Legislature(2005 - 2006)HOUSE FINANCE 519
02/25/2005 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB1 | |
| HB30 | |
| HB135 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| = | HB 1 | ||
| = | HB 30 | ||
| = | HB 135 | ||
| * | HB 134 | ||
HOUSE FINANCE COMMITTEE
February 25, 2005
1:40 p.m.
CALL TO ORDER
Co-Chair Chenault called the House Finance Committee meeting
to order at 1:40:48 PM.
MEMBERS PRESENT
Representative Mike Chenault, Co-Chair
Representative Kevin Meyer, Co-Chair
Representative Bill Stoltze, Vice-Chair
Representative Eric Croft
Representative Richard Foster
Representative Mike Hawker
Representative Jim Holm
Representative Mike Kelly
Representative Bruce Weyhrauch
MEMBERS ABSENT
Representative Reggie Joule
Representative Carl Moses
ALSO PRESENT
Cody Rice, Staff, Representative Carl Gatto; Eddy Jeans,
Director, Education Support Services, Department of
Education and Early Development; John Cramer, Director,
Administrative Services Division, Military and Veterans
Affairs; Philip Reeves, Assistant Attorney General, Oil, Gas
and Mining Section, Civil Division, Department of Law; Susan
Taylor, Director, Administrative Services Division,
Department of Revenue; Kathryn Daughhetee, Director,
Administrative Services Division, Department of Law; Nico
Bus, Acting Director, Division of Administrative Services,
Department of Natural Resources; Sean Parnell, Deputy
Director, Division of Oil and Gas, Department of Natural
Resources; Larry Meyer, Deputy Director, Tax Division,
Department of Revenue; Nancy Slagle, Director, Division of
Administrative Services, Department of Transportation and
Public Facilities; Chris Christensen, Deputy Administrative
Director, Alaska Court System
PRESENT VIA TELECONFERENCE
John Katz, Director, State/Federal Relations and Special
Counsel, Washington, D.C.; John Norman, Chair, Alaska Oil
and Gas Conservation Commission (AOGCC); Steve Porter,
Deputy Commissioner, Department of Revenue; Member, Stranded
Gas Negotiating Team; Sean Parnell, Deputy Director,
Division of Oil And Gas, Department of Natural Resources;
Barbara Brink, Director, Public Defender Agency; Josh Fink,
Public Advocate, Office of Public Advocacy
SUMMARY
HB 1 "An Act relating to the base student allocation
used in the formula for state funding of public
education; and providing for an effective date."
CSHB 1 (HES) was REPORTED out of Committee with a
"do pass" recommendation, and with two new fiscal
notes by the Department of Education and Early
Development, and a new fiscal note by Military and
Veterans Affairs.
HB 30 "An Act making appropriations for K-12 education
operating and school debt expenses; and providing
for an effective date."
CSHB 30 (HES) was REPORTED out of Committee with a
"do pass" recommendation.
HB 134 "An Act making supplemental, capital, and other
appropriations, and reappropriations; amending
appropriations; making appropriations to
capitalize funds; making an appropriation under
art. IX, sec. 17(c), Constitution of the State of
Alaska, from the constitutional budget reserve
fund; and providing for an effective date."
HB 134 was heard and HELD in Committee for further
consideration.
HB 135 "An Act making supplemental appropriations,
capital appropriations, other appropriations, and
reappropriations; amending appropriations; making
appropriations to capitalize funds; and providing
for an effective date."
HB 135 was heard and HELD in Committee for further
consideration.
1:40:59 PM
HOUSE BILL NO. 1
"An Act relating to the base student allocation used in
the formula for state funding of public education; and
providing for an effective date."
Co-Chair Meyer announced that HB 1 and HB 30 would be taken
up first, followed by HB 135 and HB 134.
CODY RICE, STAFF, REPRESENTATIVE CARL GATTO, offered to
answer questions about HB 1.
Co-Chair Meyer related that the base student allocation for
HB is $4,919, which is an increase of $70,089,500 over last
year.
EDDY JEANS, DIRECTOR, EDUCATION SUPPORT SERVICES, DEPARTMENT
OF EDUCATION AND EARLY DEVELOPMENT, explained that the
$4,919 increase is a $343 increase per student over last
year and an $8 million increase over the Governor's
proposal.
Co-Chair Meyer shared that he would like to see the amount
higher, and noted that there was a great deal of previous
testimony to that effect. He pointed out that there are
several issues, PERS/TRS, and the recently released cost
differential study, which could impact education funding.
He stated a preference to move the bill so that there could
be early funding for school districts.
1:45:28 PM
Representative Foster MOVED to report CSHB (HES) 1 out of
Committee with the accompanying fiscal notes. There being
NO OBJECTION, it was so ordered.
