Legislature(2021 - 2022)ADAMS 519

04/30/2021 01:30 PM House FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 151 UNEMPLOYMENT BENEFITS FOR COVID-19 TELECONFERENCED
<Bill Hearing Canceled>
+= HB 28 REGISTRATION OF BOATS: EXEMPTION TELECONFERENCED
Moved CSHB 28(FIN) Out of Committee
+= HB 81 OIL/GAS LEASE:DNR MODIFY NET PROFIT SHARE TELECONFERENCED
Moved CSHB 81(RES) Out of Committee
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 30, 2021                                                                                            
                         1:41 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
1:41:45 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Merrick called the House Finance Committee meeting                                                                     
to order at 1:41 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Neal Foster, Co-Chair                                                                                            
Representative Kelly Merrick, Co-Chair                                                                                          
Representative Dan Ortiz, Vice-Chair                                                                                            
Representative Ben Carpenter                                                                                                    
Representative Bryce Edgmon                                                                                                     
Representative DeLena Johnson                                                                                                   
Representative Andy Josephson                                                                                                   
Representative Bart LeBon                                                                                                       
Representative Steve Thompson                                                                                                   
Representative Adam Wool                                                                                                        
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Sara Rasmussen                                                                                                   
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative Geran Tarr, Sponsor.                                                                                             
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Dale Kelley, Commissioner, Commercial Fisheries Entry                                                                           
Commission.                                                                                                                     
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 28     REGISTRATION OF BOATS: EXEMPTION                                                                                      
                                                                                                                                
          CSHB 28(FIN) was REPORTED out  of committee with a                                                                    
          "do pass"  recommendation and with one  new fiscal                                                                    
          impact  note by  the Department  of Administration                                                                    
          and one  previously published fiscal  impact note:                                                                    
          FN2(DFG).                                                                                                             
                                                                                                                                
                                                                                                                                
HB 81     OIL/GAS LEASE: DNR MODIFY NET PROFIT SHARE                                                                            
                                                                                                                                
          CSHB 81(RES) was REPORTED out of committee with a                                                                     
          "do pass"  recommendation and with  two previously                                                                    
          published fiscal impact notes: FN1(DFG) FN2(REV).                                                                     
                                                                                                                                
Co-Chair  Merrick  thanked  the   Co-Chair  for  the  smooth                                                                    
amendment  process  to  the operating  budget  bill  in  the                                                                    
previous day.  She indicated the committee  would be hearing                                                                    
amendments for the two bills on the meeting agenda.                                                                             
                                                                                                                                
HOUSE BILL NO. 28                                                                                                             
                                                                                                                                
     "An Act relating to the registration of commercial                                                                         
     vessels; and providing for an effective date."                                                                             
                                                                                                                                
1:42:55 PM                                                                                                                    
                                                                                                                                
Co-Chair Merrick relayed there were 2 amendments for HB 28.                                                                     
                                                                                                                                
Vice-Chair Ortiz MOVED to ADOPT Amendment 1 (copy on file):                                                                     
                                                                                                                                
     Page 2, lines 9 -10:                                                                                                       
          Delete all material and insert:                                                                                       
         "(7) a commercial vessel that has a valid                                                                              
               (A) certificate of documentation issued by                                                                       
               the United States Coast Guard under 46                                                                           
               U.S.C. 12101 -12121; and                                                                                         
               (B)license issued under AS 16.05.490 or                                                                          
               16.05.530;"                                                                                                      
                                                                                                                                
     Page 2, lines 17 -21:                                                                                                      
          Delete all material.                                                                                                  
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 2, line 30:                                                                                                           
          Delete "sec. 3"                                                                                                       
          Insert "sec. 2"                                                                                                       
                                                                                                                                
Co-Chair Merrick OBJECTED for discussion.                                                                                       
                                                                                                                                
1:43:10 PM                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz  MOVED to ADOPT  Conceptual Amendment  1 to                                                                    
Amendment 1 (copy on file):                                                                                                     
                                                                                                                                
     Page 2, Line 24                                                                                                            
          Following "year" insert: "for  vessels that have a                                                                    
          certificate of documentation  issued by the United                                                                    
          States  Coast  Guard  under   46  U.S.C  121001                                                                       
          12121."                                                                                                               
                                                                                                                                
Co-Chair Merrick OBJECTED for discussion.                                                                                       
                                                                                                                                
Vice-Chair  Ortiz explained  there was  a drafting  error in                                                                    
the  original amendment  which would  be addressed  with the                                                                    
adoption of Conceptual Amendment  1. If the amendment passed                                                                    
owners of  documented vessels would  be charged $24  every 3                                                                    
years to  register with the  Division of Motor  Vehicles and                                                                    
an  $8  fee  per  year   to  register  with  the  Commercial                                                                    
Fisheries   Entry   Commission  (CFEC).   Effectively,   the                                                                    
documented vessel owner would be  double charged as the bill                                                                    
stood.  The conceptual  amendment would  exempt undocumented                                                                    
vessels from the annual $8  vessel registration fee assessed                                                                    
by CFEC. They  would still be required to  register with DMV                                                                    
every  3 years  and  pay a  fee of  $24.  He reiterated  the                                                                    
conceptual amendment simply corrected a drafting error.                                                                         
                                                                                                                                
