Legislature(2009 - 2010)HOUSE FINANCE 519
03/22/2010 01:30 PM House FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB314 | |
| HB369 | |
| HB346 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 314 | TELECONFERENCED | |
| + | HB 346 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | HB 369 | TELECONFERENCED | |
HOUSE FINANCE COMMITTEE
March 22, 2010
1:36 p.m.
1:36:05 PM
CALL TO ORDER
Co-Chair Stoltze called the House Finance Committee meeting
to order at 1:36 p.m.
MEMBERS PRESENT
Representative Mike Hawker, Co-Chair
Representative Bill Stoltze, Co-Chair
Representative Bill Thomas Jr., Vice-Chair
Representative Allan Austerman
Representative Mike Doogan
Representative Anna Fairclough
Representative Neal Foster
Representative Les Gara
Representative Reggie Joule
Representative Woodie Salmon
MEMBERS ABSENT
Representative Mike Kelly
ALSO PRESENT
Konrad Jackson, Staff, Representative Kurt Olson, Sponsor;
Linda Hall, Director, Division of Insurance, Department of
Commerce, Community and Economic Development; Trena Heikes,
Director, Division of Workers' Compensation, Department of
Labor and Workforce Development; Anne Carpeneti, Assistant
Attorney General, Legal Services Section-Juneau, Criminal
Division, Department of Law; Michael Ford, Liaison,
Department of Law; Representative Mike Chenault, Sponsor;
Tom Wright, Staff, Representative Mike Chenault; Frank
Richards, Deputy Commissioner, Highways & Public
Facilities, Department of Transportation and Public
Facilities; Bob Swenson, Manager, In-State Gasline Project,
Office of the Governor; Konrad Jackson, Staff,
Representative Kurt Olson, Sponsor; Trena Heikes, Director,
Division of Workers' Compensation, Department of Labor and
Workforce Development.
PRESENT VIA TELECONFERENCE
Erin A. Pohland, Assistant Attorney General, Department of
Law.
SUMMARY
HB 314 WORKERS' COMPENSATION
CSHB 314(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with two previously published
fiscal notes: FN1 (LAW); FN2 (LWF).
HB 346 WORKERS' COMPENSATION ADVISORY BOARD
HB 346 was HEARD and HELD in Committee for further
consideration.
HB 369 IN-STATE PIPELINE MANAGER/TEAM/COMMITTEE
HB 346 was HEARD and HELD in Committee for further
consideration.
HOUSE BILL NO. 314
"An Act relating to fees and charges for medical treatment
or services, the crime of unsworn falsification,
investigations, and penalties as they relate to workers'
compensation; and providing for an effective date."
1:37:05 PM
KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR,
reported that HB 314 addresses medical treatment, service
fees, and penalties related to worker's compensation. He
informed the committee that the Medical Services Review
Committee met a number of times the previous year to
address the issues and generated a report with a
recommendation to set up a medical services fee schedule.
House Bill 314 sets up the schedule and addresses civil
penalties. The current fee schedule cap expires at the end
of the year.
LINDA HALL, DIRECTOR, DIVISION OF INSURANCE, DEPARTMENT OF
COMMERCE, COMMUNITY AND ECONOMIC DEVELOPMENT, provided an
overview of the background and contents of HB 314. She
noted that when changes were made to the workers'
compensation law in 2005, there was an inadvertent deletion
of the basis of the Worker's Compensation Board to adopt a
fee schedule. An expectation that stakeholders would
convene and propose legislation before August 1, 2007 was
not met; subsequently, the department has twice requested
increases to the old 2004 fee schedule. She called the 2006
and 2008 increases "artificial, across-the-board." The most
recent fee schedule will expire December 31, 2010. After
expiration, there will not be a cap on charges by providers
for services given to injured workers.
Ms. Hall referred to handouts before the committee,
beginning with "Workers Compensation Medical Losses Are
More Than Half of Total Losses; All Claims-NCCI States"
(copy on file). She explained that NCCI is the National
Council on Compensation Insurance, the statistical agent
for Alaska and 35 other states. Data collected by NCCI in
the 36 states show medical expenses in 2008 being 58
percent of the total system cost with indemnity (lost
wages) at 42 percent.
Ms. Hall directed attention to the second chart, "Workers
Compensation Benefit Split in Alaska; All Claims--Alaska"
(copy on file), with pie charts focusing on statistics in
Alaska only. She noted that Alaska's medical cost is at 72
percent; the equivalent of $0.72 of every dollar spent on
workers' compensation benefits is spent on medical
services. She emphasized that this was significantly higher
than the national average.
Ms. Hall turned to the third chart, "Alaska Medical Average
Cost per Case vs. Countrywide" (copy on file). She pointed
out that in 2008, Alaska spent approximately $40,000 per
case; the national average is $26,000.
Ms. Hall referred to the final chart, "Oregon Worker's
Compensation Premium Rates Ranking, Calendar Year 2008"
(copy on file) and emphasized that Alaska ranks number one
in both 2006 and 2008 for workers' compensation premium
rates. She believed that much of the high premium costs are
driven by medical costs.
