Legislature(2003 - 2004)

02/06/2003 01:29 PM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                     February 06, 2003                                                                                          
                          1:29 PM                                                                                               
                                                                                                                                
TAPE HFC 03 - 14, Side A                                                                                                        
TAPE HFC 03 - 14, Side B                                                                                                        
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Vice Chair Meyer called the House Finance Committee meeting                                                                     
to order at 1:29 PM.                                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
Representative John Harris, Co-Chair                                                                                            
Representative Kevin Meyer, Vice-Chair                                                                                          
Representative Eric Croft                                                                                                       
Representative Richard Foster                                                                                                   
Representative Mike Hawker                                                                                                      
Representative Reggie Joule                                                                                                     
Representative Carl Moses                                                                                                       
Representative Gary Stevens                                                                                                     
Representative Bill Stoltze                                                                                                     
Representative Jim Whitaker                                                                                                     
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Bill Williams, Co-Chair                                                                                          
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Edgar Blatchford, Commissioner, Department of Community and                                                                     
Economic Development; Tom  Lawson, Director, Administrative                                                                     
Services, Department of Community and Economic Development;                                                                     
Sally Saddler, Legislative Liaison, Department of Community                                                                     
and Economic Development;Ron  Miller,  Executive  Director,                                                                     
Alaska Industrial Development and Export  Authority; Daniel                                                                     
T.  Seamount,  Jr.,   Commissioner,  Alaska  Oil  and   Gas                                                                     
Conservation Commission, Department of Administration; Cammy                                                                    
Oechsli  Taylor, Chair,  Alaska  Oil and  Gas  Conservation                                                                     
Commission; Valerie Walker, Deputy-Director, Finance, Alaska                                                                    
Industrial Development  and Export  Authority;Sarah Fisher-                                                                     
Goad, Alaska Industrial Development and Export Authority.                                                                       
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
None                                                                                                                            
                                                                                                                                
GENERAL SUBJECT(S):                                                                                                           
                                                                                                                                
     DEPARTMENT OF COMMUNITY AND ECONOMIC DEVELOPMENT                                                                           
     ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY                                                                         
     (AIDEA)                                                                                                                    
     ALASKA ENERGY AUTHORITY (AEA)                                                                                              
     ALASKA OIL AND GAS CONSERVATION COMMISSION                                                                                 
                                                                                                                                
The following overview was taken in log note format.  Tapes                                                                     
and handouts will be on file with the House Finance                                                                             
Committee through the 23rd Legislative Session, contact 465-                                                                    
2156. After the 23rd Legislative Session they will be                                                                           
available through the Legislative Library at 465-3808.                                                                          
                                                                                                                                
 LOG SPEAKER                DISCUSSION                                                                                      
                                                                                                                              
      TAPE HFC 03 - 14                                                                                                        
      SIDE A                                                                                                                  
 000 Vice-Chair Meyer       Convened the meeting at 1:29 p.m.                                                                 
                                                                                                                                
                            DEPARTMENT  OF  COMMUNITY  AND  ECONOMIC                                                          
                            DEVELOPMENT (DCED)                                                                              
 032 EDGAR     BLATCHFORD, Introduced himself and Tom Lawson,                                                                   
      COMMISSIONER,         Director,    Administrative    Services,                                                            
      DEPARTMENT        OF Department of Community and Economic                                                                 
      COMMUNITY        AND Development, as well as Sally Sadler,                                                                
      ECONOMIC DEVELOPMENT  Legislative Liaison.  He referred to the                                                            
                            mission statement  as  outlined  in  the                                                            
                            overview (copy  on file).   The  general                                                            
                            mission of  DCED  is to  promote  strong                                                            
                            communities and healthy economies.  They                                                            
                            provide  consumer  protection,   promote                                                            
                            economic  development,  administer  loan                                                            
                            programs and foster development of local                                                            
                            government.                                                                                       
 311 Representative         Noted his past experience with the                                                                  
      Foster                Commissioner during his tenure with                                                                 
                            Community  and   Regional  Affairs   and                                                            
                            commended     his     knowledge      and                                                            
                            professionalism.                                                                                  
 338 Representative         Referenced  Alaska   Seafood   Marketing                                                            
      Stevens               Institute (ASMI) and raised a concern                                                               
                            about the lack of general funds  for the                                                            
                            organization.  Asked how the legislature                                                            
                            could assist ASMI in marketing and other                                                            
                            methods of averting crises.                                                                       
 430 Commissioner           Noted that the salmon industry must be                                                              
      Blatchford            continued.  He explained that the                                                                   