CSHB 1 (HES) was REPORTED out of Committee with a "do pass"
recommendation, and with two new fiscal notes by the
Department of Education and Early Development, and a new
fiscal note by Military and Veterans Affairs.
HOUSE BILL NO. 30
"An Act making appropriations for K-12 education
operating and school debt expenses; and providing for
an effective date."
Representative Foster MOVED to report CSHB 30 (HES) out of
Committee. There being NO OBJECTION, it was so ordered.
CSHB 30 (HES) was REPORTED out of Committee with a "do pass"
recommendation.
1:46:34 PM
At ease.
1:49:03 PM
HOUSE BILL NO. 135
"An Act making supplemental appropriations, capital
appropriations, other appropriations, and
reappropriations; amending appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
FUND CAPITALIZATION
Section 6(b) Disaster Relief Fund
Base capitalization of fund $1,000.0; 2004 Bering
Strait Sea Storm $4,054.4; Interior Earthquake
shortfall $259.3; and Kaktovik Winter Storm $2,363.5
$7,677.2 GF
JOHN CRAMER, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,
MILITARY AND VETERANS AFFAIRS, reviewed the expenses related
to disaster relief.
Representative Holm asked if $259.3 is for Northway airport
resurfacing.
Mr. Cramer replied that is correct. He explained that
expenses for two airports had been disallowed earlier by the
Federal Government.
Representative Holm asked if all federal emergency funds
have been received. Mr. Cramer said he believes so.
Representative Hawker inquired if the amounts for the
projects are final numbers. Mr. Cramer related that the
information is still being gathered for Kaktovik.
Representative Hawker wondered if $1,000.0 is enough to pay
remaining claims on known disasters. Mr. Cramer stated that
the fund is becoming depleted and the unknown of spring
flooding remains. In response to further questioning by
Representative Hawker, Mr. Cramer replied that he thought
the amounts requested are adequate.
1:53:25 PM
DEPARTMENT OF MILITARY AND VETERANS AFFAIRS
Section 11 National Guard Military Headquarters
National Guard Audit Disallowance - Federal auditors
have disallowed state expenditures in FFY05 for a total
of $937,234. This request will cover October 2004 to
June 2005. An amendment will be offered in the FY 06
budget to cover these expenditures for the remainder of
FFY05 and FFY06. The department estimates they will
run out of general funds by the end of March.
$446.0 GF
Mr. Cramer related that the National Guard recently went
through an audit and several state expenditures were
disallowed. Currently, general funds are being used to
augment costs.
Representative Holm asked why the expenditures were
disallowed. Mr. Cramer replied that for years the
Department of Military and Veterans Affairs has entered into
agreements with the Federal Government to provide services
for National Guard programs. This August auditors found
nearly a million dollars in costs that were inappropriately
charged to federal programs. He listed examples of
inappropriate personnel costs. Representative Holm asked if
these costs would now be in the general appropriation
budget. Mr. Cramer said that is correct.
Vice-Chair Stoltze asked if requests regarding game
management would meet federal requirements. Mr. Cramer
replied yes.
1:56:33 PM
DEPARTMENT OF LAW
Section 10(a) Criminal Appeals/Special Litigation Component
Outside counsel for appeal costs in the Murtaugh case
related to defense of victim's rights; FY06 lapse date
$50.0 GF
SUSAN PARKES, DEPUTY ATTORNEY GENERAL, CRIMINAL DIVISION,
DEPARTMENT OF LAW, explained that the Murtaugh case is a
class action lawsuit that deals with part of a statute that
requires defense attorneys to notify victims and witnesses
that their statements are being recorded and that they have
a right to a copy of the recording. The argument is that
this is unconstitutional. She reported that it is a complex
case and the legislature hired outside council for $175,000.
The case ended up going to the Supreme Court, which resulted
in higher costs that this appropriation would cover.
st
Section 10(b) 1 Judicial District
Contractual costs for a prosecutor to represent the
Department of Law in the Therapeutic Courts program.
$21.4 SDPR
Ms. Parks explained that this is a request for authority to
receive and expend statutory designated programs receipts.
The Juneau affiliate of the National Counsel on Alcoholism
and Drug Dependence received a grant from the Department of
Transportation to start a Wellness Court. The amount
requested would go to hire a contract prosecutor to handle
wellness cases.