Ms. Hall acknowledged that the proposed new fee schedule in
HB 314 was not a "fix" that would lower the premiums, but
she asserted it would replace the consumer price index
(CPI) increases that have created a static schedule with a
sustainable schedule adding back missing procedure codes,
language for medical supplies, and transportation costs,
which have seen dramatic increases. Ms. Hall asserted that
the fee schedule in the bill would be complete. In
addition, a vendor would supply the information to the
Division of Workers' Compensation. She pointed out that
there would not be changes in the process.
1:43:32 PM
Ms. Hall remarked that the second part of the bill would
update fraud prosecution language. She noted that current
language is insufficient to prosecute in cases of fraud.
Ms. Hall provided a sectional analysis, beginning with the
first section addressing the fee schedule:
Section 1. Amends AS 23.30.097(a) to provide that
after December 31, 2010, the fee may not exceed the
usual, customary and reasonable charges in a fee
schedule adopted by the board which must include the
most recent Current Procedural Terminology codes
maintained by the American Medical Association for
category I, II and III medical services and the Health
Care Procedure Coding System for medical supplies,
injections, emergency transportations and other
medically related services. The fee schedule must
reflect the cost in the geographical area where
services are provided and is set at the 90th
percentile.
Ms. Hall detailed that fees in Alaska are based on 90
percent of the predominant charges in an Alaskan
geographical area.
Ms. Hall turned to the next section providing language
regarding fraud:
Section 2. Amends AS 23.30.250(a) to clarify that the
behaviors outlined are workers' compensation fraud
which may be punished under AS 11.46.120 - 11.46.150
(criminal law).
Ms. Hall detailed that crimes committed in false
representation is considered to be a felony and subject to
criminal prosecution.
Ms. Hall noted that the next section separates criminal
penalties in Section 2 from civil penalties:
Section 3. Amends AS 23.30.250 (c) clarifies that in
addition to criminal penalties, a violation of this
chapter may result in civil liability with an award of
three times the amount of compensatory damages.
1:46:47 PM
Ms. Hall detailed that Section 3 enables a civil action in
addition to criminal penalties, noting that attorney fees
are on top of the three times the amount of compensatory
damages.
Ms. Hall referred to the next sections:
Section 4. Amends AS 23.30.280(a) to change the
specific statute citation of AS 23.30.250 to "this
chapter" to broaden the investigative authority to the
entire chapter.
Section 5. Amends AS 23.30.280(b) to delete reference
to AS 23.30.250(a) to broaden the reporting of
fraudulent acts to the employer.
Section 6. Provides for an immediate effective date
under AS 01.10.070(c) Section 1. Amends AS
23.30.097(a) to provide that after December 31, 2010,
the fee may not exceed the usual, customary and
reasonable charges in a fee schedule adopted by the
board which must include the most recent Current
Procedural Terminology.
Representative Austerman asked for clarification related to
Page 2, line 9 and the new fee structure. Ms. Hall
responded that the fee schedule is based on procedure codes
done by the American Medical Association and are standard
throughout the industry. She explained that GENEX Services
takes all the Alaska charges in geographical areas and sets
th
the schedule at the 90 percentile and replaces the current
schedule only in that it updates and adds codes and makes
the charges in line with what is actually being billed.
Representative Austerman queried the meaning of the 90th
percentile. Ms. Hall provided the example of putting ten
charges for knee surgery in a line; 90 percent would fall
th
not a percentage but becomes a maximum amount. She agreed
the number was basically 90 percent.
Ms. Hall added that the current fee schedule is missing
approximately 2,000 procedure codes that have been added to
practice since the last update.
1:50:29 PM
Vice-Chair Thomas had questions about the measure related
to seasonal workers. He asked whether damages can be
recovered if a seasonal worker intentionally injures
himself, makes a claim, and then leaves the state. Ms. Hall
replied that there are more workers' compensation claims at
the end of the season and in difficult economic times. She
explained that an employer can go before the Workers'
Compensation Board to challenge a claim. The board is able
to go out of state and investigate. She thought the ability
to extradite would depend on the amount of benefits
collected. The claim can be challenged even if the person
has moved within the states; she was not sure about what
would happen to a person who has left the country.
Vice-Chair Thomas relayed personal experience and expressed
concerns.
1:53:30 PM
Representative Fairclough queried costs on the current fee
structure. Ms. Hall answered that the structure had been in
place since 2004. She estimated that it did not cost much
to update the schedule, although it has been ineffective.
Representative Fairclough asked about letters of opposition
the committee had received related to payment methodology.
Ms. Hall replied that she had worked with two groups with
concerns. Revisions were made in response to concerns by
the state medical association. She noted additional
opposition from those who felt the original language about
fraud prosecution was too narrow. The department had made
changes in the language that were satisfactory.
Representative Fairclough quoted from a February 2, 2010
letter from the Alaska Spine Institute dated in February
2010 related to the language currently before the
committee:
This revised language provides "the board" with an
undefined and unlimited scope of authority to make changes
and establish policy with respect to the medical fee
schedule.
Representative Fairclough pointed out that the only
difference she could see is an "and" provision on line 14
[page 2] regarding the coding system. She questioned
whether the issues raised had been addressed.
