Legislature(2009 - 2010)HOUSE FINANCE 519

02/02/2009 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved Out of Committee
Heard & Held
Heard & Held
+ Budget Overviews: TELECONFERENCED
Dept. of Environmental Conservation
Dept. of Natural Resources
Dept. of Fish & Game
                  HOUSE FINANCE COMMITTEE                                                                                       
                      February 2, 2009                                                                                          
                         1:33 p.m.                                                                                              
CALL TO ORDER                                                                                                                 
Co-Chair Stoltz  called the  House Finance Committee  meeting                                                                   
to order at 1:33:11 PM.                                                                                                       
MEMBERS PRESENT                                                                                                               
Representative Mike Hawker, Co-Chair                                                                                            
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas, Jr., Vice-Chair                                                                                     
Representative Allan Austerman                                                                                                  
Representative Harry Crawford                                                                                                   
Representative Anna Fairclough                                                                                                  
Representative Richard Foster                                                                                                   
Representative Les Gara                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Woodie Salmon                                                                                                    
MEMBERS ABSENT                                                                                                                
ALSO PRESENT                                                                                                                  
Senator  Bill Wielechowski;  Representative Nancy  Dahlstrom,                                                                   
Chair,  Joint   Armed  Services  Committee;   McHugh  Pierre,                                                                   
Liaison, Department  of Military and Veterans  Affairs; Larry                                                                   
Hartig,    Commissioner,    Department    of    Environmental                                                                   
Conservation; Tom Irwin, Commissioner,  Department of Natural                                                                   
Resources; Marty Rutherford, Deputy  Commissioner, Department                                                                   
of  Natural Resources;  Leta  Simons, Director,  Division  of                                                                   
Support  Services,  Department  of Natural  Resources;  Denby                                                                   
Lloyd, Commissioner, Department of Fish and Game                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
CSSB 77(STA)                                                                                                                    
          "An Act relating to the Joint Armed Services                                                                          
          Committee; and providing for an effective date."                                                                      
          CSSB 77(STA) was REPORTED out of Committee with a                                                                     
          "do pass" recommendation and with fiscal note #1                                                                      
          by the Legislature.                                                                                                   
HB 81     "An Act making appropriations for the operating                                                                       
          and loan program expenses  of state government, for                                                                   
          certain programs,  and to capitalize  funds; making                                                                   
          supplemental     appropriations;     and     making                                                                   
          appropriations   under   art.   IX,   sec.   17(c),                                                                   
          Constitution of the  State of Alaska; and providing                                                                   
          for an effective date."                                                                                               
          HB 81  was heard and HELD in Committee  for further                                                                   
HB 83     "An Act making appropriations for the operating                                                                       
          and  capital  expenses  of the  state's  integrated                                                                   
          comprehensive mental  health program; and providing                                                                   
          for an effective date."                                                                                               
          HB 83  was heard and HELD in Committee  for further                                                                   
1:33:45 PM                                                                                                                    
CS FOR SENATE BILL NO. 77(STA)                                                                                                
     "An Act relating to the Joint Armed Services Committee;                                                                    
     and providing for an effective date."                                                                                      
SENATOR  BILL WIELECHOWSKI,  read the  sponsor statement  for                                                                   
CSSB 77.   He explained  that the CS  for SB 77  reauthorizes                                                                   
the Joint Armed  Services Committee (JASC) which  was created                                                                   
in 1999.  At  that time Alaska was being considered  the site                                                                   
for deployment  of the  National Missal  Defense System.   In                                                                   
addition,  the   Base  Realignment  and   Closure  Commission                                                                   
(BRACC) was considering closing  vital military installations                                                                   
in Alaska.   JASC was created  for a ten-year period  to give                                                                   
the legislature  a voice  in the  national debate over  these                                                                   
issues.  JASC,  which has sixteen members that  are appointed                                                                   
by the House and Senate, has been  successful in representing                                                                   
Alaska's interests.   The committee was active  in advocating                                                                   
for  the establishment  of the  Missal Defense  Site at  Fort                                                                   
Greeley  and in protecting  Alaska's  bases during the  BRACC                                                                   
deliberations in  2005.  The  committee continues to  play an                                                                   
important role  in monitoring developments that  might affect                                                                   
the  military  in Alaska.    It  also  seeks to  protect  the                                                                   
interests  of Alaskans serving  their country.   In  May, the                                                                   
committee will  host a ceremony honoring Alaskans  who, since                                                                   
statehood, have lost their lives in combat.                                                                                     
Senator Wielechowski  reported that on January  1, 2009, JASC                                                                   
sunsets  after  ten  years.     This  bill  reauthorizes  the                                                                   
committee and makes it permanent.   The sponsors believe that                                                                   
a permanent committee  is warranted because of  the strategic                                                                   
role  that Alaska  will continue  to play  in monitoring  and                                                                   
maintaining  the  security  of  the  nation.    The  original                                                                   
version of the bill sought to  reauthorize both the committee                                                                   
and   its   homeland  security   and   emergency   management                                                                   
subcommittee.   After further discussion it was  decided that                                                                   
the  subcommittee  did  not  need to  be  reauthorized.    He                                                                   
requested that  the CS be moved  out of Committee  as quickly                                                                   
as possible.                                                                                                                    
1:36:37 PM                                                                                                                    
REPRESENTATIVE NANCY  DAHLSTROM, CHAIR, JOINT  ARMED SERVICES                                                                   
COMMITTEE,  listed the  members of the  original Joint  Armed                                                                   
Services Committee.   She emphasized  the importance  of JASC                                                                   
because of  BRACC coming up in  two years and a  major change                                                                   
in Washington.  It is unknown  how the bases will be handled.                                                                   
She  maintained   that  their  continuance  is   critical  to                                                                   
Alaska's safety and economics.                                                                                                  
Co-Chair Stoltze stated  intent to act in a  timely manner on                                                                   
the bill.  He  thought the fiscal note would not  prove to be                                                                   
