Legislature(2013 - 2014)HOUSE FINANCE 519

03/29/2013 01:30 PM FINANCE


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02:01:07 PM Start
02:01:14 PM HB4
02:38:43 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Delayed to 2:00 p.m. Today --
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 4 IN-STATE GASLINE DEVELOPMENT CORP TELECONFERENCED
Heard & Held
                  HOUSE FINANCE COMMITTEE                                                                                       
                      March 29, 2013                                                                                            
                         2:01 p.m.                                                                                              
                                                                                                                                
                                                                                                                                
2:01:07 PM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Stoltze called the  House Finance Committee meeting                                                                    
to order at 2:01 p.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Alan Austerman, Co-Chair                                                                                         
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Mark Neuman, Vice-Chair                                                                                          
Representative Mia Costello                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lindsey Holmes                                                                                                   
Representative Scott Kawasaki, Alternate                                                                                        
Representative Cathy Munoz                                                                                                      
Representative Steve Thompson                                                                                                   
Representative Tammie Wilson                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative David Guttenberg                                                                                                 
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative  Mike  Hawker;   Former  Representative  Gene                                                                    
Kubina;  Joe  Michel,  Staff, Representative  Bill  Stoltze;                                                                    
Cory  Mills, Legislative  Liaison,  Department  of Law;  Joe                                                                    
Dubler, Vice  President and Chief Financial  Officer, Alaska                                                                    
Gasline  Development Corporation  and  Director of  Finance,                                                                    
Alaska Housing Finance Corporation, Department of Revenue.                                                                      
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Bonnie Harris, Civil Division, Oil,  Gas and Mining Section,                                                                    
Department   of  Law;   Stuart   Goering,  Civil   Division,                                                                    
Commercial and Fair Business Section, Department of Law.                                                                        
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 4      IN-STATE GASLINE DEVELOPMENT CORP                                                                                     
                                                                                                                                
          HB 4 was HEARD and HELD in committee for further                                                                      
          consideration.                                                                                                        
                                                                                                                                
HOUSE BILL NO. 4                                                                                                                
     "An  Act relating  to  the  Alaska Gasline  Development                                                                    
     Corporation;  making  the  Alaska  Gasline  Development                                                                    
     Corporation,  a   subsidiary  of  the   Alaska  Housing                                                                    
     Finance Corporation, an  independent public corporation                                                                    
     of  the state;  establishing  and relating  to the  in-                                                                    
     state  natural   gas  pipeline  fund;   making  certain                                                                    
     information  provided  to  or  by  the  Alaska  Gasline                                                                    
     Development  Corporation exempt  from  inspection as  a                                                                    
     public record;  relating to the Joint  In-State Gasline                                                                    
     Development  Team;  relating   to  the  Alaska  Housing                                                                    
     Finance Corporation;  relating to judicial review  of a                                                                    
     right-of-way lease or an action  or decision related to                                                                    
     the  development  or  construction  of an  oil  or  gas                                                                    
     pipeline  on state  land; relating  to the  lease of  a                                                                    
     right-of-way   for   a  gas   pipeline   transportation                                                                    
     corridor,  including  a  corridor  for  a  natural  gas                                                                    
     pipeline that  is a contract  carrier; relating  to the                                                                    
     cost   of  natural   resources,  permits,   and  leases                                                                    
     provided    to   the    Alaska   Gasline    Development                                                                    
     Corporation;  relating  to  procurement by  the  Alaska                                                                    
     Gasline  Development   Corporation;  relating   to  the                                                                    
     review  by  the  Regulatory  Commission  of  Alaska  of                                                                    
     natural gas  transportation contracts; relating  to the                                                                    
     regulation by  the Regulatory  Commission of  Alaska of                                                                    
     an in-state  natural gas pipeline project  developed by                                                                    
     the  Alaska Gasline  Development Corporation;  relating                                                                    
     to  the  regulation  by the  Regulatory  Commission  of                                                                    
     Alaska  of  an  in-state   natural  gas  pipeline  that                                                                    
     provides transportation by  contract carriage; relating                                                                    
     to  the  Alaska   Natural  Gas  Development  Authority;                                                                    
     relating to the procurement  of certain services by the                                                                    
     Alaska  Natural  Gas Development  Authority;  exempting                                                                    
     property of  a project developed by  the Alaska Gasline                                                                    
     Development Corporation from  property taxes before the                                                                    
     commencement  of commercial  operations; and  providing                                                                    
     for an effective date."                                                                                                    
                                                                                                                                
