Legislature(2013 - 2014)BARNES 124

04/09/2013 08:00 AM COMMUNITY & REGIONAL AFFAIRS


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 181 MINING LICENSE REVENUE; REVENUE SHARING TELECONFERENCED
Heard & Held
*+ HB 166 BULK FUEL REVOLVING LOAN FUND TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
    HOUSE COMMUNITY AND REGIONAL AFFAIRS STANDING COMMITTEE                                                                   
                         April 9, 2013                                                                                          
                           8:04 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Gabrielle LeDoux, Co-Chair                                                                                       
Representative Benjamin Nageak, Co-Chair                                                                                        
Representative Neal Foster                                                                                                      
Representative Bob Herron                                                                                                       
Representative Lora Reinbold                                                                                                    
Representative Harriet Drummond                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Kurt Olson                                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 181                                                                                                              
"An  Act relating  to the  accounting for  money received  by the                                                               
state from  the mining  license tax,  mining lease  payments, and                                                               
royalties from  mining on state  tide and submerged  land seaward                                                               
of  a  municipality,  and  the availability  of  that  money  for                                                               
appropriation to  certain boroughs and municipalities  outside of                                                               
a borough."                                                                                                                     
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 166                                                                                                              
"An Act relating to the bulk fuel revolving loan fund."                                                                         
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 181                                                                                                                  
SHORT TITLE: MINING LICENSE REVENUE; REVENUE SHARING                                                                            
SPONSOR(s): REPRESENTATIVE(s) FOSTER                                                                                            
                                                                                                                                
03/20/13       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/20/13       (H)       CRA, FIN                                                                                               
04/09/13       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
BILL: HB 166                                                                                                                  
SHORT TITLE: BULK FUEL REVOLVING LOAN FUND                                                                                      
SPONSOR(s): REPRESENTATIVE(s) FOSTER                                                                                            
                                                                                                                                
03/15/13       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/15/13       (H)       CRA                                                                                                    
04/09/13       (H)       CRA AT 8:00 AM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
PAUL LABOLLE, Staff                                                                                                             
Representative Foster                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Reviewed the changes between HB 181 and                                                                  
Version U.                                                                                                                      
                                                                                                                                
DENISE MICHELS, Mayor                                                                                                           
City of Nome                                                                                                                    
Nome, Alaska                                                                                                                    
POSITION STATEMENT:  Testified in support of HB 181.                                                                          
                                                                                                                                
PAUL LABOLLE, Staff                                                                                                             
Representative Foster                                                                                                           
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented HB 166 on behalf of the sponsor,                                                               
Representative Foster.                                                                                                          
                                                                                                                                
SCOTT RUBY, Director                                                                                                            
Division of Community & Regional Affairs                                                                                        
Department of Commerce, Community & Economic Development                                                                        
POSITION STATEMENT:  During hearing of HB 166, answered                                                                       
questions.                                                                                                                      
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:04:53 AM                                                                                                                    
                                                                                                                                
CO-CHAIR BENJAMIN NAGEAK called  the House Community and Regional                                                             
Affairs  Standing  Committee  meeting   to  order  at  8:04  a.m.                                                               
Representatives  Foster,   Herron,  Olson,   Reinbold,  Drummond,                                                               
LeDoux, and Nageak were present at the call to order.                                                                           
                                                                                                                                
         HB 181-MINING LICENSE REVENUE; REVENUE SHARING                                                                     
                                                                                                                                
8:05:51 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK announced that the  first order of business would                                                               
be HOUSE  BILL NO. 181,  "An Act  relating to the  accounting for                                                               
money received by  the state from the mining  license tax, mining                                                               
lease  payments, and  royalties  from mining  on  state tide  and                                                               
submerged land  seaward of a  municipality, and  the availability                                                               
of  that   money  for  appropriation  to   certain  boroughs  and                                                               
municipalities outside of a borough."                                                                                           
                                                                                                                                
8:05:59 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX moved  to adopt  CSHB 181,  Version 28-LS0649\U,                                                               
Bullock, 3/25/13, as the working document.                                                                                      
                                                                                                                                
CO-CHAIR NAGEAK objected for purposes of discussion.                                                                            
                                                                                                                                
8:06:29 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER,  speaking  as  the  sponsor  of  HB  181,                                                               
explained that in 2011 the  Department of Natural Resources (DNR)                                                               
conducted an offshore  mineral lease sale off the  coast of Nome.                                                               
The sale  prompted a  spike in  demand for  docking space  at the                                                               
Nome harbor; space that the  harbor doesn't have and can't afford                                                               
to build.   From 2011 to 2012, the total  dockings increased from                                                               
271 to 436.  While the  state received revenue from this increase                                                               
in dockings,  there was no  framework to  help the city  with the                                                               
new  infrastructure  necessary  to accommodate  the  increase  in                                                               
traffic.    This legislation  would  help  provide the  necessary                                                               
framework.                                                                                                                      
                                                                                                                                
