Legislature(2015 - 2016)HOUSE FINANCE 519

04/13/2015 01:30 PM FINANCE

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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Heard & Held
Heard & Held
Moved HB 154 Out of Committee
Moved CSHB 123(JUD) Out of Committee
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                  HOUSE FINANCE COMMITTEE                                                                                       
                      April 13, 2015                                                                                            
                         1:34 p.m.                                                                                              
1:34:58 PM                                                                                                                    
CALL TO ORDER                                                                                                                 
Co-Chair  Thompson   called  the  House   Finance  Committee                                                                    
meeting to order at 1:34 p.m.                                                                                                   
MEMBERS PRESENT                                                                                                               
Representative Steve Thompson, Co-Chair                                                                                         
Representative Dan Saddler, Vice-Chair                                                                                          
Representative Bryce Edgmon                                                                                                     
Representative Les Gara                                                                                                         
Representative Lynn Gattis                                                                                                      
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
Representative Cathy Munoz                                                                                                      
Representative Lance Pruitt                                                                                                     
Representative Tammie Wilson                                                                                                    
MEMBERS ABSENT                                                                                                                
Representative Mark Neuman, Co-Chair                                                                                            
ALSO PRESENT                                                                                                                  
Heather  Shadduck, Staff,  Senator Pete  Kelly; Joe  Michel,                                                                    
Staff,  Representative  Steve  Thompson;  Cynthia  Franklin,                                                                    
Director,  Alcoholic Beverage  Control Board,  Department of                                                                    
Commerce, Community  and Economic Development;  Nancy Meade,                                                                    
General  Counsel,  Alaska  Court  System;  Denise  Daniello,                                                                    
Executive Director,  Alaska Commission on Aging;  Tim Clark,                                                                    
Staff,  Representative Bryce  Edgmon;  Jane Pierson,  Staff,                                                                    
Representative   Steve   Thompson;   Fred   Parady,   Deputy                                                                    
Commissioner,   Department  of   Commerce,  Community,   and                                                                    
Economic  Development;  Nick   Szymoniak,  Finance  Officer,                                                                    
Energy  Development,   Alaska  Industrial   Development  and                                                                    
Export   Authority;   Gene  Therriault,   Deputy   Director,                                                                    
Statewide   Energy   Policy   Development,   Alaska   Energy                                                                    
Authority,  Department of  Commerce, Community  and Economic                                                                    
PRESENT VIA TELECONFERENCE                                                                                                    
Leif  Able,  Self,  Kasilof;  Patrick  Reinhart,  Governor's                                                                    
Council  on Disabilities  and Special  Education, Anchorage;                                                                    
Nikole  Nelson, Executive  Director, Alaska  Legal Services,                                                                    
Anchorage;  Patrice Lee,  Self,  Fairbanks; Merrick  Peirce,                                                                    
Self,  Fairbanks;   Pamela  Throop,  Self,   Fairbanks;  Jim                                                                    
Dodson,   Fairbanks    Economic   Development   Corporation,                                                                    
Fairbanks;  Jomo  Stewart,  Fairbanks  Economic  Development                                                                    
Corporation,  Fairbanks; Lisa  Herbert, Executive  Director,                                                                    
Greater  Fairbanks  Chamber  of Commerce,  Fairbanks;  Derek                                                                    
Miller,  Fairbanks  Chamber  of  Commerce,  Fairbanks;  Luke                                                                    
Hopkins, Mayor, Fairbanks Northstar Borough.                                                                                    
HB 105    AIDEA: BONDS;PROGRAMS;LOANS;LNG PROJECT                                                                               
          HB  105  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
HB 123    ESTABLISH MARIJUANA CONTROL BOARD                                                                                     
          CSHB 123(JUD)  was REPORTED out of  committee with                                                                    
          a   "do   pass"   recommendation  and   with   two                                                                    
          previously  published  fiscal  impact  notes:  FN2                                                                    
          (ADM) and FN3 (CED).                                                                                                  
HB 154    CIVIL LEGAL SERVICES FUND                                                                                             
          HB 154  was REPORTED out  of committee with  a "do                                                                    
          pass"  recommendation  and   with  one  previously                                                                    
          published zero fiscal note: FN1 (AJS).                                                                                
HB 190    MEDICAID REFORM/FRAUD/ER USE/STUDIES                                                                                  
          HB  190  was  HEARD  and  HELD  in  committee  for                                                                    
          further consideration.                                                                                                
SB 26     BUDGET: CAPITAL                                                                                                       
          SB 26 was HEARD and  HELD in committee for further                                                                    
1:35:13 PM                                                                                                                    
HOUSE BILL NO. 190                                                                                                            
     "An  Act  relating  to   a  medical  assistance  reform                                                                    
     program; relating  to the duties  of the  Department of                                                                    
     Health  and   Social  Services;   establishing  medical                                                                    
     assistance  demonstration projects;  relating to  civil                                                                    
     penalties  for medical  assistance  fraud; relating  to                                                                    
     studies  by   the  Department  of  Health   and  Social                                                                    
     Services;  relating  to cost-containment  measures  for                                                                    
     medical  assistance;  and  providing for  an  effective                                                                    
1:36:20 PM                                                                                                                  
HEATHER SHADDUCK, STAFF, SENATOR PETE KELLY, read from a                                                                        
prepared statement:                                                                                                             