Co-Chair Merrick WITHDREW her OBJECTION.                                                                                        
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Conceptual Amendment 1 to Amendment 1 was ADOPTED.                                                                              
                                                                                                                                
Co-Chair Merrick  WITHDREW the  OBJECTION to Amendment  1 as                                                                    
amended.                                                                                                                        
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Amendment 1 as amended was ADOPTED.                                                                                             
                                                                                                                                
1:45:05 PM                                                                                                                    
                                                                                                                                
Representative Carpenter  MOVED to  ADOPT Amendment  2 (copy                                                                    
on file):                                                                                                                       
                                                                                                                                
     Page 2, line 5, following "by":                                                                                            
          Insert "the United States or"                                                                                         
                                                                                                                                
Co-Chair Merrick OBJECTED for discussion.                                                                                       
                                                                                                                                
Representative  Carpenter  explained  the amendment  was  to                                                                    
correct  an unintended  consequence  of  SB 92  [Legislation                                                                    
passed in  2018 regarding  vessel registration,  titles, and                                                                    
derelict vessels]. Prior  to SB 92 all  Alaskan vessels were                                                                    
registered as  documented or undocumented.  When SB  92 went                                                                    
into effect  it included all documented  vessels. He relayed                                                                    
SB  92  attempted  to provide  funding  to  remove  derelict                                                                    
vessels.  However,  according  to  the  Legislative  Finance                                                                    
Division,  no funding  was spent  on removing  or addressing                                                                    
derelict vessels. The amendment  would address the burden on                                                                    
owners  of U.S.  Coastguard documented  vessels outside  the                                                                    
fishing industry.                                                                                                               
                                                                                                                                
Representative Carpenter  reported that  prior to SB  92 the                                                                    
vessels   were   not    included   in   state   registration                                                                    
requirements,  as they  were  already federally  documented.                                                                    
The amendment would  also remove an increased  burden on the                                                                    
DMV, lessen  the burden on the  commercial fishing industry,                                                                    
and lessen  the burden  on law  enforcement. He  mentioned a                                                                    
document from the administration  confirming the function of                                                                    
the  amendment   would  remove   the  requirement   of  U.S.                                                                    
Coastguard registered  vessels from having to  register with                                                                    
the State of Alaska.                                                                                                            
                                                                                                                                
Co-Chair  Merrick asked  if Representative  Carpenter wanted                                                                    
the document distributed to members.                                                                                            
                                                                                                                                
Representative Carpenter replied in the affirmative.                                                                            
                                                                                                                                
1:46:36 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:51:19 PM                                                                                                                    
RECONVENNED                                                                                                                     
                                                                                                                                
Co-Chair Merrick invited  Representative Carpenter to review                                                                    
the correspondence.                                                                                                             
                                                                                                                                
Representative Carpenter  relayed the letter was  from Kelly                                                                    
Hanke  and indicated  the amendment  would exclude  all U.S.                                                                    
Coast Guard documented vessels from  having to register with                                                                    
the state.                                                                                                                      
                                                                                                                                
Vice-Chair  Ortiz asked  Representative Carpenter  to review                                                                    
the impact and intent of the amendment.                                                                                         
                                                                                                                                
Representative  Carpenter   responded  the  intent   of  the                                                                    
amendment  was to  alleviate the  owners of  vessels already                                                                    
registered  with  the  U.S.  Coast   Guard  from  having  to                                                                    
register with  the State of  Alaska. If law  enforcement was                                                                    
investigating a  derelict vessel, the U.S.  Coastguard could                                                                    
be  contacted  to  assist  with finding  the  owner  of  the                                                                    
vessel.  He  did  not  think  it was  necessary  to  have  a                                                                    
duplicative  registration requirement  to identify  a vessel                                                                    
owner.                                                                                                                          
                                                                                                                                
1:53:00 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
1:54:23 PM                                                                                                                    
RECONVENNED                                                                                                                     
                                                                                                                                
Vice-Chair    Ortiz    appreciated   the    response    from                                                                    
Representative Carpenter. However, he  thought the intent of                                                                    
the bill was to be able  to identify the owner of a derelict                                                                    
vessel. He  was concerned  with the  representative's words,                                                                    
"Relatively  sure"  was not  convincing  enough  for him  to                                                                    
support the amendment.                                                                                                          
                                                                                                                                
Co-Chair Merrick invited Ms. Kelley from CFEC to comment.                                                                       
                                                                                                                                
DALE  KELLEY,   COMMISSIONER,  COMMERCIAL   FISHERIES  ENTRY                                                                    
COMMISSION (via  teleconference), asked for the  question to                                                                    
be restated.                                                                                                                    
                                                                                                                                
Vice-Chair Ortiz thought the  amendment suggested U.S. Coast                                                                    
Guard  vessel registration  would  be enough  to identify  a                                                                    
vessel's owner  and that vessel registration  with the state                                                                    
was  unnecessary. He  wondered if  a person  investigating a                                                                    
vessel  would have  easy access  to  the vessel  information                                                                    
through  the U.S.  Coast Guard  without  relying on  another                                                                    
source.  He   asked  Representative  Carpenter  if   he  was                                                                    
accurate.                                                                                                                       
                                                                                                                                