8:07:34 AM                                                                                                                    
                                                                                                                                
PAUL   LABOLLE,  Staff,   Representative  Foster,   Alaska  State                                                               
Legislature,  began by  explaining  that the  original intent  of                                                               
HB 181 was to apply only  where offshore lease sales were located                                                               
within municipal  boundaries.  However, HB  181 didn't accomplish                                                               
the  aforementioned,  and thus  Version  U  was necessitated  and                                                               
specifies that  [the offshore  lease sales] have  to be  within a                                                               
municipality  rather than  seaward of  a municipality.   He  then                                                               
directed  attention  to the  map  section,  particularly the  map                                                               
entitled  "Nome Beach  Public Mining  Areas"  that specifies  the                                                               
actual property  corners.   The map  illustrates that  within the                                                               
municipality  the property  corners  go to  the three-mile  limit                                                               
into state waters  and that's the property within the  box on the                                                               
slide  entitled "2011  Nome Offshore  Lease  Sale Tract  Location                                                               
Map," which shows all the  offshore leases that were available in                                                               
2011.    Although  only  a  small  portion  of  those  are  being                                                               
captured, the  point is  to limit it  to municipal  boundaries in                                                               
order to limit  the scope of the legislation.   A memorandum from                                                               
Legislative  Research Services  dated March  29, 2013,  specifies                                                               
that  HB 181  only applies  to Nome.   Mr.  LaBolle relayed  that                                                               
Esther Tempel, DNR, told him that  although DNR is neutral on the                                                               
legislation at this point, it did  like Version U better than the                                                               
original version because of the narrower scope of Version U.                                                                    
                                                                                                                                
8:11:05 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX asked  whether  it's  likely the  administration                                                               
will have opinions on HB 181 as it moves through the process.                                                                   
                                                                                                                                
MR. LABOLLE answered that the  administration may have an opinion                                                               
[about various aspects],  but isn't likely to  get overly excited                                                               
about the legislation  as it merely grants  authority and doesn't                                                               
make the  administration expend funds.   He noted that  any funds                                                               
expended would have to be expended through the legislature.                                                                     
                                                                                                                                
CO-CHAIR LEDOUX  surmised then that the  legislation merely gives                                                               
the administration the authority to  appropriate funds to make up                                                               
for  the  fact that  things  are  happening in  a  municipality's                                                               
offshore area.                                                                                                                  
                                                                                                                                
MR.  LABOLLE explained  that under  Section  1, 50  percent of  a                                                               
mining  lease sale  or  the collection  of  mineral mining  lease                                                               
sales taxes is  set aside and placed in the  permanent fund.  The                                                               
remaining  50 percent  that is  generally placed  in the  general                                                               
fund (GF)  would, under Version U,  be split evenly such  that 25                                                               
percent would be placed in the  GF and 25 percent would be placed                                                               
in a  fund from  which the legislature  could appropriate  at the                                                               
request of  the commissioner  [of DNR].   In further  response to                                                               
Co-Chair LeDoux, Mr.  LaBolle specified that the  25 percent that                                                               
is  placed  in   the  fund  from  which   the  legislature  could                                                               
appropriate at the request of  the commissioner would function as                                                               
would  any  other non-dedicated  fund  that  is expendable  by  a                                                               
simple majority vote.                                                                                                           
                                                                                                                                
CO-CHAIR  LEDOUX  questioned what  HB  181  achieves if  this  is                                                               
something the legislature can already do.                                                                                       
                                                                                                                                
MR.  LABOLLE   clarified  that  the  legislation   establishes  a                                                               
framework by  which DNR  would track the  lease sales  and mining                                                               
taxes within those municipal boundaries.   Therefore, [DNR] would                                                               
know  how much  to request  and whether  to request  it from  the                                                               
legislature.   In  this particular  case, the  lease sales  drove                                                               
docking demand  at the Port of  Nome as illustrated by  the chart                                                               
entitled "Port Vessel Traffic by  season."  The chart illustrates                                                               
that docking  demand grew from  271 total dockings in  the harbor                                                               
in 2011 to 436 total dockings in the harbor in 2012.                                                                            
                                                                                                                                
CO-CHAIR LEDOUX inquired  then as to why  the municipality didn't                                                               
just increase docking fees for  vessels above a certain length as                                                               
that would've  likely captured the larger  commercial vessels and                                                               
not the local vessels.                                                                                                          
                                                                                                                                
MR. LABOLLE  deferred to city  personnel, but noted that  most of                                                               
these  vessels   are  small  dredges,   10-20  feet   in  length.                                                               
Furthermore,  although   the  municipality  could   increase  the                                                               
docking fees, it doesn't provide  the capital necessary to dredge                                                               
out the harbor.                                                                                                                 
                                                                                                                                
