Legislature(1997 - 1998)
04/29/1997 02:00 PM House FIN
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HOUSE FINANCE COMMITTEE
April 29, 1997
2:00 P.M.
TAPE HFC 97-115, Side 1, #000 - end.
TAPE HFC 97-115, Side 2, #000 - end.
TAPE HFC 97-116, Side 1, #000 - #352.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee
meeting to order at 2:00 p.m.
PRESENT
Co-Chair Therriault Representative Kohring
Representative Davies Representative Martin
Representative Davis Representative Moses
Representative Foster Representative Mulder
Representative Grussendorf
Representative Kelly
Co-Chair Hanley was absent from the meeting.
ALSO PRESENT
Representative Mark Hodgins; Wilson Condon, Commissioner,
Department of Revenue; Paul Fuhs, Yukon Pacific; Greg
Erickson, Juneau; Tamar Di Franco, Special Assistant,
Department of Revenue; Blain McCune, Public Defender Agency;
Scott Calder, Fairbanks; Connie Sipe, Director, Division of
Senior Services; Keith Lauger, Alaska Industrial Development
and Export Authority; Eric Yould, Rural Alaska Electric
Association; Vayla Colonell, Valley Electric Association;
Duane Parlow, Homer Electric Association; Marlyn Wilson,
Staff, Senator Sharp.
SUMMARY
HB 127 "An Act relating to the citizen review board and
panels for permanency planning for certain
children in state custody; renaming the Citizens'
Review Panel For Permanency Planning as the
Citizens' Foster Care Review Board; extending the
termination date of the Citizens' Foster Care
Review Board; and providing for an effective
date."
HB 127 was HELD in Committee for further
consideration.
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HB 250 "An Act establishing a North Slope Gas
Commercialization Team to develop recommendations
regarding a North Slope gas project; and providing
for an effective date."
HB 250 was reported out of Committee with "no
recommendation" and with a zero fiscal note by the
House Finance Committee for the Department of
Revenue.
SB 175 "An Act relating to revenue bonds issued by the
Alaska Industrial Development and Export Authority
for interties between Healy and Fairbanks and
between Anchorage and the Kenai Peninsula; and
providing for an effective date."
SB 175 was reported out of Committee with a "do
pass" recommendation Department of Commerce and
Economic Development, 4/21/97.
HOUSE BILL NO. 250
"An Act establishing a North Slope Gas
Commercialization Team to develop recommendations
regarding a North Slope gas project; and providing for
an effective date."
REPRESENTATIVE MARK HODGINS testified in support of CSHB 250
(O&G). He observed that HB 250 was introduced by the
Governor. He discussed changes made by the committee
substitute. He noted that the North Slope Gas
Commercialization Team (team) was consolidated. He
explained that the "confidentiality" provision was retained
in the bill at the advise of legislative legal counsel. He
noted that the team was reduced to three members. The team
would be comprised of the commissioner of the Department of
Natural Resources, the commissioner of the Department of
Revenue and the Attorney General. He stated that this
change would allow the fiscal note to be reduced. He
recommended that the fiscal note be reduced to zero. He
observed that the Governor has a contingency fund of
approximately $400 thousand dollars. He stressed that a
zero fiscal note would facilitate passage of the
legislation. He acknowledged that there would be some
contractual and travel needs. He emphasized that the North
Slope natural gas project is not deemed to be economical
under current circumstances. He stressed that the team
would consider what state and local governments can do to
alleviate taxes and make the project economical.
Representative Davies asked what form tax relief would take.
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Representative Hodgins observed that the North Slope gas
project is an enormous undertaking. He noted that there
would be a ramp up period. He stressed that a tax lessening
at the front end could help the project. He emphasized that
if the project is not economical it will not happen. He
stressed that the project represents $150 billion dollars in
revenues. Federal revenues would be approximately $26
billion dollars. He noted that the message must be sent to
the federal government that there will be no federal
revenues if the project does not go forward.
Representative Davies expressed concern that all of the
taxes and royalties could be eliminated without making the
project economical.
Representative Hodgins responded that the team will identify
the level of taxation needed for the project to be
profitable. He asserted that no one wants to be involved in
the project unless there is going to be a profit.
Co-Chair Therriault observed that the project will be
subject to legislative approval. Representative Hodgins
noted that the House Oil and Gas Committee will meet during
the interim. He stressed that the Committee will provide a
public forum for discussions.