a problem.                                                                                                                      
MCHUGH PIERRE,  LIAISON, DEPARTMENT OF MILITARY  AND VETERANS                                                                   
AFFAIRS,  emphasized   that  the  Department   supports  JASC                                                                   
because it is  a vehicle to move information  on the economic                                                                   
impact of  the military bases  in Alaska.  He  explained that                                                                   
DMVA works with  all commands when briefing  the legislature.                                                                   
He thanked the Committee for their support.                                                                                     
1:39:23 PM                                                                                                                    
Representative Kelly recalled  that unused funds are held and                                                                   
not  sent back  to the  general fund.   He  wondered if  that                                                                   
would change in CSSB 77.                                                                                                        
Co-Chair  Hawker  related how,  in  the past,  the  operating                                                                   
budget  did not  lapse.    Currently, the  Governor's  budget                                                                   
carries  over,  but  the  legislature's   budget  now  lapses                                                                   
Co-Chair Stoltze stated that there was no public testimony.                                                                     
1:40:38 PM                                                                                                                    
Co-Chair  Hawker MOVED  to REPORT  CSSB 77  out of  Committee                                                                   
with individual  recommendations and the  accompanying fiscal                                                                   
CSSB 77(STA) was REPORTED out  of Committee with a "do  pass"                                                                   
recommendation and with fiscal note #1  by the Legislature.                                                                     
There being NO OBJECTION, it was so ordered.                                                                                    
1:42:21 PM                                                                                                                    
HOUSE BILL NO. 81                                                                                                             
     "An  Act making  appropriations  for  the operating  and                                                                   
     loan program  expenses of state government,  for certain                                                                   
     programs, and  to capitalize funds;  making supplemental                                                                   
     appropriations;  and  making appropriations  under  art.                                                                   
     IX,  sec. 17(c),  Constitution of  the State of  Alaska;                                                                   
     and providing for an effective date."                                                                                      
HOUSE BILL NO. 83                                                                                                             
     "An  Act making  appropriations  for  the operating  and                                                                   
     capital    expenses    of   the    state's    integrated                                                                   
     comprehensive mental  health program; and  providing for                                                                   
     an effective date."                                                                                                        
Co-Chair Hawker  assumed the gavel  and began  the discussion                                                                   
of budget overviews.                                                                                                            
1:43:15 PM                                                                                                                    
LARRY  HARTIG,  COMMISSIONER,   DEPARTMENT  OF  ENVIRONMENTAL                                                                   
CONSERVATION,  provided a brief  overview of the  Department.                                                                   
He  listed  the  goals of  the  Department,  emphasizing  the                                                                   
assistance provided  to small  communities around  the state.                                                                   
He outlined the five divisions within the Department.                                                                           
Commissioner  Hartig  reported  that  there  were  about  541                                                                   
FTE's.   The  main  offices  are  in Anchorage,  Juneau,  and                                                                   
Fairbanks.  There  are 10 small offices scattered  around the                                                                   
1:45:43 PM                                                                                                                    
Commissioner  Hartig related  that  the  operating budget  is                                                                   
around $73  million for  FY09.   A large  portion of  that is                                                                   
from federal  and other funds.   The federal funds  come with                                                                   
strings attached.   He noted that the primary  portion of the                                                                   
capital  budget goes toward  funding the  Village Safe  Water                                                                   
(VSW) Program and the Municipal  Matching Grants Program.  He                                                                   
discussed a  37 percent decline  in federal revenues  for VSW                                                                   
over the last four years.  In  the FY10 budget there is a $25                                                                   
million  request to  help  supplant those  declining  federal                                                                   
revenues.   The  problem in  rural Alaska  with less  federal                                                                   
funding is meeting sanitation needs.                                                                                            
1:48:00 PM                                                                                                                    
Vice-Chair Thomas  asked if the $25 million  was general fund                                                                   
dollars  and  what the  role  of  the legislature  would  be.                                                                   
Commissioner Hartig  explained that there were  two different                                                                   
grant programs:  VSW, which is  primarily federal  funds, and                                                                   
the   Municipal  Matching   Grant,   which   is  for   larger                                                                   
communities.    The  $25  million  request  is  for  the  VSW                                                                   
program.  A large number of projects  have been identified in                                                                   
rural Alaska.   The target is  to provide primary  service of                                                                   
running water and  adequate sanitation.  About  87 percent of                                                                   
households in  rural Alaska now  have running water  and good                                                                   
sanitation.  He spoke of difficulties  accomplishing the goal                                                                   
of serving all households.  The  sites that do not have those                                                                   
services are priorities.                                                                                                        
Co-Chair Stoltze  wondered what  would happen to  the funding                                                                   
mechanism  if   a  waste  system   was  out  of   compliance.                                                                   
Commissioner  Hartig explained  that  municipal projects  are                                                                   
prioritized and that example would  have to be examined as to                                                                   
how far  down the list it  was.  Anchorage is  different from                                                                   
other  municipalities  because   it  has  more  capacity  for                                                                   
bonding.    Co-Chair   Stoltze  thought  that   was  a  scary                                                                   
proposition  and  thought  his   example  would  qualify  for                                                                   
emergency funding.                                                                                                              
1:52:19 PM                                                                                                                    
Representative  Fairclough  asked  if  different  communities                                                                   
have differing water quality standards.   Commissioner Hartig                                                                   
clarified  that the standards  are the  same statewide.   The                                                                   
standards  are  broken  into marine  water  and  fresh  water                                                                   
categories.  There are site-specific  criteria for some sites                                                                   
outside the normal process.                                                                                                     
Representative  Fairclough  referred   to  the  Ocean  Ranger                                                                   
program and wondered if the output  requirements are the same                                                                   
for  a cruise  ship  as  for drinking  water.    Commissioner                                                                   
Hartig  explained  that the  criteria  for marine  and  fresh                                                                   
water standards are  different.  He said that  for the cruise                                                                   