Representative Carpenter responded, "Partially."                                                                                
                                                                                                                                
Ms. Kelley replied  she was trying to figure  out the intent                                                                    
of the  amendment and  how it  articulated with  the overall                                                                    
bill. She indicated  CFEC was not an  enforcement agency and                                                                    
was  unsure  of  the  process in  dealing  with  a  derelict                                                                    
vessel. She  reported that for documented  vessels there was                                                                    
a  U.S.  Coast  Guard  documented  registry  online  look-up                                                                    
system that  might provide information, but  the information                                                                    
was   not  necessarily   inclusive.  Originally,   the  bill                                                                    
attempted  to  correct  documented vessels  from  having  to                                                                    
register  with DMV.  They never  had to  until 2019.  A U.S.                                                                    
Coast  Guard documentation  was  effectively a  registration                                                                    
and abstract of title which  tracked the entire history of a                                                                    
vessel. The  Commercial Fisheries Entry  Commission required                                                                    
U.S.  Coast  Guard  documentation  to  license  [documented]                                                                    
vessels.  She   continued  for  undocumented   vessels  CFEC                                                                    
required DMV registration and title to issue a license.                                                                         
                                                                                                                                
1:59:54 PM                                                                                                                    
                                                                                                                                
Representative  Carpenter thought  Ms.  Kelley had  answered                                                                    
the  question  definitively.  U.S.  Coast  Guard  registered                                                                    
vessel  information  could  be   accessed  online  from  any                                                                    
computer connected  to the internet. He  commented there had                                                                    
been discussion in  the bill about avoiding  double fees for                                                                    
portions  of  the  user  group. Yet,  the  bill  required  a                                                                    
portion of the  user group to register  twice. The amendment                                                                    
would recognize there was already  a registration process in                                                                    
place  for  a  certain  class of  vessel  with  the  federal                                                                    
government easily  accessible online.  The U.S.  Coast Guard                                                                    
had the needed information to  be able to identify owners of                                                                    
derelict vessels. He read the amendment.                                                                                        
                                                                                                                                
Co-Chair Merrick recognized Representative Johnson.                                                                             
                                                                                                                                
Representative Wool gathered from  the sponsor statement and                                                                    
prior  testimony   that  the  bill  was   trying  to  reduce                                                                    
duplicative  state  registration  for  certain  vessels.  By                                                                    
acknowledging  that  CFEC  had  a  database  for  commercial                                                                    
fishing  vessels, the  vessels  would not  have to  register                                                                    
with the  DMV, avoiding  two registrations within  the state                                                                    
database.  He noted  the U.S.  Coast Guard  was part  of the                                                                    
federal rather than the state  database. He did not think it                                                                    
was  unreasonable  to  have  every  vessel  with  a  certain                                                                    
description registered  with the state  even if it  was also                                                                    
registered with the U.S. Coastguard.  He suggested the state                                                                    
fee  was only  $8  per year.  He spoke  of  the fiscal  note                                                                    
associated  with   the  removal  of  derelict   vessels.  He                                                                    
suspected the fiscal note would  change if the amendment was                                                                    
adopted.                                                                                                                        
                                                                                                                                
2:03:52 PM                                                                                                                    
                                                                                                                                
Representative LeBon  suggested that if a  person registered                                                                    
a  vessel  with  the  U.S. Coast  Guard,  they  were  likely                                                                    
utilizing  the  services  of  a  preferred  marine  mortgage                                                                    
underwriter.   He  explained   that  the   preferred  marine                                                                    
underwriter searched  the U.S. Coast Guard  database and any                                                                    
other source  including state, UCC filings,  and DMV filings                                                                    
to  investigate  ownership  history  and clear  title  of  a                                                                    
vessel.  He   thought  requiring  a  redundancy   in  vessel                                                                    
registration was unnecessary and  compared it to home owners                                                                    
and mortgages.                                                                                                                  
                                                                                                                                
2:05:47 PM                                                                                                                    
                                                                                                                                
Representative Edgmon commented  that the amendment proposal                                                                    
was a  sweeping change.  He did not  think there  was enough                                                                    
time  or information  to decide  on an  oversight issue.  He                                                                    
noted the  number of supporters  of the bill.  The amendment                                                                    
was  a technical  fix regarding  oversight established  in a                                                                    
major  omnibus  bill,  SB 92,  which  would  exempt  smaller                                                                    
commercial  fishing  vessels  from having  to  undergo  dual                                                                    
registration.  The  current bill  was  vetted  in the  House                                                                    
Fisheries  Committee  and   had  overwhelming  support  from                                                                    
several  fishing associations.  He  suggested the  amendment                                                                    
was a  meat cleaver  to an issue  that was  being surgically                                                                    
dealt with  in the bill  currently before the  committee. He                                                                    
was unaware of what the effects  would be and wanted to hear                                                                    
from interested  parties such  as the  U.S. Coast  Guard and                                                                    
the Alaska DMV.  He also wanted to know  about any potential                                                                    
fiscal  impacts.  He suggested  there  was  a reason  for  a                                                                    
two-tier system  of vessel registration with  the U.S. Coast                                                                    
Guard  and the  State of  Alaska. He  would be  opposing the                                                                    
amendment. He encouraged the sponsor  to present the idea in                                                                    
a separate piece  of legislation where it  could be properly                                                                    
vetted.                                                                                                                         
                                                                                                                                
