Legislature(1997 - 1998)

05/01/1998 02:25 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
HOUSE FINANCE COMMITTEE                                                        
                    May 1, 1998                                                
                       2:25 P.M.                                               
                                                                               
TAPE HFC 98 - 140, Side 1                                                      
TAPE HFC 98 - 140, Side 2                                                      
                                                                               
CALL TO ORDER                                                                  
                                                                               
Co-Chair Gene Therriault called the House Finance Committee                    
meeting to order at 2:25 p.m.                                                  
                                                                               
PRESENT                                                                        
                                                                               
Co-Chair Hanley    Representative Kelly                                        
Co-Chair Therriault   Representative Kohring                                   
Representative Davies  Representative Martin                                   
Representative Davis   Representative Moses                                    
Representative Grussendorf Representative Mulder                               
                                                                               
Representative Foster was absent from the meeting.                             
                                                                               
ALSO PRESENT                                                                   
                                                                               
Kevin Banks, Division of Oil and Gas, Department of Natural                    
Resources; Chris Stockard, Captain, Department of Public                       
Safety; Jeff Cook, Vice President External Affairs, Mapco,                     
Fairbanks; James Hornaday, Staff, Representative Kott,                         
Patrick Lounsbury, Staff, Representative James.                                
                                                                               
SUMMARY                                                                        
                                                                               
HB 81 "An Act relating to the members of the board and                         
staff of the Alaska Permanent Fund Corporation."                               
                                                                               
 CSHB 81 (FIN) was REPORTED out of Committee with                              
"no recommendation" and with a zero fiscal note by                             
the House Finance Committee for the Alaska                                     
Permanent Fund Corporation and zero fiscal note by                             
the Office of the Governor, 2/12/98.                                           
                                                                               
HB 405 "An Act relating to failing to stop a vehicle when                      
directed to do so by a peace officer."                                         
                                                                               
 CSHB 405 (FIN) was REPORTED out of Committee with                             
"no recommendation" and with four fiscal impact                                
notes, one by the Department of Corrections, one                               
by the Alaska Court System, one by the Department                              
of Administration, and one by the Department of                                
Law dated 3/9/98.                                                              
                                                                               
HB 469 "An Act approving the sale of Prudhoe Bay Unit                          
royalty oil by the State of Alaska to Mapco Alaska                             
Petroleum, Inc.; and providing for an effective                                
date."                                                                         
                                                                               
HB 469 was REPORTED out of Committee with "no                                  
recommendation" and with a fiscal impact note by                               
the Department of Natural Resources.                                           
                                                                               
HJR 50 Proposing amendments to the Constitution of the                         
State of Alaska relating to a public corporation                               
established to manage the permanent fund.                                      
                                                                               
 HJR 50 was HELD in Committee for further                                      
consideration.                                                                 
HOUSE BILL NO. 469                                                             
                                                                               
"An Act approving the sale of Prudhoe Bay Unit royalty                         
oil by the State of Alaska to Mapco Alaska Petroleum,                          
Inc.; and providing for an effective date."                                    
                                                                               
KEVIN BANKS, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL                    
RESOURCES explained that HB 469 would ratify a five-year                       
contract that would begin on December 1, 1998 with MAPCO.                      
The expiration date would coincide with a long-term contract                   
that MAPCO has with the state of Alaska.  The contract also                    
has a security clause.  MAPCO has agreed to put a letter of                    
credit equal to 75 days worth of oil.  This would cover the                    
state of Alaska in the case that MAPCO defaults in the                         
contract.  MAPCO is required to process at least 80 percent                    
of the oil in the state of Alaska.  MAPCO has indicated that                   
they would process most of the oil.  There is also a local                     
hire provision in the contract.  Residents are defined in                      
the same manner as in the North Star lease agreement.                          
                                                                               
Mr. Banks explained that the price is based on the value                       
calculated by the producers.  The producers base their price                   
on the market value of Alaska North Slope (ANS) oil,                           
transportation chargers for tankers, tariffs for the                           
pipeline, and adjustments for quality.  MAPCO would pay this                   
price plus .15 cents.                                                          
                                                                               
Co-Chair Therriault noted that the State established this                      
pricing structure in the Amerada Hess settlement.                              
                                                                               
In response to a question by Representative Davies, Mr.                        
Banks explained that the additional .15 cents was added to                     
assure that the value to the state of Alaska is considered                     
first.  He observed that the state of Alaska is taking a                       
portion of its oil and selling it in the same market.  There                   
is concern that the State could reduce the value of royalty                    
oil through the sale of oil.  He explained how the sale of                     
oil by the state of Alaska could shift the balance of oil                      
distribution between the West Coast and the Far East or mid                    
United States.                                                                 
                                                                               
Representative Davies noted that MAPCO can increase or                         
decrease the monthly nomination.  MAPCO would have to stay                     
below the maximum quantity authorized per year.  Mr. Banks                     
noted that there is a reservation fee if MAPCO fails to take                   
the maximum quantity in any given month.  The state of                         
Alaska is committed to a certain amount per month.  He                         
clarified that MAPCO would not be allowed to exceed 33                         
percent in any month.  The nomination occurs 3 months before                   
production begins.                                                             
                                                                               