2:03:15 PM
OFFICE OF THE GOVERNOR
Section 8 Arctic National Wildlife Refuge
Funds for support of national efforts to open ANWR for
oil and gas exploration and development
$500.0 GF
JOHN KATZ, DIRECTOR, STATE/FEDERAL RELATIONS AND SPECIAL
COUNSEL, WASHINGTON, D.C., (via teleconference), spoke in
support of the appropriation to open ANWAR and in support of
Arctic Power. He opined that this is the best opportunity
to open ANWAR to responsible development since the Clinton
administration. He referred to the first of two vehicles
for opening ANWAR, budget reconciliation. The congressional
leadership recently announced an intention to try to
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conclude budget reconciliation by the July 4 recess, and to
include ANWAR in the budget package. In two of the last
three years, Congress has failed to pass budget
reconciliation.
Mr. Katz explained that the second legislative vehicle is
comprehensive energy legislation. Last year energy
legislation faltered in the last days of Congress. This
year an energy bill could be subject to a filibuster in the
Senate. The preferred alternative is budget reconciliation,
which is leadership driven and not subject to a filibuster.
Mr. Katz supported the continuation of Arctic Power,
speculating that if there were not an entity like Artic
Power, one would have to be created. He explained that
Arctic Power should have the flexibility that government
sometimes does not have, to implement a multifaceted public
policy advocacy of position. In August the governor's
office took direct control of ANWAR funding, which lead to a
contract between the state and Arctic Power. He noted
several changes requested of Artic Power: transfer resources
and staff to Washington, D.C., hire new staff and
professional services, and improve coordination and
communication with the Congressional delegation. Mr. Katz
pointed out that Artic Power has made significant strides
toward improving their efforts. They are in the process of
transferring staff to Washington, D.C., have recently hired
new people, and are now consulting much better.
Mr. Katz recommended a two-step approach to funding.
Appropriate funds now in the supplemental budget, which
th
should be enough to get the effort through until the July 4
recess or the August recess. Later in the session the
legislature will be in a better position to proceed, and
will have had an opportunity to observe Artic Power.
2:11:41 PM
Representative Weyhrauch agreed with the general strategic
approach to the use of the funds. He asked if the money is
intended to be used in Washington, D.C. to re-educate
undecided Senators and Legislators. Mr. Katz replied yes,
but, at the moment, the Congressional delegation wants to
limit advocacy activities in the Senate and concentrate
efforts in the House. Arctic Power also reaches out beyond
the capitol to target groups, organizations, and states.
Representative Weyhrauch asked if it is the intention of the
administration to eliminate the Anchorage office. Mr. Katz
said that is under discussion. He maintained that the
Governor's view is that there should be a limited presence
in Anchorage to disseminate information, raise funds, and do
the accounting, but the current presence is too large.
Resources should be sent to Washington where the work would
do the most good.
2:16:23 PM
DEPARTMENT OF ADMINISTRATION
Section 7(a) Capital
AOGCC costs for gas pipeline reservoir studies and
depletion plan evaluations.
$1,200.0 GF
STEVE PORTER, DEPUTY COMMISSIONER, DEPARTMENT OF REVENUE;
MEMBER, STRANDED GAS NEGOTIATING TEAM, testified via
teleconference in support of the legislation. He noted that
getting Alaska's stranded gas to market is every bit as
large a project as anyone estimated it to be. Total sales
value of just the proven North Slope natural gas reserves
would be $210 billion at a price of $6/mmcfg. He observed
that the department researched ways to enhance the prospect
of bringing Alaska North Slope gas to market. The primary
areas of research centered on sharing risk through various
financial structures and different levels and types of
ownership participation. The general areas of research were:
gas price, risk analysis, cost overrun risk, tariff
structure and FERC process, Alaska State Gas Entity,
pipeline funding, socio-economic report, Canada pipeline
issues, and understating the applicant's perspective on
economics.
Mr. Porter discussed forms of support used in the
negotiations. The department contracted for and continues to
use the expertise of Dr. Pedro Van Meurs and his team for
the actual negotiations. The department also uses analytical
experts to fine-tune their negotiating position in each of
the contract negotiations. He emphasized that each side's
lawyers are regular participants in the negotiations and
indicated that he expects legal support to increase.
Mr. Porter noted that the department is also working with
the Alberta Government:
While we are negotiating with the applicants under the
SGDA, we also have a responsibility as the sovereign of
encouraging and supporting any other proposal that may
bring Alaska North Slope Gas to market. That
encouragement and support generally has taken the form
of economic evaluation and analysis and feedback to the
parties to help them move their projects forward. A
good example of this support is the Alaska Gasline Port
Authority proposal. We have volunteered to review their
project proposal and give them feedback on the overall
economics of their proposal as well as express any
concerns we have with the overall viability of their
project.
Mr. Porter discussed reimbursement:
One of the goals of the State was to make sure we
received the maximum amount we could from project
applicants under the reimbursement provisions of the
SGDAT We billed and received in reimbursement from
ExxonMobil/ConoeoPhillips/BP the maximum amount
available under the Act of $1.5 million. The state
continues to be reimbursed also by Transcanada, and
Department of Natural Resources is tracking that
reimbursement.