Representative Gara directed attention to Section 3 (Page
3, line 10) and language regarding liability of a person
guilty of fraud. He noted that current law says a person is
"entitled to compensatory damages and an award of three
times the amount of those damages." He compared the
proposed language: "economic damages as a result of the
award and three times the amount of the compensatory
damages." He questioned the reason for the language change.
1:58:12 PM
ERIN A. POHLAND, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF
LAW (via teleconference), explained that the change was for
clarification. The change is that the person who suffers
from economic harm as a result of workers' compensation
fraud would be entitled to three times economic damages as
compared to essentially four times the compensatory
damages.
Representative Gara pointed out that original statute does
not have the word "economic." He noted that generally
statutes talk in terms of compensatory damages a person is
entitled. He suggested reverting to compensatory damages
plus an award of three times the amount of compensatory
damages. He asked the policy reason for the new language.
Ms. Hall did not know any reason not to have the original
language in the bill.
Representative Gara understood the intent was to make it
clear that the amount of compensatory language was three
times and not four. Ms. Hall believed old language had been
interpreted as four times the damages. Representative Gara
pointed out that a person usually does not get the three
times unless they got the compensatory damages; he wanted
to know if the goal was to take away the right to
compensatory damages. Ms. Hall responded that taking away
compensatory damages was not the goal.
2:02:18 PM
Representative Austerman asked whether eliminating Section
3 would make the old language law.
Representative Gara commented that the bill says a person
would be given criminal penalties. In addition, a person
would get compensatory damages plus a three times
multiplier. To be consistent with current statute, he
proposed starting with the word "person" on line 9 to read:
"person for compensatory damages as a result of the
violation and an award of three times compensatory damages
resulting from the violation".
Co-Chair Stoltze requested an explanation of the difference
between economic and compensatory damages. Ms. Hall
explained that compensatory damages are broader than
economic damages and potentially more subjective.
Representative Gara described "compensatory damages" as
resulting when someone hits a person in a car; the person
hit is entitled to compensation for losses such as physical
damages and lost wages, although lost wages tend to be
called economic damages. He was concerned that the bill was
written just in terms of economic damages. He asked whether
the attorney had problems with going back to compensatory
damages plus three times the amount of those compensatory
damages. Ms. Pohland believed there should be a discussion
with the Department of Labor and Workforce Development in
terms of the policy change. She opined that damages that
would be considered in a workers' compensation fraud case
would be economic damages.
Representative Gara described a hypothetical situation in
which there could be medical damages as opposed to economic
damages. Ms. Pohland agreed and pointed out that there are
provisions already in place addressing an insurer or
employer's failure to insure (AS 23.30.155 and AS
23.30.255). Penalties and damages are already in place; for
example, there is usually a penalty provision (essentially
an extra interest) that is tacked on when an employer or an
insurer have unfairly controverted a claim. The legislation
was intended to address other situations, such as the
intentional misclassification of employees to avoid paying
workers' compensation premiums, or lying in a case.
2:08:25 PM
Ms. Hall added that one of the reasons for the section was
a "co-mingling" of civil and criminal language, which had
presented difficulty in attempted prosecution. The language
attempted to clear up the confusion between criminal and
civil penalties.
Representative Austerman wanted to ask the Department of
Labor and Workforce Development about the change in policy.
TRENA HEIKES, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, did not know
why the changes were made in subsection (c). She had
recommended a change in the attorney fee language.
Currently, attorney's fees allow prevailing party by law,
but that is a small percent of costs. She requested adding
an award of reasonable attorney's fees, or recovery of full
reasonable attorney's fees. Regarding Representative Gara's
question, she did not know why the change was made. She
recommended deleting the language "economic" and
"compensatory" so that damages are not delineated.
Representative Gara summarized that no one had intended to
change the damages a person is entitled to. He asked for an
evaluation by DLWD of proposed changes: line 9 to 10 (page
3) cross out "who suffers economic" and insert "for
compensatory" after "person" on line 9; on line 10 after
"violation" put "and" instead of "for". The result would
be: "a person for compensatory damages as a result of the
violation and an award of three times". Ms. Heikes replied
that her first reaction was that she did not have a problem
with the proposal.
Ms. Hall felt the proposed change left the intent intact
and clarified the issue in a way that would resolve
concerns.
2:14:06 PM
Ms. Pohland concurred that the proposal clarified the
language and makes clear what damages a person is entitled
to without changing the original intent.
Representative Doogan understood that the legislation would
get rid of the application of theft by deception in the
statute and replaces it with being guilty of perjury and
related offenses. He asked why the change was being made in
terms of the criminal code.
Ms. Hall noted that another amendment was pending that
would provide further clarity. She stated that the goal was
to make workers' compensation fraud more than a paperwork
problem or theft by deception but closer to real workers'
compensation fraud on the part of an employee, provider, or
employer. In making the change, DCCED was attempting to
clarify that it was talking about other specific things in
Section 2.
Ms. Heikes explained that the need for the change in AS
23.30.250 arose out of a problem DLWD had in prosecuting
for fraud. The statute currently says that the intent
element of the crime is to "knowingly" make a false
statement, etc., that the person is guilty of theft by
deception. However, theft by deception is a higher intent.