                            Department  of  Community  and  Economic                                                            
                            Development  (DCED)  services  sometimes                                                            
                            included lending  to  ensure  a  healthy                                                            
                            seafood industry.   He  stated that  the                                                            
                            2003 season necessitated major decisions                                                            
                            to  develop  solutions  to  the  current                                                            
                            problem.  He emphasized that the current                                                            
                            Administration  encouraged   flexibility                                                            
                            from  other  cabinet  members  to  offer                                                            
                           suggestions.                                                                                       
 559 Representative Joule Referenced municipal revenue sharing.                                                                 
                            Asked  whether   revenue   sharing   was                                                            
                            foreseen in  the  face of  five  or  ten                                                            
                            percent departmental reductions.                                                                  
650 Commissioner           Stressed the Department's intent to                                                                  
      Blatchford           search for solutions to assist the rural                                                             
                           community.  He stated  that a large part                                                             
                           of  the   Department's  mission  was  to                                                             
                           advocate for  the  unorganized boroughs.                                                             
                           He  stated that  DCED did  not  have any                                                             
                           concrete   numbers   and   was   seeking                                                             
                           solutions.                                                                                         
744 Representative Joule Asked for the Department's action plans.                                                             
808 Commissioner           Noted the premise that each person living                                                            
      Blatchford           in Alaska should have the opportunity for                                                            
                           a  fruitful  life  in his  or  her  home                                                             
                           community.   He stressed that development                                                            
                           of natural resources should  first be to                                                             
                           local residents.  He mentioned  that, in                                                             
                           rural areas, the largest landowners were                                                             
                           the    regional   Native    or   village                                                             
                           corporations.  The   Administration  has                                                             
                           asked not to impose  any agenda on local                                                             
                           areas   without  cooperation  of   local                                                             
                           residents.                                                                                         
936 Representative         Welcomed the Commissioner and expressed                                                              
      Stoltze              appreciation for his commitment.  Asked                                                              
                           regarding administrative action to change                                                            
                           the name of the Department.                                                                        
1006 Commissioner          Responded that the Administration had                                                                
      Blatchford           asked to change the name to Commerce and                                                             
                           Economic Development.  He noted that the                                                             
                           mission of the department was based on a                                                             
                           premise that the best social program is a                                                            
                           job,  and  that   encouraging  a  strong                                                             
                           economy addresses social ills.                                                                     
1100 Representative        Asked about the impact of dividend                                                                   
      Stoltze              payments to rural Alaskans and speculated                                                            
                           that not receiving a dividend could prove                                                            
                           more disastrous  than a lack  of revenue                                                             
                           sharing.                                                                                           
1143 Representative        Questioned the policy of the Department                                                              
      Hawker               regarding the public ownership of the                                                                
                           Alaska Railroad  Corporation.   He noted                                                             
                           that the Corporation's tax-exempt status                                                             
                           competed  against   private  enterprise,                                                             
                           resulting  in sometimes  a  net cost  to                                                             
                           local community.   He referenced his own                                                             
                           community of Whittier.                                                                             
1304 Commissioner          Noted that the intent of statute was to                                                              
      Blatchford           promote a healthy Alaska and that this                                                               
                           included communities along the railway.                                                              
                           He  acknowledged the  feelings of  these                                                             
                           communities and  vowed to  keep  them in                                                             
                           mind when serving on the Railroad Board.                                                           
1412 Representative        Endorsed    Commissioner    Blatchford's                                                             
      Hawker               support of those issues.  He thanked him                                                           
                            for his support of private enterprise.                                                            
 1446 Representative Joule  Referred   to   the   merger   of    two                                                            
                            departments,  which   resulted  in   the                                                            
                            current Department (previously Community                                                            
                            and Regional Affairs [DCRA] and Commerce                                                            
                            and Economic  Development [DCED]).    He                                                            
                            commented that rural  Alaska might  feel                                                            
                            alienated under the current organization                                                            
                            and name.                                                                                         
 1607 Commissioner          Responded that, while working with DCRA,                                                            
      Blatchford            he believed deeply in its mission.  He                                                              
                            stated that, in the current  process, he                                                            
                            would keep the interests of rural Alaska                                                            
                            at the  forefront of  DCED's mission  to                                                            