ships,   under   DEC's   interpretation   of   the   Citizens                                                                   
Initiative, DEC is precluded from  authorizing a mixing zone.                                                                   
He  detailed  how  a  mixing   zone  works.    Representative                                                                   
Fairclough  wondered   if  the   standards  for   salt  water                                                                   
discharge for  cruise ships are stricter than  drinking water                                                                   
standards in  Anchorage.  Commissioner  Hartig said  that the                                                                   
mixing  zone   standard  holds  cruise  ships   to  a  higher                                                                   
treatment standard.                                                                                                             
1:56:33 PM                                                                                                                    
Representative  Kelly  asked  if  a  change  in  the  law  is                                                                   
required   and  if   the  Commissioner's   hands  are   tied.                                                                   
Commissioner Hartig  said that  was correct.   The Department                                                                   
of Law  and DEC  interpret the  Initiative  to state that  it                                                                   
precludes DEC  from authorizing mixing zones  from discharges                                                                   
from cruise ships.                                                                                                              
Commissioner Hartig  related that  DEC must find  $390,000 in                                                                   
cost  savings this  year  and is  working  to identify  those                                                                   
areas.   They will most likely  be found in vacancies  and in                                                                   
travel and  not in  program cuts.   Co-Chair Hawker  asked if                                                                   
the cost savings  would be from general funds.   Commissioner                                                                   
Hartig said  yes and  thought those costs  could be  found by                                                                   
March.   Co-Chair Hawker  spoke of a  February 3  deadline of                                                                   
the  supplemental  budget.    Commissioner  Hartig  said  the                                                                   
$390,000 would appear in the supplemental as a decrement.                                                                       
1:59:28 PM                                                                                                                    
Commissioner Hartig spoke of a  net zero supplemental request                                                                   
to the FY09 budget.                                                                                                             
Commissioner Hartig  detailed the  FY10 budget which  will be                                                                   
for $74,135,000 and  have a slight increase  in the operating                                                                   
budget  due to  one  additional PFT  for  a mining  engineer.                                                                   
There is an  on-going effort, following up on  the Governor's                                                                   
directive, to  establish a climate change  subcabinet chaired                                                                   
by DEC's  Commissioner.  In order  to build a strategy  as to                                                                   
how  Alaska will  fit into  national  regulations on  climate                                                                   
change,  $184,000  in  the  Commissioner's   budget  will  be                                                                   
shifted to the  Air Quality budget.  There  are also standard                                                                   
increases from the bargaining units for negotiations.                                                                           
Co-Chair Hawker  noted an additional request  for $247,000 in                                                                   
general  funds, with $78,300  going to  replace lost  federal                                                                   
funding.    In  the  10-year  plan  there  is  a  significant                                                                   
increase  in general  funds  due to  the  decline in  federal                                                                   
funds.   Commissioner  Hartig agreed  with Co-Chair  Hawker's                                                                   
analysis.  He explained  that most of the loss  of funds will                                                                   
be from  the VSW  fund.  There  was a  37 percent decline  in                                                                   
federal funding over the last  four years.  The projection is                                                                   
for a  continuing drop of about  $10 million a  year, zeroing                                                                   
out in about 2016.                                                                                                              
2:03:24 PM                                                                                                                    
Representative Austerman asked  about the 4 cent surcharge in                                                                   
the Revenue to  Prevention account of the Response  Fund.  He                                                                   
wondered  if within  the 10-year  plan there  is evidence  of                                                                   
planning  for declining  oil  revenue.   Commissioner  Hartig                                                                   
made an  assumption that  within the  10-year plan  something                                                                   
not  yet identified  would  fill  that gap.    Representative                                                                   
Austerman  opined  that  it  is   an  issue  that  should  be                                                                   
addressed today.   Commissioner  Hartig spoke of  projections                                                                   
about the effect of the rate of  decline in production on the                                                                   
Representative  Austerman  requested information  about  cost                                                                   
recovery  as  it  relates  to   the  Response  Fund  account.                                                                   
Commissioner Hartig described  the two pieces of the response                                                                   
fund; $50 million in the Response  Account, and cost recovery                                                                   
to replenish those funds, as well as preventive measures.                                                                       
Co-Chair  Hawker spoke  of LB&A's  auditing  efforts and  the                                                                   
Department's  response.    Commissioner   Hartig  offered  to                                                                   
provide more information on that subject.                                                                                       
2:07:22 PM                                                                                                                    
Representative  Gara recalled  requests for projections  from                                                                   
DEC last year.   He wondered if there was a  shortfall in the                                                                   
Response  Fund.   Commissioner  Hartig  projected that  there                                                                   
will be a shortfall.  He referred  to a handout entitled "DEC                                                                   
Response Fund"  (copy on file) that demonstrates  a projected                                                                   
shortfall.  Representative  Gara asked if DEC  has a proposal                                                                   
yet  to adjust  the 4  cent surcharge.   Commissioner  Hartig                                                                   
replied that DEC does not have  a plan at this time, but will                                                                   
imminently.  Representative  Gara related the  history of the                                                                   
surcharge  as  it  related to  ACES  legislation.    Co-Chair                                                                   
Hawker added  that the  management of  those funds  should be                                                                   
part of the  discussion.   Commissioner Hartig  reported that                                                                   
the response  fund monies are based  on crude oil.   There is                                                                   
concern among  industry that  the monies  are being  used for                                                                   
all prevention and all response.                                                                                                
2:09:45 PM                                                                                                                    
Representative Kelly  referred to the Baseline  Budget Growth                                                                   
on page 4 of  the "Overview of 10 Year Plan"  (copy on file).                                                                   
He  questioned the  drastic increase  in  general funds  from                                                                   
FY10 to FY11 and  in other state funds from FY09  to FY10, as                                                                   
well as  the continuing loss of  federal funds.   He wondered                                                                   
what will happen  if oil stays at a low price.   Commissioner                                                                   
Hartig reiterated  that the  main reason  for an increase  in                                                                   
general  funds  and  decrease  in federal  funds  is  due  to                                                                   
changes in funding for the VSW  program.  Solutions are being                                                                   
examined.  DEC  needs to look how those services  can be more                                                                   