Mr. Porter observed that the state has placed a proposal on
the table in the Exxon/ConocoPhillips/BP negotiations and
received a counter proposal from them. The department is
also developing a proposal with TransCanada. Each of these
negotiations will require a substantial amount of work to
bring a SODA contract to the legislature.
"The current activities in support of these
negotiations will include substantial legal support in
negotiating the fiscal contracts and other associated
contracts and exhibits necessary to bring a contract
proposal to the legislature. In addition each variation
of fiscal term negotiations may require additional
analytical support from our contractors."
Mr. Porter explained that once the Administration has a
contract to present to the legislature they will need to
prepare a commissioner's finding that the contract is in the
fiscal interests of the state. This finding will go out for
a 30-day public comment period along with the proposed
contract. The Commissioner will then respond to those
comments and bring the final fiscal finding and contract to
the legislature for ratification. The process may entail
going back to the applicant for a refinement of the
agreement. The supplemental request would provide funding
for this process.
Mr. Porter observed that if the state is successful and
decides to take an ownership interest in the pipeline it
could almost immediately be in a partnership relationship
with an applicant attempting to build a pipeline. He
emphasized that state representatives need to be ready to
make financial and other decisions in order to be effective
in the new entity. He stressed the need to move the project
forward and observed that the requested funding would
develop the state organization that will need to be in place
almost immediately upon ratification of any contract.
Mr. Porter noted that capital funding of state gas line
participation cannot be determined at this time. The
department will come back to the legislature when a
determination is made regarding the type and level of state
participation in a gas pipeline.
2:25:11 PM
JOHN NORMAN, CHAIR, ALASKA OIL AND GAS CONSERVATION
COMMISSION (AOGCC), (via teleconference), reported that the
purpose of the $1,200 million request is to study the
[Prudhoe Bay] reservoir, and to be sure that AOGCC can
complete its work in a timely manner. Conservation order
number 341, which establishes an off-take rate of 2.7
billion cubic feet per day from the Prudhoe Bay reservoir,
is currently in effect. The order is based on a study done
in 1977. Mr. Norman offered to provide a copy of the order
and the report. He quoted from the report, "The numbers in
this report should be considered relative, rather than
absolute. Reservoir performance productions on a field
without production history are approximate, at best."
Mr. Norman explained that since 1977, AOGCC has continued to
monitor and regulate oil production in the re-injection of
gas in a way that would maximize oil production from the
reservoir. AOGCC has not undertaken to update that order
until now, when it appears that prospects of major gas sales
from that reservoir might be imminent. Mr. Norman spoke of
production history and the ability to predict the behavior
of the reservoir. He spoke of the risks when failing to do
so and the amount of the oil that would be lost. He
stressed the need to begin to move forward, using sound
science to develop the reservoir in a responsible way.
Mr. Norman requested that the supplemental funds be provided
in a timely manner from general funds. He explained that
AOGCC's budget is mainly based on production levels. This
particular undertaking is significant because it targets one
reservoir owned by three companies.
2:33:08 PM
DEPARTMENT OF LAW
Section 7(b) Civil Division, Oil, Gas and Mining
Legal costs for work related to the state gas pipeline
and to bringing North Slope natural gas to market, and
other oil and gas projects for FY05 and FY06.
$9,000.0 GF
PHILIP REEVES, ASSISTANT ATTORNEY GENERAL, OIL, GAS AND
MINING SECTION, CIVIL DIVISION, DEPARTMENT OF LAW, explained
that the Department of Law is dependent on a substantial
amount of assistance from outside legal council in the on-
going negotiations regarding construction of a natural gas
pipeline from the North Slope. The State is currently
involved in two parallel negotiations under the Stranded Gas
Act (AS 43.82). Both Stranded Gas negotiations contemplate
the State's participation in the pipeline project.
Mr. Reeves related that the State is drafting and
negotiating terms of several legal agreements that would be
required for participation as a partner in the pipeline
project. Individual agreements include: the Stranded Gas
Agreement; a Business Entity Agreement; a Project Financing
Agreement; a Construction Agreement; an Operating Agreement;
and a Gas Balancing Agreement. The Stranded Gas Agreement
and the Business Entity Agreement are the current focus of
intensive contract development work and negotiations.
Mr. Reeves emphasized the necessity for "Fast Track"
supplemental funding. The Department of Law has already
expended essentially its entire Oil & Gas contract services
appropriation for FY 04 - FY 05, due to the unanticipated
additional work arising from participation in two
simultaneous Stranded Gas negotiations; and consideration of
State partnership in the North Slope gas pipeline project,
which necessitates development of the Business Entity and
Financing Agreements.