                            provide for  unorganized boroughs.    He                                                            
                            added that  the Governor requested  that                                                            
                            unorganized boroughs have a say in public                                                           
                            policy decisions.                                                                                 
 1707 Representative Croft  Referred to last week's  presentation by                                                            
                            Director   Cheryl   Frasca,    Director,                                                            
                            Division of Management &  Budget, Office                                                            
                            of the Governor (OMB), and questioned the                                                           
                            affects  of  a   five  or  ten   percent                                                            
                            reduction.                                                                                        
 1743 Commissioner          Responded that, while working ideas were                                                            
      Blatchford            presented to the Director of Office of                                                              
                            Management and  Budget,  the  Department                                                            
                            remained in  the  process of  discussion                                                            
                            regarding the budget.  He stated that his                                                           
                            Department would soon present numbers for                                                           
                            consideration.                                                                                    
 1809 Representative Croft  Asked  for  rough  ideas   of  potential                                                            
                            impacts  of  a   five  or  ten   percent                                                            
                            reduction to the Department.                                                                      
 1828 Commissioner          Stated that he planned to shore up any                                                              
      Blatchford            reductions with spirit and enthusiasm.                                                            
 1849 Representative Croft  Referred to AS 37.07.060, and stated his                                                            
                            beliefs that documents  sent to OMB  are                                                            
                            public information.  He quoted Section G,                                                           
                            which says that all goals and objectives,                                                           
                            plans programs,  and  estimated  budgets                                                            
                            forwarded to OMB by  a state agency  are                                                            
                            public information.                                                                               
 1942 Representative        Asked regarding the Salmon Task Force, in                                                           
      Stevens               the area of quality, and the mandatory                                                              
                            chilling of  fish  at time  of  capture.                                                            
                            Pointed out that requiring  fishermen to                                                            
                            install icing equipment was difficult, in                                                           
                            times of financial difficulties.   Asked                                                            
                            what assistance  might be  available  in                                                            
                            terms of loans.   Also  asked about  the                                                            
                            Governor's Fish Plan.                                                                             
 2059 Commissioner          Stated that he does not have specifics,                                                           
      Blatchford           but stated that they would work with                                                                 
                           local communities to address the crisis.                                                             
                           His  Department  has been  asked  to  be                                                             
                           flexible  and   look   for  governmental                                                             
                           barriers that impede the industry.  They                                                             
                           are  looking  at  loan programs  in  the                                                             
                           Division  of  Investments and  reviewing                                                             
                           regulations  and  criteria.    Regarding                                                             
                           transportation,    the   Governor    has                                                             
                           clarified that roads are  essential.  If                                                             
                           transportation  was   improved,  natural                                                             
                           resources might be easier to transport.                                                            
2245 Representative        Asked whether organic labeling to promote                                                            
      Stoltze              agriculture was also a federal problem.                                                            
2315 Commissioner          Noted that organic labels applied to                                                                 
      Blatchford           seafood as well as agriculture.  He                                                                  
                           agreed to  provide further answers later                                                             
                           in the afternoon.                                                                                  
2411 Representative        Asked about aquaculture in the State, in                                                             
      Hawker               particular for shellfish.  He noted the                                                              
                           involvement in Seward.                                                                             
2438 Commissioner          Explained that shellfish farming was                                                                 
      Blatchford           introduced in the 1990s.  The idea was to                                                            
                           revitalize  local  opportunities through                                                             
                           shellfish  farming.   He  mentioned  his                                                             
                           involvement in the Native Tribal Council                                                             
                           Board,  which  had  discussed  shellfish                                                             
                           farming.     He  noted   the  tremendous                                                             
                           potential  to  revive  the  industry  in                                                             
                           coastal areas.  He pointed out that this                                                             
                           requires cooperation of the Legislature.                                                           
2544 Representative        Asked to hear more proposals on that                                                                 
      Hawker               subject.  He also asked regarding                                                                    
                           promoting salmon aquaculture programs in                                                             
                           western Alaska.                                                                                    
2615 Commissioner          Mentioned the need to be equitable in                                                                
      Blatchford           distribution of state resources and                                                                  
                           stated  he would  respond  later in  the                                                             
                           month.                                                                                             
2643 Vice-Chair Meyer      Mentioned the National Petroleum Reserve-                                                            
                           Alaska  impact on  the  North Slope  and                                                             
                           referenced  a  report   issued  in  late                                                             
                           January.   Noted that $18.6  million had                                                             