WILSON CONDON, COMMISSIONER, DEPARTMENT OF REVENUE spoke in
support of the legislation. He noted that the team will
look at what is needed to take North Slope natural gas to
Asian markets. The legislation addresses how the Public
Records Act and the Public Meetings Act will govern the
operations of the team.
Commissioner Condon discussed the Department of Revenue's
fiscal note. He stated that the fiscal note contains $75
thousand dollars in the contractual line for continuation of
a contract with Dr. van Meurs. Dr. van Meurs will work with
the Administration and Legislature. There is an additional
$75 thousand dollars in the contractual line for a
socioeconomic study. He emphasized that the study will help
the Legislature to judge if fiscal terms should be modified.
The fiscal note also includes $50 thousand dollars for the
continuation of a temporary position in the Department of
Revenue. He observed that the position is currently working
on the project full-time. He stated that funding is
necessary for travel between Anchorage and Juneau.
Commissioner Condon stressed that the federal government can
have a large influence on the economics of the project. He
maintained that, if the project is not built in Alaska, the
market will be supplied by a project outside of the United
States. He added that there will be some travel costs to
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Washington D.C.
Representative Davies observed that page 5, lines 12 - 24
was deleted from HB 250. This language addressed the
State's participation in a North Slope gas project and
further actions needed to ascertain or alleviate the
anticipated socioeconomic impacts of the project.
Commissioner Condon reiterated the importance of a
socioeconomic study. He stressed that the study will help
with legislative decisions regarding the project. He
recommended that State participation not be proposed. He
stated that any proposals should be analyzed to determine
its value to the State of Alaska.
PAUL FUHS, YUKON PACIFIC testified in support of CSHB 250
(O&G). He discussed subsection (10) on page two. He
observed that this section expresses the intent that
negotiations take place with all potential project sponsors,
with the goal that a contract be signed with the project
sponsor group.
Mr. Fuhs stressed that the project must be backed by long-
term gas sales. He emphasized the difficulty of obtaining
contracts or financing if there is an unstable tax climate.
He disagreed with the statement that the project would not
be economical even if all of the State's taxes were given
away. He stated that an analysis, by Credit Swiss First
Boston, showed positive economics for the project. He
maintained that the goal is for a unified proposal to be
made to the Asian markets. He stated that permits,
participation of producers, and state and federal fiscal
terms are needed to assess the economics. He observed that
the analysis differed in their estimations of how quickly
full production is achieved. He stated that they anticipate
placing 5 to 6 million tons the first year and 2 - 3 million
tons every additional year. He argued that the project is
in the "ball park". He maintained that the Asian markets
are patiently waiting for a proposal from Alaska.
GREGG ERICKSON, ECONOMIC CONSULTANT, ERICKSON ASSOCIATES,
JUNEAU spoke in regards to the public information provisions
in the bill. He maintained that provisions of public access
will hurt the prospects of the project and are bad public
policy. He referred to page 4, line 14. He noted that the
provision states that the North Slope Gas Commercialization
Team is not a governmental body for the purposes of the Open
Meetings Act. The legislation also provides that the Public
Records Act does not apply to documents that contain
sensitive, proprietary, or privileged information. He
stressed that the determination of "sensitive" is up to the
administrative decision maker. He noted that all of the
material could be kept secretive forever. He maintained
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that there is no reason for the secrecy. He observed that
the team has been functioning for a year and that he has
already obtained documents from the Department of Revenue.
He stated that the Department of Revenue and the Attorney
General have produced 95 percent of the documents that he
has requested. He acknowledged that some documents were
withheld on the grounds that they contained proprietary and
privileged information. He observed that he did not appeal
the decision to withhold these documents.
Mr. Erickson noted that the Attorney General advised him
that the team is not covered by the Open Meetings Act. He
emphasized that the Governor did not request provisions
regarding the Open Meeting Act or Public Records Act. He
stressed that these provisions are not needed to put into
statute practices that have already been going on. He
maintained that these provisions represent change to a long
standing public policy that includes the public. He
maintained that public participation is an important part of
doing governmental business. He stated that gas sales could
be the dominate public policy issue of the next decade. He
stressed that it is not an "auspicious start for the
process, of getting a gas pipeline built, ...to have the
public cut out of the beginning of the process." He
observed that there was discussion in the 1970's regarding
the "deal" between the State and oil companies. He stressed
that if the Administration has the ability to selectively
decided what documents are available to the public and the
legislature, that the public will question legislative
decisions.
In response to a question by Representative Davies, Mr.
Erickson did not dispute that meetings between the
commissioners and a third party are not under the Open
Meetings Act. He clarified that his concerns are in regards
to documentation. He added that provisions relating to the
Open Meetings Act are unnecessary. He stated that draft
documents are part of the public record.