Early expenditure of contract services appropriation for
work on the North Slope gas pipeline has also depleted
contract funds in the Department's FY05 budget request that
were earmarked for use on other non-gas pipeline projects.
Those contract services funds - utilized on oil royalty
reopeners, TAPS oil pipeline matters, and Cook Inlet area
gas pipeline matters - also need to be supplemented in this
fiscal year.
Mr. Reeves concluded that the Department of Law has asked
for a fast-track supplemental appropriation of $9 million
for contract legal services through June 30, 2006. While
the Department prefers to receive the full $9 million amount
in this supplemental appropriation, it would be possible to
split the appropriation between FY 05 and FY 06, with $5
million in the fast-track supplemental available for
expenditure in FY 05.
In response to a question by Representative Weyhrauch, Mr.
Reeves said that firms are paid on an hourly basis.
Representative Weyhrauch asked how much lobbyists in
Washington, D.C. are paid. Mr. Reeves replied that they
have extended contracts for legal services when negotiating
for gas pipeline contracts. Representative Weyhrauch asked
how many Alaska firms would be hired. Mr. Reeves replied
that there is one Alaska firm and two outside firms under
contract. As additional agreements come up, more firms
could be considered. Representative Weyhrauch inquired if
there would be competitive bidding for those jobs. Mr.
Reeves replied that he does not believe it involves a
bidding process.
2:38:04 PM
In response to a question by Representative Hawker, Mr.
Reeves explained that the focus of the negotiations with the
business entity agreement would be a limited liability
partnership. Representative Hawker asked if the funding is
strictly for Stranded Gas applications. Mr. Reeves replied
that at this time there are two parallel negotiations going
on, and this fund source would be available for additional
applicants, if additional projects are considered.
Representative Croft expressed surprise at the request for
funds for the FY 06 budget. He asked if $5 million is truly
a supplemental request for FY 05 and $4 million is for the
FY 06 budget. Mr. Reeves related that the focus of the
Stranded Act Working Group is a project that does not track
with a fiscal year. Several more projects will be brought
before the legislature this Session. He maintained that the
majority of the $9 million would be expended this fiscal
year; however, it is questionable whether the legal
contracts can be completed this year.
Representative Croft inquired if any of the funds are needed
for tariff negotiations or other oil and gas issues, or if
these are just "gas pipeline lawyers". Mr. Reeves repeated
that there are tariff matters before regulatory bodies that
also have received money earmarked for the FY 05 budget.
Those monies have been expended, have been moved over to
North Slope gas pipeline negotiations at this time, and now
need to be replenished out of the requested funds.
Representative Croft questioned how much is needed for gas
pipeline costs and how much is needed for tariff
negotiations. He suggested waiting for the "reopener" on
the tariff issue. He further inquired how much would go to
replenishing other non-gas pipeline expenditures. Mr.
Reeves replied that he does not have specific numbers, but
that it is his understanding that there is not an intent to
expend any of the money beyond the amounts earmarked for
particular matters.
SUSAN TAYLOR, DIRECTOR, ADMINISTRATIVE SERVICES DIVISION,
DEPARTMENT OF REVENUE, in response to Representative Croft's
question, recalled that non-gas pipeline matters would
amount to $350,000. She suggested that Mr. Porter
elaborate.
2:44:41 PM
Mr. Porter, in response to Representative Croft's question,
pointed out that there are a number of elements that are
being negotiated at the same time, and a substantial amount
of money can be spent in a short amount of time if the
negotiations are going well.
Representative Croft asked how much of the $5 million has
actually been "signed off" to pay somebody. Mr. Reeves
replied that a large part of the money would be used for
work to be completed between now and June 30.
2:47:19 PM
KATHRYN DAUGHHETEE, DIRECTOR, ADMINISTRATIVE SERVICES
DIVISION, DEPARTMENT OF LAW, addressed Representative
Croft's question. She anticipated that the Department would
not be able to pay the contracted bills that are coming in
now, and would be out of money by April. The fee is
entirely for outside experts, attorneys and firms. She
stated that they do not want the State to be in a position
to be unable to pay bills and that is why the request is on
fast track.
Representative Croft stated that $5 million in attorney fees
would be paid out in the next four months. Ms. Daughhetee
replied that is correct.
2:49:00 PM
Co-Chair Chenault asked how many of the services would be
duplicated because of the two on-going negotiations. Mr.
Porter responded that there are duplication issues, but
expertise from lawyers has been utilized resulting in little
duplication. The Stranded Gas team is small and is familiar
with the needs of both negotiations, so there is a lot of
coordination between the two groups.