                           been  appropriated  through  the  Impact                                                             
                           Mitigation Program.   He  clarified that                                                             
                           this  funding was  generated through  50                                                             
                           percent federal royalties,  and could be                                                             
                           redistributed to communities through the                                                             
                           impact fee.  He asked about the program's                                                            
                           success, and whether any remaining funds                                                             
                           went  into the  General Fund.   He  also                                                             
                           asked  how   further  development  might                                                             
                           affect the program.                                                                                
 2806 Commissioner          Referred to Mr. Tom Lawson, Director,                                                               
      Blatchford            Administrative Services, Department of                                                              
                            Community and Economic Development.                                                               
 2826 TOM          LAWSON, Explained that funds came from lease                                                                 
      DIRECTOR,             sales and payments to the federal                                                                   
      ADMINISTRATIVE        government, half of which was passed on                                                             
      SERVICES, DEPARTMENT  to the  State.  The  State has  received                                                            
      OF   COMMUNITY   AND  payments over a ten-year period.  The $18                                                           
      ECONOMIC DEVELOPMENT  million  represents  the  annual   lease                                                            
                            payments.   In 2004,  they expected  $36                                                            
                            million.  He summarized that the concept                                                            
                            of the program was  to provide money  to                                                            
                            rural   areas   impacted   by    leasing                                                            
                            exploration and development  of oil  and                                                            
                            gas.  He  conceded  that  the  program's                                                            
                            effectiveness had come into question.  He                                                           
                            stated  the  Department's  openness   to                                                            
                            working with legislature.  Annually, only                                                           
                            $1.7 million was  paid into the  General                                                            
                            Fund, most  of which  went into  grants.                                                            
                            Additional money could go to the General                                                            
                            Fund in the next year.   Statute directs                                                            
                            that, if money remains after  grants, 25                                                            
                            percent  of  the  balance  goes  to  the                                                            
                            General Fund, .5 Percent to schools, and                                                            
                            the    remainder     for     legislative                                                            
                            appropriation   to   the   Power    Cost                                                            
                            Equalization program.                                                                             
 3107 Vice-Chair Meyer      Noted that as more exploration occurred,                                                            
                            he foresaw  the  fund  would  grow,  and                                                            
                            wanted to explore this source of revenue.                                                         
 3144 Representative        Noted that his career was spent in                                                                  
      Hawker                villages that benefited from this impact                                                            
                            program.   Funds  have gone  to  develop                                                            
                            fundamental infrastructures, such as boat                                                           
                            launching, community airports, etc.  This                                                           
                            is a  beneficial  program  for  isolated                                                            
                            areas of state.  He agreed for  the need                                                            
                            of  judicious  and  fair  allocation  of                                                            
                            resources.                                                                                        
 3251 Representative Joule  Referred to a previous discussion as  to                                                            
                            the intent for the  use of these  funds.                                                            
                            He believes in the funds are intended for                                                           
                            impacted communities  to  provide  basic                                                            
                            infrastructure.                                                                                   
 3357 Vice-Chair Meyer      Voiced his support of the program.                                                                
 3418 Commissioner          Expressed his appreciation for the                                                                  
      Blatchford            opportunity to serve state government.                                                              
                            The discussion was concluded.                                                                     
                                                                                                                                
                            ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT                                                          
                            AUTHORITY (AIDEA)                                                                               
 3447 RON          MILLER, Noted that he had been hired as Executive                                                            
      EXECUTIVE  DIRECTOR,  Director  and  introduced  Mike   Barry,                                                          
      ALASKA    INDUSTRIAL Chairman of  AIDEA and AEA,  and Valerie                                                             
      DEVELOPMENT      AND Walker, Deputy-Director, Finance, Alaska                                                             
      EXPORT AUTHORITY     Industrial   Development    and   Export                                                             
                           Authority. He  explained  that AIDA  had                                                             
                           been created by the legislature in 1967,                                                             
                           and  began  issuing  general  obligation                                                             
                           bonds in  1980.  In  1981, the Authority                                                             
                           was capitalized with $23 million in cash                                                             
                           and  a loan  portfolio of  $166 million.                                                             
                           Assets today are over  $1.1 billion.  In                                                             
                           1993, the  legislature placed the Alaska                                                             
                           Energy Authority (AEA) under the overview                                                            
                           of AIDEA; the AIDEA  board serves as AEA                                                             
                           board,  and  AIDEA  staff  oversees  AEA                                                             
                           operations.  The  programs, however, are                                                             
                           separate.                                                                                          
3638 Mr. Miller            Referred to the printed overview (copy on                                                            
                           file) outlining programs  and mission of                                                             