8:16:10 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON inquired as to  the intent of the co-chairs                                                               
with HB  181.  He then  noted that the  last time he was  in Nome                                                               
was the end of  August, which is a really busy  time for the gold                                                               
miners  and the  community.    He opined  that  [HB  181 and  the                                                               
discussion  thus far]  hardly explains  what is  going on  in the                                                               
community.  In the middle  of July the Pacific Northwest Economic                                                               
Region (PNWER)  is having its  annual summit at which  there will                                                               
be 200-300  legislators from Canada  as well as  legislators from                                                               
Oregon, Washington, Idaho,  and Montana for a total  of about 600                                                               
people in  Anchorage.  The  day after the  summit there is  a day                                                               
trip  to Nome  to  view the  activities of  the  Bering Sea  Gold                                                               
television show.   Since it's difficult to capture  the impact of                                                               
the aforementioned  on Nome, Representative Herron  suggested the                                                               
committee hold  HB 181 and visit  Nome to understand the  goal of                                                               
HB 181 and the relationship  [the community] has with the growing                                                               
[gold mining] industry and economy.   Such a visit will provide a                                                               
better understanding of how DNR  can't even comprehend the impact                                                               
to the community.  For instance,  prior to Nome stopping DNR, DNR                                                               
was issuing permits to people who  would come to Nome to mine for                                                               
gold  with no  idea and  no preparedness.   However,  DNR stopped                                                               
after there  were already  88 dredges  in Nome,  which is  a huge                                                               
impact on the community.                                                                                                        
                                                                                                                                
8:19:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD   characterized  visiting  Nome   as  an                                                               
excellent idea.   She then noted that she really  likes that Nome                                                               
is  using  its  local  resources  to  build  its  infrastructure.                                                               
Therefore, HB  181 seems  necessary and  she related  her support                                                               
for it.  She then inquired as  to how much [the gold miners] will                                                               
be  taxed and  whether that  will impact  the attraction  to gold                                                               
mining in the area.                                                                                                             
                                                                                                                                
MR.  LABOLLE  clarified  that  HB  181  doesn't  impact  the  tax                                                               
structure at all  as the tax remains the same.    The legislation                                                               
just takes  the tax  captured from the  department and  splits it                                                               
into  the permanent  fund  and the  general fund  (GF).   Of  the                                                               
general  fund  portion, 50  percent  is  placed into  a  separate                                                               
account that can be appropriated by the legislature.                                                                            
                                                                                                                                
8:21:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   FOSTER   thanked   Representative   Herron   for                                                               
highlighting  the  difficulties  Nome  is  currently  having  and                                                               
[through] PNWER  the Arctic  access issues  that will  impact the                                                               
Nome  port also.    Since the  Nome  port is  only  going to  get                                                               
busier, the  more people  can be educated  about the  problem the                                                               
better.    Representative  Foster   relayed  that  Nome  supports                                                               
economic  development  and  embraces  mining, which  has  a  rich                                                               
history in Alaska.                                                                                                              
                                                                                                                                
8:22:09 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK opined  that a visit to Nome is  a great idea and                                                               
inquired as to when would be the best time to visit.                                                                            
                                                                                                                                
8:22:59 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON  remarked  that   he  would  rather  House                                                               
Community  and Regional  Affairs  Standing  Committee visit  Nome                                                               
than  the House  Finance Committee.    He recalled  that the  day                                                               
after  the PNWER  summit is  July 19th  when PNWER  delegates can                                                               
make the trip.                                                                                                                  
                                                                                                                                
CO-CHAIR  NAGEAK said  that  the committee  could  work with  the                                                               
sponsor and the City of Nome to plan a visit.                                                                                   
                                                                                                                                
8:24:23 AM                                                                                                                    
                                                                                                                                
DENISE MICHELS, Mayor,  City of Nome, related support  for HB 181                                                               
and a visit from the committee.   She told the committee that the                                                               
best time for a visit would be after  June.  In order to give the                                                               
committee an  idea of  situation in  Nome, Mayor  Michels related                                                               
that  in 2011  there were  only  39 dredges,  however, last  year                                                               
after  opening lease  sales  there were  88  dredges, 30  support                                                               
vessels, and 2  research ships.   Last year  there were more than                                                               
120 vessels in the harbor for suction dredging alone.                                                                           
                                                                                                                                
8:25:15 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX agreed  that visiting  Nome is  a great  idea in                                                               
order  for the  committee to  know the  communities for  which it                                                               
makes decisions.                                                                                                                
                                                                                                                                
8:25:42 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK removed his objection  to the adoption of Version                                                               
U.   [No further objection was  stated and Version U  was treated                                                               
as before the committee.]                                                                                                       
                                                                                                                                
8:26:07 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  asked  if   it's  acceptable  with  the                                                               
sponsor to hold HB 181.                                                                                                         
                                                                                                                                