2:50:33 PM
DEPARTMENT OF NATURAL RESOURCES
Section 7(c)(1) Capital
Gas pipeline risk analysis and royalty issues
$2,500.0 GF
NICO BUS, ACTING DIRECTOR, DIVISION OF ADMINISTRATIVE
SERVICES, DEPARTMENT OF NATURAL RESOURCES, explained the
economic issues related to the request for an additional
$2.5 million dollars: $1 million is requested for risk
analysis contractual money to assist in mitigating the
state's capacity ownership risk; $1.5 million is requested
for additional work on royalty issues such as the conversion
of net profit shares to a fixed or sliding scale royalty.
He emphasized that the monies are needed right now to
continue the work until June 30.
Section 7(c)(2) Capital
Gas pipeline corridor geologic hazards and resource
evaluation
$2,000.0 GF
Mr. Bus noted that the request would allow people in the
field right now to evaluate geological hazards, mineral
potential, and construction materials resources from Delta
Junction to the Canadian border. He stressed that it is
very important for future development such as the proposed
Alaska Railroad extension along this corridor. Some of the
products will be: peer-reviewed geologic reports, maps, and
GIS data for a 10-mile wide corridor, and detailed airborne-
geophysical surveys of a wider corridor to aid the mapping
of bedrock geology, active faults, and mineralized areas.
He requested a fast track supplemental so that work can
begin and in order to take advantage of the summer field
season.
Co-Chair Chenault asked if the work would be extended
through June 30 into FY 06. Mr. Bus replied that the first
$2 million would be for the contractors to fly the corridor,
and an additional $4 million would be used in subsequent
years. If approval was given in March, the contractors
could begin in April and May of this year.
In response to Representatives Croft and Chenault, Mr. Bus
noted that it is an expensive corridor from Delta Junction
to the Canadian border and is strictly for the gas pipeline,
not mining projects.
2:55:02 PM
Section 7(c)(3) Capital
Gas pipeline Bullen Point Road right-of-way permitting
$3,200.0 GF
Mr. Bus commented that this amount is for pipelines along
the Dalton Highway to Bullen Point.
Co-Chair Chenault expressed concern about appropriating
money without having an RFP.
Representative Croft asked how long the right-of-way would
be. Mr. Bus said fifty miles. Representative Croft
inquired why it costs so much to permit such a small
section. Mr. Bus explained that the area is from the
Prudhoe Bay field into existing pipeline corridors - for 50
miles of permitting from Point Thomson to Prudhoe Bay.
Representative Croft asked if this is vital for the gas line
itself, or only if the Point Thomson benchmarks are hit.
SEAN PARNELL, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS,
DEPARTMENT OF NATURAL RESOURCES, replied that he would
obtain that information.
2:58:58 PM
Section 7(c)(4) Capital
Division of Oil and Gas increased workload for gas
pipeline
$2,700.0 GF
Mr. Parnell explained that recently three companies have
requested analysis from the department, which is already
overburdened from work on gas pipeline issues. He reported
that the reason the supplemental amount is needed now is
because of staff burnout and high turnover rate. The money
would be used to hire new staff for reservoir evaluation and
modeling, and for commercial and regulatory work to keep
revenues flowing into the state, and to allow resource
development to occur in a timely fashion.
Representative Hawker wondered whether it would be necessary
to go nationwide to fill these positions. Mr. Parnell
replied that the department would be able to attract a
significant percentage from the private sector in Alaska.
Representative Hawker suggested contracting with the private
sector rather than hiring state employees. Mr. Parnell
opined that it would be difficult to find new talent in the
contracting community because there would be conflicts of
interest. He pointed out that contract money is included in
the $2.5 million request for risk analysis and royalty
money.
3:03:52 PM
Section 7(c)(5) Capital
Commissioner's Office increased workload for gas
pipeline
$200.0 GF
Mr. Bus explained the need to hire two project assistants,
one for actual gas pipeline negotiation support, and one for
planning and logistical support of negotiations, for the
balance of this year and through FY 06.
Representative Kelly asked if the positions are lined up
with positions in the FY 06 budget. Mr. Bus explained that
they are not in the FY 06 request and they need to be kept
separate because the department does not want to mix
operating budget regular staff with this request.
Representative Kelly inquired if these positions would be in
the supplemental request for 06. Mr. Bus replied they are
not. These positions are specific positions needed to
negotiate for gas funded through FY 06.
3:06:35 PM
DEPARTMENT OF REVENUE
Section 7(d) Capital
Commissioner's Office - Work related to the state gas
pipeline and to bringing North Slope natural gas to
market
$5,300.0 GF
Ms. Taylor explained that these expenses are related to
setting up the Alaska Natural Gas Entity (ANGE) and
contractual funding.
Representative Croft asked if the money would be used to set
up the corporation. Ms. Taylor replied that the timing
would require quick hiring of key people.
