Legislature(1995 - 1996)

04/13/1995 08:40 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
                                                                               
                     HOUSE FINANCE COMMITTEE                                   
                         APRIL 13, 1995                                        
                            8:40 A.M.                                          
                                                                               
  TAPE HFC 95 - 84, Side 2, #000 - end.                                        
  TAPE HFC 95 - 85, Side 1, #000 - end.                                        
  TAPE HFC 95 - 85, Side 2, #000 - #217.                                       
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House  Finance Committee                 
  meeting to order at 8:40 A.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Kohring                         
  Co-Chair Foster               Representative Martin                          
  Representative Kelly          Representative Navarre                         
  Representative Brown          Representative Parnell                         
  Representative Therriault                                                    
                                                                               
  Representative  Mulder  and Representative  Grussendorf were                 
  not present for the meeting.                                                 
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Rod  Mourant,  Staff,  Representative Pete  Kott;  Catherine                 
  Reardon,  Director,  Division  of   Occupational  Licensing,                 
  Department  of  Commerce  and  Economic  Development;  Randy                 
  Welker,    Legislative    Auditor,    Legislative   Affairs;                 
  Representative Norman Rokeberg; Patrick  Coughlin, Assistant                 
  Attorney  General,  Oil  and  Gas,   Mining  Section,  Civil                 
  Division, Department  of Natural Resources; Ken Boyd, Acting                 
  Director, Division  of Oil  and Gas,  Department of  Natural                 
  Resources.                                                                   
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 207    An Act relating to adjustments to royalty reserved                 
            to  the  state to  encourage  otherwise uneconomic                 
            production  of  oil  and  gas;  relating   to  the                 
            depositing of royalties  and royalty sale proceeds                 
            in the Alaska permanent fund; and providing for an                 
            effective date.                                                    
                                                                               
            CS HB 207 (FIN) was reported out of Committee with                 
            a "do pass" recommendation  and with fiscal  notes                 
            by  the Department of  Revenue dated  3/22/95, the                 
            Department of Natural Resources dated 3/8/95 and a                 
                                                                               
                                1                                              
                                                                               
                                                                               
            zero  fiscal notes  by the  Department  of Revenue                 
            dated 2/27/95.                                                     
                                                                               
  HB 233    An Act  extending until 1999  the termination date                 
            of the  Board of  Clinical Social  Work Examiners,                 
            Board of Marital and Family Therapy, State Medical                 
            Board,  Board  of Nursing,  Board of  Nursing Home                 
            Administrators,   Board   of    Psychologist   and                 
            Psychological  Associate  Examiners,  Real  Estate                 
            Commission,   and   Hazardous    Substance   Spill                 
            Technology  Review  Council; extending  until 1996                 
            the termination date of the Board of Marine Pilots                 
            and  the  Correctional Industries  Commission; and                 
            providing for an effective date.                                   
                                                                               
            CS HB 233 (FIN) was reported out of Committee with                 
            a "do  pass" recommendation and with  fiscal notes                 
            by  the   Department  of  Commerce   and  Economic                 
            Development   and   zero  fiscal   notes   by  the                 
            Department of Administration dated 3/20/95 and the                 
            Department of Transportation and Public Facilities                 
            dated 3/20/95.                                                     
  HOUSE BILL 233                                                               
                                                                               
       "An Act extending  until 1999  the termination date  of                 
       the Board of  Clinical Social Work Examiners,  Board of                 
       Marital and Family Therapy, State  Medical Board, Board                 
       of Nursing, Board of Nursing Home Administrators, Board                 
       of Psychologist and Psychological  Associate Examiners,                 
       Real Estate Commission,  and Hazardous Substance  Spill                 
       Technology  Review Council;  extending  until 1996  the                 
       termination date of the Board  of Marine Pilots and the                 
       Correctional Industries Commission;  and providing  for                 
       an effective date."                                                     
                                                                               
  Co-Chair  Hanley  indicated  that HB  233  would  extend the                 
  existence  of  numerous  boards and  commissions  which  are                 
  either in  their  sunset or  wind-down year.   The  affected                 
  boards  and  commissions  perform  regulatory and  licensure                 
  services for the State of Alaska.  A work draft #9-LS0682\R,                 
  Lauterbach, 4/12/95,  was distributed to  Committee members.                 
  [Copy  on  file].     The  draft  extends  the   boards  and                 
  commissions to the dates recommended by the audit.                           
                                                                               
  ROD MOURANT, STAFF, REPRESENTATIVE PETE KOTT, testified that                 
  the sunset dates  on all sections match  the recommendations                 
  made by Legislative Audit.   Representative Navarre asked if                 
  complaints had been registered regarding  the board process.                 
  Mr.  Mourant did  not know  of any.   Representative Navarre                 
  noted  that  he supported  the  board changes,  although, he                 
  pointed   out  that   there  currently   exists  a   process                 
                                                                               
                                2                                              
                                                                               
                                                                               
  established for a final year audit.                                          
                                                                               
  Discussion  followed  between   Representative  Martin   and                 
  Representative Navarre regarding the audit process.                          
                                                                               
  Representative  Foster  MOVED  that the  work  draft  be the                 
  version  before  the Committee.    Representative Therriault                 
  OBJECTED, noting that he had introduced an amendment adopted                 
  at  a  previous  meeting [Amendment  #1]  which  deleted the                 
  Hazardous  Technology  Review  Council.   He  remarked  that                 
  material remained  in the  work draft  currently before  the                 
  Committee.                                                                   
                                                                               
  Representative Brown noted the  letter on file from RCAC  in                 
  support of the  Council.  She  pointed out that the  Council                 
  resulted from a recommendation from  the Oil Spill Division,                 
  following Exxon Valdez and the lack of oil spill technology.                 
  Representative Therriault countered, through action taken on                 
  the operating budget,  their funding  has been deleted  from                 
  the budget thus negating the need for the council.                           
                                                                               