In response to a question by Representative Davis, Mr.
Erickson stated that documents have already been submitted
to the team by oil companies involved in the project. He
stated that Commissioner Condon indicated that these
documents contained market projections. He noted that
documents containing commercial information can be kept
confidential. He clarified that he is more concerned with
provisions relating to the Public Records Act. He
emphasized that "sensitive" could be interpreted as
something that is embarrassing.
Co-Chair Therriault stated that objections by detractors
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could result in industry withholding information to the
detriment of the project.
Mr. Erickson stressed that discussions have been going on
for a year without litigation. He maintained that "if it is
not broken don't fix it". He acknowledged that litigation
could be brought forth. He emphasized that under current
practices it would be difficult to substantiate accusations
of a secret conspiracy to give away the tax resource. He
stressed that it would be difficult to charge the
Administration of withholding information. He observed that
future legislatures cannot be bound. He added that the
State's taxing power or its sovereignty cannot be given
away. He maintained that the result would be a contract
that has no legal authority, but which has moral authority.
(Tape Change, HFC 97-115, Side 2)
In response to a question by Representative Davies, Mr.
Erickson acknowledged that there will be a public process
before anything becomes law. He stressed that the
Legislature does not stand any different than the public in
regards to access.
Representative Davies noted that legislators may view oil
and gas tax records in confidentially. Mr. Erickson noted
that there are no statutes that would parallel these
provisions in regards to the gas project. He observed that
if legislators view documents in confidentiality they could
not talk about what they discover.
Representative Hodgins noted that the legislation speaks to
the definition of proprietary interests. He provided
members with a memorandum from Jack Chenoweth, Legislative
Counsel, dated 4/18/97 (copy on file). He stated that the
legislation allows negotiations of sensitive material in a
private setting before a proposal is made to the
Legislature. He observed that the Legislature is the public
forum.
Representative Davies questioned why it is necessary to
include the Public Meetings Act provisions in the
legislation. Representative Hodgins observed that Legal
Services indicated that the provisions on confidentiality
need to be included. Representative Davies observed that
confidentiality pertains more to the records than to
meetings.
Representative Davies expressed concern that the legislation
extends to notice of a meeting that would not prejudice
confidential information. He observed that the principle of
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the Open Meetings Act is that the public can follow the
deliberations or reasoning of a body.
Representative Hodgins stressed that if a commissioner is
meeting with agents of the project that they are probably
exempt from any public records. Written material would be
part of the public record. He emphasized that the three
major resource holders on the North Slope would provide
proprietary information they do not wish to be available on
a public forum.
Representative Davies clarified that he is referring to the
remaining intermediate documents that may be created. He
asked if it is the intent that documents, that are not
proprietary, be held confidential. Representative Hodgins
stated that it is the intent that the document that is
produced would come before the Legislature.
TAMAR DI FRANCO, SPECIAL ASSISTANT, DEPARTMENT OF REVENUE
explained that there was a joint federal/state working group
on the 1979 Beaufort Sea lease sale. She observed that the
group was doing work that is very similar to what the team
will be doing. The Alaska Supreme Court ruled that the 1979
Beaufort Sea working group should have noticed their
meetings.
Co-Chair Therriault observed that the notice requirements
could be problematic. Ms. di Franco noted that it has been
the Department's position to release as many documents as
possible. She indicated that the Department of Revenue
would continue to release documents that are not sensitive
in nature. She maintained that the Department will continue
to be as open as they are able to, per agreements with
negotiating parties.
Representative Martin expressed concern with the delegation
of authority to a "secret team". Co-Chair Therriault
pointed out that the Legislature will participate in
decision making.
Representative Grussendorf observed that the commissioner of
the Department of Labor would not be included on the team.
He emphasized the role that the commissioner of the
Department of Labor could play in relation to Alaska hire
and Alaskan businesses. He asked why the commissioners of
the Department of Labor and the Department of Commerce and
Economic Development were dropped off.
Representative Hodgins explained that, due to time
constraints, the Committee decided to focus on tax issues.
He noted that Commissioner Condon's testimony indicated that
the other commissioners would be involved in an ex officio
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manner. He emphasized the intent to keep the team small.
Co-Chair Therriault observed that the reduction of size
influenced the reduction of the fiscal note. He stressed
that the Legislature can address local hire issues.
Representative Grussendorf referred to the fiscal note. He
did not think that the fiscal note should be zero. Co-Chair
Therriault reiterated that the intent is to use the
Governor's contingency fund.