Mr. Porter further explained that as negotiations move
forward, there are a limited number of personnel tracking
all the various portions of the negotiations. A team of
individuals is needed to participate in the evaluation phase
of how to develop an Alaskan entity. Staff and personnel
are needed now to begin to do that and to move forward in
the event that a stranded gas contract is awarded. If the
contract were approved by the legislature in early summer, a
fully staffed organization would be needed on the day the
contract is ratified. In advance of that day, there would
be a limited team in place to negotiate elements of the
contract. Twelve positions would be fully funded prior to
the end of FY 05, and a portion of that team would be
brought on for negotiation support to develop ANGE.
Representative Croft opined that twelve positions couldn't
cost $5.3 million. Mr. Porter clarified that the cost is
$1.5 million for ANGE. The rest would be for negotiation
support, not staff, but contract support and evaluation of
other projects. He listed other uses for the money such as
to resolve property tax issues, corporate income tax issues
and other upstream items, to resolve production tax issues,
and to address financing participation issues.
Representative Croft wondered if the $9 million for lawyers
or the $10 million going to DNR pays any of those costs.
Mr. Porter suggested that Representative Croft think of the
lawyers as drafting contracts; legal and technical sides of
the issue. Representative Croft asked if DNR has a property
tax model. Mr. Porter responded that property tax issues
are not DNR's responsibility. He described three models
used in the evaluation process, which continue to be
revised.
3:14:47 PM
Section 7(e) Capital
Alaska Natural Gas Development Authority increased
workload for gas pipeline
$2,170.0 GF
Ms. Taylor related that the money would go to two project
positions and additional contractual costs related to spur
line work.
Co-Chair Chenault inquired about the feasibility of Liquid
Natural Gas (LNG) in Cook Inlet.
Mr. Porter pointed out that currently there is an
operational LNG plant in Cook Inlet, and the possibility of
expansion is being looked into. He talked about the
benefits of exporting gas, which results in lower tariffs
and costs. There is the possibility of a new plant and
expansion of the old plant after the market is analyzed.
Co-Chair Chenault noted that the total amount of funding for
the project could be discussed at a later time.
Representative Kelly asked how scope, schedule, budget and
invoice control is being done. Mr. Porter deferred to the
Department of Law.
Ms. Daughhetee explained how negotiations in the department
work and how reviews are done. She described the project
management process. Ms. Daughhetee, in response to a
question by Representative Kelly, explained how the legal
team works, but emphasized that Mr. Wilson Condon,
Commissioner, Department of Revenue, reviews the gas line
contracts and each invoice.
3:21:53 PM
Mr. Porter added that in a negotiation there is a daily
review of specific deliverables and a timeframe. This costs
about $1 million a month and the control factor is related
to the work product.
3:23:29 PM
DEPARTMENT OF REVENUE
Section 12 Tax Division
Increased tobacco tax enforcement costs for the Tobacco
Tax legislation passed as ch. 1, FSSLA 2004.
$395.5 GF
Ms. Taylor related that the legislature passed a bill that
increased the tobacco tax rate and changed licensing
requirements. DOR has been implementing the provisions in
the new law and have hired additional personnel, including
enforcement personnel.
Representative Hawker indicated that in 20 recent
inspections, 16 out of 20 were dealing in illegal
cigarettes. He asked if that is a fair assessment.
LARRY MEYER, DEPUTY DIRECTOR, TAX DIVISION, DEPARTMENT OF
REVENUE, replied that unstamped products have been found
during the inspections. He implied that more consumer
education is needed. Representative Hawker asked if there
was intentional bootleg activity. Mr. Meyer termed it a
quality control issue, and suggested that more merchant
education is needed. Representative Hawker inquired if
there is a problem with the stampers not functioning
correctly. Mr. Meyers replied that the machine requires
calibration. Representative Hawker clarified that there are
not massive violations, but equipment malfunction. Mr.
Meyer agreed.
Representative Hawker asked if any of the inspections have
involved intentional violations. Mr. Meyers replied that
there may be one or two, but the investigation is
continuing.
Ms. Taylor suggested that the issues are being addressed
with the large sellers of tobacco, and the smaller sellers
would be investigated shortly.
Representative Kelly asked if the tax gets collected when
the product is misstamped. Mr. Meyers replied that only a
few are misstamped products and most are in compliance.
3:29:52 PM
Representative Hawker suggested that the distributor has to
buy the stamps from the state and implied that a person
could set the machine to circumvent the Stamp Act. Mr.
Meyers agreed it was a possibility. Representative Hawker
emphasized concern about that. Ms. Taylor requested support
for increased enforcement.
3:31:28 PM
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES
Section 14(a) Marine Vessel Operations
Fuel cost increases and other increased operating
costs.