  Co-Chair Hanley  recommended deleting Section 10 which would                 
  include the appropriate  change to  the title before  moving                 
  the  work draft.    Representative  Therriault WITHDREW  his                 
  MOTION.    There  being  NO  OBJECTION,  it  was  withdrawn.                 
  Representative Foster MOVED the work draft excluding Section                 
                                                                               
  Representative Navarre MOVED  to delete  Section #9.   There                 
  being NO OBJECTION, it was  deleted.  Co-Chair Hanley  asked                 
  when the audits would begin.                                                 
                                                                               
  RANDY  WELKER,  LEGISLATIVE  AUDITOR,  LEGISLATIVE  AFFAIRS,                 
  stated  that  the audits  are  required by  statute  and are                 
  scheduled routinely.                                                         
                                                                               
  CATHERINE  REARDON,  DIRECTOR,   DIVISION  OF   OCCUPATIONAL                 
  LICENSING, DEPARTMENT OF COMMERCE AND ECONOMIC  DEVELOPMENT,                 
  explained Section #2, the Board of Marine Pilots.  She asked                 
  the Committee to  consider extending that board  until 1999.                 
  There currently exists legislation in both the House and the                 
  Senate to change  the statute regarding marine  pilots which                 
  could  extend  the  marine  pilot  board until  1999.    She                 
  repeated that it would be easiest  for the Department if all                 
  the  legislation  had the  same date.    Also, the  Board of                 
  Marine Pilots is in it's wind-down year, so at the time that                 
  the audit was prepared in 1993, Legislative Budget and Audit                 
  had recommended a four year extension.  She thought changing                 
  the date to 1999  would not be against the general advice of                 
  the audit group.  Mr. Welker agreed.                                         
                                                                               
  Representative  Navarre  MOVED  to amend  Page  1,  Line 13,                 
                                                                               
                                3                                              
                                                                               
                                                                               
  deleting  "1998"  and  inserting  "1999".   There  being  NO                 
  OBJECTION, it was adopted.                                                   
                                                                               
  Representative Martin MOVED to report CS HB 233 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal notes.   There  being NO OBJECTIONS,  it                 
  was so ordered.                                                              
                                                                               
  CS HB  233 (FIN) was  reported out of  Committee with a  "do                 
  pass"  recommendations   and  with   fiscal  notes   by  the                 
  Department  of   Commerce  and  Economic   Development,  the                 
  Department  of  Education  and  zero  fiscal  notes  by  the                 
  Department   of   Administration  dated   3/20/95   and  the                 
  Department  of Transportation  and  Public Facilities  dated                 
  3/20/95.                                                                     
  HOUSE BILL 207                                                               
                                                                               
       An Act relating  to adjustments to royalty  reserved to                 
       the state to encourage otherwise uneconomic  production                 
       of oil and gas; relating to the depositing of royalties                 
       and royalty sale proceeds in the Alaska permanent fund;                 
       and providing for an effective date."                                   
                                                                               
  Representative Therriault MOVED to adopt  the work draft #9-                 
  GH0039\H,  Chenoweth,  4/12/95  as the  version  before  the                 
  Committee.    There  being  NO  OBJECTION, it  was  adopted.                 
  Representative Therriault summarized the changes made at the                 
  Subcommittee level.                                                          
                                                                               
  KEN  BOYD,  ACTING  DIRECTOR,  DIVISION   OF  OIL  AND  GAS,                 
  DEPARTMENT OF  NATURAL RESOURCES, commented  that the change                 
  made  to  Page 3,  Section  B  was  the  only one  that  the                 
  Administration  was  not   in  support  of.     The  Knowles                 
  Administration  wants  the  floor for  the  reduction  to be                 
  established at 75%.                                                          
                                                                               
  REPRESENTATIVE  ROKEBERG   appreciated  the   Subcommittee's                 
  effort, although noted concern with the oversight  provision                 
  indicated in Section  #3.   Representative Brown echoed  her                 
  concern  with  the   lack  of  oversight  proposed   in  the                 
  legislation.                                                                 
                                                                               
  Representative Brown explained that Amendment #1 [Attachment                 
  of the preliminary decision.   Representative Brown MOVED to                 
  adopt Amendment #1.  Representative Therriault recommended a                 
  conceptual amendment deleting "written" each time it appears                 
  in  the  amendment.    There  being  NO  OBJECTION  to   the                 
  conceptual  amendment,  it  was  adopted.     Representative                 
  Rokeberg  recommended  that  consideration of  Amendment  #2                 
  precede Amendment #1.                                                        
                                                                               
                                4                                              
                                                                               
                                                                               
  Representative  Brown remarked that  the Amendment  #1 would                 
  give the Legislature access to  the "meat" of decisions  and                 
  underlining  data.   She pointed  out, that information,  as                 
  the bill is  currently written  would be kept  confidential.                 
  Representative  Brown  urged  the  Committee  to  adopt  the                 
  amendment.    There being  NO  OBJECTIONS, Amendment  #1 was                 
  adopted.                                                                     
                                                                               
  Representative Brown MOVED to adopt Amendment #2.  She spoke                 
  to  the  amendment  in relationship  to  the  "far reaching"                 
  aspects  of the legislation.   The  bill would  provide more                 
  discretion than had previously been  given to the Department                 
  of Natural Resource's  Commissioner.   She commented on  the                 
  merit  of  providing  oversight  by  a  separate  branch  of                 
  government (Legislature)  to prevent  corruption.   Co-Chair                 
  Hanley questioned  the legislative  recourse proposed  under                 
  the amendment.  Representative Brown explained that recourse                 
  would be to allow public  comment by individual legislators.                 
  She acknowledged that the ultimate authority would rest with                 
  the Commissioner of the Department of Natural Resources.                     
                                                                               