In response to a question by Representative Martin, Mr.                        
Banks pointed out that the State is confined in its ability                    
to offer competitive bids.  He observed that a substantial                     
amount of oil is going to MAPCO under a contract that was                      
awarded in the late 70's.  At the end of the contract the                      
State hopes to be free to begin competitive bidding without                    
any potential customers having a significant advantage over                    
another.  Both contracts would end in the year 2003.                           
                                                                               
Representative Martin questioned the criteria that would be                    
used to ensure local hire.  Mr. Banks observed that MAPCO's                    
state contract provided them with the stability of supply                      
needed to start a refinery.                                                    
                                                                               
Representative Martin asked why the contract would only add                    
.15 cent a barrel.  He maintained that the price is too low.                   
He suggested that in-state refineries have the advantage of                    
not paying shipping costs.  Mr. Banks maintained that the                      
price at pump station one represents an amount close to                        
market value.  The additional .15 cents provides a cushion.                    
                                                                               
Co-Chair Therriault pointed out that no monetary value is                      
applied to local hire.  Mr. Banks noted that the commercial                    
terms of the contract were kept separate from other                            
potential benefits.                                                            
                                                                               
Representative Kelly referred to the definition of "royalty                    
value" on page 2, line 17.  He observed that MAPCO is paying                   
what the State could get for the oil plus .15 cents.                           
                                                                               
JEFF COOK, VICE PRESIDENT EXTERNAL AFFAIRS, MAPCO, FAIRBANKS                   
spoke in support of the legislation.  He noted that the oil                    
will be refined into jet fuel and diesel.  He stressed that                    
MAPCO has hired locally.  He noted that the Alaska Royalty                     
Oil and Gas Advisory Board took testimony on the MAPCO                         
contract.  The Board approved the contract unanimously.  He                    
emphasized that they pay the fair market value and the                         
tariff cost to Fairbanks.                                                      
                                                                               
Representative Kelly asked if MAPCO has any other sources of                   
oil.  Mr. Cook observed that MAPCO purchases oil from the                      
state of Alaska and Phillips Oil.  He noted that MAPCO pays                    
less to the Phillips Oil company than it pays to the state                     
of Alaska.                                                                     
                                                                               
Representative Martin maintained that cost factors are not                     
the same.  Mr. Cook observed that MAPCO did not receive any                    
tax breaks to offset their $70 million dollar expansion.  He                   
pointed out that the same expansion would cost approximately                   
$45 million dollars if it were built in Tennessee.                             
                                                                               
Co-Chair Therriault noted that there is a zero fiscal note.                    
                                                                               
Representative Kohring stated that he is concerned with the                    
issue of competition.                                                          
                                                                               
Representative Kelly MOVED to report HB 469 out of Committee                   
with the accompanying fiscal note.  There being NO                             
OBJECTION, it was so ordered.                                                  
                                                                               
HB 469 was REPORTED out of Committee with "no                                  
recommendation" and with a fiscal impact note by the                           
Department of Natural Resources.                                               
HOUSE BILL NO. 405                                                             
                                                                               
"An Act relating to failing to stop a vehicle when                             
directed to do so by a peace officer."                                         
                                                                               
Co-Chair Therriault MOVED to ADOPT Amendment 1 (copy on                        
file).                                                                         
                                                                               
JAMES HORNADAY, STAFF, REPRESENTATIVE KOTT stated that the                     
sponsor supports the amendment.  He added that                                 
representatives of the Anchorage Police Department and the                     
Department of Public Safety also support the amendment.  He                    
explained that the amendment would add new language:  "A                       
person commits the offense of failure to stop at the                           
direction of a peace officer in the first degree if the                        
person violates (b) of this section and during the                             
commission of that offense, the person violates a traffic                      
law or commits another crime."   The amendment also provides                   
that "crime" has the meaning given in AS 11.81.900; and                        
"traffic law" has the meaning given in AS 28.15.261.                           
                                                                               
Co-Chair Therriault observed that there are approximately                      
330 of these types of violations on a yearly basis.  The                       
Department of Law indicated that that they would try to                        
prosecute these offenses as felonies.  He observed that the                    
Department of Law could prosecute with the use discretion in                   
order to reduce the fiscal impact.  The Anchorage Police                       
Department supports full prosecution of violations.                            
                                                                               
CHRIS STOCKARD, CAPTAIN, DEPARTMENT OF PUBLIC SAFETY                           
explained that it is currently a class B misdemeanor to                        
elude a police officer.  The legislation increases the                         
penalty and creates a new felony category for more serious                     
violations.  There are approximately 20 states that have                       
made fleeing a police office a felony offense.                                 
                                                                               
There being NO OBJECTION, Amendment 1 was adopted.                             
                                                                               
(Tape Change, HFC 98 - 140, Side 2)                                            
                                                                               