                           organization.     He  discussed  AIDEA's                                                             
                           programs:  participations, business  and                                                             
                           export  assistance,  a  Conduit  Revenue                                                             
                           Bond, Rural  Development Initiative Fund                                                             
                           (RDIF), and development finance programs.                                                            
                           He noted some  of their larger projects,                                                             
                           such as involvement in the Red Dog mining                                                            
                           system, as  well as the  DeLong Mountain                                                             
                           Transportation  System. He  referred  to                                                             
                           page   7,  which   lists   recent  AIDEA                                                             
                           accomplishments,  including the  Federal                                                             
                           Express  Aircraft  Maintenance Facility,                                                             
                           and the Four Dam  Pool Project.  He also                                                             
                           referred  to   pages  8  and   9,  which                                                             
                           illustrate the diversity and performance                                                             
                           of AIDEA's loan portfolio.  Page 10 is a                                                             
                           list  of   finance  projects,  including                                                             
                           shipyards and coal facilities.   He also                                                             
                           noted  AIDEA's  investment portfolio  of                                                             
                           conservative  instruments totaling  $370                                                             
                           million.  In 1996 a dividend program was                                                             
                           created to provide agency stability. The                                                             
                           dividend consists  of between  25 to  50                                                             
                           percent of the  company's net income for                                                             
                           the  year, two  years prior  to dividend                                                             
                           payment.  Since  the policy was enacted,                                                             
                           the Authority  has paid $129  million in                                                             
                           dividends to the State.                                                                            
3913 Mr. Miller            Explained that AIDEA provides staff to                                                               
                           AEA,   which   includes   oversight   of                                                             
                           operations and  maintenance  of all  AEA                                                             
                           owned power projects  and management and                                                             
                           staffing of the AEA rural and alternative                                                            
                           energy  programs.  The Energy  Authority                                                             
                           mission is to  assist in the development                                                           
                            of safe  reliable  and efficient  energy                                                            
                            systems  throughout Alaska.     This  is                                                            
                            accomplished through  various  programs,                                                            
                            including revolving  loan  funds,  power                                                            
                            project  fund,  rural  energy  programs,                                                            
                            alternative energy  program,  and  power                                                            
                            cost equalization.   He  also  mentioned                                                            
                            training programs, circuit rider program                                                            
                            to assist village electric utilities, and                                                           
                            various electric programs operated by the                                                           
                            Energy   Authority.    He   noted    its                                                            
                            affiliation with  the Denali  Commission                                                            
                            and private business.  He  concluded his                                                            
                            presentation and invited questions.                                                               
 4127 Vice-Chair Meyer      Referred to the Alaska Seafood Processing                                                           
                            Plant that had closed, and asked whether                                                            
                            jobs had  been  transferred  to  another                                                            
                            country.                                                                                          
 4149 Mr. Miller            Noted that this job transfer may have                                                               
                            been a one-time  occurrence.  They  have                                                            
                            been trying to determine whether any  of                                                            
                            the product remained on the market.                                                               
 4215 Representative        Asked about the new president of ASI                                                                
      Stevens               (Alaska Seafood International).                                                                   
 4230 Mr. Miller            Stated that John Lowrance, from Leader                                                              
                            Creek Fisheries,  had  been hired  as  a                                                            
                            consultant to decide what to do with the                                                            
                            plant and determine product development.                                                            
                            He  was  hired  by  ASI  as  an  interim                                                            
                            replacement for the outgoing CEO.                                                                 
 4300 Representative        Expressed   his    support    of    this                                                            
      Stevens               appointment.                                                                                      
 4318 Representative        Referred to page 10 of the handout that                                                             
      Stoltze               lists development finance projects.  He                                                             
                            asked  regarding  the   DeLong  Mountain                                                            
                            Transportation System, and also referred                                                            
                            to the Red Dog mining project, and asked                                                            
                            about  Mr.  Miller's  satisfaction  with                                                            
                            project success.                                                                                  
 4408 Mr. Barry             Responded that in his experience, the                                                               
                            programs were providing a large number of                                                           
                            jobs and great  economic diversification                                                            
                            throughout the State.  He referred to the                                                           
                            list, and acknowledged that the  success                                                            
                            rates have been varied.  He commented on                                                            
                            the general success of the Red Dog Mine,                                                            
                            as well as the  Federal Express Aircraft                                                            