The law appears to establish two different intents, which
makes prosecution difficult, if not impossible. For that
reason, DLWD wanted just one intent. In the re-write, AS
23.30.250(a) provisions were gutted.
Representative Doogan queried whether the proposal would
make a misdemeanor a felony or affect other "penalty
creep." Ms. Heikes answered that under the new statute, the
felony or misdemeanor status would depend on amount of
damage or the amount taken.
2:19:12 PM
Co-Chair Stoltze MOVED to ADOPT Amendment 1 (26-LS1354\R.1,
Bailey, 3/9/10):
Page 1, line 2:
Delete "investigations,"
Page 2, line 24, through page 3, line 6:
Delete all material and insert:
"*Sec. 2. AS 23.30.250(a) is amended to read:
(a) A person who (1) knowingly makes a false or
misleading statement, representation, or
submission related to a benefit under this
chapter; (2) knowingly assists, abets, solicits,
or conspires in making a false or misleading
submission affecting the payment, coverage, or
other benefit under this chapter; (3) knowingly
misclassifies employees or engages in deceptive
leasing practices for the purpose of evading full
payment of workers' compensation insurance
premiums; or (4) employs or contracts with a
person or firm to coerce or encourage an
individual to file a fraudulent compensation
claim [IS CIVILLY LIABLE TO A PERSON ADVERSELY
AFFECTED BY THE CONDUCT, IS GUILTY OF THEFT BY
DECEPTION AS DEFINED IN AS 11.46.180, AND] may be
prosecuted under AS 11 [PUNISHED AS PROVIDED BY
AS 11.46.120 - 11.46.150}.
Vice-Chair Thomas OBJECTED
Co-Chair Stoltze remarked that he offered the amendment by
request of the Department of Law.
Ms. Hall explained that the amendment further refines
language to clarify and separate potential criminal
behavior vs. civil behavior. She noted the word
"investigations" would be removed from the title. The
deletion of Section 2 would remove references to civil
liability in order to streamline the legislation. Adoption
of the changes would make Section 4 and Section 5 on page 3
unnecessary.
Representative Doogan wondered if the changes mean the
entire criminal code would apply.
2:22:36 PM
ANNE CARPENETI, ASSISTANT ATTORNEY GENERAL, LEGAL SERVICES
SECTION-JUNEAU, CRIMINAL DIVISION, DEPARTMENT OF LAW,
explained that a person who commits a crime under any
pretext is subject to prosecution under Title 11. She
reported that the department thought it would be clearer to
simply state a person who commits a crime in relation to
this type of activity is prosecutable under Title 11, since
theft by deception under Title 11 has particular elements
that need to be proven.
Representative Doogan reiterated his concern regarding the
amendment and asked if a more discrete definition of the
offences was warranted. Ms. Carpeneti related that the
Department of Law's view of violations that occur in the
context of the worker's compensation law is already subject
to prosecution under Title 11. It is unnecessary to list
the specific offences in the legislation. The Department's
intent in recommending that Title 11 be cross referenced in
relation to these types of crimes was to keep the bill
clear , inclusive, and expand their ability to prosecute
fraud. Representative Doogan appreciated the Department's
approach.
2:28:56 PM
Representative Gara asked why Sections 4 and 5 must be
deleted if Amendment 1 is adopted. He assumed the sections
broadened the Department's investigative and prosecutorial
authority.
2:30:01 PM RECESS
2:30:57 PM
MICHAEL FORD, LIAISON, DEPARTMENT OF LAW, explained that
sections 4 and 5 were in the bill accidentally. Changes
were made in the Judiciary Committee that removed the
reference to those sections, therefore Sections 4 and 5
should have been removed in the CS. He added that the
sections could remain as a matter of policy. Representative
Gara implied that he did not want Worker's Compensation
investigators feeling constrained. Mr. Ford believed that
removal of Sections 4 and 5 simply reflect technical
changes to correct an oversight.
Representative Gara requested assurance from the Department
of Labor and Workforce Development. Ms. Heikes replied that
the DLWD supports removal of Sections 4 and 5. She
confirmed that previously the investigators could not get
prosecutions because of confusion regarding intent and the
bill clarifies that.
Vice-Chair Thomas WITHDREW his OBJECTION. There being NO
OBJECTION, Amendment 1 was adopted.
Representative Gara MOVED to ADOPT Conceptual Amendment 2:
Page 3, lines 9-10:
Delete "who suffers economic" and replace with "for
compensatory"
Page 3, line 10:
Replace "for" with "and"
Co-Chair Stoltze OBJECTED
Representative Gara read the changes, "on behalf of a
person for compensatory damages as a result of the
violation and an award of three times the amount of
compensatory damages…"
Ms. Hall agreed with the amendment.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, Amendment 2 adopted.
Co-Chair Stoltze requested discussion of the fiscal notes.
Ms. Heikes explained FN 2 (LWF) that the $75 thousand was
for development of the new medical fee schedule.
Vice-Chair Thomas MOVED to report CSHB 314(FIN) out of
Committee with individual recommendations and the
accompanying fiscal notes.