In response to a question by Representative Grussendorf, Mr.                   
Stockard clarified that a person must knowingly elude a                        
police officer.  The police officer's vehicle must be marked                   
appropriately so that a reasonable person would recognize it                   
as a law enforcement vehicle.  If the officer is not                           
operating a vehicle they must be in a clearly recognizable                     
uniform.                                                                       
                                                                               
Mr. Hornaday pointed out that there is a definition of                         
"knowingly" in AS 81.900.                                                      
                                                                               
Representative Mulder asked if the legislation would act as                    
a deterrent.                                                                   
                                                                               
Mr. Stockard observed that the Anchorage Police Department                     
feels that it would be a deterrent.  The Department of                         
Public Safety is less certain.  He explained that officers                     
would include information about the law in their school                        
presentation.                                                                  
                                                                               
Co-Chair Therriault asked if forfeiture of the vehicle was                     
considered as a deterrent.  Mr. Hornaday stressed that                         
forfeiture is difficult to enforce.                                            
                                                                               
Representative Davies asked if persons in an emergency                         
situation would be charged with eluding a police officer.                      
Mr. Stockard emphasized that generally persons in an                           
emergency situation will stop because they want the police                     
to assist them.                                                                
                                                                               
Representative Grussendorf spoke in support of the                             
legislation.                                                                   
                                                                               
Representative Mulder MOVED to report CSHB 405 (FIN) out of                    
Committee with the accompanying fiscal notes.                                  
                                                                               
CSHB 405 (FIN) was REPORTED out of Committee with "no                          
recommendation" and with four fiscal impact notes, one by                      
the Department of Corrections, one by the Alaska Court                         
System, one by the Department of Administration, and one by                    
the Department of Law dated 3/9/98.                                            
HOUSE BILL NO. 81                                                              
                                                                               
"An Act relating to the members of the board and staff                         
of the Alaska Permanent Fund Corporation."                                     
                                                                               
Co-Chair Therriault noted that the Committee had take                          
previous action on HB 81.                                                      
                                                                               
Representative Davies MOVED to ADOPT Amendment 4 (copy on                      
file).   He observed that the amendment would replace                          
section 4 with:  "A removal by the governor must be in                         
writing and must state the reason for the removal.   The                       
removal should not be based on the general decision to have                    
the governor's own appointed member on the board.  The                         
governor may not request a member of the board to submit a                     
resignation."                                                                  
                                                                               
Representative Grussendorf noted that an individual may wish                   
to resign as opposed to receiving public humiliation.                          
                                                                               
Co-Chair Therriault expressed concern that a governor could                    
ask for a resignation without cause.                                           
                                                                               
Representative G. Davis MOVED to delete "should" and add                       
"may".  There being NO OBJECTION, it was so ordered.                           
                                                                               
Representative Kelly questioned if "the governor may not                       
request a member of the board to submit a resignation"                         
should also be deleted.                                                        
                                                                               
PATRICK LOUNSBURY, STAFF, REPRESENTATIVE JAMES spoke in                        
opposition to the amendment.  He maintained that the                           
language is still loose.                                                       
                                                                               
Representative Martin spoke against the amendment.                             
                                                                               
Representative Mulder spoke in support of the amendment.                       
                                                                               
Representative Grussendorf MOVED to amend the amendment by                     
deleting:  "The governor may not request a member of the                       
board to submit a resignation."  There being NO OBJECTION,                     
it was so ordered.                                                             
                                                                               
A roll call vote was taken on the motion.                                      
                                                                               
IN FAVOR: Kelly, Kohring, Mulder, Davies, Davis, Grussendorf                   
OPPOSED: Martin, Moses, Therriault                                             
                                                                               
Co-Chair Hanley and Representative Foster were absent for                      
the vote.                                                                      
                                                                               
The MOTION PASSED (6-3).                                                       
                                                                               
Representative Mulder noted that the fiscal note would no                      
longer pertain to the legislation.  He MOVED to report CSHB
81 (FIN) out of Committee with a new zero fiscal note.  Mr.                    
Lounsbury agreed that the fiscal note would be zero.  There                    
being NO OBJECTION, it was so ordered.                                         
                                                                               
Mr. Lounsbury stated that everyone supports the legislation                    
with the exception of the current Administration.                              
                                                                               
CSHB 81 (FIN) was REPORTED out of Committee with "no                           
recommendation" and with a zero fiscal note by the House                       
Finance Committee for the Alaska Permanent Fund Corporation                    
and zero fiscal note by the Office of the Governor, 2/12/98.                   
HOUSE JOINT RESOLUTION NO. 50                                                  
                                                                               
Proposing amendments to the Constitution of the State                          
of Alaska relating to a public corporation established                         
to manage the permanent fund.                                                  
                                                                               
Co-Chair Therriault questioned if the language should be in                    
a separate section of the Constitution.                                        
                                                                               
Mr. Lounsbury stated that Article III, Section 26 would not                    
be the proper place for HJR 50.                                                
                                                                               
HJR 50 was HELD in Committee for further consideration.                        
ADJOURNMENT                                                                    
                                                                               
The meeting adjourned at 3:45 p.m.                                             
                                                                               

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