2:01:14 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze noted that the bill before the committee                                                                       
had one amendment. He noted that the revised amendment                                                                          
deleted a reference to the "days of notification."                                                                              
                                                                                                                                
Co-Chair Stoltze MOVED Amendment One 28-LS0021\R.8,                                                                             
Bullock, 3/29/13. Representative Holmes OBJECTED for                                                                            
discussion.                                                                                                                     
                                                                                                                                
     Page 4, line 23, following "state":                                                                                        
          Insert ", except that the commissioner of natural                                                                     
     resources and  the commissioner of  revenue may  not be                                                                    
     designated  to serve  on the  board unless  the project                                                                    
     for which a  license is issued under  AS 43.90 has been                                                                    
     abandoned or is no  longer receiving the inducements in                                                                    
     AS 43.90.110(a)   or   the  commissioner   of   natural                                                                    
     resources  and  the  commissioner  of  revenue  are  no                                                                    
     longer   signatories   on   a  valid   contract   under                                                                    
     AS 43.90."                                                                                                                 
                                                                                                                                
     Page 12, lines 14 - 20:                                                                                                    
          Delete "The conduct of and results from field                                                                         
     studies   and   other  technical   information;   trade                                                                    
     secrets;   and    information   that    discloses   the                                                                    
     particulars of a  business or the affairs  of a private                                                                    
     enterprise, investor, advisor,  consultant, counsel, or                                                                    
     manager  developed  or   obtained  by  the  corporation                                                                    
     relating to  the development,  financing, construction,                                                                    
     or  operation  of  an  in-state  natural  gas  pipeline                                                                    
     project by  the corporation  that, if  disclosed, could                                                                    
     cause  commercial or  competitive  harm  or damage  are                                                                    
     confidential and not subject to AS 40.25.110."                                                                             
          Insert "Information and trade secrets of the                                                                          
     corporation  are   confidential  and  not   subject  to                                                                    
     AS 40.25 if the  corporation determines that disclosure                                                                    
     would cause  commercial or  competitive harm  or damage                                                                    
     to  the corporation.   Information  that discloses  the                                                                    
     particulars of a  business or the affairs  of a private                                                                    
     enterprise, investor, advisor,  consultant, counsel, or                                                                    
     manager   that  is   developed  or   obtained  by   the                                                                    
     corporation and related  to the development, financing,                                                                    
     construction, or  operation of an in-state  natural gas                                                                    
     pipeline  project by  the  corporation is  confidential                                                                    
     and not subject to AS 40.25."                                                                                              
                                                                                                                                
     Page 38, line 29, following "state;":                                                                                      
          Insert "and"                                                                                                          
                                                                                                                                
     Page 39, lines 4 - 6:                                                                                                      
          Delete "; and                                                                                                         
                    (7)  order an expansion of an in-state                                                                      
          natural gas pipeline or order an open season                                                                          
          under the terms provided for an expansion or open                                                                     
          season in this chapter"                                                                                               
                                                                                                                                
     Page 39, line 17:                                                                                                          
          Delete "90"                                                                                                           
          Insert "30"                                                                                                           
                                                                                                                                
     Page 43, line 14:                                                                                                          
          Delete "an approved"                                                                                                  
          Insert "a"                                                                                                            
                                                                                                                                
     Page 43, line 15, following "parties":                                                                                     
          Insert ", and the formation of the precedent                                                                          
     agreement or related contract was not affected by                                                                          
     unlawful market activity or unfair dealing as                                                                              
     described in (b)(1) of this section"                                                                                       
                                                                                                                                