CSHB 314(FIN) was REPORTED out of Committee with a "do
pass" recommendation and with two previously published
fiscal notes: FN1 (LAW); FN2 (LWF).
2:37:31 PM RECESS
2:51:26 PM RECONVENED
HOUSE BILL NO. 369
"An Act relating to an in-state natural gas pipeline, the
office of in-state gasline project manager, the Joint In-
State Gasline Development Team, and the In-State Gasline
Steering Committee; and providing for an effective date."
2:51:47 PM
Vice-Chair Thomas MOVED to ADOPT CS for HB 369 (FIN), 26-
LS1527\C, Cook, 3/18/10, as a working draft.
Co-Chair Stoltze OBJECTED
TOM WRIGHT, STAFF, REPRESENTATIVE MIKE CHENAULT,
highlighted the changes in the CS described in the CS
Sectional Analysis (copy on file).
"An Act relating to an in-state natural gas pipeline,
the office of in-state gas line project manager, the
Joint In-State Gasline Development Team; requiring the
development of an in-state natural gas pipeline plan,
to be delivered to the legislature by July 1, 2011,
that provides for a gas line that is operational by
December 31, 2015; directing the Joint In-State
Gasline Development Team to assume responsibilities
under sec. 19, ch. 14, SLA 2009; requiring expedited
review and action by state agencies or entities
relating to the in-state natural gas pipeline project;
and providing for an effective date."
Mr. Wright noted the change to the title of the bill. The
title was tightened up to differentiate the legislation
from other bills dealing with natural gas development. He
continued with the sectional.
Section 1: Adds a new chapter, Chapter 34: In-State
natural Gas Pipeline, to AS 38, Public Land.
Sec. 38.34.010. In-state gas line project manager.
(a) Creates the position of in-state gas line project
manager within the governor's Office. This position
will continue until one year after commercial
operation of the in-state natural gas pipeline begins.
(b) The Governor appoints an individual to the
position of an in-state gas line manager and may be
removed at the Governor's discretion. (c) Describes
the duties of the in-state gas line project manager.
Sec. 38.34.020. Expedited review and action by state
agencies or entities. (a) States that any state agency
or entity conducting and taking action relating to the
in-state gas line shall be expedited. (b) A state
agency or entity may not include in any project
certificate, right of way, permit or other
authorization issued to a licensee a term or condition
that is not required by law if the in-state project
manager determines the term or condition would prevent
or impair the expeditious construction and operation
or expansion of the in-state gas line. (c) A state
agency or entity may not, unless required by law,
amend or abrogate any certificate, right of way,
permit or other authorization issued to a licensee if
the project manager determines the action would
prevent or impair the expeditious construction and
operation or expansion of the in-state gas line.
In Section 1 Sec.38.34.020., The word entity was added
to "review and action by state agencies". The
inclusion allows for involvement of entities such as
ANGDA (Alaska Natural Gas Development Authority).
Sec. 38.34.030. Joint In-state Gasline Development
Team. (a) Establishes the Joint In-State Gasline
Development Team in the Governor's Office. The team
consists of the commissioner of the Department of
Transportation and Public Facilities or designee, the
chief executive officer of the Alaska Railroad
Corporation or designee, the chief executive officer
of the Alaska Natural Gas Development Authority, the
in-state gas line project manager and the chief
executive officer of the Alaska Housing Finance
Corporation. (b) Names the Alaska Housing Finance
Corporation's chief executive officer as chair. (c)
Allows the development team to hire staff, enter into
contracts and exercise other powers to carry out its
functions.
The chief executive Officer of the Alaska Housing
Finance Corporation was added as a fifth member and
chair to the Joint In-state Gasline Development Team
in Sec.38.34.030.
Mr. Wright explained that Dan Fauske, (CEO/Executive
Director, Alaska Housing Finance Corporation, Department of
Revenue) would bring his finance and leadership experience
to the team.
2:55:31 PM
Co-Chair Stoltze interjected that he believed in the value
of having a Development Team member who is familiar with
the legislative and budget process.
Mr. Wright elaborated further.
Sec. 38.34.040. Duties of the Development Team. (a)
Ensure a project plan for the development of an in-
state gas line is completed and delivered to the
legislature by July 1, 2011. The project plan must
specify and document how an in-state gas line can be
designed, financed, constructed and made operational
by December 31, 2015. (b) The Joint In-State Gasline
Development Team is to assume all executive authority
over and managerial responsibility for all activities
enumerated under sec. 19, ch. 14, SLA 2009, including
work previously completed, work in process, and work
for which money has been encumbered but that is not
completed on the effective date of this subsection.