                            Facility.     He   explained  that   the                                                            
                            Authority had saved a great deal of money                                                           
                            through refinancing the bonds.  He noted                                                            
                            that when the bonds are paid off, future                                                            
                            revenues will  remain  in the  state  of                                                            
                            Alaska.  He  noted that the Healy  Clean                                                          
                           Coal had a very unclear future, and would                                                            
                           be examined in terms of the overall State                                                            
                           energy policy.   He also  mentioned that                                                             
                           the  Alaska  Seafood Center  was  not  a                                                             
                           successful investment.                                                                             
                                                                                                                                
                           TAPE HFC 03 - 14, Side B                                                                         
                           Continued that these investments operated                                                            
                           at a net loss.   Goals of new Board at a                                                             
                           work meeting will review all projects and                                                            
                           programs  to ensure  that  programs will                                                             
                           allow for future dividends.                                                                        
4542 Mr. Barry             Explained that the programs intended for                                                             
                           AIDEA  when it  was  established by  the                                                             
                           legislature do  not  impact the  State's                                                             
                           credit.  Out of all AIDEA's total assets,                                                            
                           only $10 million is funded by obligations                                                            
                           to the State of Alaska.                                                                            
4442 Mr. Barry             Noted the Suneel coal facility was                                                                   
                           operational and viable.  Discussions are                                                             
                           underway on how to save employment, since                                                            
                           coal was no  longer being shipped to the                                                             
                           facility.                                                                                          
4351 Mr. Barry             Observed that the bulk of the non-                                                                   
                           performing assets was  Healy Clean Coal.                                                             
                           They comprise less than eight percent of                                                             
                           total assets.  AIDEA maintains four times                                                            
                           their  non-performing assets  in  liquid                                                             
                           securities.  Mr. Barry stated that AIEDA                                                             
                           is sound financially.                                                                              
4255 Mr. Barry             Noted that a portion of the Skagway Ore                                                              
                           Terminal was being  demolished.  Skagway                                                             
                           still wants to keep options for minerals                                                             
                           activities  in   the  Yukon   to  create                                                             
                           potential jobs.   The Ketchikan shipyard                                                             
                           is operational, and AIDEA was negotiating                                                            
                           with  the local  community  for them  to                                                             
                           acquire ownership.                                                                                 
4203 Representative        Asked about the construction of new power                                                            
      Stoltze              facilities, and what role AIDEA would                                                                
                           play in terms of guidance.                                                                         
4131 Mr. Miller            Noted that the current role of AIDEA for                                                             
                           guidance was conflicting.  He pointed out                                                            
                           that his  agency administered facilities                                                             
                           which generate energy.  He suggested that                                                            
                           another,  more  objective entity  should                                                             
                           provide  guidance  statewide,  and  that                                                             
                           AIDEA would follow that plan.                                                                      
4037 Representative        Asked about the ASI facility, in term of                                                             
      Stoltze              relocating the DEC inspection facility                                                               
                           from  Palmer  to  Anchorage.   He  asked                                                             
                           whether this was a wise decision.                                                                  
4005 Mr. Miller            Was unable to answer this question at                                                                
                           this time.                                                                                         
 3931 Representative        Referenced the 2002 Annual Report, and                                                              
      Hawker                noted that of the $355 million in cash,                                                             
                            cash   equivalents    and    investments                                                            
                            securities,   none   were   listed    as                                                            
                            restricted assets.   He  asked if  these                                                            
                            were  these   truly   unrestricted   and                                                            
                            available for investment at this time.                                                            
 3849 VALERIE      WALKER, Responded that the investments were                                                                  
      DEPUTY-DIRECTOR,      generally unrestricted.  She mentioned a                                                            
      FINANCE,      ALASKA bond covenant requiring AIDEA to maintain                                                            
      INDUSTRIAL            $50 million in US Treasury securities                                                               
      DEVELOPMENT      AND maturing in one year or less, or cash.                                                               
      EXPORT AUTHORITY      She termed this as a liquidity covenant.                                                            
                            She also noted commitments of $29 million                                                           
                            to fund loans, and $20 million to fund a                                                            
                            dividend as of June 30.   She summarized                                                            
                            that, from the  $357 million, one  would                                                            
                            deduct  $100   million  that   must   be                                                            
                            maintained.    Ongoing  responsibilities                                                            
                            include $20 million in loan commitments.                                                            
                            She noted  that,  depending on  interest                                                            
                            rates and  loan  demands, payoffs  could                                                            