JOE  MICHEL, STAFF,  REPRESENTATIVE BILL  STOLTZE, explained                                                                    
the  revised  amendment.  He  began with  page  4,  line  23                                                                    
following  the   word  "state"  insert,  "except   that  the                                                                    
commissioner of  natural resources  and the  commissioner of                                                                    
revenue may not  be designated to serve on  the board unless                                                                    
the project  for which  a license is  issued under  AS 43.90                                                                    
has been abandoned or is  no longer receiving the inducement                                                                    
under  or  the commissioner  of  natural  resources and  the                                                                    
commissioner  of  revenue are  no  longer  signatories on  a                                                                    
valid contract under AS 43.90."                                                                                                 
                                                                                                                                
2:04:36 PM                                                                                                                    
                                                                                                                                
Mr. Michel  noted the  next change shown  on page  12, lines                                                                    
14-20. He stated that the  language was deleted beginning on                                                                    
line  14,  page  12.  New   language  was  inserted  stating                                                                    
"information  and  trade  secrets of  the  corporation  were                                                                    
confidential and not subject to  AS 40.25 if the corporation                                                                    
determined  that   disclosure  would  cause   commercial  or                                                                    
competitive harm or damage  to the corporation." Information                                                                    
that disclosed the particulars of  a business or the affairs                                                                    
of  a  private  enterprise,  investor,  advisor,  consultant                                                                    
council or  manager that  was developed  or obtained  by the                                                                    
corporation  and  related  to  the  development,  financing,                                                                    
construction  or   operation  of  an  instate   natural  gas                                                                    
pipeline  project by  the corporation  was confidential  and                                                                    
not subject to AS 40.25.                                                                                                        
                                                                                                                                
Mr. Michel  discussed the  next change on  page 38,  line 29                                                                    
including a drafting correction;  insert the word "and." The                                                                    
next  change seen  on page  39 lines  4-6 deleted  "and" and                                                                    
inserted  "order and  expansion  of an  instate natural  gas                                                                    
pipeline or an  open season under the terms  provided for an                                                                    
expansion or open season in this chapter."                                                                                      
                                                                                                                                
Representative Holmes  understood that similar  language was                                                                    
added on page  38 lines 9-11. She assumed  that the language                                                                    
was deleted. Mr. Michel concurred  and apologized. She noted                                                                    
that the  language was also included  on page 39 of  the CS,                                                                    
lines 5 and 6. She assumed  that the language on line 39 was                                                                    
eliminated because it was duplicative.                                                                                          
                                                                                                                                
CORY MILLS,  LEGISLATIVE LIAISON, DEPARTMENT OF  LAW, agreed                                                                    
with Representative Holmes' assessment.                                                                                         
                                                                                                                                
Mr. Michel continued with page  39, line 17 where the number                                                                    
90  was deleted  and the  number 30  was inserted.  He noted                                                                    
that page  43 the words  "an approved" were removed  and the                                                                    
letter "a" was inserted.                                                                                                        
                                                                                                                                
2:07:43 PM                                                                                                                    
                                                                                                                                
Mr.  Michel  concluded  with page  43,  line  15,  following                                                                    
"parties" the  language "and the formation  of the precedent                                                                    
agreement or  related contract was not  affected by unlawful                                                                    
market activity or unfair dealing  as described in (b)(1) of                                                                    
this section" was inserted.                                                                                                     
                                                                                                                                
2:08:10 PM                                                                                                                    
                                                                                                                                
Representative Gara  asked about the amendment  allowing for                                                                    
an expansion of the gas  pipeline and its potential conflict                                                                    
with the  Alaska Gasline Inducement Act  (AGIA) mandate that                                                                    
the state not exceed a 0.5 BCF pipeline.                                                                                        
                                                                                                                                
Ms. Mills  recommended posing the question  to Bonnie Harris                                                                    
who served as an advisor to AGIA.                                                                                               
                                                                                                                                