effectively delivered  or how a lower level  of service could                                                                   
be provided.   Systems that are easier to maintain  will need                                                                   
to  be  provided  and  communities   may  need  provide  more                                                                   
maintenance.  Additional legislation may be required.                                                                           
Representative Kelly suggested  having no backfill of federal                                                                   
funding.  He  wondered if a comparison had  been done between                                                                   
the minimum federal requirements  and state responsibilities.                                                                   
Commissioner  Hartig could not  think of  an example  where a                                                                   
state   standard  was   higher  than   a  federal   standard.                                                                   
Representative  Kelly said  his question  pertains to  law as                                                                   
well as to regulation.                                                                                                          
2:15:26 PM                                                                                                                    
Representative Joule  asked about increased costs  to install                                                                   
sanitation systems  and whether communities can  afford them.                                                                   
He  wondered   if  alternative  systems  would   be  cheaper.                                                                   
Commissioner Hartig said that  the capacity of a community to                                                                   
pay for  the system  is considered.   If the community  can't                                                                   
pay for it, another  method is considered.  He  noted that in                                                                   
the past, systems were installed that were not affordable.                                                                      
Commissioner  Hartig  reported   on  lower  cost  alternative                                                                   
Representative  Joule  requested  a  climate  change  report.                                                                   
Commissioner  Hartig spoke  of a good  relationship  with the                                                                   
legislative  committee  on  the   Climate  Impact  Assessment                                                                   
2:19:32 PM                                                                                                                    
Representative Austerman  said a plan  to deal with  the loss                                                                   
of federal funding should be made.                                                                                              
Representative  Kelly shared a  story about a  DEC inspection                                                                   
that did not  make sense.  He requested data  on inspections.                                                                   
Commissioner  Hartig  estimated  a  $2  million  increase  in                                                                   
inspection funding.  He restated  the Department's mission to                                                                   
protect the  public's health.   At this time,  the Department                                                                   
is  not  fulfilling a  statutory  duty  regarding  restaurant                                                                   
inspections.  He explained the process of inspection.                                                                           
Co-Chair  Hawker   favored  the  merits  of   revisiting  the                                                                   
2:26:08 PM                                                                                                                    
Representative  Gara shared a  story of inspection  excesses.                                                                   
Commissioner Hartig  thought there was a way  to approach the                                                                   
issue and at the same time protect the public.                                                                                  
Representative Gara wondered if  new utility services in some                                                                   
villages  cost over  $100 a  month  and if  some people  were                                                                   
declining those  services due  to the expense.   Commissioner                                                                   
Hartig agreed that  there were people who were  opting not to                                                                   
make  use  of  utilities  due   to  high  costs.    Different                                                                   
approaches  need  to be  looked  at  to solve  that  problem.                                                                   
Representative  Gara  asked  for  a grid  on  utility  costs.                                                                   
Commissioner Hartig said it was  possible that there are $100                                                                   
utility bills per  household in some areas.   He related that                                                                   
some  communities are  over optimistic  and  find out  actual                                                                   
costs when  they try  to provide utilities  themselves.    He                                                                   
offered to provide a utility expense grid.                                                                                      
2:29:29 PM                                                                                                                    
Representative  Joule  wondered how  the  development of  the                                                                   
Outer  Continental  Shelf  intersects  with  the  Department.                                                                   
Commissioner  Hartig  explained  that  development  within  3                                                                   
miles  falls   under  state   water  discharge   regulations.                                                                   
Activity   outside   of  3   miles   falls   under  the   EPA                                                                   
Vice-Chair  Thomas  asked for  information  about  sanitation                                                                   
standards at fish cleaning stations.   He was concerned about                                                                   
the disposal of carcasses.                                                                                                      
2:32:07 PM                                                                                                                    
TOM  IRWIN, COMMISSIONER,  DEPARTMENT  OF NATURAL  RESOURCES,                                                                   
referred  to  the  Department   of  Natural  Resources  (DNR)                                                                   
organization   chart  (copy   on  file).     He  stated   the                                                                   
Department's mission to "develop,  conserve, and maximize the                                                                   
use of Alaska's natural resources  consistent with the public                                                                   
interest".     He   considered  DNR   the  state's   business                                                                   
department, accountable  to the public.  He  listed the areas                                                                   
the  Department  supports  and   its  main  functions.    DNR                                                                   
currently employs over 900 people  with offices in Anchorage,                                                                   
Juneau, and Fairbanks.                                                                                                          
Commissioner  Irwin reported that  the FY09 operating  budget                                                                   
is  at $142  million,  which includes  funding  for the  AGIA                                                                   
increments.   He highlighted  the Divisions  of Oil  and Gas,                                                                   
Mining, Land, & Water, and Geological  & Geophysical Surveys.                                                                   
2:37:39 PM                                                                                                                    
Commissioner  Irwin  described  the responsibilities  of  the                                                                   
Divisions of  Forestry, Coastal  Management, Parks  & Outdoor                                                                   
Recreation,  State  Pipeline  Coordinator's  Office,  Project                                                                   
Management  & Permitting,  and the Mental  Health Trust  Land                                                                   
Commissioner  Irwin reported  that  in 2008  there was  $3.37                                                                   
billion in state revenue from  oil and gas royalties and non-                                                                   
petroleum sources.   He highlighted  the progress  in several                                                                   
areas.   There were 1700  oil and gas  leases.   He indicated                                                                   
that DNR is pro-development and  97 percent of the leases are                                                                   
proceeding  according  to  the  lease  conditions.    Current                                                                   
issues being addressed  are in Cook Inlet and  Point Thomson.                                                                   
There were 5.5  million acres under lease in 2008.   A recent                                                                   
hire to the Department was Dr. Mark Myers.                                                                                      
Commissioner  Irwin referred  to an interim  decision  on two                                                                   
leases  regarding  Point  Thomson,  which  are  currently  in                                                                   
default.   He talked  about oil  and gas  development on  the                                                                   
North Slope and royalty issues.                                                                                                 
2:42:24 PM                                                                                                                    