REPRESENTATIVE FOSTER deferred to Mayor Michels.                                                                                
                                                                                                                                
MS.  MICHELS said  that  although she  would like  HB  181 to  be                                                               
retroactive,  she understands  that  isn't possible.   Since  she                                                               
hasn't heard  when the next state  lease sales would be  she said                                                               
that holding HB 181 wouldn't be a  problem as long as "we keep on                                                               
top of it for the next season."                                                                                                 
                                                                                                                                
8:27:39 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK opened public testimony.                                                                                        
                                                                                                                                
8:28:36 AM                                                                                                                    
                                                                                                                                
MAYOR MICHELS read the following letter of support:                                                                             
                                                                                                                                
     With the high  prices for precious metal  and the state                                                                    
     DNR-sponsored lease sales,  we've experienced an influx                                                                    
     of offshore placer mining.   These miners have provided                                                                    
     a boost to our local  merchants and the economy, at the                                                                    
     same  time they've  impacted our  city services.   Even                                                                    
     though the City of Nome  normally funds services with a                                                                    
     variety of revenue sources like  property or sales tax,                                                                    
     [Nome  spent]  revenues  to  cover   the  cost  for  an                                                                    
     additional staff  at $60,000.   We also  purchased land                                                                    
     at $85,000  and did  design for mooring  to aid  in the                                                                    
     congestion with  this increase in dredges  at $217,000.                                                                    
     So,  overall  the city  has  spent,  on its  own,  over                                                                    
     $302,000 to  expand our port facilities  to support the                                                                    
     gold dredging fleet.   Also, other impacts  are we have                                                                    
     an increase  in staff  doing oil spill  cleanup because                                                                    
     of  all  the vessels  there.    So, there's  additional                                                                    
     resources that we've been using.                                                                                           
                                                                                                                                
     We  are  a mining  community  and  we do  support  this                                                                    
     economic  opportunity  and  we support  this  potential                                                                    
     solution for  a portion  of the revenue  shortfall that                                                                    
     may  be possible  with the  reallocation of  the mining                                                                    
     license  tax.   It  applies  to  all mining  operations                                                                    
     regardless   of  land   status,   size,  or   location.                                                                    
     Presently, there  is no  uniform mechanism  to allocate                                                                    
     portions of  the revenue back  to communities  that are                                                                    
     impacted, such as Nome, by  resource development.  Such                                                                    
     a  revenue  sharing model  is  effective  in the  state                                                                    
     fishing  industry   and  similar  programs   have  been                                                                    
     successful  in revenue  sharing  from the  oil and  gas                                                                    
     industry in  the Gulf of  Mexico.  Sharing  portions of                                                                    
     the state  revenue from  mining development  with local                                                                    
     communities in  a predictable fashion would  reduce the                                                                    
     need for local government  to impose their own targeted                                                                    
     taxes on the industry  and allows for local communities                                                                    
     to   provide   services   to  the   entities   in   the                                                                    
     communities.                                                                                                               
                                                                                                                                
8:30:51 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  NAGEAK related  his understanding  that  there are  two                                                               
seasons of  gold mining, and  thus there is activity  almost year                                                               
round in  front of  the port.   Therefore,  he surmised  that the                                                               
City of Nome is impacted in the winter time.                                                                                    
                                                                                                                                
MS.  MICHELS  replied  yes,  adding   that  currently  there  are                                                               
approximately 17 miners doing under the ice mining.                                                                             
                                                                                                                                
8:31:48 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK, upon determining no  one else wished to testify,                                                               
closed public testimony.                                                                                                        
                                                                                                                                
8:31:58 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  related his appreciation to  the committee                                                               
for  hearing HB  181  and  the desire  to  increase the  existing                                                               
infrastructure to  accommodate increased economic  development in                                                               
the mining area.                                                                                                                
                                                                                                                                
8:32:24 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  NAGEAK announced  that HB  181 would  be held  over and                                                               
that staff  would work with  the sponsor,  Representative Herron,                                                               
and the City of Nome to  determine the dates and logistics of the                                                               
committee's visit to Nome.                                                                                                      
                                                                                                                                
8:33:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON said  it was  only a  suggestion to  visit                                                               
Nome in July  after the PNWER summit.  He  then stated that until                                                               
one visits  Nome, one  won't know the  scale of  what's occurring                                                               
with gold mining,  which he likened to the gold  rush at the turn                                                               
of the century.                                                                                                                 
                                                                                                                                
REPRESENTATIVE DRUMMOND said that  initially she was wondering if                                                               
the scope  of the  situation could be  witnessed by  video rather                                                               
than expending  the funds  for the committee  to travel  to Nome.                                                               
However, now  she understands that  perhaps a visit is  in order,                                                               
and thus she will consider it.                                                                                                  
                                                                                                                                