  Representative Therriault  thought that  Amendment #2  would                 
  create more frustration  for the  commissioner while at  the                 
  same time would  provide information  to the Legislature  on                 
  the findings and determination.                                              
                                                                               
  Representative Martin suggested  that it would be  difficult                 
  for   some   legislators   to   keep   private   information                 
  confidential.  He supported continuing  with the status quo.                 
  Representative Parnell agreed, stating that he voted against                 
  the    amendment   in    Subcommittee    for   reasons    of                 
  confidentiality.  He  felt that there would  be no incentive                 
  to keep important information confidential.                                  
                                                                               
  (Tape Change, HFC 95-85, Side 1).                                            
                                                                               
  Representative Rokeberg concurred that public oversight  was                 
  needed.   He  pointed out  that he  supported Amendment  #2,                 
  although  recommended  deleting  "the  committee shall  give                 
  notice to  all members of the legislature of the committee's                 
  meeting in executive session with  the commissioner...."  He                 
  felt with the  removal of  that language  would protect  the                 
  confidentiality  of the material  while continuing  to allow                 
  Legislative  Budget  and Audit  Committee  (LBA) to  call an                 
  Executive Session.                                                           
                                                                               
  Representative Rokeberg  spoke  strongly  in  favor  of  the                 
  removal of the  sunset provision.   He indicated that  there                 
  has  been significant  testimony that  the  sunset provision                 
  would not be workable for the bill.  The process of applying                 
  for a royalty reduction  and receiving investment commitment                 
                                                                               
                                5                                              
                                                                               
                                                                               
  from the private sector  would take years.  He  thought that                 
  time frame would be detractive and  with a five year sunset,                 
  destroy the intent of the bill.                                              
                                                                               
  Co-Chair Hanley asked if there had been oversight provisions                 
  in the  Oil and  Gas or  House Resource  Committee versions.                 
  Representative Rokeberg stated there were.   Before the bill                 
  moved from Committee,  the conflict of interest  between the                 
  Conservation Commission and  the commissioner was addressed.                 
  He noted that he supported the oversight capacity.  Co-Chair                 
  Hanley voiced his concern in  deleting the executive session                 
  portion.                                                                     
                                                                               
  Representative Navarre  spoke against the  sunset provision,                 
  and in particular regarding  information not made  available                 
  to legislators from the executive session.  He felt that the                 
  responsibility of the audit and the Legislature would  be to                 
  provide a check and balance for each body of government.                     
                                                                               
  Representative Parnell asked what access the Legislature had                 
  when  the   original  royalty  contracts   were  negotiated.                 
  Representative Brown responded  that the original  royalties                 
  were not negotiated.   The original royalty was acquired  in                 
  an competitive sale.  The  competitive sale process provides                 
  a great  protection for  the interests  of the  State.   She                 
  emphasized that a situation would be established through the                 
  proposed  legislation  which  would  allow  negotiations  to                 
  determine that royalty.                                                      
                                                                               
  Representative  Therriault asked if  in the  current royalty                 
  process could  be adjusted.  Representative  Brown responded                 
  that royalties  could only increase.   Mr. Boyd  agreed with                 
  Representative Brown.   He added that the  legislation would                 
  provide clear  authority to  the commissioner  to lower  the                 
  royalty.                                                                     
                                                                               
  Representative  Martin  asked   about  past  experience   in                 
  competitive sales.   Mr.  Boyd responded  once a  lease sale                 
  exists, a  provision then exists  clarifying that  royalties                 
  could be  reduced at  some point.   He  added, a  protection                 
  within that concern, specifies that before one can receive a                 
  reduction  on a  new field,  the field  must be  delineated.                 
  That process is time consuming and would consist of drilling                 
  wells.   Mr. Boyd concluded  that the  Department would  not                 
  object to having the  legislative oversight.                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #2.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Kelly                                    
       OPPOSED:       Kohring,  Martin,  Parnell,  Therriault,                 
                      Foster, Hanley                                           
                                                                               
                                                                               
                                6                                              
                                                                               
                                                                               
  Representatives Mulder  and Grussendorf were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (3-6).                                                     
                                                                               
  Representative   Brown   MOVED   to  adopt   Amendment   #3.                 
  [Attachment  #3].    She  stated  that the  amendment  would                 
  clarify  the   actual  situation  with  respect  to  appeals                 
  received by the  court.  She  added that Amendment #3  would                 
  provide a standard  of review.   Mr. Boyd responded that  an                 
  appeal would be  available with  or without the  recommended                 
  language.                                                                    
                                                                               
  Co-Chair Hanley questioned  if the precedence of  appeal had                 
  been established and if so, the language would cover all the                 
  circumstances which could occur.                                             
                                                                               
  PATRICK COUGHLIN,  ASSISTANT ATTORNEY GENERAL,  OIL AND GAS,                 
  MINING  SECTION,  CIVIL  DIVISION,   DEPARTMENT  OF  NATURAL                 
  RESOURCES, responded  that  the  language  of  the  proposed                 
  amendment accurately reflects what the  court had previously                 
  established:  "The limited right to review agency decisions,                 
  the court would  apply where there  is a provision which  is                 
  not appealable".                                                             
                                                                               
  Discussion  followed  between  Representative   Parnell  and                 
  Representative  Therriault   regarding  the  need   for  the                 
  language change.                                                             
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #3.                   
                                                                               
       IN FAVOR:      Brown                                                    
       OPPOSED:       Martin,  Navarre,  Parnell,  Therriault,                 
                      Kelly, Kohring, Hanley, Foster.                          
                                                                               
  Representatives Mulder  and Grussendorf were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (1-8).                                                     
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #4.                 
  [Attachment  #4].     Representative  Brown  explained  that                 
  Amendment  #4  would provide  a clear  standard of  what the                 
  commissioner's goals were.   She felt that  current language                 
  establishes a "vague" concept of the "best interest" for the                 
  State as the standard, whereas,  the amendment would provide                 
  that  the  natural resources  be  managed for  their maximum                 
  economic value.                                                              
                                                                               