                            either exceed loan  commitments, or  not                                                            
                            equal that amount.  She  maintained that                                                            
                            the funds were unrestricted, while at the                                                           
                            same time the most secure investment held                                                           
                            by the Authority.                                                                                 
 3642 Representative        Observed that, with the $100 million                                                                
      Hawker                needed in short-term liquid assets, this                                                            
                            reduced the  aggregate  of  unrestricted                                                            
                            assets  to  $250  million.     He  asked                                                            
                            whether, if the legislature altered  the                                                            
                            dividend formula, the $250 million would                                                            
                            be the dividend source.                                                                           
 3537 Ms. Walker            Confirmed that this was true.                                                                     
 3523 Representative        Estimated that if the formula were                                                                  
      Hawker                changed,   the    dividend   would    be                                                            
                            approximately $17 million.                                                                        
 3507 Ms. Walker            Clarified that, if you deduct $91 million                                                           
                            in  development  projects  losses,   the                                                            
                            dividend would be in the range of $9  to                                                            
                           $18 million.                                                                                       
 3449 Co-Chair Harris       Concluded the discussion on this subject.                                                         
                                                                                                                                
                            ALASKA OIL & GAS CONSERVATION COMMISSION                                                        
 3404 CAMMY        OECHSLI Introduced Commissioner Daniel Seamount.                                                           
      TAYLOR,       CHAIR,                                                                                                      
      ALASKA OIL AND GAS                                                                                                        
      CONSERVATION                                                                                                              
      COMMISSION (AOGCC)                                                                                                        
 3330 DANIEL  T. SEAMOUNT,  Referred  to  handouts  outlining  their                                                            
      JR.,   COMMISSIONER,  power point presentation (copy on file).                                                            
      ALASKA  OIL  AND GAS  He pointed out that the first photograph                                                            
      CONSERVATION          showed an alpine field being developed by                                                         
      COMMISSION,          the Phillips Corporations, using new                                                                 
      DEPARTMENT        OF industry technologies.                                                                             
      ADMINISTRATION                                                                                                            
3048 Mr. Seamount          He referred to Page 2 of the handout, and                                                            
                           discussed the history of the agency.  He                                                             
                           also addressed the function and oversight                                                            
                           of the agency, as  compared to a private                                                             
                           oil company and other state agencies.                                                              
2941 Mr. Seamount          Discussed the mission statement: to                                                                  
                           protect the  public interest in  oil and                                                             
                          gas resources.                                                                                      
2832 Mr. Seamount          Observed   that   the  AOGCC   regulates                                                             
                           operations affecting subsurface oil & gas                                                            
                           resources, ensures the reliability of oil                                                            
                           and gas  flow measurements,  and ensures                                                             
                           that  under-ground sources  of  drinking                                                             
                           water   are  protected   by  permitting,                                                             
                           inspecting,     field    studies     and                                                             
                           investigations.                                                                                    
2711 Mr. Seamount          Noted that the home office is in                                                                     
                           Anchorage. There are field offices in the                                                            
                           North Slope,  Cook Inlet and  the Mat-Su                                                             
                           valley.  AOGC has oversight over oil and                                                             
                           gas  project  everywhere  in  the  state                                                             
                           except Denali National Park.                                                                       
2613 Mr. Seamount          Referred the Commission's customers,                                                                 
                           including   Alaskans,   oil    and   gas                                                             
                           companies, Alaska  Department of Natural                                                             
                           Resources,  Department of  Environmental                                                             
                           Conservation,     U.S.     Environmental                                                             
                           Protection Agency  and  other interested                                                             
                           parties.                                                                                           
2454 Mr. Seamount          Outlined   the    Commission's   primary                                                             
                           services.                                                                                          
2435 Mr. Seamount          Discussed the Commission's goals and                                                                 
                           strategies:   prevent  physical   waste,                                                             
                           ensure greater ultimate recovery, assess                                                             
                           oil  and gas  development,  evaluate and                                                             
                           inspect   drilling  to   protect   water                                                             
                           resources,  and  evaluate proposals  for                                                             
                           reservoir development.                                                                             
2252 Mr. Seamount          Maintained that Alaska will not suffer                                                               
                           from the same mistakes made in Texas and                                                             
                           other states.    He explained  that this                                                             
                           would be  implemented through protecting                                                             
                           correlative   rights  and   adjudicating                                                             
                           disputes between owners.                                                                           
2216 Mr. Seamount          Discussed drilling wells. He observed                                                                
                           that   current    technologies   enabled                                                             