(c) Describes specific plans that are to be included
within the project plan for an in-state gas line that
will serve Fairbanks, the south central region of the
state, and other communities whenever practicable,
connecting with or enhancing the existing gas pipeline
system, and reaching to tidewater. (d) The
development team's work product is to include an
analysis of alternative possible routes and select a
route that is consistent with the following
requirements: (1) is the most economical, (2) will
provide gas to residents at a reasonable cost, (3)
allows for connecting lines to serve industrial,
residential and utility customers along the entire
route and in other regions of the state that can be
served at commercially feasible rates, (4) uses state
land and existing state highway and railroad rights of
way to the maximum extent feasible, (5) uses existing
highway and railroad bridges, gravel pits equipment
yards and maintenance facilities and other existing
facilities and resources to the maximum extent
feasible. (e) With the intent that any project-related
assets acquired or developed be available for transfer
or sale to the entity best able to complete the
project, the development team is to: (1) prepare
plans and designs necessary for the construction of
the in-state gas line; (2) coordinate with entities
qualified to build, own and operate the gas line; (3)
identify, apply for and obtain rights-of-way and other
permits for the project route; (4) work with other
entities to promote gas supply and purchase contracts
required for the project to be commercially viable;
(5) prepare cost estimates for project design,
construction and operation to determine the project's
feasibility and the projected cost of natural gas to
consumers; (6) coordinate with and use, to the fullest
extent, possible existing work by other state agencies
and entities before contracting for new reports and
research and analysis; (7) determine regulatory
authority over the pipeline project and perform any
necessary compliance requirements; (8) identify and
apply for, or support extension of, existing permits
for export of Alaska natural gas if that export
improves project economics and will reduce the price
of natural gas to in-state consumers. (f) Any rights
to a gas line corridor obtained by a state agency
under eminent domain may be transferred to a private
entity. (g) Describes the various aspects of the in-
state gas line project the development team may
consider.
Sec.38.34.040, changes the July 1, 2011 deadline from
construction ready to a completed project plan
delivered to the legislature. He added that the change
accommodated concerns raised by the impending
deadline.
Mr. Wright also pointed out that in subsection(c) "the
south central region" includes Valdez. He read the final
change in Sec.38.34.060. Subsection b that dealt with
conflicts of interest.
3:00:22 PM
Sec. 38.34.060. Conflicts of interest. (a) If a
member of the Development Team acquires, owns or
controls a direct or indirect interest in property, an
organization or business that might be affected by the
in-state gas line project or other matters under
consideration by the Development Team shall
immediately disclose the interest to the Development
Team. This disclosure is part of the public record
and shall be included in the minutes of the first
meeting of the Development Team held after the
disclosure. (b) Members of the development team are
subject to AS 39.50 (Public Official Disclosure) and
AS 39.52 (Alaska Executive Branch Ethics Act).
Representative Gara referred to page 4, line 8 of the CS
that calls for analysis of "alternative possible routes".
He explained that alternatives might not be routes. The
alternatives could include importation of liquefied natural
gas or Cook Inlet gas subsidies. He asked the sponsor if he
would change the language to reflect other possibilities.
Representative Chenault wanted time to consider the
request.
Representative Gara understood the goal to be ready to move
forward but wanted to avoid spending money unnecessarily.
He did not want to see gas pipeline engineering plans
discarded. On page 4 line, 23 he requested to insert the
word "preliminary", that would read, "prepare [preliminary]
plans and designs for construction of the in-state natural
gas line project." Representative Chenault argued that even
though he dislikes wasting money the state should pay for
whatever plans are necessary to determine costs.
3:04:17 PM
Representative Gara referred to line 27, of the CS,
regarding obtaining right-of-ways. He wondered if it was a
waste of money to obtain right-of-ways that might not be
used. Representative Chenault believed that in order for
the project to move forward the state will need to spend
money up front to develop right-of-ways. He felt resolving
right-of-way issues was essential to promoting the project
to a private entity.
Co-Chair Stoltze WITHDREW his OBJECTION. There being NO
OBJECTION, it was so ordered. The CS for HB 369 (FIN), 26-
LS1527\C, Cook, 3/18/10CS was adopted.
3:06:29 PM RECESS
3:07:45 PM RECONVENED
Representative Chenault recalled Representative Gara's
request to change the language in the CS on page 4, line 8
to delete the word "routes". He stated that he did not want
to change the language. He felt that although liquefied
natural gas imports might become a stop gap measure, HB 369
was written specifically, to develop an in-state gas line.
Representative Gara announced that he supported leaving HB
369 as a pipeline bill but pointed out that on Page 4, line
8 of the CS the language called for analyzing alternatives.
He felt that leaving the word routes narrowed analysis of
all options. He wanted the state to be free to analyze any
cheaper alternatives. Representative Chenault offered that
there are a number of options being evaluated by other
sources. His specific bill dealt with the development of
in-state gas pipeline routes not alternative options. He
felt that all of the options will be evaluated once all of
the information and cost analysis is gathered.
Co-Chair Hawker interjected that Speaker Chennault's
intention was to present legislation to promote an in-state
gas line not liquefied natural gas importation. Speaker
Chenault affirmed.
3:11:44 PM
Representative Doogan asked if the pipeline project will be
limited in size by AGIA. Representative Chenault stated
that the project would not be limited to the 500 bcf
(billion cubic feet) specified by AGIA depending on the
state's involvement.