CO-CHAIR NAGEAK echoed earlier comments  that until one views the                                                               
scope  of the  situation in  person, one  doesn't understand  how                                                               
busy it is in Nome.                                                                                                             
                                                                                                                                
REPRESENTATIVE HERRON  reiterated the  need to see  the situation                                                               
in  person  and  characterized  it as  an  investment  in  making                                                               
decisions  for  communities  and  regions that  are  impacted  by                                                               
economic impacts.  Furthermore, he  suggested that the expense of                                                               
the committee  traveling to  Nome will be  small relative  to the                                                               
impact of moving HB 181 forward.                                                                                                
                                                                                                                                
8:38:45 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX  opined that  the  intention  behind HB  181  is                                                               
excellent.   Nome, she further  opined, needs something  in terms                                                               
of assistance to develop the  necessary infrastructure.  However,                                                               
she questioned  whether this  legislation provides  the necessary                                                               
funding   stability   as  it   will   only   be  a   year-to-year                                                               
appropriation.                                                                                                                  
                                                                                                                                
REPRESENTATIVE FOSTER confirmed that the  primary focus of HB 181                                                               
is  to  meet  the  initial  infrastructure  needs  of  Nome,  but                                                               
acknowledged that  there could be  the potential [for more].   He                                                               
requested comment from Mayor Michels.                                                                                           
                                                                                                                                
MAYOR  MICHELS characterized  the mechanism  within HB  181 as  a                                                               
more  stable  source of  revenue  sharing  as  she only  sees  it                                                               
increasing as  the [lease sales]  are a positive  economic driver                                                               
for the state.                                                                                                                  
                                                                                                                                
8:40:57 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK restated that HB 181 would be held over.                                                                        
                                                                                                                                
              HB 166-BULK FUEL REVOLVING LOAN FUND                                                                          
                                                                                                                                
8:41:14 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK announced that the  final order of business would                                                               
be  HOUSE  BILL NO.  166,  "An  Act  relating  to the  bulk  fuel                                                               
revolving loan fund."                                                                                                           
                                                                                                                                
8:41:29 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER,  speaking as sponsor of  HB 166, explained                                                               
that HB 166  addresses who qualifies for the  bulk fuel revolving                                                               
loan fund.  Currently, the  bulk fuel revolving loan fund applies                                                               
to  communities  with  populations  that fall  below  2,000,  but                                                               
doesn't make  a distinction  between communities  that are  on or                                                               
off   the  road   system.     This   legislation  maintains   the                                                               
aforementioned for communities connected  by the road system, but                                                               
also allows for  communities with populations that  are less than                                                               
4,000 to  qualify as  well.  The  legislation also  increases the                                                               
maximum amount requested [from the  bulk fuel loan] from $750,000                                                               
to $1,500,000.                                                                                                                  
                                                                                                                                
8:42:32 AM                                                                                                                    
                                                                                                                                
PAUL   LABOLLE,  Staff,   Representative  Foster,   Alaska  State                                                               
Legislature, highlighted  that communities  with a  population of                                                               
less than 4,000 only qualify if  the community is located off the                                                               
interconnected state road system  otherwise the population cap of                                                               
2,000  remains.   Therefore, that  expansion in  population would                                                               
capture those living off the Rail Belt.                                                                                         
                                                                                                                                
8:43:01 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  inquired as to what  communities the [expansion]                                                               
would include.                                                                                                                  
                                                                                                                                
MR.  LABOLLE  referred to  the  list  entitled "All  incorporated                                                               
places in  State of Alaska."   The  green highlights in  the list                                                               
are those  communities with  a population  above 2,000  but below                                                               
4,000  [and not  on the  interconnected state  road system]  that                                                               
would be  included were HB  166 to  pass.  Those  communities are                                                               
Cordova,  Dillingham, Kotzebue,  Nome, Petersburg,  and Wrangell-                                                               
Petersburg, Seward, and Wrangell.                                                                                               
                                                                                                                                
REPRESENTATIVE   FOSTER   pointed   out   that   the   population                                                               
specifications are  a policy call.   Representative  Foster noted                                                               
that  although he  may have  considered a  higher population  cap                                                               
that  would  include  Barrow, he  took  into  consideration  that                                                               
Barrow has natural  gas and the bulk fuel  revolving loan program                                                               
is likely not used in Barrow.                                                                                                   
                                                                                                                                
CO-CHAIR NAGEAK acknowledged that is the case for Barrow.                                                                       
                                                                                                                                
REPRESENTATIVE  DRUMMOND inquired  as to  why Seward  is included                                                               
since it is located on the road system.                                                                                         
                                                                                                                                
MR.  LABOLLE clarified  that the  list highlights  per population                                                               
and doesn't take  into consideration whether the  community is on                                                               
the road  system.  He  agreed that  Seward would not  be included                                                               
under the provisions of HB 166.                                                                                                 
                                                                                                                                