Commissioner Irwin  referred to  expansions by Conoco  and BP                                                                   
which will  be great for the  state.  BP will  begin drilling                                                                   
development  wells  with the  Liberty  Unit,  and Chevron  is                                                                   
exploring  in  White  Hills.    He listed  new  oil  and  gas                                                                   
exploration by  Anadarko, Chandler,  and ConocoPhillips.   He                                                                   
highlighted  new activity  in the  Cook Inlet  area.  He  was                                                                   
happy to announce  the first geothermal lease  sale since the                                                                   
80's.  He highlighted drilling  projects in the Nenana Basin.                                                                   
He noted that DNR continues to hold area-wide lease sales.                                                                      
2:44:58 PM                                                                                                                    
Commissioner  Irwin  talked about  the  Division  of Oil  and                                                                   
Gas's (DOG)  ongoing commercial  activities.  He  shared that                                                                   
there were 209 approvals issued  by DOG in 2008.  He expected                                                                   
those  to  continue even  with  the  economic downturn.    He                                                                   
shared  statistics  regarding new  explorations,  exploration                                                                   
wells and  seismic programs,  and new development  approvals.                                                                   
Petroleum  Systems  Integrity  Office  (PSIO)  held  Alaska's                                                                   
first quality management symposium.                                                                                             
Commissioner  Irwin  spoke  of   preliminary  field  work  by                                                                   
TransCanada Alaska's on the AGIA  pipeline.   DOG is on track                                                                   
to complete the  AGIA royalty inducement regulations  for gas                                                                   
valuation   and  royalty-in-kind/royalty-in-value   (RIK/RIV)                                                                   
switching.    PSIO  continues  to move  forward  on  the  gap                                                                   
2:46:38 PM                                                                                                                    
Commissioner  Irwin spoke  about the  future of Flint  Hills'                                                                   
facility  operations,  which  he considered  critical.    The                                                                   
amount  of fuel  hauled  on the  railroad  from Fairbanks  to                                                                   
Anchorage  is the  backbone of  the railroad.   This fuel  is                                                                   
competitive  in the world  of keeping  the Anchorage  Airport                                                                   
with supplies for  the 747 traffic.  It is  important for the                                                                   
backhaul  work   which  affects  tourism,  supplies   to  the                                                                   
interior, and  fuel for military  bases.  He said  the bottom                                                                   
line is  that it is important  to keep the  facility running,                                                                   
and yet respect other in-state competition.                                                                                     
2:48:52 PM                                                                                                                    
Commissioner Irwin pointed out  that DNR is working hard with                                                                   
Flint Hills on  the economics of the facility.   The railroad                                                                   
is participating.   The contentious issue was  purchasing the                                                                   
facility, which DNR has not recommended,  but has only looked                                                                   
at as an option.                                                                                                                
Co-Chair  Hawker voiced  appreciation  for  hearing that  the                                                                   
private sector has  been involved and respected.   He thought                                                                   
there  was a  lot at  risk in  bankrupting  an Alaska  Native                                                                   
owned investment for the sake of the state's railroad.                                                                          
Commissioner Irwin agreed.                                                                                                      
2:52:05 PM                                                                                                                    
Co-Chair  Stoltze  requested  that any  proposal  be  brought                                                                   
before  the legislature.   Commissioner  Irwin said that  DNR                                                                   
must  go  through  a  royalty  board  and  then  through  the                                                                   
legislature.   He  was  comfortable with  Co-Chair  Stoltze's                                                                   
statement.     Co-Chair  Stoltze  said  he   would  pursue  a                                                                   
commitment from the administration.                                                                                             
Co-Chair Hawker  said he was troubled with  Alaska Railroad's                                                                   
proposal that the state buy Flint  Hills.  Commissioner Irwin                                                                   
said that was out  of his control.  Co-Chair  Stoltze said it                                                                   
is all based on trust.                                                                                                          
2:55:15 PM                                                                                                                    
MARTY RUTHERFORD, DEPUTY COMMISSIONER,  DEPARTMENT OF NATURAL                                                                   
RESOURCES,  explained about  the  need for  oversight by  the                                                                   
Commissioner  Irwin offered  to  provide  updates.   Co-Chair                                                                   
Hawker commented on the appropriateness of that offer.                                                                          
Representative Austerman asked  for a time frame on the Flint                                                                   
Hills issue.   Commissioner Irwin  thought that at  one point                                                                   
Flint Hills  was at  foreclosure.  He  opined that  now, with                                                                   
the low oil  prices, DNR has probably "bought  six months" to                                                                   
study  this  issue.    Co-Chair  Hawker  requested  a  public                                                                   
dialogue in front of the Committee.                                                                                             
2:59:32 PM                                                                                                                    
Representative  Crawford said it  was hard to  understand how                                                                   
Flint  Hills could  be losing  money at today's  prices.   He                                                                   
requested more information about their financial status.                                                                        
Representative Gara  suggested that as a part  of the state's                                                                   
review,  an investigation  of  Flint Hill's  high gas  prices                                                                   
should be  done.   Commissioner Irwin  explained that  DNR is                                                                   
focused on  the economic issues of  the plant.  He  said that                                                                   
plants like Flint  Hills have been shut down in  the Lower 48                                                                   
due  to lack  of flexibility.   He  speculated the  direction                                                                   
that Flint  Hills is going.   He pointed  out that  there are                                                                   
two other entities, Petro Star  and Tesoro.  He explained how                                                                   
companies invest in Alaska.  He  emphasized that it is a free                                                                   
market and there are two sides to the issue.                                                                                    
Representative Gara  thought a private enterprise  might do a                                                                   
better job  with fuel pricing.   Commissioner Irwin  said the                                                                   
object  is  to  balance  the   interests.    Co-Chair  Hawker                                                                   
clarified that Flint Hills deals  predominantly with jet fuel                                                                   
and heating fuel, not gasoline.                                                                                                 
3:06:57 PM                                                                                                                    
Representative  Joule  wanted   more  information  about  the                                                                   
Department's  capital   budget,  specifically,   the  Coastal                                                                   
Impact Assessment Program.                                                                                                      
Representative  Kelly said  Flint Hills  is in his  district.                                                                   
DNR  is  looking at  Flint  Hills  in  order to  examine  the                                                                   