Representative Gara referred to page 4, lines 23 and 27 of
the CS. He asked the sponsor to consider adding the word
"preliminary" before plans on line 23. On line 27, he
requested adding "applying" for and omit "and obtain
rights-of-way and". He stated that he offered these
conceptual amendments as cost saving measures to limit
ineffectual effort by the state. Speaker Chenault
reiterated that it is imperative to have the rights-of-ways
in place in order to transfer or sell the project to a
private entity. He read the following:
Page 4, lines 20-21, "With the intent that any
project-related assets acquired or developed be
available for transfer or sale to the entity best able
to complete the project…"
Speaker Chenault stressed that if the state must own or
control right-of-ways to support project completion it was
a valuable use of state funds.
Co-Chair Hawker interjected that there are not mandates in
HB 369. He emphasized that the bill only requires a project
plan be delivered to the legislature by July 1, 2011. He
cautioned that prescribing limits to a dynamic process
could hurt the outcome of the project.
3:16:49 PM
Mr. Wright explained that any private entity interested in
the feasibility of the project will do its own analysis.
Representative Austerman asked if the bill allows the state
to build and own the pipeline and lease it out for
operation.
Representative Chenault asserted that he would not want the
state to build the in-state gas line. However the
legislation does not preclude the state from participating
in any form.
Representative Fairclough referred to page 5, lines 12-13,
that allows for a state agency to transfer any acquired gas
line corridor rights to a private entity. She wondered if
that was a normal process for state. Representative
Chenault stated he did not know the answer.
Co-Chair Hawker added that the language was added at the
request of the Department of Transportation and Public
Facilities to clarify the department's ability to do so.
3:20:51 PM
FRANK RICHARDS, DEPUTY COMMISSIONER, HIGHWAYS & PUBLIC
FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC
FACILITIES, explained that the state is currently
prohibited to transfer land obtained by a state agency
through eminent domain to a private entity.
Representative Fairclough referred to Sec.38.34.050 that
dealt with confidentiality. She observed that the
development team will have access to confidential
information and pointed out that the bill would add a new
layer of access by someone other than commissioners.
Representative Chenault read lines 30-31 of Sec.38.34.050.
"Confidential information received by the development
team shall be kept confidential."
Co-Chair Hawker closed public testimony. He called for
discussion of the fiscal notes. He referenced the new FN
(OOG) dated 3/12/2010 (copy on file) and noted it was
indeterminate.
Bob Swenson, Manager, In-State Gasline Project, Office of
the Governor; relayed that the fiscal note was outdated and
no longer applied to the CS version of the legislation.
Co-Chair Hawker asked if the updated fiscal note
information was available. Mr. Swenson stated it was.
Representative Kelly pointed out that the legislature
previously approved the Governor's requests for in-state
pipeline development funds. He requested Mr. Swenson
delineate the expenditure of the funds as it relates to the
current project.
Co-Chair Hawker elaborated that the Governor requested an
additional $6.5 million dollars in this year's operating
budget for in-state gas line development. He informed the
committee that a fiscal note for the legislation would
incorporate the appropriation request. He requested Mr.
Swenson provide a recap of the overall fiscal requirements
to move the project forward under the authority of HB 369.
Mr. Swenson summarized the projected fiscal note
expenditures. He stated that the fiscal note total is $
8,000,053. Incorporated in that total is $ 1,000,095 for
personal services. He highlighted the positions deemed
necessary due to the accelerated timeline for completion of
the project plan. He listed them as follows: project
manager, engineering manager, commercial manager,
legislative liaison/public outreach officer, finance and
budget analyst, schedule coordinator, and finally a
technical writer. He added that $6.8 million was requested
for contractual services. He noted the contractual services
request was similar to the entire operating budget request
of 6.5 million with the additional amount intended for
market analysis. He expounded that the contractual services
request was divided into four components. The first
component was completion of environmental and permitting
activities and state and federal right-of-way approvals.
That includes all of the different issues involved in the
permitting process. The second component of the request was
project management and engineering data acquisition to
further refine the engineering design.
3:31:24 PM
The third component was refinement of cost of service
estimates and tariff modeling. The component was expanded
to incorporate both possible routes. The fourth component
consisted of a complete documentation of pipeline assets
for commercial offering.
Co-Chair Hawker wondered if the mandates could be completed
in one year for the additional approximately $1.2 million
over the Governor's original operating budget request. He
noted the additional funds were for personal services to
get the work done. Mr. Swenson stated that was correct. He
offered that in reference to the fiscal note the years out
from FY 2011 remain indeterminate dependent upon outcomes
of the plan. Co-Chair Hawker robustly concurred.
Representative Austerman asked if it was possible to
project the expenditures for the out years. Mr. Swenson
voiced that the "what if" scenario is incredibly broad and
depends on what part of the project the state is willing to
undertake. He believed it would be impossible at this time.
3:35:25 PM
Co-Chair Hawker asked that in reference to the fiscal
notes, if the mission of the bill is essentially the same
as the intent directive from the legislature except for the
accelerated timeline and creation of clear management
hierarchy and authority. Mr. Swenson affirmed. He stated
the accelerated timeline was worrying. The assurance that
an in-state gas pipeline operational by December 31, 2015
was of particular concern. The permitting process was out
of the state's control and difficult to submit to an
aggressive timeline.