  Co-Chair Hanley OBJECTED.  Mr. Boyd stressed that a standard                 
  could not  be met,  and that  consequently it  could not  be                 
  proven as met.   He added that  language on Page 2,  Line 8,                 
                                                                               
                                7                                              
                                                                               
                                                                               
  would  clarify the existing law  for older and newer fields.                 
  That section explains that  "the field or pool would  not be                 
  otherwise economic feasible".                                                
                                                                               
  Representative  Brown  pointed  out  that  Page 4,  Line  20                 
  establishes the standard  in law at this time.   She did not                 
  agree with Mr. Boyd,  that the standard would  be compatible                 
  in order to provide  the State a reasonable rate  of return.                 
  She  pointed out that the Subcommittee members did not agree                 
  that  a rate of return  could be determined.  Representative                 
  Navarre MOVED to  amend Amendment  #4 by deleting  "maximum"                 
  and inserting  "best".   There  being NO  OBJECTION, it  was                 
  changed.                                                                     
                                                                               
  A  roll  call  was taken  on  the  MOTION  to adopt  amended                 
  Amendment #4.                                                                
                                                                               
       IN FAVOR:      Navarre, Brown                                           
       OPPOSED:       Parnell,  Therriault,  Kelly,   Kohring,                 
                      Martin, Foster, Hanley                                   
                                                                               
  Representatives Mulder  and Grussendorf were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (2-7).                                                     
                                                                               
  Representative Brown  spoke to  Amendment  #5.   [Attachment                 
  adding language to Line 5, following "shall" inserting "with                 
  the applicants  consent".   She thought  that the  amendment                 
  would  provide  the  Legislature  information regarding  the                 
  decision made  by the commissioner.   Representative  Martin                 
  OBJECTED.                                                                    
                                                                               
  Representative Rokeberg interjected that the language  would                 
  be a redundancy  that the findings and the  determination be                 
  made public.   Mr. Boyd agreed with  Representative Rokeberg                 
  although  pointed  out  that  the  amendment  would  provide                 
  additional   information   requiring   the    applicant   to                 
  demonstrate to the public confidential data.                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #5.                   
                                                                               
       IN FAVOR:      Brown                                                    
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
  Martin,                  Hanley, Foster                                      
                                                                               
  Representatives  Mulder, Grussendorf  and  Navarre were  not                 
  present for the vote.                                                        
                                                                               
  The MOTION FAILED (1-7).                                                     
                                                                               
                                                                               
                                8                                              
                                                                               
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #6.                 
  [Attachment #6].  She stated  that Amendment #6 would change                 
  the floor from 75% to 60%.                                                   
                                                                               
  (Tape Change, HFC 95-85, Side 2).                                            
                                                                               
  Representative  Brown  summarized that  75% would  provide a                 
  royalty of 3.25%  floor and would  then set the floor  at 5%                 
  for those fields not previously producing.  She thought that                 
  would  be in  the best  interested for  the  royalty owners.                 
  Representative Therriault  OBJECTED stating  that the  price                 
  should be  negotiable and  would depend  on new  information                 
  when  made available.   Representative Rokeberg  agreed with                 
  Representative Therriault.                                                   
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #6.                   
                                                                               
       IN FAVOR:      Brown                                                    
       OPPOSED:       Parnell,  Therriault,  Kelly,   Kohring,                 
                      Martin, Navarre, Foster, Hanley                          
                                                                               
  Representatives Mulder  and Grussendorf were not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (1-8).                                                     
                                                                               
  Representative Parnell advised that he  had planned to offer                 
  a  sunset  amendment, but  based on  Representative Rokeberg                 
  statement, he  would hold that  proposal in order  to gather                 
  more information, and then offer it on the House floor.                      
                                                                               
  Representative Therriault MOVED  to report  CS HB 207  (FIN)                 
  out of  Committee with  individual recommendations  and with                 
  the accompanying fiscal  notes.  Representative  Brown asked                 
  if the bill had a fiscal note from the Department of Natural                 
  Resources.  Mr.  Boyd stated that  the fiscal note had  been                 
  removed in the  House Resources Committee which  amounted to                 
  $105.6  thousand  dollars.   That  amount  would pay  for  a                 
  Petroleum Engineer to provide the required in-house work.                    
                                                                               
  Representative Brown referenced the reduction to the Oil and                 
  Gas Division's budget in the  Lease Sale Analysis component.                 
  She  asked  how that  reduction  would affect  the  level of                 
  professional  staff  in  the  Division  in order  to  review                 
  applications.   Mr. Boyd explained that cuts would cause the                 
  loss of at least  one person from the team.   Representative                 
  Brown asked  the Committee's  reconsideration of  the fiscal                 
  note originally requested by the Department.                                 
                                                                               
  Representative Therriault MODIFIED THE  MOTION to move  only                 
  the  bill from  Committee  with individual  recommendations.                 
  There being NO OBJECTION, it was so ordered.                                 
                                                                               
                                9                                              
                                                                               
                                                                               
  Representative Brown MOVED the original fiscal notes.  There                 
  being NO OBJECTION, it was so ordered.                                       
                                                                               
  CS HB 207  (FIN) was  reported out of  Committee with a  "do                 
  pass" recommendation and with fiscal notes by the Department                 
  of  Revenue  dated   3/22/95,  the  Department  of   Natural                 
  Resources dated  3/8/95,  and  a  zero fiscal  note  by  the                 
  Department of Revenue dated 2/27/95.                                         
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 10:15 A.M.                                          
                                                                               
                                                                               
                     HOUSE FINANCE COMMITTEE                                   
                         APRIL 13, 1995                                        
                            8:40 A.M.                                          
                                                                               