Vice-Chair Ortiz  relayed that the  situation Representative                                                                    
LeBon described had existed for  a number of years. He asked                                                                    
the representative if it had been an ongoing process.                                                                           
                                                                                                                                
Representative  LeBon  replied  that any  bank  financing  a                                                                    
vessel did  an ownership search  and a lien inquiry.  A bank                                                                    
would not want to find out  after the fact that another bank                                                                    
also had  a loan  against the same  vessel. It  would render                                                                    
the  second loan  junior to  the first.  Banks tended  to be                                                                    
very careful with such circumstances.                                                                                           
                                                                                                                                
Vice-Chair  Ortiz  noted  the   issue  of  derelict  vessels                                                                    
despite tracing  abilities. The  original bill  attempted to                                                                    
address the  issue. Even though  there had  been significant                                                                    
vessel information available, the  issue of derelict vessels                                                                    
continued to  exist. The  current bill  helped clean  up the                                                                    
issue of duplicative registration.                                                                                              
                                                                                                                                
Representative LeBon responded that he was good with it.                                                                        
                                                                                                                                
2:10:19 PM                                                                                                                    
                                                                                                                                
Representative Johnson  voted for the original  bill because                                                                    
it was an attempt to  ensure that harbor masters could track                                                                    
down  owners of  derelict  vessels. She  had received  input                                                                    
from her  constituents who did  not think it would  work out                                                                    
well for non-fishing vessel owners.  She relayed that at the                                                                    
last town  hall she  had participated  in a  woman testified                                                                    
and provided a  description of the process  of registering a                                                                    
vessel. It  caused her  to take another  look at  the issue.                                                                    
She thought  the amendment  allowed for  people who  owned a                                                                    
sailboat not to have to  go through extensive hoops to enjoy                                                                    
a boat. She was open to hearing feedback.                                                                                       
                                                                                                                                
Representative  Edgmon asked  about  the amendment's  fiscal                                                                    
ramifications.  He noted  there  would be  less money  going                                                                    
into  the  derelict vessel  fund.  He  thought having  other                                                                    
state documentation provided a  valid public purpose. He did                                                                    
not understand the  true depth of the cost  of the amendment                                                                    
which  did not  have  an accompanying  fiscal  note. It  was                                                                    
difficult for him to continue to be part of the dialogue.                                                                       
                                                                                                                                
Representative  Wool asked  how  many boats  in Alaska  were                                                                    
over 32 feet long or over  5 tons. He was concerned with the                                                                    
percentage of  boats that would  no longer have  to register                                                                    
with the  U.S. Coast Guard. He  opined there was no  harm in                                                                    
redundancy. He was  concerned with the number  of boats that                                                                    
might  fall   into  the  exempt  category   because  of  the                                                                    
potential revenue  impact. He was  not ready to  support the                                                                    
amendment.                                                                                                                      
                                                                                                                                
2:16:07 PM                                                                                                                    
                                                                                                                                
Representative Johnson thought about  $20,000 was the amount                                                                    
available to  dispose of derelict  vessels. She  argued that                                                                    
the amount  was nominal  based on  the real  cost associated                                                                    
with disposing  of a vessel.  She was not seeing  the fiscal                                                                    
impact. She thought the amendment was straight forward.                                                                         
                                                                                                                                
Co-Chair Merrick invited Representative Tarr to comment.                                                                        
                                                                                                                                
2:17:30 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GERAN  TARR,  SPONSOR, understood  that  the                                                                    
point  of the  bill was  to have  a state-managed  database.                                                                    
Certain   references   to   the  U.S.   Coast   Guard   were                                                                    
specifically removed  from the  original bill.  She believed                                                                    
it  was considered  in the  debate of  the legislation.  The                                                                    
decision  was  made to  pass  a  bill  that would  create  a                                                                    
state-managed  database for  purposes  of managing  derelict                                                                    
vessels. Since then,  it was identified that the  CFEC was a                                                                    
state-managed  database as  was  the  DMV registration.  The                                                                    
bill  would  clean  up  the   redundancy  within  the  state                                                                    
entities  which she  supported.  However, she  wanted to  be                                                                    
certain that  it did  not upend the  original intent  of the                                                                    
bill and additionally  remove the ability for the  fee to be                                                                    
collected. She  had looked at the  amount collected to-date.                                                                    
The fee was necessary given  the cost of the derelict vessel                                                                    
clean-up. The fee would help to offset costs.                                                                                   
                                                                                                                                
CO-CHAIR MERRICK MAINTAINED the OBJECTION.                                                                                      
                                                                                                                                