$12,000.0 AMHS FUNDS
NANCY SLAGLE, DIRECTOR, DIVISION OF ADMINISTRATIVE SERVICES,
DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES,
explained the $10 million request for the Marine Highway
Authority for fuel cost increases, weekly operating costs of
new ferries, overhaul costs, risk management costs, and
increase marketing campaign costs.
Section 14(b) Central Region Highways and Aviation
King Salmon airport - prior year invoices outstanding
for air traffic control costs.
$44.5 GF
Ms. Slagle explained a need for the King Salmon airport to
continue operation of a control tower. The costs are from
FY 04.
Co-Chair Chenault asked if it was for extended hours. Ms.
Slagle replied no.
Section 14(c) Program Development
Legal costs for defense of SB 260, which changed the
membership make up of the policy board for metropolitan
planning organizations.
$85.0 GF
Ms. Slagle spoke of a lawsuit and legal costs involving SB
260. Ms. Slagle noted that these requests are projects that
are ready to go and there are timing issues involved.
3:36:53 PM
COURT SYSTEM
Section 16 Trial Courts
Therapeutic court funding coming from NCADD $18.9,
Technical Improvement grant from Alaska Legal Services
$18.1, Youth for Justice grant $7.5 and Color of
Justice grant $5.0.
$49.5 SDPR
CHRIS CHRISTENSEN, DEPUTY ADMINISTRATIVE DIRECTOR, ALASKA
COURT SYSTEM, noted that the request is for an increase in
the Alaska Court System's authority to offer grants: For
Youth For Justice, Color of Justice Grant, Alaska Legal
Services for installation of computers, and Juneau Wellness
Court.
Co-Chair Chenault closed testimony on HB 135.
HB 135 was heard and HELD in Committee for further
consideration.
3:39:52 PM
HOUSE BILL NO. 134
"An Act making supplemental, capital, and other
appropriations, and reappropriations; amending
appropriations; making appropriations to capitalize
funds; making an appropriation under art. IX, sec.
17(c), Constitution of the State of Alaska, from the
constitutional budget reserve fund; and providing for
an effective date."
DEPARTMENT OF ADMINISTRATION
Section 1 d Public Defender Agency
Projected annual caseload increase - PD was reappointed
to several hundred old cases associated with the
Blakely decision which rendered some aspects of the
State of Alaska's sentencing framework
unconstitutional. Also, increases in travel to remote
courts, expert witness, discovery and file storage
costs. Funding of $24.9 in General Fund/Program
Receipts is from the Dept. of Law from collections
under Criminal Rule 39 and Appellate Rule 209. Also
includes Therapeutic court funding coming from federal
funds received by the National Council on Alcohol and
Drug Dependency and allocated to State agencies.
$887.2 GF; $20.0 SDPR
BARBARA BRINK, DIRECTOR, PUBLIC DEFENDER AGENCY, (via
teleconference), explained that the request for supplemental
funds is based on caseload and workload increases, which are
out of the Public Defender Agency's control. The percentage
of increase in caseloads is 9 percent this year, over 2,000
more cases than last year, primarily because of the Blakely
decision. There is also an increase of 2,300 more Superior
Court felony filings than last year, which are the most
time-consuming, cost-intensive cases. The Public Defender
Agency has also picked up some cases previously handled by
the Office of Public Advocacy.
3:43:18 PM
Section 1 c Office of Public Advocacy
Projected annual caseload increase - Because of the
difficulty in projecting case types and costs 18 months
in advance, OPA has historically funded the workload
and caseload increases through supplemental
appropriations. Funding of $25.0 in General
Fund/Program Receipts is from the Dept. of Law from
collections under Criminal Rule 39 and Appellate Rule
209.
$600.0 GF
JOSH FINK, PUBLIC ADVOCATE, OFFICE OF PUBLIC ADVOCACY, (via
teleconference), pointed out that the Office of Public
Advocacy is experiencing similar caseload increases. Felony
filings in Anchorage are up by 76 percent for the first half
of the year, and up 32 percent statewide. Mr. Fink opined
that the requested supplemental would amount to a hold-the-
line budget.
Co-Chair Meyer asked where the caseloads are coming from.
Mr. Fink explained how the court assigns cases.
Representative Hawker, addressing the question to both Mr.
Fink and Ms. Brink, asked for a reason behind the increase.
Ms. Brink said that she believes more cases are being
prosecuted, and that crime is not going up. She explained
that there are newly funded positions, more district
attorneys and prosecutors, and more troopers making arrests,
which leads to more cases. Representative Hawker asked what
types of cases are being prosecuted more. Ms. Brink replied
that she was not able to answer that question.
HB 134 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 3:48 PM
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