on social and cultural values, the grant application
specified the following: "The social disruption prompted by oil
and gas development affects many traditional activities."
However, Wainwright is located 220 miles away from NPR-A
development. He then turned attention to an application for the
$63,000 renovation of a roller rink in Barrow, which is located
160 miles from Alpine. Senator Wilken respectfully suggested
that there is no impact on the borough.
8:23:15 AM
SENATOR WILKEN then turned attention to other concerns that are
specified on slide 19. For instance, grants have been funded as
capital projects with no lapse date. However, the majority of
the grants are for operating expenses, which typically have a
one-year life. He opined that there is very little
accountability as illustrated with the 2000 approval of a grant
for the construction of a cultural center in Nuiqsut. In 2002
$300,000 was [approved] for the operation of the Nuiqsut
cultural center, although to date no foundation has been dug.
Senator Wilken then pointed out that positive impacts of NPR-A
activities aren't considered. For instance, the people of
Nuiqsut are going to have free natural gas. Moreover, [NPR-A
activities] provide jobs and an income. Therefore, it's time to
change and thus SB 171 establishes a special legislative impact
review committee in a conference committee structure. He
highlighted Judge Carpeneti's remarks in the Barrow V. State
case as follows: "The duty imposed by the federal government
ultimately falls upon the Alaska Legislature and it includes the
duties to examine the claimed needs of the subdivisions arising
from oil and gas development impacts, to evaluate them and, if
the claimed needs are found to exist, to rate them in order of
priority, and to meet them out of NPR-A revenues."
SENATOR WILKEN explained that SB 171, as related in slide 22,
establishes a special legislative impact review committee
consisting of three members from the Senate Finance Committee
and three members from the House Finance Committee. Under the
legislation, the process will work the same save that the
legislature has inserted itself through the committee, as
illustrated on slide 22. He then moved on to slide 23, which
highlights that "impact" is the first criteria for which the
application is reviewed before moving through the funding
process. The reason to do the aforementioned is to fix the
current process, which he characterized as broken. He reminded
the committee that this is the only program that stands in front
of the permanent fund and thus it's necessary to take
extraordinary measures to address the situation. He then
reviewed the advantages of the process proposed in SB 171.
Under SB 171 those making the decisions will be elected
officials acting in an open process with public decisions and
thus the committee will be accountable to the public. The
aforementioned is in contrast to the current process, which is a
closed process performed by state employees who are only
accountable to their boss.
8:30:40 AM
SENATOR WILKEN continued with slide 25, which reviews the path
of the money under SB 171. He acknowledged that some will say
that the proposed committee is a politically driven group that
will "short the impacts, ... not define them properly, and not
give the impact to communities that are just due" because of the
desire to have more money for the GF, permanent fund, or
specific areas. With regard to that, Senator Wilken pointed out
that legislators are accountable to those who elected them. He
also pointed out that legislators must work under the laws and
regulations in place. The proposed committee, he explained,
will determine where the money goes. In complying with the
Alaska State Constitution, 25 percent of NPR-A funds will go to
the permanent fund and .5 percent to a school trust. Currently,
the 25 percent is taken off the net. He explained that money
comes to the state, goes to the grants, and 25 percent of what
is left [after the grants are taken] is placed in the permanent
fund. However, sometimes after the grants there isn't enough
money to take the 25 percent. Under SB 171, the impact draws
are taken and 25 percent of what's left is placed in the
permanent fund. When there isn't enough money after the grants
to satisfy the 25 percent requirement, a provision similar to
that of the constitutional budget reserve comes into play. If
there is money left over after the grants and the 25 percent for
the permanent fund have been paid, then any leftover debt is
satisfied after which support is given to the power cost
equalization (PCE) program, and then the GF. Senator Wilken
concluded as follows: "Senate Bill 171 is a method to fairly
allocate the financial benefits of NPR-A to all Alaskans while,
at the same time, mitigate the direct impact of development on
certain communities as required by federal law."
8:34:57 AM
REPRESENTATIVE LEDOUX inquired as to the percentage of NPR-A
funds that would be allocated to the North Slope Borough as
compared to the current percentage the borough receives. In
other words, she inquired as to how much [money] the North Slope
Borough would lose under SB 171.
SENATOR WILKEN said that it's difficult to determine. He used
last year as an example. Last year $32 million was available
and there was $54 million in requests. The calculation was made
in regard to what was necessary for PCE and the remainder [of
the requests] were approved with grants, which he opined was
built backwards. Furthermore, no consideration was given for
the impact of the projects. Currently, $4 million can be
allocated. Senator Wilken turned to the question as to what it
costs to alleviate impact of NPR-A development, which isn't
answered today because under the current situation "we build
backwards on what's available and we fund up to a certain amount
that's calculated by somebody."
8:36:53 AM
REPRESENTATIVE CISSNA related her understanding that Senator
Wilken makes a case with regard to the need to review the
disbursement methods, but she questioned why the legislation
doesn't open up a process to really analyze such. She expressed
concern with having Finance committee members on this proposed
committee because they are the very people who will know of lots
of needs for the funds. Furthermore, their hunger for their own
area will be greater and thus Finance committee members are
biased. She asked if the sponsor reviewed other possible
methods with regard to the disbursal of these NPR-A monies.