8:45:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DRUMMOND requested  an  explanation  of the  bulk                                                               
fuel revolving loan fund.                                                                                                       
                                                                                                                                
MR. LABOLLE  explained that  it's a  capitalized fund  from which                                                               
money  is loaned  to  communities at  a low  interest  rate of  4                                                               
percent for  the purchase  of fuel.   Those communities  pay back                                                               
into  the fund,  and thus  it's a  self-sustaining loan  program;                                                               
it's  very   similar  to  the  various   Alaska  Housing  Finance                                                               
Corporation (AHFC) programs.                                                                                                    
                                                                                                                                
8:46:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DRUMMOND  surmised then  that communities  use the                                                               
bulk  fuel revolving  loan fund  to  purchase fuel  and over  the                                                               
winter as [residents] use the fuel  and pay for it, the community                                                               
pays back the loan.                                                                                                             
                                                                                                                                
MR.  LABOLLE  replied yes,  adding  that  most rural  communities                                                               
purchase fuel  prior to  freeze up because  flying in  fuel after                                                               
the freeze is cost prohibitive.                                                                                                 
                                                                                                                                
8:47:41 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD  inquired as to the  current discount and                                                               
what a standard loan would be at this time.                                                                                     
                                                                                                                                
8:47:59 AM                                                                                                                    
                                                                                                                                
SCOTT RUBY,  Director, Division of Community  & Regional Affairs,                                                               
answered that  it would  be what  commercial banks  would charge.                                                               
Because  many of  these communities  are in  a unique  situation,                                                               
they have  to purchase large  amounts of  fuel.  He  related that                                                               
with many of  these loan programs, the  smaller communities don't                                                               
have the ability to  go to a bank and capitalize  a large loan of                                                               
$600,000-$750,000.   Under  the previous  iteration of  [the bulk                                                               
fuel revolving loan  fund] AEA charged a market  rate that varied                                                               
between  4-6 percent.   Last  year, when  reviewing the  interest                                                               
rate,  it   was  determined  not  to   penalize  communities  for                                                               
borrowing  to provide  fuel for  their residents.   Therefore,  4                                                               
percent was  determined to be  a rate that  was low enough  to be                                                               
sustainable while still paying all the costs of the program.                                                                    
                                                                                                                                
8:49:57 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  inquired  as to  what  the  communities                                                               
would pay if they sought a loan from a bank.                                                                                    
                                                                                                                                
MR.  RUBY responded  that he  didn't  know, but  did recall  that                                                               
Akiachuk did  borrow from  a bank  in past  years and  offered to                                                               
provide that information to the committee.                                                                                      
                                                                                                                                
REPRESENTATIVE REINBOLD asked if  the division is well-funded and                                                               
would be able to cover this legislation were it to pass.                                                                        
                                                                                                                                
MR. RUBY, referring  to the document entitled "Effects  of HB 166                                                               
on  Bulk  Fuel  Loan  Accounts,"   informed  the  committee  that                                                               
although six new  communities would qualify for  loans under [the                                                               
bulk fuel  loan account  or the bulk  fuel bridge  loan account],                                                               
it's likely that three of them  wouldn't seek loans from the loan                                                               
fund because they can receive  large amounts of fuel periodically                                                               
delivered  by barge.   The  three that  might participate  in the                                                               
[bulk  fuel  loan program]  would  be  Dillingham, Kotzebue,  and                                                               
Nome.  He then informed the  committee that if all the loans were                                                               
funded it could potentially amount  to $10 million more needed to                                                               
capitalize the fund, which would  cover the cost of the potential                                                               
loans as well as provide a  buffer to avoid running out of funds.                                                               
Without  the  aforementioned  capitalization, the  division  will                                                               
have to  scrutinize applicants such  that those that can  fund it                                                               
would  either be  denied or  reduce  the amount  that they  could                                                               
borrow in order to ensure that  the funds are available for those                                                               
with the most necessity.                                                                                                        
                                                                                                                                
8:52:18 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD asked whether  this legislation will have                                                               
any impact  on power  cost equalization (PCE)  or the  Low Income                                                               
Home Energy Assistance Program (LIHEAP).                                                                                        
                                                                                                                                
MR. RUBY replied yes because it  subsidizes the cost of the fuel.                                                               
He  pointed out  that one  of the  primary borrowers  of this  is                                                               
electric  utilities.   If [the  proposal in  HB 166]  reduces the                                                               
cost  of  the fuel  [for  communities  that  used the  bulk  fuel                                                               
revolving loan] over other possibilities,  it would have a direct                                                               
relationship  on   PCEs  because  one   of  the  pieces   of  the                                                               
calculation is the cost of fuel.                                                                                                
                                                                                                                                