  TAPE HFC 95 - 84, Side 2, #000 - end.                                        
  TAPE HFC 95 - 85, Side 1, #000 - end.                                        
  TAPE HFC 95 - 85, Side 2, #000 - #217.                                       
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-Chair  Mark  Hanley called  the  House Finance  Committee                 
  meeting to order at 8:40 A.M.                                                
                                                                               
  PRESENT                                                                      
                                                                               
  Co-Chair Hanley               Representative Kohring                         
  Co-Chair Foster               Representative Martin                          
  Representative Kelly          Representative Navarre                         
  Representative Brown          Representative Parnell                         
  Representative Therriault                                                    
                                                                               
  Representative  Mulder  and Representative  Grussendorf were                 
  not present for the meeting.                                                 
                                                                               
  ALSO PRESENT                                                                 
                                                                               
  Rod  Mourant,  Staff,  Representative  Pete Kott;  Catherine                 
  Reardon,  Director,  Division  of   Occupational  Licensing,                 
  Department  of  Commerce  and  Economic  Development;  Randy                 
  Welker,    Legislative    Auditor,    Legislative   Affairs;                 
  Representative Norman Rokeberg; Patrick  Coughlin, Assistant                 
  Attorney   General,  Oil  and  Gas,  Mining  Section,  Civil                 
  Division, Department of Natural Resources;  Ken Boyd, Acting                 
  Director, Division  of Oil  and Gas,  Department of  Natural                 
  Resources.                                                                   
                                                                               
                                                                               
                               10                                              
                                                                               
                                                                               
  SUMMARY                                                                      
                                                                               
  HB 207    An Act relating to adjustments to royalty reserved                 
            to  the  state to  encourage  otherwise uneconomic                 
            production  of  oil  and   gas;  relating  to  the                 
            depositing of royalties  and royalty sale proceeds                 
            in the Alaska permanent fund; and providing for an                 
            effective date.                                                    
                                                                               
            CS HB 207 (FIN) was reported out of Committee with                 
            a "do  pass" recommendation and  with fiscal notes                 
            by the  Department of  Revenue dated  3/22/95, the                 
            Department of Natural Resources dated 3/8/95 and a                 
            zero  fiscal  notes by  the Department  of Revenue                 
            dated 2/27/95.                                                     
                                                                               
  HB 233    An Act  extending until 1999 the  termination date                 
            of the  Board of Clinical  Social Work  Examiners,                 
            Board of Marital and Family Therapy, State Medical                 
            Board, Board  of Nursing,  Board  of Nursing  Home                 
            Administrators,   Board   of    Psychologist   and                 
            Psychological  Associate  Examiners,  Real  Estate                 
            Commission,   and   Hazardous    Substance   Spill                 
            Technology  Review  Council; extending  until 1996                 
            the termination date of the Board of Marine Pilots                 
            and  the  Correctional Industries  Commission; and                 
            providing for an effective date.                                   
                                                                               
            CS HB 233 (FIN) was reported out of Committee with                 
            a  "do pass" recommendation  and with fiscal notes                 
            by  the  Department   of  Commerce  and   Economic                 
            Development   and  zero   fiscal   notes  by   the                 
            Department of Administration dated 3/20/95 and the                 
            Department of Transportation and Public Facilities                 
            dated 3/20/95.                                                     
                                                                               
  HOUSE BILL 233                                                               
                                                                               
       "An Act extending  until 1999  the termination date  of                 
       the Board of  Clinical Social Work Examiners,  Board of                 
       Marital  and Family Therapy, State Medical Board, Board                 
       of Nursing, Board of Nursing Home Administrators, Board                 
       of Psychologist and Psychological  Associate Examiners,                 
       Real Estate  Commission, and Hazardous  Substance Spill                 
       Technology  Review Council;  extending  until 1996  the                 
       termination date of  the Board of Marine Pilots and the                 
       Correctional Industries Commission;  and providing  for                 
       an effective date."                                                     
                                                                               
  Co-Chair  Hanley  indicated  that HB  233  would  extend the                 
  existence  of  numerous  boards  and  commissions which  are                 
  either  in  their sunset  or wind-down  year.   The affected                 
                                                                               
                               11                                              
                                                                               
                                                                               
  boards  and  commissions  perform  regulatory and  licensure                 
  services for the State of Alaska.  A work draft #9-LS0682\R,                 
  Lauterbach, 4/12/95,  was distributed to  Committee members.                 
  [Copy  on   file].    The  draft  extends   the  boards  and                 
  commissions to the dates recommended by the audit.                           
                                                                               
  ROD MOURANT, STAFF, REPRESENTATIVE PETE KOTT, testified that                 
  the sunset dates  on all sections match  the recommendations                 
  made by Legislative Audit.   Representative Navarre asked if                 
  complaints had been registered  regarding the board process.                 
  Mr. Mourant  did not  know of  any.   Representative Navarre                 
  noted  that  he supported  the  board changes,  although, he                 
  pointed  out   that  there   currently   exists  a   process                 
  established for a final year audit.                                          
                                                                               
  Discussion  followed  between   Representative  Martin   and                 
  Representative Navarre regarding the audit process.                          
                                                                               
  Representative  Foster  MOVED  that the  work  draft  be the                 
  version  before the  Committee.   Representative  Therriault                 
  OBJECTED, noting that he had introduced an amendment adopted                 
  at  a  previous  meeting [Amendment  #1]  which  deleted the                 
  Hazardous  Technology  Review  Council.    He remarked  that                 
  material remained  in the  work draft  currently before  the                 
  Committee.                                                                   
                                                                               
  Representative Brown noted  the letter on file from  RCAC in                 
  support of the  Council.  She  pointed out that the  Council                 
  resulted from a recommendation from  the Oil Spill Division,                 
  following Exxon Valdez and the lack of oil spill technology.                 
  Representative Therriault countered, through action taken on                 
  the operating budget,  their funding  has been deleted  from                 
  the budget thus negating the need for the council.                           
                                                                               