Representative Martin asked why the team was declared a non-
governmental body. Representative Hodgins emphasized that
there were problems with codifying a task force. The
legislation allows confidentiality. The team will produce a
contract. The contract will be turned over to the
Legislature for consideration.
Representative Martin expressed concern that the Department
of Law will be required to provide assistance to a non-
governmental body.
Representative Davies suggested the addition of language on
page 4, line 20 after "working documents." He suggested
"would reveal proprietary or privileged information that the
potential sponsor requested be kept confidential" be added
and "contain sensitive, proprietary, or privileged
information and the potential sponsor requests that the
records or working documents be kept confidential" be
deleted. He explained that the potential sponsor would not
be able to request that working documents be kept
confidential. The Department of Revenue would decide the
status of working documents. The potential sponsor would
request that information they provide be kept confidential.
Any working document that did not reveal sensitive
information could be released.
Ms. di Franco stated that the legislation as written allows
the Department of Revenue to do what is intended by the
proposed amendment. She stated that working documents that
were summary documents or more broadly analytical of
specific information would not be covered by the
confidentiality provision.
Representative Davies interpreted the language to mean a
document that simply analyzes records that have been
requested to be kept confidential, could be kept
confidential.
Representative Hodgins observed that the opinion by Legal
Services would go against the proposed amendment. He
observed that the definition of proprietary is included in
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the legislation. He emphasized that there will be
proprietary information in the course of negotiations. He
maintained that the team could not negotiate with private
entities if everything was going to be part of the public
record. He assumed that the public will have the ability to
receive information that is not sensitive.
Representative Davies stated that he would like the
legislation to clarify that only those documents that would
reveal confidential information would be held confidential.
Representative Hodgins observed that the lines that would be
deleted by the proposed amendment give the person who brings
forward the information the right to declare if the material
is confidential. Co-Chair Therriault suggested that the
language is clear that documents must contain sensitive,
proprietary or privileged information to remain
confidential.
Representative Hodgins explained that the sponsor would be
allowed to determine the nature of the material in their
request for confidentiality. He noted that gas companies
would have proprietary information they would not want to be
public.
Representative Davies did not move the amendment. He
observed that the Department of Revenue's intent is to
release information that is not proprietary.
Co-Chair Therriault provided members with a zero House
Finance Committee fiscal note for the Department of Revenue
(copy on file). Representative Grussendorf expressed
concern with the zero fiscal note.
Representative Davies emphasized that the proposal may
request that the Legislature change the fiscal terms of the
State to the tune of millions of dollars a year. He
stressed that an appropriate amount of money should be
appropriated to ensure that the Legislature receives a good
proposal that has been fully considered. He maintained that
contingency funds are for unanticipated contingencies.
Representative Foster MOVED to report CSHB 250 (O&G) out of
Committee with individual recommendations. Representative
Davies OBJECTED.
A roll call vote was taken on the MOTION.
IN FAVOR: Davis, Foster, Kelly, Kohring, Martin, Therriault
OPPOSED: Grussendorf, Davies
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Co-Chair Hanley and Representatives Moses and Mulder were
absent for the vote.
The MOTION PASSED (6-2).
Co-Chair Therriault MOVED to adopt the House Finance
Committee zero fiscal note. There being NO OBJECTION, it
was so ordered.
Representative Davies MOVED to Amend fiscal note of $150
thousand dollars in the contractual line.
A roll call vote was taken on the MOTION.
IN FAVOR: Grussendorf, Davies
OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Therriault
Co-Chair Hanley and Representatives Moses and Mulder were
absent for the vote.
The MOTION FAILED (2-6).
HB 250 was reported out of Committee with "no
recommendation" and with a zero fiscal note by the House
Finance Committee for the Department of Revenue.
(Tape Change, HFC 97-116, Side 1)
HOUSE BILL NO. 127
"An Act relating to the citizen review board and panels
for permanency planning for certain children in state
custody; renaming the Citizens' Review Panel For
Permanency Planning as the Citizens' Foster Care Review
Board; extending the termination date of the Citizens'
Foster Care Review Board; and providing for an
effective date."
BLAIR MCCUNE, DEPUTY DIRECTOR, ALASKA PUBLIC DEFENDERS
AGENCY testified via the teleconference network. He
observed that section 20 provides that the Public Defender
Agency "shall" cooperate with the Citizen's Foster Care
Review Board. Section 23 says that the Board shall submit
reports to the court. He observed that section 23 would
strengthen the Board. He stated that there would be some
financial impact to the Public Defender Agency. He
expressed concern that there is a duplication of effort. He
observed that the Board is about permanency planning. He
added that there are other entities involved in the court
process. He suggested that the Public Defender Agency be
taken off the Board. He noted that conflicts could arise if
the Agency was representing parents in criminal proceedings.