Representative  Carpenter looked  at  the  index of  written                                                                    
testimony  and  counted  seven  organizations  favoring  the                                                                    
bill.  He suspected  their  support  was because  commercial                                                                    
fishermen  were referenced.  It  did not  surprise him  that                                                                    
active  commercial  fishermen   with  active  vessels  would                                                                    
support alleviating duplicate  registrations. He wondered if                                                                    
active  commercial vessels  that  were  not affiliated  with                                                                    
fishing  would also  like to  be  excluded from  duplicative                                                                    
registrations.   He   speculated   that   there   would   be                                                                    
significant support. If the intent  was to identify derelict                                                                    
vessels, there was  no need for state  registration, as they                                                                    
were identifiable  through the U.S. Coast  Guard. He offered                                                                    
the amendment for the sake of parody amongst user groups.                                                                       
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Carpenter, Johnson, LeBon, Thompson                                                                                   
OPPOSED: Wool, Edgmon, Josephson, Ortiz, Merrick, Foster                                                                        
                                                                                                                                
The MOTION to ADOPT Amendment 2 FAILED (4/6).                                                                                   
                                                                                                                                
2:24:07 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:24:33 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Representative  Wool  commented  that the  previous  speaker                                                                    
mentioned  that commercial  fishermen only  had to  register                                                                    
once.  He clarified  commercial  fishermen  had to  register                                                                    
vessels over  32 feet and over  five tons with CFEC  and the                                                                    
U.S. Coast Guard.                                                                                                               
                                                                                                                                
Representative Carpenter  agreed. However,  the undocumented                                                                    
fishing  vessels were  being  treated  differently, as  they                                                                    
would  not  be  required  to register  twice.  The  previous                                                                    
amendment  specifically talked  about  both fishing  vessels                                                                    
and non-fishing  vessels that were documented.  He read from                                                                    
the  sponsor  statement.  There  was  a  subset  of  fishing                                                                    
vessels that  would be exempt.  He suggested there  would be                                                                    
no  need for  them  to  be registered  with  the U.S.  Coast                                                                    
Guard.  His point  was moot,  as the  amendment had  already                                                                    
failed.                                                                                                                         
                                                                                                                                
2:26:30 PM                                                                                                                    
                                                                                                                                
Vice-Chair  Ortiz  MOVED to  report  CSHB  28 (FIN)  out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes.                                                                                                      
                                                                                                                                
Representative Carpenter OBJECTED.                                                                                              
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Edgmon, Josephson,  LeBon, Ortiz,  Thompson, Wool,                                                                    
Merrick, Foster                                                                                                                 
OPPOSED: Carpenter, Johnson                                                                                                     
                                                                                                                                
The MOTION PASSED (8/2).                                                                                                        
                                                                                                                                
CSHB 28(FIN) was REPORTED out  of committee with a "do pass"                                                                    
recommendation and  with one new  fiscal impact note  by the                                                                    
Department  of Administration  and one  previously published                                                                    
fiscal impact note: FN2(DFG).                                                                                                   
                                                                                                                                
HOUSE BILL NO. 81                                                                                                             
                                                                                                                                
     "An Act authorizing the commissioner of natural                                                                            
     resources to modify a net profit share lease."                                                                             
                                                                                                                                
2:27:46 PM                                                                                                                    
                                                                                                                                
Representative Josephson  MOVED to  ADOPT Amendment  1 (copy                                                                    
on file):                                                                                                                       
                                                                                                                                
     Page 7, following line 20:                                                                                                 
          Insert a new bill section to read:                                                                                    
          "* Sec. 6. AS 38.05. I 80 is amended by adding a                                                                      
          new subsection to read:                                                                                               
               (mm)  The commissioner  may not  grant a  net                                                                    
               profit share  modification under (j)  of this                                                                    
               section   unless   the   net   profit   share                                                                    
               modification     is    approved     by    the                                                                    
               legislature."                                                                                                    
                                                                                                                                
Co-Chair Merrick OBJECTED for discussion.                                                                                       
                                                                                                                                
Representative  Josephson  explained  that  the  net  profit                                                                    
share  leasing   program  was  not  well   known  until  the                                                                    
introduction  of HB  81 and  the Senate  companion bill.  He                                                                    
explained that  the administration  wanted more  latitude to                                                                    
negotiate  certain items  embedded  into royalty  contracts.                                                                    
They were binding  bilateral contracts that did  not need to                                                                    
be revisited. The proposal could  be rejected summarily. The                                                                    
administration's position was that  by giving it the liberty                                                                    
to modify  a net  profit share lease  (NPSL), it  could help                                                                    
prevent  field assets  from being  stranded.  It begged  the                                                                    
question  about  the nature  of  a  lease  and the  duty  to                                                                    
develop. He noted that previous  legislators, Eric Croft and                                                                    
Harry Crawford,  had introduced an  initiative on  the topic                                                                    
of the obligation to develop.                                                                                                   
                                                                                                                                