  Co-Chair Hanley recommended deleting Section  10 which would                 
  include the appropriate  change to  the title before  moving                 
  the work  draft.   Representative  Therriault  WITHDREW  his                 
  MOTION.    There  being  NO  OBJECTION,  it  was  withdrawn.                 
  Representative Foster MOVED the work draft excluding Section                 
                                                                               
  Representative Navarre MOVED  to delete  Section #9.   There                 
  being NO OBJECTION, it  was deleted.  Co-Chair  Hanley asked                 
  when the audits would begin.                                                 
                                                                               
  RANDY  WELKER,  LEGISLATIVE  AUDITOR,  LEGISLATIVE  AFFAIRS,                 
  stated  that the  audits  are required  by  statute and  are                 
  scheduled routinely.                                                         
                                                                               
  CATHERINE  REARDON,  DIRECTOR,   DIVISION  OF   OCCUPATIONAL                 
  LICENSING, DEPARTMENT OF  COMMERCE AND ECONOMIC DEVELOPMENT,                 
  explained Section #2, the Board of Marine Pilots.  She asked                 
                                                                               
                               12                                              
                                                                               
                                                                               
  the Committee to  consider extending that board  until 1999.                 
  There currently exists legislation in both the House and the                 
  Senate to change  the statute regarding marine  pilots which                 
  could  extend  the  marine  pilot  board  until  1999.   She                 
  repeated that it would be easiest  for the Department if all                 
  the  legislation  had the  same date.    Also, the  Board of                 
  Marine Pilots is in it's wind-down year, so at the time that                 
  the audit was prepared in 1993, Legislative Budget and Audit                 
  had recommended a four year extension.  She thought changing                 
  the date to  1999 would not be against the general advice of                 
  the audit group.  Mr. Welker agreed.                                         
                                                                               
  Representative  Navarre  MOVED  to amend  Page  1,  Line 13,                 
  deleting  "1998"  and  inserting  "1999".   There  being  NO                 
  OBJECTION, it was adopted.                                                   
                                                                               
  Representative Martin MOVED to report CS HB 233 (FIN) out of                 
  Committee  with  individual  recommendations  and  with  the                 
  accompanying fiscal notes.   There  being NO OBJECTIONS,  it                 
  was so ordered.                                                              
                                                                               
  CS HB  233 (FIN) was  reported out  of Committee with  a "do                 
  pass"   recommendations  and  with   fiscal  notes   by  the                 
  Department  of   Commerce  and  Economic   Development,  the                 
  Department  of  Education  and  zero  fiscal  notes  by  the                 
  Department   of  Administration   dated   3/20/95  and   the                 
  Department  of Transportation  and  Public Facilities  dated                 
  3/20/95.                                                                     
                                                                               
  HOUSE BILL 207                                                               
                                                                               
       An Act relating  to adjustments to royalty  reserved to                 
       the state to  encourage otherwise uneconomic production                 
       of oil and gas; relating to the depositing of royalties                 
       and royalty sale proceeds in the Alaska permanent fund;                 
       and providing for an effective date."                                   
                                                                               
  Representative Therriault MOVED to adopt  the work draft #9-                 
  GH0039\H,  Chenoweth,  4/12/95  as  the  version  before the                 
  Committee.    There  being  NO  OBJECTION, it  was  adopted.                 
  Representative Therriault summarized the changes made at the                 
  Subcommittee level.                                                          
                                                                               
  KEN  BOYD,  ACTING  DIRECTOR,  DIVISION   OF  OIL  AND  GAS,                 
  DEPARTMENT OF  NATURAL RESOURCES, commented that  the change                 
  made to  Page  3,  Section  B was  the  only  one  that  the                 
  Administration  was  not   in  support  of.     The  Knowles                 
  Administration  wants  the  floor for  the  reduction  to be                 
  established at 75%.                                                          
                                                                               
  REPRESENTATIVE  ROKEBERG   appreciated  the   Subcommittee's                 
  effort, although noted concern  with the oversight provision                 
                                                                               
                               13                                              
                                                                               
                                                                               
  indicated in Section  #3.   Representative Brown echoed  her                 
  concern  with  the   lack  of  oversight  proposed   in  the                 
  legislation.                                                                 
                                                                               
  Representative Brown explained that Amendment #1 [Attachment                 
  of the preliminary decision.   Representative Brown MOVED to                 
  adopt Amendment #1.  Representative Therriault recommended a                 
  conceptual amendment deleting "written" each time it appears                 
  in  the  amendment.     There  being  NO  OBJECTION  to  the                 
  conceptual  amendment,  it  was  adopted.     Representative                 
  Rokeberg  recommended  that  consideration of  Amendment  #2                 
  precede Amendment #1.                                                        
                                                                               
  Representative Brown  remarked that  the Amendment #1  would                 
  give the Legislature access  to the "meat" of  decisions and                 
  underlining   data.  She  pointed out, that  information, as                 
  the bill is  currently written  would be kept  confidential.                 
  Representative  Brown  urged  the  Committee  to  adopt  the                 
  amendment.    There being  NO  OBJECTIONS, Amendment  #1 was                 
  adopted.                                                                     
                                                                               
  Representative Brown MOVED to adopt Amendment #2.  She spoke                 
  to  the  amendment  in relationship  to  the  "far reaching"                 
  aspects of the  legislation.   The bill  would provide  more                 
  discretion than had previously been  given to the Department                 
  of Natural Resource's  Commissioner.   She commented on  the                 
  merit  of  providing  oversight  by  a  separate  branch  of                 
  government (Legislature)  to prevent  corruption.   Co-Chair                 
  Hanley  questioned the  legislative recourse  proposed under                 
  the amendment.  Representative Brown explained that recourse                 
  would be to allow public  comment by individual legislators.                 
  She acknowledged that the ultimate authority would rest with                 
  the Commissioner of the Department of Natural Resources.                     
                                                                               