                           extended reach wells, and two well bores                                                             
                           to  surface location,  as  well as  side                                                             
                           tracking.                                                                                          
2132 Mr. Seamount          Referred to the underground injection                                                              
                            program.  Inspections   ensure   greater                                                            
                            recovery     and     accurate     volume                                                            
                            measurements. This means more revenue for                                                           
                            the state of Alaska.                                                                              
 2046 Mr. Seamount          Showed a map of the North Slope base. He                                                            
                            explained the time required to  complete                                                            
                            inspections. He also noted that, if ANWR                                                            
                            is opened, the area of oversight would be                                                           
                            greatly increased.                                                                                
 1956 Mr. Seamount          Referred to the Cook Inlet base.                                                                  
 1932 Mr. Seamount          Observed that filed studies review                                                                  
                            proposed plans of  development, evaluate                                                            
                            monthly production and injection reports                                                            
                            and evaluate reservoir performances.                                                              
 1853 Mr. Seamount          Discussed key issues and initiatives:                                                               
                            permitting  -   streamline;   regulation                                                            
                            modification; North  Slop Gas  Pipeline;                                                            
                            Electronic data; UIC program; mature and                                                            
                            aging oil  fields; audit and  compliance                                                            
                            capability; and business process review.                                                          
 1605 Mr. Seamount          Discussed oil and gas activity as it                                                                
                            pertained to permitting.  He  noted that                                                            
                            since  1990  there  had  been  a  steady                                                            
                            increase in the number of permits due to                                                            
                            the exploration of satellite development.                                                           
                            He stated that the  number of wells  had                                                            
                            risen from  less than  500 in  1975,  to                                                            
                           nearly 4000.                                                                                       
 1414 Mr. Seamount          Expressed a commitment to improving the                                                             
                            time to process permits.  In  the recent                                                            
                            quarter, the time  has decreased to  ten                                                            
                            days.                                                                                             
 1323 Mr. Seamount          Referred to the contact information on                                                              
                            the final page of the handout (on file)                                                           
 1306 Co-Chair Harris       Asked how the agency was funded.                                                                  
 1247 Cammy        Oechsli Noted that they were funded through a                                                                
      Taylor,       Chair, regulatory cost charge and a federal                                                                 
      Alaska Oil & Gas grant.  They receive no General Fund                                                                     
      Conservation          money.                                                                                            
      Commission                                                                                                                
 1230 Vice-Chair Meyer      Asked why exploration activity was                                                                  
                            declining, even  though  the  number  of                                                            
                            companies was increasing.                                                                         
 1147 Mr. Seamount          Maintained that their agency had not yet                                                            
                            observed  a  decrease  in  activity.  He                                                            
                            mentioned re-drilling and  side-drilling                                                            
                            of  existing  wells,   which  carry   an                                                            
                            increase, as well as the  development of                                                            
                            satellite   discoveries.      He   cited                                                            
                            aggressive development at this time.                                                              
 1046 Vice-Chair Meyer      Asked whether development was in area of                                                            
                            producing the  satellite  field,  rather                                                          
                           than exploration drilling. He referred to                                                            
                           a previous presentation by Philips.                                                                
0956 Co-Chair Harris       Asked whether new techniques were being                                                              
                           employed to develop old fields.                                                                    
0932 Mr. Seamount          Stated that the ability to extend well                                                               
                           reaches had been improved by technology.                                                           
909 Representative         Referred   to    his   chairmanship   of                                                             
      Stevens              Department    of   Administration    and                                                             
                           Department    of    Natural    Resources                                                             
                           subcommittees.    He   asked  about  the                                                             
                           placement of AOGC.                                                                                 
846 Ms. Oechsli Taylor     Explained that the Commission had been                                                               
                           created  before  statehood, and  modeled                                                             
                           after   a   national   model   act   for                                                             
                           conservation  practices.   It  was  then                                                             
                           moved  to  the   Department  of  Natural                                                             
                           Resources.  At development of Purdue Bay,                                                            
                           the Legislature  wanted to  separate the                                                             
                           two functions, since the State of Alaska                                                             
                           is   a  significant   landowner.     The                                                             
                           potential  appearance  of   conflict  of                                                             
                           interest led the Legislature to move the                                                             
                           department elsewhere.                                                                              
717 Co-Chair Harris        ADJOURNMENT                                                                                      
                           The meeting was adjourned at 3:11 PM                                                               
                                                                                                                                

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