Representative Josephson  continued that  fundamentally, his                                                                    
amendment  would  allow for  agreements  to  be reached  but                                                                    
would not bind  them by law until they were  approved by the                                                                    
legislature. His  reason for offering  the amendment  had to                                                                    
do  with   trust.  He  suggested  that   legislators  wanted                                                                    
reassurance that  the administration  would negotiate  in an                                                                    
arms-length way, as  the state was sovereign.  He was unsure                                                                    
the  administration  was  willing  to negotiate  in  such  a                                                                    
manner.  He noted,  for example,  there  were reports  about                                                                    
press releases involving a large  metallic mine Southwest of                                                                    
Anchorage.  It was  difficult to  tell where  the industry's                                                                    
words  ended, and  the state's  words began.  Separation was                                                                    
lacking and parroting occurred giving him pause.                                                                                
                                                                                                                                
Representative Josephson continued  that the legislature had                                                                    
given the  industry substantial breaks. The  legislature was                                                                    
looking  at reforms  of SB  21 [Oil  and gas  production tax                                                                    
legislation  passed in  2013] in  the form  of HB  247 [Tax,                                                                    
credits,  interest, refunds,  and  oil  and gas  legislation                                                                    
that passed in 2016] and  HB 111 [Legislation passed in 2017                                                                    
regarding  oil   and  gas  production  tax,   payments,  and                                                                    
credits].  The legislature  realized how  complicated SB  21                                                                    
had been.  He argued  that the punitive  floor on  gross tax                                                                    
was not really  a floor except in  narrow circumstances. The                                                                    
bill [SB 21] was favorable to the oil industry.                                                                                 
                                                                                                                                
Representative  Josephson was  torn because  Mr. Fitzpatrick                                                                    
had presented evidence that the  legislation could result in                                                                    
a  solution   where  everyone  benefited,  with   the  state                                                                    
potentially benefiting  in the long-run. He  suggested there                                                                    
was no harm in the  legislature looking at the contracts for                                                                    
approval. It had  been done in 1996 with the  North Star oil                                                                    
and gas  lease in  HB 548.  The bill  was vetted  and passed                                                                    
within 6  weeks and  gave the  state the  right to  modify a                                                                    
NPSL. He thought the legislature should do the same.                                                                            
                                                                                                                                
Representative  Josephson noted  a  memo  that indicated  it                                                                    
might be  unconstitutional or inappropriate.  However, there                                                                    
were  instances  in  current law  where  a  royalty  in-kind                                                                    
contract  was accepted.  He had  voted on  a couple  of such                                                                    
contracts  in  the House  Resources  Committee  then on  the                                                                    
House Floor.  Also, there were  terms in the  Alaska Gasline                                                                    
Inducement  Act  (AGIA)  that   required  acceptance  of  an                                                                    
agreement related  to AGIA and  ratification by a  bill from                                                                    
the  House Rules  Committee. There  was some  background for                                                                    
the requirement of legislative approval.                                                                                        
                                                                                                                                
Representative Josephson  reiterated that  he was  unsure if                                                                    
he  wanted to  give  the administration  leeway. He  relayed                                                                    
that  the House  resources  Committee modified  the bill  so                                                                    
that  it would  not apply  to royalty  modification. He  had                                                                    
been told that without  the modification, Prudhoe Bay, where                                                                    
the state  had seen  $13 billion of  royalties since  it was                                                                    
developed,   could   have    been   modified   without   the                                                                    
legislature's  participation.  The  Senate version  did  not                                                                    
include the  same modification. He  suggested that  if there                                                                    
was not  an easy  concurrence between  the bodies,  the bill                                                                    
would  go  to  conference committee  where  the  legislature                                                                    
could be  in a position  of modifying Prudhoe  Bay's royalty                                                                    
which he did not want to do. He thanked the committee.                                                                          
                                                                                                                                
2:37:12 PM                                                                                                                    
                                                                                                                                
Representative   Thompson   was   apprehensive   about   the                                                                    
legislature  having to  approve any  NPSL modifications.  He                                                                    
was  concerned   with  a  potential  timeline   issue  if  a                                                                    
modification  was  need  when the  legislature  was  not  in                                                                    
session.  He trusted  the  Department  of Natural  Resources                                                                    
(DNR)  to make  modifications  based on  their history  with                                                                    
previous modifications. He  did not want to see  a well shut                                                                    
down  because of  the legislature  not meeting  in a  timely                                                                    
manner.                                                                                                                         
                                                                                                                                
Representative Carpenter  relayed that the  amendment stated                                                                    
that profit  share modifications  would have to  be approved                                                                    
by the legislature.  He thought the complexity  of the issue                                                                    
would take  a long time  to properly vet in  the legislative                                                                    
process. He also  pointed out the need to  take politics out                                                                    
of  the decision  about whether  a NPSL  modification should                                                                    
advance. He did not think  it would contribute to setting an                                                                    
example of being business friendly in the state.                                                                                
                                                                                                                                
Co-Chair  Merrick  agreed  with  Representative  Carpenter's                                                                    
comment.                                                                                                                        
                                                                                                                                