  Representative  Therriault thought  that Amendment  #2 would                 
  create more frustration  for the  commissioner while at  the                 
  same time would  provide information  to the Legislature  on                 
  the findings and determination.                                              
                                                                               
  Representative Martin suggested  that it would  be difficult                 
  for   some   legislators   to   keep   private   information                 
  confidential.  He supported continuing  with the status quo.                 
  Representative Parnell agreed, stating that he voted against                 
  the    amendment   in    Subcommittee    for   reasons    of                 
  confidentiality.   He felt that  there would be no incentive                 
  to keep important information confidential.                                  
                                                                               
  (Tape Change, HFC 95-85, Side 1).                                            
                                                                               
  Representative Rokeberg concurred  that public oversight was                 
  needed.    He pointed  out that  he supported  Amendment #2,                 
                                                                               
                               14                                              
                                                                               
                                                                               
  although  recommended  deleting  "the  committee shall  give                 
  notice to all members of  the legislature of the committee's                 
  meeting in executive session with  the commissioner...."  He                 
  felt  with the  removal of that  language would  protect the                 
  confidentiality of  the material  while continuing  to allow                 
  Legislative  Budget  and Audit  Committee  (LBA) to  call an                 
  Executive Session.                                                           
                                                                               
  Representative  Rokeberg  spoke  strongly  in  favor of  the                 
  removal of the  sunset provision.   He indicated that  there                 
  has  been significant  testimony  that the  sunset provision                 
  would not be workable for the bill.  The process of applying                 
  for  a royalty reduction and receiving investment commitment                 
  from the private sector  would take years.  He  thought that                 
  time frame would be detractive and  with a five year sunset,                 
  destroy the intent of the bill.                                              
                                                                               
  Co-Chair Hanley asked if there had been oversight provisions                 
  in the  Oil and  Gas or  House Resource Committee  versions.                 
  Representative Rokeberg stated there were.   Before the bill                 
  moved from Committee,  the conflict of interest  between the                 
  Conservation Commission and the  commissioner was addressed.                 
  He noted that he supported the oversight capacity.  Co-Chair                 
  Hanley voiced his concern in  deleting the executive session                 
  portion.                                                                     
                                                                               
  Representative Navarre  spoke against the  sunset provision,                 
  and in particular  regarding information not made  available                 
  to legislators from the executive session.  He felt that the                 
  responsibility of the audit and the Legislature  would be to                 
  provide a check and balance for each body of government.                     
                                                                               
  Representative Parnell asked what access the Legislature had                 
  when  the  original   royalty  contracts  were   negotiated.                 
  Representative Brown  responded that the  original royalties                 
  were not negotiated.   The original royalty was  acquired in                 
  an competitive sale.  The  competitive sale process provides                 
  a great  protection for  the interests  of the  State.   She                 
  emphasized that a situation would be established through the                 
  proposed  legislation  which  would  allow  negotiations  to                 
  determine that royalty.                                                      
                                                                               
  Representative Therriault  asked if  in the current  royalty                 
  process  could be adjusted.   Representative Brown responded                 
  that  royalties could only  increase.  Mr.  Boyd agreed with                 
  Representative Brown.   He added that the  legislation would                 
  provide clear  authority to  the commissioner  to lower  the                 
  royalty.                                                                     
                                                                               
  Representative  Martin   asked  about  past   experience  in                 
  competitive sales.   Mr.  Boyd responded  once a  lease sale                 
  exists, a  provision then  exists clarifying  that royalties                 
                                                                               
                               15                                              
                                                                               
                                                                               
  could be  reduced at  some point.   He  added, a  protection                 
  within that concern, specifies that before one can receive a                 
  reduction on  a  new field,  the field  must be  delineated.                 
  That process is time consuming and would consist of drilling                 
  wells.   Mr.  Boyd concluded  that the Department  would not                 
  object to having the  legislative oversight.                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #2.                   
                                                                               
       IN FAVOR:      Navarre, Brown, Kelly                                    
       OPPOSED:       Kohring,  Martin,  Parnell,  Therriault,                 
                      Foster, Hanley                                           
                                                                               
  Representatives Mulder and Grussendorf were  not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (3-6).                                                     
                                                                               
  Representative   Brown   MOVED   to   adopt  Amendment   #3.                 
  [Attachment  #3].    She  stated  that the  amendment  would                 
  clarify  the  actual  situation  with   respect  to  appeals                 
  received by the  court.  She  added that Amendment #3  would                 
  provide a standard  of review.   Mr. Boyd responded that  an                 
  appeal would be  available with  or without the  recommended                 
  language.                                                                    
                                                                               
  Co-Chair Hanley questioned  if the precedence of  appeal had                 
  been established and if so, the language would cover all the                 
  circumstances which could occur.                                             
                                                                               
  PATRICK COUGHLIN,  ASSISTANT ATTORNEY GENERAL, OIL  AND GAS,                 
  MINING  SECTION,  CIVIL  DIVISION,  DEPARTMENT  OF   NATURAL                 
  RESOURCES,  responded  that  the language  of  the  proposed                 
  amendment  accurately reflects what the court had previously                 
  established:  "The limited right to review agency decisions,                 
  the court would  apply where there  is a provision which  is                 
  not appealable".                                                             
                                                                               
  Discussion  followed  between  Representative   Parnell  and                 
  Representative  Therriault  regarding   the  need  for   the                 
  language change.                                                             
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #3.                   
                                                                               
       IN FAVOR:      Brown                                                    
       OPPOSED:       Martin,  Navarre,  Parnell,  Therriault,                 
                      Kelly, Kohring, Hanley, Foster.                          
                                                                               
  Representatives Mulder and Grussendorf were  not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (1-8).                                                     
                                                                               