premium on the royalty and a Regulatory  Commission of Alaska                                                                   
decision  regarding   distance  sensitive  mileage   for  the                                                                   
tariff,  which  expires  in  2010.   He  explained  that  the                                                                   
question  Flint Hills  had was  whether it  could get  relief                                                                   
from the  high royalty  payment.   Commissioner Irwin  agreed                                                                   
that DNR  was approached  by Flint  Hills to renegotiate  the                                                                   
contract and  then DNR requested  more data.   Representative                                                                   
Kelly pointed  out that the  price of  oil in the  high $30's                                                                   
has  provided   some  relief,  but  the  topic   still  needs                                                                   
examination.  He maintained that  a natural gas pipeline into                                                                   
Fairbanks would solve the problem.   He opined that the issue                                                                   
would not  be dealt with  during this session.   Commissioner                                                                   
Irwin agreed.                                                                                                                   
3:11:18 PM                                                                                                                    
Representative  Fairclough  asked who  is  involved with  the                                                                   
land transfer from the federal  government to the state under                                                                   
the  Statehood Act.   Commissioner  Irvin said  that DNR  is.                                                                   
Representative Fairclough  asked how many acres  remain to be                                                                   
transferred.     Commissioner Irvin  read the  numbers:   for                                                                   
state  entitlements,   all  state   land  grants,   including                                                                   
territorial  grants  from the  Statehood  Act  - 105  million                                                                   
acres.   Conveyed, tentative  approval,  and patented  - 95.8                                                                   
million acres.   Remaining entitlement  - 9.9  million acres.                                                                   
That   entitlement   includes   statehood,   mental   health,                                                                   
university,  and   school  grants.    Alaska   Native  Claims                                                                   
Settlement  Act  entitlements,  as  of  December  2007  -  46                                                                   
million acres.   Interim, conveyed, and patented  - almost 39                                                                   
million.    There is  a  remaining  entitlement of  almost  7                                                                   
million.   BLM management  and  DNR staff were  able to  keep                                                                   
pace with the statehood entitlement  conveyances.  He thought                                                                   
that the  loss of  federal funds  will be  a problem  for the                                                                   
3:13:32 PM                                                                                                                    
Representative  Fairclough asked  if the  95.8 million  acres                                                                   
had already been  surveyed.  She requested the  "real number"                                                                   
of untransferred  properties to Alaska,  as well as  the plan                                                                   
that this  administration  is continuing  to push forward  or                                                                   
modify  so that  land can  be utilized.   Commissioner  Irwin                                                                   
replied  that most of  the land  has not  been surveyed.   He                                                                   
explained how it was made available to the public.                                                                              
Ms. Rutherford  offered to  provide data  on what lands  have                                                                   
been surveyed and  which had been tentatively  approved.  The                                                                   
federal  government is  responsible for  the surveying.   The                                                                   
surveying has been  stalled because of a need  for resolution                                                                   
to over selections by Native Corporations.   She termed it an                                                                   
incremental process.  Representative  Fairclough asked if the                                                                   
properties  had  to  be  surveyed  to  become  public.    Ms.                                                                   
Rutherford  said that  after the  land  has been  tentatively                                                                   
approved, there  could be a  third party interest  that would                                                                   
allow  the state  and  Native Corporations  to  use the  land                                                                   
until the survey is complete.                                                                                                   
3:16:55 PM                                                                                                                    
Representative  Fairclough wondered  what  pressure could  be                                                                   
put on the federal government  to make that land available to                                                                   
the state,  in light  of the current  economy.  She  stressed                                                                   
the  importance of  the  state having  all  of it  "allotment                                                                   
available".  Ms. Rutherford agreed  that it was time to focus                                                                   
on the survey.  Senator Stevens  put a lot of pressure on the                                                                   
BLM for  conveyance.  Now  is the time  for the  surveying to                                                                   
speed up.                                                                                                                       
Co-Chair Hawker referred to the  10-Year Plan and wondered if                                                                   
the   Park    Division's   plan   had   been    incorporated.                                                                   
Commissioner  Irwin  discussed the  problem  of  the cost  of                                                                   
parks maintenance - a $64-$65 million backlog.                                                                                  
3:20:19 PM                                                                                                                    
LETA  SIMONS,   DIRECTOR,  DIVISION   OF  SUPPORT   SERVICES,                                                                   
DEPARTMENT OF  NATURAL RESOURCES,  explained that  the Park's                                                                   
strategic plan was considered  in the 10-year plan.  Co-Chair                                                                   
Hawker asked  how much of  it was adopted.   Ms.  Simons said                                                                   
the  10-Year  Plan was  looked  at  in conjunction  with  the                                                                   
capital improvement request.   Co-Chair Hawker commented that                                                                   
it is a challenge.                                                                                                              
Representative Salmon asked for  an update on the natural gas                                                                   
pipeline.  Ms. Rutherford reported  that TransCanada did have                                                                   
a field  season.  They  did not sign  the AGIA license  until                                                                   
the first week  in December.  The fall field  season will not                                                                   
be  reimbursable.   This  winter a  126  borehole program  is                                                                   
being started.   Alaska contractors are in place.   Dr.  Mark                                                                   
Myers  was hired to  work as  the AGIA  coordinator and  will                                                                   
probably  work  with  the  Denali  group.    TransCanada  was                                                                   
required  to  relinquish  their   federal  and  state  Alaska                                                                   
Natural  Gas Transportation  System  (ANGTS) authorities  and                                                                   
permits, including  some of their  wetlands work.   They will                                                                   
be restarting all of their right of way work.                                                                                   
3:24:43 PM                                                                                                                    
Representative Fairclough spoke  of issues regarding drainage                                                                   
in the  Eagle River  Valley.   James King  had advocated  for                                                                   
more money  for parks maintenance.   She asked why  there was                                                                   
no state  parks foundation  to help with  that request.   She                                                                   
thought  it   would  be  a   perfect  opportunity   to  allow                                                                   
businesses to  provide matching money to move  parks forward.                                                                   
She requested a follow up on that  topic.  Commissioner Irwin                                                                   
agreed to do so.                                                                                                                
3:26:05 PM                                                                                                                    