SENATOR WILKEN acknowledged that this proposal is a bit
cumbersome, although it's the most public and accountable method
he found. He further acknowledged that there is always the
tension [for members to] take home what they need. However, the
NPR-A funds realize that a certain area of the state is impacted
[by the NPR-A development] and those funds are used to mitigate
those impacts. Therefore, the question is whether the requests
for mitigation are logical and sustainable. Whatever the case,
the law has to be followed.
8:41:11 AM
REPRESENTATIVE CISSNA noted that there have been studies on the
subject of impacted communities, one of which found that local
communities tend not to be adequately mitigated for the impacts
they suffer. She inquired as to why the sponsor chose public
hearings rather than a much larger arena.
SENATOR WILKEN said that he would be open to any thoughts to
make the process more public, manageable, and accountable. He
commented, "I've done the best I can to come up with what I
consider to be a accountable, manageable, public group to decide
what impact is and then spread the wealth of NPR-A across the
rest of the state; that's the purpose of this bill."
8:44:02 AM
CO-CHAIR OLSON characterized accountability as the key issue and
asked if the sponsor would agree.
SENATOR WILKEN replied yes.
CO-CHAIR OLSON, drawing from his experience as a staffer and a
legislator, recalled seeing communities in the state request
good and bad projects and he assumed that the impacted villages
would have the same opportunity. He then opined that it appears
that the problem with accountability lays at the step of DCCED
rather than with the impacted villages.
8:45:09 AM
CO-CHAIR OLSON specified that the impacted villages and the
North Slope Borough are doing everything that all other
communities in the state are. However, they have "a pie" to
which they have quicker access. The problem, he reiterated, is
the lack of oversight of one state agency, DCCED.
SENATOR WILKEN noted his agreement and emphasized the need to
fix it now before "the money gets so big that it just overwhelms
us."
8:46:36 AM
REPRESENTATIVE NEUMAN inquired as to the response of DCCED
regarding the lack of accountability.
SENATOR WILKEN answered that the department asked what the
legislature would like it to do. Currently, there is no
structure and it's very loose because no one has delineated any
operating rules.
REPRESENTATIVE NEUMAN referred to slide 19 and the example of
the cultural center that received grants, although it was never
constructed. He inquired as to how that could occur.
SENATOR WILKEN echoed his earlier statements that SB 171
attempts to bring accountability to these decisions and
establish fairness to the federal legislation.
8:48:50 AM
REPRESENTATIVE LEDOUX asked whether a significant amount of the
problem is that DCCED isn't giving enough weight to the impact.
She questioned whether it would be simpler to state in law that
"impact" with a specified amount of points is the highest
priority. She suggested that such would eliminate a lot of the
problems.
SENATOR WILKEN said Representative LeDoux is correct, but noted
that her suggestion lacks accountability for the only program
that comes before the permanent fund. He opined that the level
of scrutiny for this program should be higher.
REPRESENTATIVE LEDOUX surmised that the sponsor is almost
assuming that under SB 171 there wouldn't be enough grants going
to the North Slope Borough and they would go elsewhere.
SENATOR WILKEN reminded that the committee that the laws in
place must be followed.
8:51:53 AM
REPRESENTATIVE SALMON referred to slide 25 with regard to PCE,
which the Senate doesn't seem to support.
8:52:41 AM
CO-CHAIR THOMAS recalled giving Senator Wilken's staff
legislation regarding the University of Alaska potentially being
in line for impact aid due to the NPR-A. If so, he asked if the
sponsor would want any impact aid to the university to be
treated in the same manner as proposed under SB 171.
SENATOR WILKEN related his understanding that there has been
discussion with regard to the Southeast corner of NPR-A being
set aside and the revenues from which would go to the
university. However, he said he didn't know what the split
would be. Furthermore, he said he wasn't sure that impact would
be included in that discussion. He informed the committee that
it's federal legislation that he understands is languishing.
CO-CHAIR THOMAS related his belief that Fairbanks is the
community most impacted by oil.
8:54:23 AM
CO-CHAIR THOMAS recalled the sponsor saying that the NPR-A is
the only impact aid monies, but he pointed out that the Tongass
forest receipts are in the direct impact aid grant process. He
related his difficulty with impact funds because it seems that
those areas with boroughs receive more funding rather than the
areas that face the most impact. He then inquired as to why no
money was taken for the PFD from the Tongass forest receipts.
He then requested the total capital GF monies that the North
Slope Borough has received over the last six years. He then
inquired as to whether the department can fix this in-house
without this legislation.
SENATOR WILKEN informed the committee that he has data with
regard to forest receipts and past capital expenditures, and the
draw the North Slope Borough makes on 43.56 properties that it
can supply the committee and compare with the information
provided by DCCED.
[SB 171 was held over.]
8:57:39 AM
ADJOURNMENT
There being no further business before the committee, the House
Community and Regional Affairs Standing Committee meeting was
adjourned at 8:57:45 AM.
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