Mr. Swenson shared that another issue is optimization. He
explained that the earliest phase of a massive project is
the most important and affects the costs of the project
over time. Significant optimization effort must be taken
early on in a project to save money in the long term.
Optimization is not always conducive to an accelerated
timeline. He stated that these issues should be addressed
before moving forward.
Co-Chair Hawker agreed. He commented that in terms of the
fiscal note it was basically the same project that the
administration had all ready been working on. He
ascertained that there was coordination of fiscal note
preparation with the other departments involved in the
project.
Representative Kelly asked how the role of project manager
would interact with the Development Team. Mr. Swenson was
not certain how the management structure was going to be
set up.
3:44:53 PM RECESS
3:51:39 PM RECONVENED
Representative Fairclough referenced page 5, lines 12 and
13 of the CS regarding eminent domain.
Representative Fairclough wondered what transferring gas
line corridor rights to a private entity means to the
state. She asked if the state could recover those rights if
necessary. Mr. Richards understood that the contract with
the private entity developer would provide a construction
right-of-way and contain a reverter clause. He revealed
that when construction is completed the property will
revert back to state ownership. Representative Fairclough
asked if the contract language adequately protects the
states interest. Mr. Richards answered that the contract
reverts the property rights back to the state even in a
scenario that the project is not completed. Representative
Fairclough wondered if the state's interest is protected if
the private entity sells their assets to another party. Mr.
Richards did not know the answer.
HB 369 was HEARD and HELD in Committee for further
consideration.
HOUSE BILL NO. 346
"An Act establishing the Workers' Compensation Advisory
Board; and providing for an effective date."
3:57:30 PM
KONRAD JACKSON, STAFF, REPRESENTATIVE KURT OLSON, SPONSOR,
reported that the Medical Services Review Committee
recommended that the Legislature establish a Worker's
Compensation Advisory Council. The council would replace
the Medical Services Review Committee. He noted the word
"Board" was changed to "Council" in the Labor and Commerce
Committee.
TRENA HEIKES, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, noted that
the council consists of four members each who represent
organized labor and employers and three members who
represent medical care providers. She remarked that Alaska
is the only state that allows the medical providers to vote
on such matters.
Representative Austerman referred to the fiscal note, FN 1
(LWF) and asked if Medical Services Review Committee
members needed to travel. Ms. Heikes responded that two of
the members were from Ketchikan. The Department brought
them up for monthly and bi-monthly meetings from May to
November of last year.
Representative Austerman queried Ms. Heikes about the $40
thousand expenditure for travel in the fiscal note. Ms.
Heikes explained that it was for the Worker's Compensation
Advisory Council members travel to meetings twice a year.
She explained that currently the Medical Services Review
Committee travel budget is approximately $10-12 thousand
and part of the overall travel budget for the Division of
Worker's Compensation.
Representative Doogan asked if the $40 thousand was the
total expenditure for the new Council. Ms. Heikes affirmed.
She added that the Medical Services Review Committee will
be abolished and their approximately $10-12 thousand travel
budget will be rolled into the $40 thousand.
Representative Austerman determined that the $40 thousand
is an increase in expenditures. Ms. Heikes affirmed.
Vice-Chair Thomas opined that the fishing and tourism
industries were not specifically represented on the Council
in the bill. He also felt the bill could allow duplicated
union membership in the employer representation language.
4:05:08 PM
Representative Kelly asked why there is more than one
member from organized labor since the majority of Alaskan
workers are non-union. Ms. Heikes responded that organized
labor had the most experience with worker's compensation.
She believed that the experienced members with an
established base of knowledge would help the Council work
efficiently.
Representative Kelly maintained his concern that the
council did not adequately represent the work force.
Representative Fairclough noted that only voting members
counted in the quorum. She wondered why the two members who
represent insurers were not voting members. Ms. Heikes
pointed out that although insurers have an interest in
worker's compensation they are not typically given a vote.
Worker's Compensation issues are between employers and
employees. The medical providers complete the process.
Representative Gara asked how the ad hoc committee compares
to the Worker's Compensation Advisory Council. Ms. Heikes
explained that the ad hoc committee is an ad hoc group of
members from organized labor and the Worker's Compensation
Committee of Alaska, an employer industry organization. The
ad hoc Committee did not operate under an official
statutory mandate and met behind closed doors. Council
meetings will be on the record and invite public
involvement.
Representative Gara expressed concern with allowing medical
providers to vote on all matters brought to the Council. He
felt they should vote exclusively on medical care
reimbursement rates, medical care provisions, and other
applicable Medical Services Review Committee issues. He
believed other council members could leverage their votes.
Ms. Hiekes agreed that was a concern of industry and union
members on the Medical Services Review Committee. The
medical providers felt they were a major participant in the
system. The treatment of work related injuries, workers
recovery time, degree of permanent impairment, and
vocational re-training involve medical opinion. They were
given a voice by a bare majority. A vote provides incentive
for the medical providers to come to the Council meetings.
Representative Gara maintained his concern making medical
providers voting members for issues that do not concern
them.
4:13:49 PM
Vice-Chair Thomas felt that Council members should be
Alaska residents.
HB 346 was HEARD and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 4:15 PM.