2:08:51 PM                                                                                                                    
                                                                                                                                
BONNIE HARRIS, CIVIL DIVISION, OIL,  GAS AND MINING SECTION,                                                                    
DEPARTMENT  OF LAW  (via  teleconference),  stated that  the                                                                    
language regarding  expansion of a pipeline  was intended to                                                                    
bind  non-competition  terms  with AGIA's  limitations.  She                                                                    
noted that  clarifying language might be  indicated, but she                                                                    
opined that the CS expressed the intent correctly.                                                                              
                                                                                                                                
Representative  Gara  recalled  a discussion  regarding  the                                                                    
extension of the Regulatory Commission  of Alaska (RCA). The                                                                    
discussion focused on potential  that a party might withhold                                                                    
information, preventing the RCA  from issuing their decision                                                                    
in a timely manner.                                                                                                             
                                                                                                                                
Ms.  Mills believed  that  the language  could  be found  in                                                                    
42.05 of  the CS. She  deferred the question to  Mr. Goering                                                                    
from the RCA.                                                                                                                   
                                                                                                                                
2:10:59 PM                                                                                                                    
                                                                                                                                
STUART   GOERING,  CIVIL   DIVISION,  COMMERCIAL   AND  FAIR                                                                    
BUSINESS  SECTION, DEPARTMENT  OF LAW  (via teleconference),                                                                    
stated that  the information  sought by  Representative Gara                                                                    
was found  in AS 42.05.433,  which clarified the  ability to                                                                    
extend time for  review of "related contracts"  if the party                                                                    
submitting them  had not furnished adequate  information. He                                                                    
mentioned a  provision in the contract  carriage certificate                                                                    
language  in  AS  42.08.330(b),  page 44  that  allowed  the                                                                    
commission to extend  the review period for  the duration of                                                                    
the delay caused by the  failure of the applicant to provide                                                                    
additional   information   reasonably    required   by   the                                                                    
commission.                                                                                                                     
                                                                                                                                
Representative Gara asked  about page 44, line  21. He asked                                                                    
if the language  in the CS required an RCA  finding that the                                                                    
pipeline be "in the public convenience and necessity."                                                                          
                                                                                                                                
2:13:25 PM                                                                                                                    
                                                                                                                                
Mr.  Goering  stated  yes.  The  finding  was  required  for                                                                    
applicants   other    than   Alaska    Gasline   Development                                                                    
Corporation (AGDC).  He noted  that AS  42.08.020, beginning                                                                    
on  page  36  of  the  CS  allowed  that  if  AGDC  was  the                                                                    
applicant,  the public  convenience  and necessity  required                                                                    
the pipeline.  He stated  that AS  42.08.330 applied  to all                                                                    
other  applicants.  The  applicant must  demonstrate  public                                                                    
convenience   and  necessity   in  order   to  receive   the                                                                    
certificate.                                                                                                                    
                                                                                                                                
Representative Gara posed  hypothetically that AGDC retained                                                                    
a  role but  contracted with  another company  to build  and                                                                    
operate a pipeline. He asked  which provision would apply in                                                                    
the situation.                                                                                                                  
                                                                                                                                
Mr.  Goering  replied  that  the   exact  structure  of  the                                                                    
business would  determine the answer.  He explained  that AS                                                                    
42.08.020  would apply  if AGDC  was the  applicant for  the                                                                    
certificate  with a  hypothetical  contract  to operate  the                                                                    
pipeline. If another entity applied  for the certificate, AS                                                                    
42.08.330 would  apply and the  application would  require a                                                                    
showing  that  the  proposed  service   was  in  the  public                                                                    
convenience and necessity.                                                                                                      
                                                                                                                                
Representative Gara  asked about the CS.  He understood that                                                                    
an AGDC  pipeline was eligible  for two possible  sources of                                                                    
funds: the  reserve fund and  bonding. He wondered  if money                                                                    
from  the  reserve  fund  was   not  subject  to  the  moral                                                                    
obligation  of  the state,  but  bonding  would incur  state                                                                    
responsibility for moral obligation.                                                                                            
                                                                                                                                
2:16:31 PM                                                                                                                    
                                                                                                                                
Co-Chair Stoltze  stated that he would  revisit the question                                                                    
following adoption of the amendment.                                                                                            
                                                                                                                                