DENBY  LLOYD,  COMMISSIONER,  DEPARTMENT  OF FISH  AND  GAME,                                                                   
referred  to  a  handout  labeled  "Overview  of  the  Alaska                                                                   
Department of  Fish and Game"  (copy on file).   He commented                                                                   
about the goals, mandates, and  missions of the Department of                                                                   
Fish  and Game.    He  highlighted the  phrase  "utilization,                                                                   
development,   and   conservation   of   natural   resources"                                                                   
undertaking   for  the  maximum   benefit  of  Alaskans   and                                                                   
maintained  on the "sustained  yield principle".   He  quoted                                                                   
the mission  of the  Department.   He highlighted  Department                                                                   
Commissioner Lloyd highlighted  the core services provided by                                                                   
the  Department:   harvest   management,  stock   assessment,                                                                   
customer  service,  public  involvement,  state  sovereignty,                                                                   
habitat conservation, and workforce development.                                                                                
3:31:34 PM                                                                                                                    
Commissioner  Lloyd  shared  the  activities  the  Department                                                                   
conducts in support of core services.                                                                                           
Representative   Gara  mentioned   that  the  Alaska   Energy                                                                   
Authority  (AEA)  was reviewing  applications  for  renewable                                                                   
energy  projects throughout  the  state, many  of which  have                                                                   
potential fisheries  impacts.  He wondered how  Fish and Game                                                                   
was  involved in  the review  of those  applications and  how                                                                   
they would affect the Department's work load.                                                                                   
Commissioner  Lloyd  said  that there  would  be  substantial                                                                   
increases in the Habitat Division  in order to provide timely                                                                   
and effective  permitting process.   He did  not see it  as a                                                                   
large burden on  the staffing level.  He emphasized  that the                                                                   
permitting  demands were  a priority.   He  hoped they  would                                                                   
have sufficient staff to keep up.                                                                                               
3:34:51 PM                                                                                                                    
Representative  Gara  said he  came  upon  the problem  of  a                                                                   
fishery impact by  accident.  He mentioned three  projects on                                                                   
the Kenai Peninsula.                                                                                                            
Commissioner Lloyd said he is  familiar with a number of such                                                                   
projects.  He did not currently  have an indication that more                                                                   
staff  would  be  needed for  permitting  review  of  fishery                                                                   
Co-Chair Hawker asked if Fish  and Game had been contacted by                                                                   
AEA prior to  fund recommendations.  Commissioner  Lloyd said                                                                   
he would provide those the numbers.                                                                                             
Commissioner Lloyd  described "Structure and Budget"  on page                                                                   
three of  the handout.   He reviewed  the six divisions,  the                                                                   
boards and commissions, and management of the Department.                                                                       
Commissioner  Lloyd reported that  the FY09 operating  budget                                                                   
is $180 million, from sixteen  funding sources, including $55                                                                   
million in federal  funds, $58.1 in state general  funds, and                                                                   
$26.1 million in fish and game funds.                                                                                           
3:37:25 PM                                                                                                                    
Commissioner  Lloyd said  the  Department  has 910  permanent                                                                   
full-time positions,  767 permanent part-time  positions, and                                                                   
62 non-permanent positions, totaling 1,739 positions.                                                                           
Commissioner  Lloyd  described  the FY10  budget  request  as                                                                   
totaling $180 million.   There will be a slight  reduction of                                                                   
personnel within the Department.                                                                                                
3:39:17 PM                                                                                                                    
Commissioner   Lloyd   turned   to  the   "Other   Designated                                                                   
Responsibilities  for  the  Commissioner".      Most  of  the                                                                   
Department's  responsibilities occur in  waters from  zero to                                                                   
three miles and  in inland waters.  The  federal counterparts                                                                   
are  the National  Marine  Fisheries  Service  and the  North                                                                   
Pacific Marine Fishery Management  Council.  He described the                                                                   
Department's role on management boards.                                                                                         
Co-Chair Hawker opened the meeting up to questions.                                                                             
Representative Austerman  wondered if Commissioner  Lloyd had                                                                   
asked for enough  money to get the job done.   He referred to                                                                   
a problem  with stock  assessment.   Commissioner Lloyd  said                                                                   
that there is enough  money to "do the job we're  doing", but                                                                   
there  is always  room  for improvement.    He thought  stock                                                                   
assessment  could  be  improved.     Alaska's  resources  are                                                                   
currently  being managed  on the  sustained yield  principle.                                                                   
More  benefit  could  be extracted  if  more  resources  were                                                                   
available.   He maintained that  the FY10 budget  request was                                                                   
3:42:57 PM                                                                                                                    
Representative  Austerman  followed   up  asking  about  flat                                                                   
federal funding for  the next year.  He remembered  that last                                                                   
year the  Department  had lost  federal money.   In light  of                                                                   
that fact he was  curious why the sum being  asked for wasn't                                                                   
3:43:55 PM                                                                                                                    
Commissioner  Lloyd reported  that while  the overall  budget                                                                   
remains  at $180  million, there  are  some internal  shifts.                                                                   
Last year  the Department  lost about  $7 million in  federal                                                                   
funds.  He pointed  out that many of the services  were moved                                                                   
to state  funds.   Two large  projects for  $1 million  each,                                                                   
Marine  Mammal Research  and Bering Sea  Crab Research,  were                                                                   
funded for only one year, and  the FY10 budget contains those                                                                   
requests  again.     He  reported   that  there  is   not  an                                                                   
expectation of drastic cuts in  federal funds this year or in                                                                   
future  years, so  that has not  been planned  for in  future                                                                   
Representative  Austerman said  that made  him nervous.   Co-                                                                   
Chair Hawker agreed.                                                                                                            
3:45:40 PM                                                                                                                    
Commissioner Lloyd offered to  revisit the numbers.  Co-Chair                                                                   
Hawker  reminded the Commissioner  that  the 10-Year  Plan is                                                                   
just a planning tool.                                                                                                           