REPRESENTATIVE REINBOLD  inquired then as to  whether there could                                                               
be cost shifting.                                                                                                               
                                                                                                                                
MR. LABOLLE characterized it more  as saving shifting rather than                                                               
cost  sharing   because  while   the  fund   would  need   to  be                                                               
capitalized, it would be a  separate appropriation.  Furthermore,                                                               
it's a  self-sustaining fund  into which  a community  pays back.                                                               
Therefore, if a new community uses  the fund and reduces its fuel                                                               
costs, when the  utility starts to burn fuel  to make electricity                                                               
it's burning  cheaper fuel.   Although the  consumer won't  see a                                                               
lower electric  rate, the  PCE subsidy  would decrease  and would                                                               
save funds.   For  example, if  the cost  of generating  power is                                                               
$.30 and  PCE rates were  $.20 to the  consumer, PCE would  be in                                                               
place at  a 10  percent subsidy.   In fuel  savings, if  $.25 per                                                               
Kilowatt hour  (KWh) power can  be generated, they will  pay $.20                                                               
and PCE will only have to pay $.05.                                                                                             
                                                                                                                                
8:54:47 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX asked what the interest rate is.                                                                                
                                                                                                                                
MR.  RUBY specified  that  for  loans under  the  bulk fuel  loan                                                               
account,  the  interest rate  is  4  percent for  the  first-time                                                               
borrowers who  are in  good standing.   There  is the  option for                                                               
those in good  standing in the second year to  receive a discount                                                               
such that  the interest  rate is  reduced to 3  percent.   If the                                                               
borrower continues  to be  in good standing  there is  a discount                                                               
such that the interest rate is reduced to 2 percent.                                                                            
                                                                                                                                
8:55:21 AM                                                                                                                    
                                                                                                                                
CO-CHAIR  LEDOUX   inquired  as   to  whether  it's   common  for                                                               
[communities] using the bulk fuel loan account to default.                                                                      
                                                                                                                                
MR. RUBY answered that it isn't  common.  He pointed out that all                                                               
of these  loans are  intended to  be paid back  in less  than one                                                               
year.  There  have been a couple of entities  that have [applied]                                                               
for financial  hardship and paid  back the loans over  the course                                                               
of more than one year or  via a payment plan.  Technically, there                                                               
haven't been  any defaults and  all loans have been  repaid, save                                                               
those that are on multi-year re-payment schedules.                                                                              
                                                                                                                                
CO-CHAIR LEDOUX asked  whether the division would  provide a loan                                                               
to an entity that is in default [for a prior year's loan].                                                                      
                                                                                                                                
MR. RUBY  said that in certain  cases under the bulk  fuel bridge                                                               
loan program, the division has loaned  funds to an entity that is                                                               
in  default  the prior  year  in  order  to avoid  the  community                                                               
turning off  its electric  utility.  However,  that has  not been                                                               
the case for [loans] for  residential heating as it has primarily                                                               
been  the  case  for  electric   generation  to  keep  the  plant                                                               
operating and to protect public facilities.                                                                                     
                                                                                                                                
8:56:47 AM                                                                                                                    
                                                                                                                                
MR. LABOLLE  explained that  the increase  from $750,000  to $1.5                                                               
million  directly corresponds  with the  increase in  the maximum                                                               
population  of  the  possible  community  on  the  system,  which                                                               
maintains  it  at  $370  per  person.   He  reiterated  that  the                                                               
numbers, both  the population and  the loan amount,  are starting                                                               
points for which the committee's  input would be appreciated.  In                                                               
response to Co-Chair Nageak, Mr.  LaBolle said [changes] could be                                                               
accomplished through the  amendment process or the  adoption of a                                                               
committee substitute.                                                                                                           
                                                                                                                                
8:57:59 AM                                                                                                                    
                                                                                                                                
CO-CHAIR LEDOUX  inquired as  to how the  sponsor decided  on the                                                               
$1.5 million.                                                                                                                   
                                                                                                                                
MR.  LABOLLE explained  that  first the  sponsor  decided on  the                                                               
population  of 4,000  as  a  place holder  and  then divided  the                                                               
current fund  of $750,000 by  the 2,000, which amounted  to about                                                               
$370 per person.   That per person amount was  then multiplied by                                                               
the  [population  number  of]  4,000,   which  amounted  to  $1.5                                                               
million.                                                                                                                        
                                                                                                                                
REPRESENTATIVE FOSTER  said simply stated the  population and the                                                               
loan  eligibility were  doubled.   Using Nome  as an  example, he                                                               
offered  that  the company  that  does  most of  the  residential                                                               
heating  has storage  capacity of  about 4  million gallons.   If                                                               
those tanks  are filled  twice, that's 8  million gallons  and if                                                               
the  fuel  costs $3.00  per  gallon  that  amounts to  about  $24                                                               
million.   Therefore,  the increase  to $1.5  million would  be a                                                               
small  portion  of  what  the community  uses  and  doesn't  even                                                               
include the  utilities.   Still, Representative  Foster expressed                                                               
the need  to periodically review  the bulk fuel loan  program and                                                               
make adjustments  to it more often  than every 10 years  in order                                                               
to avoid large adjustments.                                                                                                     
                                                                                                                                