Representative Holmes  addressed language on page  38, lines                                                                    
9-11   regarding   an   RCA  expansion.   She   noted   that                                                                    
Representative Gara  had inquired whether the  expansion was                                                                    
constrained  by  the AGIA  license.  She  believed that  any                                                                    
expansion would have  to be in accordance  with the chapter.                                                                    
She  added  that  AS  42.08.300  limited  any  expansion  in                                                                    
conflict with AGIA.                                                                                                             
                                                                                                                                
2:18:12 PM                                                                                                                    
                                                                                                                                
Representative Holmes WITHDREW  her OBJECTION. Amendment one                                                                    
was ADOPTED.                                                                                                                    
                                                                                                                                
Co-Chair  Stoltze  noted   a  discussion  about  legislative                                                                    
approval. He  did not want  legislative approval  to provide                                                                    
hindrance or  handicap. He  hoped that  legislative approval                                                                    
could  be triggered  by events.  He requested  that proposed                                                                    
amendments    address    constitutional    or    legislative                                                                    
prerogatives.                                                                                                                   
                                                                                                                                
2:20:45 PM                                                                                                                    
                                                                                                                                
Representative Holmes asked  about legislative oversight and                                                                    
prerogatives regarding  the assets  of AGDC. She  noted that                                                                    
AGDC  would be  a subsidiary  of  the state  and its  assets                                                                    
would belong  to the state.  She wondered about  the process                                                                    
if  AGDC had  a failed  open season.  Would the  legislature                                                                    
have ownership  of AGDC's assets  if an open  season failed?                                                                    
How would the state regulate AGDC if an open season failed?                                                                     
                                                                                                                                
JOE  DUBLER, VICE  PRESIDENT  AND  CHIEF FINANCIAL  OFFICER,                                                                    
ALASKA  GASLINE  DEVELOPMENT  CORPORATION  AND  DIRECTOR  OF                                                                    
FINANCE, ALASKA  HOUSING FINANCE CORPORATION,  DEPARTMENT OF                                                                    
REVENUE,  replied  that assets  belonging  to  AGDC and  the                                                                    
Alaska Housing  Finance Corporation (AHFC) also  belonged to                                                                    
the state.  The boards  of both  entities were  staffed with                                                                    
commissioners and public  members to allow the  assets to be                                                                    
managed  in  accordance with  the  state's  desires. In  the                                                                    
event  of an  open season,  all  data and  designs would  be                                                                    
property of  the state. Funds  would be transferred  back to                                                                    
the state after the corporation was dissolved.                                                                                  
                                                                                                                                
Representative Gara  understood that AGDC was  governed by a                                                                    
board that would serve with two commissioners.                                                                                  
                                                                                                                                
Mr.  Dubler  agreed and  saw  board  approval as  a  primary                                                                    
control of the corporation.                                                                                                     
                                                                                                                                
2:24:27 PM                                                                                                                    
                                                                                                                                
Representative   Gara   asked   about  a   requirement   for                                                                    
reimbursement for  transferring the state's work  product to                                                                    
a private entity.                                                                                                               
                                                                                                                                
Mr. Dubler did  not recall a requirement of  that nature. He                                                                    
did   recall  that   the  board   would  have   a  fiduciary                                                                    
responsibility to  the state to  safeguard their  assets. He                                                                    
noted that AHFC and AIDEA operated in a similar fashion.                                                                        
                                                                                                                                
2:26:30 PM                                                                                                                    
                                                                                                                                
Representative Gara  discussed the  moral obligation  of the                                                                    
state. He wondered if the  bonds would be considered a moral                                                                    
obligation if another, better project emerged.                                                                                  
                                                                                                                                
Mr. Dubler  replied no. He  explained that  the construction                                                                    
period would be financed with  different debt than the long-                                                                    
term  bonds   taken  out  for   a  construction   loan.  The                                                                    
construction  lenders  demand a  high  rate  because of  the                                                                    
completion risk assumed.                                                                                                        
                                                                                                                                
Representative Gara  asked about  moral obligation  for AGDC                                                                    
financing.                                                                                                                      
                                                                                                                                