Representative Salmon voiced concern  about the management of                                                                   
fish in  the Yukon River.   He wanted  to know what  kinds of                                                                   
protections are in place to preserve  fish populations there.                                                                   
Commissioner  Lloyd said he  wasn't sure  why the numbers  of                                                                   
fish   were  so   low.   He   said  the   specific   problems                                                                   
Representative Salmon  mentioned were being looked  at within                                                                   
various programs.                                                                                                               
3:48:26 PM                                                                                                                    
Representative  Salmon asked  if a hatchery  system  could be                                                                   
established in the  Yukon River.  Commissioner  Lloyd said he                                                                   
did not have specific answers to that concern.                                                                                  
Co-Chair Stoltze thought that  there was a common interest in                                                                   
fish management  among various user  groups.  He  asked about                                                                   
planned  increases in  hunting  licenses and  game tag  fees.                                                                   
Commissioner  Lloyd said  the Department  is discussing  that                                                                   
issue at this time.                                                                                                             
3:51:09 PM                                                                                                                    
Co-Chair Stoltze  questioned the  economic impact  of genetic                                                                   
stock  studies on  sport  fisheries.   He  wondered if  those                                                                   
studies   had   influenced   the    Department's   allocation                                                                   
recommendations  for the  Cook  Inlet region.    Commissioner                                                                   
Lloyd  said  that the  Department  would  not be  making  any                                                                   
allocation  recommendations  to  the  Board  of  Fish.    The                                                                   
genetic  information will  be completed  soon.  He  mentioned                                                                   
studies  involving  Susitna  River Sockeye,  which  he  hoped                                                                   
would be completed soon.  He said  the stock assessments over                                                                   
the next few years would be intensive.                                                                                          
Co-Chair Stoltze  asked where the  money came from to  hire a                                                                   
new  assistant commissioner.     Commissioner Lloyd  reported                                                                   
that the money  came from the intensive  management increment                                                                   
in the operating  budget.  Co-Chair Stoltze  thought that was                                                                   
capital budget money.  Commissioner  Lloyd stated that it was                                                                   
an operating  budget component.   Co-Chair  Stoltze asked  if                                                                   
any capital budget  money was used.  Commissioner  Lloyd said                                                                   
3:54:09 PM                                                                                                                    
Representative  Gara asked if  there was an adequate  program                                                                   
to  measure  out  migration  of smolt  on  the  Yukon  River.                                                                   
Commissioner Lloyd said there  was not a program on the Yukon                                                                   
River for  that purpose.  He  said he was referring  to adult                                                                   
escapement counts.  Representative  Gara asked why it was not                                                                   
feasible to  do. Commissioner Lloyd  said he wasn't  sure the                                                                   
technology was available for such a study.                                                                                      
Representative  Gara said  it was the  state's largest  river                                                                   
system and  he felt  it was  important to  find out  what was                                                                   
going  on with  the  fish  populations there.    Commissioner                                                                   
Lloyd offered to discuss that issue further.                                                                                    
Representative Austerman  brought up the issue  of disease in                                                                   
fish  populations.   Commissioner Lloyd  recalled that  there                                                                   
was an  unresolved problem  with freshwater occurring  fungus                                                                   
in the  Yukon.  He said  he was not  an expert and  could not                                                                   
provide much more information.                                                                                                  
3:57:52 PM                                                                                                                    
Representative  Kelly   asked  if  headway  was   being  made                                                                   
concerning  the  declining  fish  population  in  the  Yukon.                                                                   
Commissioner  Lloyd believed  the  return was  cyclical.   He                                                                   
said the Department was developing  a better understanding of                                                                   
the Yukon fisheries.                                                                                                            
Representative  Kelly spoke  of the  net sizes  and how  they                                                                   
impact  different-sized fish.   He  wondered if  that was  an                                                                   
4:01:00 PM                                                                                                                    
Commissioner Lloyd  replied that net size selectivity  is the                                                                   
subject  of several  studies.   He  said  information on  the                                                                   
topic would be available in the spring of 2010.                                                                                 
Co-Chair Hawker  asked about  the "great bison  controversy".                                                                   
Commissioner  Lloyd  answered  that  the  Department  has  an                                                                   
opportunity to reintroduce the  wood bison.  He felt that the                                                                   
provisions  that allow  for  reintroduction  of animals  into                                                                   
experimental population were already in place.                                                                                  
Co-Chair  Hawker  specifically  mentioned  the  Nenana  Basin                                                                   
natural gas  development.  Commissioner Lloyd  summarized the                                                                   
advantages of  areas being considered  as choice  habitat for                                                                   
the wood bison.                                                                                                                 
4:04:14 PM                                                                                                                    
Commissioner Lloyd  said conversations about the  Nenana area                                                                   
were occurring.   He  hoped to respond  to the concern  about                                                                   
reintroducing  the animals  and  to keep  the dialogue  alive                                                                   
with the federal government.                                                                                                    
4:06:13 PM                                                                                                                    
Representative  Crawford  shared   an  experience  in  Kodiak                                                                   
involving  bison, and  said he  did not  understand what  the                                                                   
problem  was.   Commissioner  Lloyd voiced  appreciation  for                                                                   
Representative Crawford's comment.                                                                                              
Co-Chair  Hawker   noted  a  concern  with   the  ability  of                                                                   
environmental  groups  to intervene.    Representative  Kelly                                                                   
agreed that the issue needs to be clearly solved.                                                                               
The meeting was adjourned at 4:08 PM.                                                                                           

Document Name Date/Time Subjects
CS for SB 77 Sponsor Statement.doc HFIN 2/2/2009 1:30:00 PM
SB 77
ADF&G Oveview.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
FISH&GAME_10 year plan.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
NATURALRESOURCES_Plan 2009.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
DNR Org Chart Feb09.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
DEC 10 Year Plan.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
DEC PERP AnnualReport_FY08.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
DEC Response Fund 1.26.09.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
DEC Rural Alaska Sanitation 1 26 09.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
Water and Sewer Service Rates 2.9.09.pdf HFIN 2/2/2009 1:30:00 PM
HB 81
Rep Hawker response 2 17 09.pdf HFIN 2/2/2009 1:30:00 PM
HB 81