2:40:10 PM                                                                                                                    
                                                                                                                                
Representative   Wool   agreed   the  subject   matter   was                                                                    
complicated. He  shared Representative  Josephson's concerns                                                                    
about  the   amendments  adopted  in  the   House  Resources                                                                    
Committee being  removed from  the committee  substitute. He                                                                    
would  be especially  concerned  with  limiting the  capital                                                                    
expenditure  language  to  NPSLs  only.  The  state  had  26                                                                    
leases, 2  of which  were currently  in production.  Most of                                                                    
the  leases  had sat  dormant  for  their existence  -  some                                                                    
leases were decades long. He  would not comment on his trust                                                                    
level  of the  administration but  shared some  of the  same                                                                    
concerns  as Representative  Josephson.  There were  several                                                                    
triggers that  could influence  production depending  on the                                                                    
price  of  oil. Producers  wanted  to  keep their  wells  in                                                                    
production,  and he  wanted  to see  the  wells continue  to                                                                    
produce oil. He suggested  that future administrations could                                                                    
potentially negotiate  new terms. The state  had the ability                                                                    
to   renegotiate  royalty   rates,   although  it   occurred                                                                    
infrequently.   He  was   concerned  with   the  amendment's                                                                    
potential question of constitutionality.                                                                                        
                                                                                                                                
Representative Edgmon  concurred with  Representative Wool's                                                                    
comments. He  appreciated the  efforts of  the maker  of the                                                                    
amendment but could not support it.                                                                                             
                                                                                                                                
2:43:03 PM                                                                                                                    
                                                                                                                                
Representative   LeBon   disagreed   with  the   notion   of                                                                    
politicizing  the issue.  He did  not think  the legislature                                                                    
was geared to  weigh in on the issue. He  had confidence the                                                                    
department  would   be  motivated  to  negotiate   the  best                                                                    
possible settlement for the state.                                                                                              
                                                                                                                                
Representative Josephson  did not  know how it  was possible                                                                    
to keep  politics out of  the issue. He explained  that when                                                                    
producers  were  profitable, they  paid  a  portion under  a                                                                    
NPSL. It  was essentially a  contract that was  entered into                                                                    
willingly by  both parties. The legislature  was being asked                                                                    
to trust  that the industry  would do something. He  did not                                                                    
see  himself as  "Anti-industry." However,  the most  recent                                                                    
promises  of record  had not  been  great. He  did not  have                                                                    
confidence  in the  administration  because of  the lack  of                                                                    
separation between  the two institutions.  He did  not think                                                                    
that looking  at the  issue through  a political  lens would                                                                    
color  it  in  a  detrimental   way.  He  suggested  if  the                                                                    
administration could  make its case to  the legislature, the                                                                    
legislature  would  approve it,  just  like  it happened  in                                                                    
1996. His  constituents were dissatisfied with  the share of                                                                    
taxes and royalties the state received for its assets.                                                                          
                                                                                                                                
Co-Chair Merrick MAINTAINED the OBJECTION.                                                                                      
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Josephson, Ortiz                                                                                                      
OPPOSED:  Edgmon,    Johnson,    LeBon,   Thompson,    Wool,                                                                    
Carpenter, Merrick, Foster                                                                                                      
                                                                                                                                
The MOTION to ADOPT Amendment 1 FAILED (2/8).                                                                                   
                                                                                                                                
2:46:21 PM                                                                                                                    
                                                                                                                                
Representative  Wool MOVED  to  ADOPT Amendment  2 (copy  on                                                                    
file):                                                                                                                          
                                                                                                                                
     Page 1, line 1:                                                                                                            
          Delete "authorizing the commissioner of natural                                                                       
          resources to modify a net profit share"                                                                               
                                                                                                                                
          Insert "relating to the  modification of a royalty                                                                    
          or  net profit  share in  an  oil and  gas or  gas                                                                    
          only"                                                                                                                 
                                                                                                                                
     Page 7, following line 20:                                                                                                 
          Insert new bill sections to read:                                                                                     
     "*Sec.6.AS.38.05.180 is amended by adding a new                                                                            
     subsection to read:                                                                                                        
          (mm)The commissioner  may grant  a royalty  or net                                                                    
          profit  share   modification  under  U)   of  this                                                                    
          section  only if  the Alaska  Royalty Oil  and Gas                                                                    
          Development  Advisory  Board recommends  that  the                                                                    
          commissioner  approve the  royalty  or net  profit                                                                    
          share modification.                                                                                                   
                                                                                                                                
     "*Sec. 7. AS 38.06.040(a) is amended to read:                                                                              
          (a) The board shall                                                                                                   
               (1)  in accordance with  the criteria set out                                                                    
               in AS 38.06.070, develop a  plan for the wise                                                                    
               development  of  the   state's  oil  and  gas                                                                    
               royalty  interests; the  plan of  development                                                                    
               shall be consistent with                                                                                         
                    (A) growth of the private sector of                                                                         
                    the economy;                                                                                                
                    (B) environmental standards required                                                                        
                    by law: and                                                                                                 
                    (C) public fiscal stability;                                                                                
               (2)hold  public hearings  on proposed  sales,                                                                    
               exchanges, or other  disposals of royalty oil                                                                    
               or  gas to  determine  whether the  proposals                                                                    
               comply with AS 38.06.070;                                                                                        
               (3)  examine  proposed sales,  exchanges,  or                                                                    
               other  disposal  of,  and  recommend  to  the                                                                    
               legislature that  it approve or  disapprove a                                                                    
               proposed  sale, exchange,  or other  disposal                                                                    
               of                                                                                                               
                    (A) the oil or gas that is obtained by                                                                      
                    the   stale   as    royalty   under   AS                                                                    
                    38.05.182; or                                                                                               
                    (B) the rights to receive future oil or                                                                     
                    gas production under slate leases;                                                                          
                    [and]                                                                                                       
               (4) recommend to  the commissioner of natural                                                                    
               resources  the  conditions  relating  to  the                                                                    
               sale, delivery,  transportation, refining, or                                                                    
               processing  of oil  or gas  that [WI-IICI  IJ                                                                    
               the  commissioner may  include  in the  offer                                                                    
               and sale of oil or gas obtained by the state                                                                     
               as royalty under AS 38.05.182; and                                                                               
               (5)  review a  royalty  or  net profit  share                                                                    
               modification    under   AS    38.05.180   and                                                                    
               recommend  that the  commissioner approve  or                                                                    
               disapprove the modification."                                                                                    
                                                                                                                                