Mr. Dubler replied that the  state was not responsible for a                                                                    
moral obligation of AGDC.  States often established separate                                                                    
corporations   for  housing   agencies   and  student   loan                                                                    
corporations  to  eliminate  possibilities  for  general  or                                                                    
moral obligations unless  chosen so by the  state. He stated                                                                    
that AGDC would be a  stand-alone corporation in Alaska. The                                                                    
state was not responsible for the debt of the subsidiary.                                                                       
                                                                                                                                
Representative  Gara  was  surprised and  comforted  by  the                                                                    
information.  He  asked  legal   counsel's  opinion  on  the                                                                    
matter.                                                                                                                         
                                                                                                                                
2:29:50 PM                                                                                                                    
                                                                                                                                
Ms.  Mills  stated  that  the issue  had  been  vetted.  The                                                                    
administration  opposed the  Capital Reserve  Fund initially                                                                    
because of  its creation of  a moral obligation.  She agreed                                                                    
with the statement made by  Mr. Dubler regarding the state's                                                                    
lack of moral obligation.                                                                                                       
                                                                                                                                
Representative  Gara requested  a letter  from the  Attorney                                                                    
General assuring the committee  that the legislature was not                                                                    
pledging the moral obligation if AGDC were to bond.                                                                             
                                                                                                                                
Ms. Mills offered to provide the requested letter.                                                                              
                                                                                                                                
2:31:22 PM                                                                                                                    
                                                                                                                                
Representative Costello  asked about the gasline  project in                                                                    
relation to Susitna.                                                                                                            
                                                                                                                                
Mr.  Dubler viewed  the two  projects as  complimentary. The                                                                    
Susitna   hydro  project   provided   electricity  for   the                                                                    
railbelt. The  natural gas would  provide an  alternative to                                                                    
electricity  when   needed.  He  mentioned  a   schedule  of                                                                    
projected gas flow and noted  that some demands would not be                                                                    
met.  Susitna  would provide  the  remainder  of the  energy                                                                    
needs for the region.                                                                                                           
                                                                                                                                
Co-Chair  Stoltze understood  that the  Susitna project  was                                                                    
evolving.                                                                                                                       
                                                                                                                                
Mr. Dubler commented that the  projections for growth in the                                                                    
railbelt  led to  anticipation of  a shortfall  in 2025  for                                                                    
total energy  usage in  the region.  He reiterated  that the                                                                    
Susitna project was complimentary to the gasline project.                                                                       
                                                                                                                                
Co-Chair  Stoltze  pointed  out   support  for  the  instate                                                                    
gasline from entities opposing the Susitna project.                                                                             
                                                                                                                                
2:34:54 PM                                                                                                                    
                                                                                                                                
Representative Thompson pointed out  that Fairbanks was part                                                                    
of the railbelt.                                                                                                                
                                                                                                                                
Mr. Dubler  appreciated the clarification. He  was unsure of                                                                    
the exact definition of "railbelt."                                                                                             
                                                                                                                                
Representative Gara  asked if the reserve  fund was required                                                                    
by AGDC to bond.                                                                                                                
                                                                                                                                
Mr.  Dubler  believed  that  AGDC  could  bond  without  the                                                                    
reserve fund.  The reserve fund provided  an additional tool                                                                    
by creating the moral obligation.  He stated that AGDC would                                                                    
revisit the  legislature with  a request  if a  reserve fund                                                                    
was  deemed necessary.  He pointed  out  that revenue  bonds                                                                    
would provide typical financing for the project.                                                                                
                                                                                                                                
Co-Chair  Stoltze  recognized   former  Representative  Gene                                                                    
Kubina for providing bagels to the committee.                                                                                   
                                                                                                                                
Representative  Mike Hawker  appreciated that  the committee                                                                    
continued to hear the bill.                                                                                                     
                                                                                                                                
2:38:43 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 2:38 p.m.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
HB 4 Amendment Stoltze R version 3-29-13.pdf HFIN 3/29/2013 1:30:00 PM
HB 4