                               16                                              
                                                                               
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #4.                 
  [Attachment  #4].     Representative  Brown  explained  that                 
  Amendment #4  would provide  a  clear standard  of what  the                 
  commissioner's goals were.   She felt that  current language                 
  establishes a "vague" concept of the "best interest" for the                 
  State as the standard, whereas,  the amendment would provide                 
  that  the  natural resources  be  managed for  their maximum                 
  economic value.                                                              
                                                                               
  Co-Chair Hanley OBJECTED.  Mr. Boyd stressed that a standard                 
  could not  be met,  and that  consequently it  could not  be                 
  proven as met.   He added that  language on Page 2,  Line 8,                 
  would clarify the existing  law for older and newer  fields.                 
  That section explains that  "the field or pool would  not be                 
  otherwise economic feasible".                                                
                                                                               
  Representative  Brown  pointed  out  that  Page 4,  Line  20                 
  establishes the  standard in law at this  time.  She did not                 
  agree with Mr.  Boyd, that the standard  would be compatible                 
  in order to provide  the State a reasonable rate  of return.                 
  She pointed out that the Subcommittee members did not  agree                 
  that a rate of  return could be determined.   Representative                 
  Navarre MOVED to  amend Amendment  #4 by deleting  "maximum"                 
  and  inserting  "best".   There being  NO OBJECTION,  it was                 
  changed.                                                                     
                                                                               
  A  roll  call  was taken  on  the  MOTION  to adopt  amended                 
  Amendment #4.                                                                
                                                                               
       IN FAVOR:      Navarre, Brown                                           
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
                      Martin, Foster, Hanley                                   
                                                                               
  Representatives Mulder and Grussendorf were  not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (2-7).                                                     
                                                                               
  Representative  Brown spoke  to Amendment  #5.   [Attachment                 
  adding language to Line 5, following "shall" inserting "with                 
  the applicants  consent".   She thought  that the  amendment                 
  would provide  the  Legislature  information  regarding  the                 
  decision made  by the  commissioner.   Representative Martin                 
  OBJECTED.                                                                    
                                                                               
  Representative Rokeberg interjected  that the language would                 
  be a  redundancy that the findings and  the determination be                 
  made public.   Mr. Boyd agreed with  Representative Rokeberg                 
  although  pointed  out  that  the  amendment  would  provide                 
  additional   information   requiring   the    applicant   to                 
                                                                               
                               17                                              
                                                                               
                                                                               
  demonstrate to the public confidential data.                                 
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #5.                   
                                                                               
       IN FAVOR:      Brown                                                    
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
  Martin,                  Hanley, Foster                                      
                                                                               
  Representatives  Mulder, Grussendorf  and  Navarre were  not                 
  present for the vote.                                                        
                                                                               
  The MOTION FAILED (1-7).                                                     
                                                                               
  Representative  Brown   MOVED   to   adopt   Amendment   #6.                 
  [Attachment #6].  She stated  that Amendment #6 would change                 
  the floor from 75% to 60%.                                                   
                                                                               
  (Tape Change, HFC 95-85, Side 2).                                            
                                                                               
  Representative Brown  summarized that  75%  would provide  a                 
  royalty of 3.25%  floor and would then  set the floor  at 5%                 
  for those fields not previously producing.  She thought that                 
  would be  in the  best interested  for  the royalty  owners.                 
  Representative  Therriault OBJECTED  stating that  the price                 
  should be  negotiable and  would depend  on new  information                 
  when made  available.   Representative Rokeberg  agreed with                 
  Representative Therriault.                                                   
                                                                               
  A roll call was taken on the MOTION to adopt Amendment #6.                   
                                                                               
       IN FAVOR:      Brown                                                    
       OPPOSED:       Parnell,  Therriault,   Kelly,  Kohring,                 
                      Martin, Navarre, Foster, Hanley                          
                                                                               
  Representatives Mulder and Grussendorf were  not present for                 
  the vote.                                                                    
                                                                               
  The MOTION FAILED (1-8).                                                     
                                                                               
  Representative Parnell advised that he  had planned to offer                 
  a sunset  amendment, but  based  on Representative  Rokeberg                 
  statement, he  would hold that  proposal in order  to gather                 
  more information, and then offer it on the House floor.                      
                                                                               
  Representative Therriault MOVED  to report  CS HB 207  (FIN)                 
  out of  Committee with individual  recommendations and  with                 
  the accompanying  fiscal notes.  Representative  Brown asked                 
  if the bill had a fiscal note from the Department of Natural                 
  Resources.  Mr.  Boyd stated that  the fiscal note had  been                 
  removed in the  House Resources Committee which  amounted to                 
  $105.6  thousand  dollars.   That  amount  would pay  for  a                 
  Petroleum Engineer to provide the required in-house work.                    
                                                                               
                               18                                              
                                                                               
                                                                               
  Representative Brown referenced the reduction to the Oil and                 
  Gas Division's budget in the  Lease Sale Analysis component.                 
  She  asked  how that  reduction  would affect  the  level of                 
  professional  staff  in  the  Division  in order  to  review                 
  applications.  Mr. Boyd explained  that cuts would cause the                 
  loss of at least  one person from the team.   Representative                 
  Brown asked  the Committee's  reconsideration of the  fiscal                 
  note originally requested by the Department.                                 
                                                                               
  Representative Therriault  MODIFIED THE MOTION  to move only                 
  the  bill from  Committee  with individual  recommendations.                 
  There being NO OBJECTION, it was so ordered.                                 
                                                                               
  Representative Brown MOVED the original fiscal notes.  There                 
  being NO OBJECTION, it was so ordered.                                       
                                                                               
  CS  HB 207 (FIN)  was reported out  of Committee  with a "do                 
  pass" recommendation and with fiscal notes by the Department                 
  of  Revenue  dated   3/22/95,  the  Department   of  Natural                 
  Resources  dated  3/8/95,  and  a zero  fiscal  note  by the                 
  Department of Revenue dated 2/27/95.                                         
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting adjourned at 10:15 A.M.                                          
                                                                               
                                                                               
                               19                                              

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