Co-Chair Merrick OBJECTED FOR DISCUSSION.                                                                                       
                                                                                                                                
Representative  Wool explained  that the  amendment required                                                                    
any change to  a NPSL or royalty  (currently allowable under                                                                    
law)  be  approved  by  the   Alaska  Royalty  Oil  and  Gas                                                                    
Development Advisory  Board. The  board currently  helped to                                                                    
facilitate  the wise  development  of Alaska's  oil and  gas                                                                    
royalty  interests by  providing  means  and procedures  for                                                                    
sales, exchanges,  or other  disposition of  those interests                                                                    
in  ways  calculated  to  promote  private  economic  growth                                                                    
consistent  with  applicable   environmental  standards  and                                                                    
public   fiscal    stability   and   in    accordance   with                                                                    
AS.38.05.183. The  amendment would add the  requirement that                                                                    
any change  in royalty and  NPSLs would have to  be approved                                                                    
by  the board.  He thought  it provided  an extra  safeguard                                                                    
layer.                                                                                                                          
                                                                                                                                
Representative Josephson  supported the amendment.  He spoke                                                                    
of the  referral of royalty in-kind  from the administration                                                                    
to  the  legislature. He  argued  that  royalty in-kind  was                                                                    
already  politicized.  He  noted that  the  amendment  would                                                                    
further  politicize  the advisory  board.  He  did not  know                                                                    
whether  it  would  be a  meaningful  layer  of  protection.                                                                    
However, he admitted that public input would be a plus.                                                                         
                                                                                                                                
Co-Chair Merrick WITHDREW the OBJECTION.                                                                                        
                                                                                                                                
Representative Carpenter OBJECTED without comment.                                                                              
                                                                                                                                
Representative Carpenter MAINTAINED the OBJECTION.                                                                              
                                                                                                                                
A ROLL CALL VOTE WAS TAKEN ON THE MOTION.                                                                                       
                                                                                                                                
IN FAVOR: Ortiz, Wool, Edgmon, Josephson, Foster                                                                                
OPPOSED: LeBon, Thompson, Carpenter, Johnson, Merrick                                                                           
                                                                                                                                
The MOTION to ADOPT Amendment 2 FAILED (5/5).                                                                                   
                                                                                                                                
2:51:04 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:52:16 PM                                                                                                                    
RECONVENNED                                                                                                                     
                                                                                                                                
Vice-Chair Ortiz MOVED to report CSHB 81(RES) out of                                                                            
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
                                                                                                                                
Representative Carpenter OBJECTED with no comment.                                                                              
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: LeBon, Ortiz, Thompson, Wool, Carpenter, Edgmon,                                                                      
Johnson, Foster, Merrick                                                                                                        
OPPOSED: Josephson                                                                                                              
                                                                                                                                
The MOTION PASSED (9/1).                                                                                                        
                                                                                                                                
CSHB 81(RES) was REPORTED out of committee with a "do pass"                                                                     
recommendation and with two previously published fiscal                                                                         
impact notes: FN1(DFG) FN2(REV).                                                                                                
                                                                                                                                
2:53:38 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
2:55:10 PM                                                                                                                    
RECONVENNED                                                                                                                     
                                                                                                                                
Co-Chair Merrick reviewed the agenda for the next meeting                                                                       
scheduled on Monday, May 3, 2021 at 9:00 a.m.                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
2:55:31 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 2:55 p.m.                                                                                          

Document Name Date/Time Subjects
HB 81 Amendment 1 Josephson.pdf HFIN 4/30/2021 1:30:00 PM
HB 81
HB 81 Amendment 2 Wool.pdf HFIN 4/30/2021 1:30:00 PM
HB 81
HB 81 Legal Memo Josephson 042921.pdf HFIN 4/30/2021 1:30:00 PM
HB 81
HB 28 Amendment 1 Ortiz.pdf HFIN 4/30/2021 1:30:00 PM
HB 28
HB 28 Amendment 2 Carpenter.pdf HFIN 4/30/2021 1:30:00 PM
HB 28
HB 28 Conceptual Amendment 1 to Amendment 1.pdf HFIN 4/30/2021 1:30:00 PM
HB 28