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He noted that the Public Defender Agency would be
represented on panels.
SCOTT CALDER, FAIRBANKS testified via the teleconference
network. He maintained that the bill is premature and
excessive. He stressed that the State has delayed
implementation for six and a half years. He asserted that
arguments that the lack of funding for administrative
functions obscure the fact that the Governor has not
appointed members to the local panel, under AS 47.14.220.
He observed that approximately $500 thousand dollars has
been appropriated to fund a local and special act for
Anchorage. He stressed that it is inappropriate to consider
reshaping existing laws for a statewide program based upon
one local experience. He emphasized that the provisions of
AS 47.14.200 would be eliminated by the legislation. He
pointed out that the duties of cooperation for the
Department of Health & Social Services, Department of Law,
Public Defender Agency, Office of Public Advocacy and the
Alaska Court System is contained in existing statute AS
47.14.250. He expressed concern that there will be a
duplication of effort. He referred to AS 47.14.210. He
asserted that the reason the law exists is to make a basic
factual report to the Legislature about what is going on
with the system. He stressed that nonvoting representatives
of these agencies need to be present to facilitate
cooperation. He maintained that the sunset date should be
extended and the Governor should appoint members in each of
the judicial districts and implement the panel. He
acknowledged the work of the Anchorage panel, but emphasized
that other areas should not be excluded. He cited Article
II, Section 19 or the Alaska Constitution.
CONNIE SIPES, DIRECTOR, DIVISION OF SENIOR SERVICES,
ANCHORAGE testified via the teleconference network. She
observed that the panel is placed in the Division of Senior
Services for administrative purposes. She maintained that
it is an appropriate time to revitalize the citizen foster
care review experience. She maintained that it should be
more than an Anchorage pilot project. She observed that it
is a complex system. The legal rights of parents, children,
families, and foster care providers are involved. She
asserted that guidance is needed from a state panel to set
policies and procedures, coordinate between agencies, and to
set standards for training, handling and management of cases
at local levels. She stressed that the bill benefits from
the pilot experience. She noted that the Administration
supports the bill.
Co-Chair Therriault observed that the Committee will look at
the fiscal impact and other issues.
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HB 127 was HELD in Committee for further consideration.
SENATE BILL NO. 175
"An Act relating to revenue bonds issued by the Alaska
Industrial Development and Export Authority for
interties between Healy and Fairbanks and between
Anchorage and the Kenai Peninsula; and providing for an
effective date."
KEITH LAUGER, ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT
AUTHORITY (AIDEA) testified via the teleconference network
in support of SB 175. He observed that SB 175 provides a
technical fix for legislative bonding Authority to issue
revenue bonds relating to the Northern and Southern
interties. The original bond authorization was enacted in
1993, for AIDEA to issue up to $60 million dollars in bonds
for each intertie. The authorizing legislation contained
specific provisions relating to ownership of the interties.
Since the passage of the legislation utilities have worked
out agreements that provide for a different ownership
structure. The Bond Counsel has determined that under the
existing statute the Authority would be unable to issue
bonds for the new ownership structure that is contemplated.
Senate Bill 175 would clarify that ownership is not
important, who is going to benefit from the interties is
important. He observed that AIDEA supports the legislation.
ERIC YOULD, EXECUTIVE DIRECTOR, RURAL ALASKA ELECTRIC
COOPERATIVE ASSOCIATION testified via the teleconference
network in support of SB 175. He noted that he represents
the six utilities that would be affected by the legislation.
He stated that the legislation would authorize revenue bonds
to be sold on behalf of AIDEA for the participating
communities and utilities. The legislation also provides
for joint ownership by the utilities.
VAYLA COLONELL, VALLEY ELECTRIC ASSOCIATION testified via
the teleconference network in support of SB 175.
DUANE PARLOW, HOMER ELECTRIC ASSOCIATION testified via the
teleconference network in support of SB 175.
Representative Martin MOVED to report SB 175 out of
Committee with individual recommendations and with the
accompanying fiscal note. There being NO OBJECTION, it was
so ordered.
SB 175 was reported out of Committee with a "do pass"
recommendation Department of Commerce and Economic
Development, 4/21/97.
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ADJOURNMENT
The meeting adjourned at 4:00 p.m.
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