9:00:46 AM                                                                                                                    
                                                                                                                                
MR.  LABOLLE  pointed out  that  on  the document  entitled  "All                                                               
incorporated places  in the State  of Alaska" it  only considered                                                               
communities under 5,000.  He  noted that Bethel isn't included on                                                               
the  list  because  it  has  a  population  of  6,219,  and  thus                                                               
Representative  Herron  may  be   interested  in  the  population                                                               
factor.                                                                                                                         
                                                                                                                                
9:01:28 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  said  she   would  like  to  hear  from                                                               
Representative Herron on the matter.                                                                                            
                                                                                                                                
9:01:49 AM                                                                                                                    
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
9:02:20 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK announced that HB 166 would be held over.                                                                       
                                                                                                                                
9:02:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER  related  his understanding  that  because                                                               
this  legislation  may have  financial  implications,  it may  be                                                               
referred  to the  House Finance  Committee.   However, the  House                                                               
Finance Committee won't take up  HB 166 this session.  Therefore,                                                               
he  offered to  consult  with Representative  Herron and  revisit                                                               
this legislation next session.                                                                                                  
                                                                                                                                
9:03:13 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE DRUMMOND  questioned then whether in  the meantime                                                               
there will be a handful of  communities that won't have access to                                                               
the revolving loan  fund or will have access at  a higher rate or                                                               
to commercial loans.                                                                                                            
                                                                                                                                
MR. LABOLLE stated  that all communities on the  list have access                                                               
through commercial loan funds.                                                                                                  
                                                                                                                                
9:03:45 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FOSTER noted  that  if all  the communities  took                                                               
advantage  of the  loan,  $10  million would  be  necessary.   He                                                               
expressed  the  need  to  avoid  a situation  in  which  a  well-                                                               
organized  community  such  as   Nome  or  Kotzebue  files  their                                                               
application first  and then there  are no funds left  for smaller                                                               
communities,  such as  Teller, that  really need  the assistance.                                                               
The  aforementioned is  another component  that will  be reviewed                                                               
over the interim.                                                                                                               
                                                                                                                                
MR.  LABOLLE  interjected  that  independent  of  the  population                                                               
parameters, there has been discussion  regarding whether the $370                                                               
per person is realistic.                                                                                                        
                                                                                                                                
9:05:05 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  REINBOLD  suggested  that a  committee  visit  to                                                               
[Nome] should  also include further education  regarding the fuel                                                               
and energy situation in the area.                                                                                               
                                                                                                                                
REPRESENTATIVE FOSTER said he would like to do so.                                                                              
                                                                                                                                
9:05:52 AM                                                                                                                    
                                                                                                                                
CO-CHAIR NAGEAK restated that HB 166 would be held over.                                                                        
                                                                                                                                
9:06:18 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Community  and Regional  Affairs Standing  Committee meeting  was                                                               
adjourned at 9:07 a.m.                                                                                                          
                                                                                                                                

Document Name Date/Time Subjects
CSHB 181 ver U.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 ver A.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Sponsor Statement.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 hearing request.pdf HCRA 4/9/2013 8:00:00 AM
HB 181
HB181-DNR-MLW-4-6-13.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB181-DOR-TAX-04-05-13.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB181-DOR-TRS-04-05-13.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB181-DCCED-DCRA-04-04-13.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 leg research applicability.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Supporting Documents legal service memo.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Support East West Nome Beach Public Mining Area R (3) (1).pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Supporting Documents Nome Mining Map.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Supporting Documents Nome Offshore Lease Tract Map (March 2012).pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Supporting Documents Nome Vessel Stats Spread at 11 06 12.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 181 Supporting Documents Nome Vessel Calls Chart at 11 06 12 edited.pdf HCRA 4/9/2013 8:00:00 AM
HCRA 1/28/2014 8:00:00 AM
HB 181
HB 166 ver A.pdf HCRA 4/9/2013 8:00:00 AM
HB 166
HB 166 Sponsor Statement.pdf HCRA 4/9/2013 8:00:00 AM
HB 166
HB 166 hearing request.pdf HCRA 4/9/2013 8:00:00 AM
HB 166
HB 166 DCCED-DCRA-04-04-13.pdf HCRA 4/9/2013 8:00:00 AM
HB 166
HB 166 cities 5001 population.pdf HCRA 4/9/2013 8:00:00 AM
HB 166
HB 166 Supporting Document Impact letter from CRA.pdf HCRA 4/9/2013 8:00:00 AM
HB 166