     HB  190   begins  the  process   of  reform   and  cost                                                                    
     containment  needed to  slow the  growth of  the Alaska                                                                    
     Medicaid program.   Medicaid has grown  to $1.8 Billion                                                                    
     of the  annual operating budget, and  has accounted for                                                                    
     22%  of  the total  UGF  increases  over the  last  ten                                                                    
     years.   The  current and  former administrations  have                                                                    
     testified the  Medicaid program,  as it stands,  is not                                                                    
     sustainable.   Low oil prices  and billions  of dollars                                                                    
     in revenue shortfalls  have forced us to  change how we                                                                    
     do business.   In July 2013, the  Medicaid Budget Group                                                                    
     of  the  Department  of   Health  and  Social  Services                                                                    
     reported the  total spending on Medicaid  services will                                                                    
     reach $6.3  billion in 2032, including  $2.8 billion in                                                                    
     state matching funds.  If we  don't act now to bend the                                                                    
     growth curve  of Medicaid, many  of our  most venerable                                                                    
     Alaskans will be without  critical health care services                                                                    
     they need.                                                                                                                 
Ms. Shadduck provided a sectional analysis (copy on file)                                                                       
of the bill. She read from the document:                                                                                        
     Section  1:   Adds  new  sections   establishing  civil                                                                    
     penalties for  false claims for medical  assistance and                                                                    
     authorizing  the   Department  of  Health   and  Social                                                                    
     Services  (the  department)  to asses  civil  penalties                                                                    
     against medical assistance providers.                                                                                      
Ms. Shadduck noted that Section 1  was found on page 1, line                                                                    
7 of the  bill and commented that every  dollar averted from                                                                    
fraud  translated into  more money  available  to serve  the                                                                    
"most vulnerable" citizens.                                                                                                     
Ms. Shadduck turned to Section 2  that began on page 3, line                                                                    
5 of the legislation:                                                                                                           
     Section  2:   Requires  the  Department  of Health  and                                                                    
     Social Services (the department)  to design, adopt, and                                                                    
     implement  a   medical  assistance   (Medicaid)  reform                                                                    
     program. Requires the department  to prepare and submit                                                                    
     a report  about reforms, savings, and  costs related to                                                                    
     the  Medicaid program.   Provides  for a  definition of                                                                    
Ms.  Shadduck explained  that subsection  (a) mandated  that                                                                    
the reform program  must include ten items.  She read number                                                                    
one from the legislation:                                                                                                       
     (1)   referrals  to   community   and  social   support                                                                    
     services,  including  career   and  education  training                                                                    
     services available through the  Department of Labor and                                                                    
     Workforce  Development under  AS 23.15,  the University                                                                    
     of Alaska, or other sources;                                                                                               
Ms. Shadduck related  that the state had a  multitude of job                                                                    
training  available  through  its  job  centers,  vocational                                                                    
rehabilitation offices,  Workforce Investment  Act programs,                                                                    
vocational training programs, and support from non-profits.                                                                     
Ms. Shadduck continued beginning with item two:                                                                                 
     (2)   distribution  of   an   explanation  of   medical                                                                    
     assistance  benefits  to  recipients  for  health  care                                                                    
     services received under the program;                                                                                       
     (3)  expanding  the  use of  telemedicine  for  primary                                                                    
     care, behavioral health, and urgent care;                                                                                  
     (4)   enhancing   fraud  prevention,   detection,   and                                                                    
     (5)  reducing the  cost of  behavioral health,  senior,                                                                    
     and  disabilities services  provided  to recipients  of                                                                    
     medical   assistance  under   the   state's  home   and                                                                    
    community-based services waiver under AS 47.07.045;                                                                         
Ms. Shadduck  detailed that  number five  related to  a 1915                                                                    
"K"  or  "I"  option  [federal  regulation  related  to  the                                                                    
Community  Choice  Act]  which  was a  way  to  enhance  the                                                                    
current  federal match  from 50  percent to  56 percent  for                                                                    
option "K"  and no federal  match to  a match of  50 percent                                                                    
for option  "I". The options were  eligible for telemedicine                                                                    
for individuals receiving home care.                                                                                            
Ms. Shadduck continued to read:                                                                                                 
     (6) pharmacy initiatives;                                                                                                  
     (7) enhanced care management;                                                                                              
Ms.  Shadduck defined  that  enhanced  care management  were                                                                    
methods that  taught individuals  how to use  the healthcare                                                                    
system.  She noted  that Medicaide  recipients often  needed                                                                    
guidance  on  how to  approach  healthcare.  She added  that                                                                    
enhanced care  management did not detract  from preventative                                                                    
care and  included primary  healthcare, vaccines,  flu shots                                                                    
and all other appropriate care.                                                                                                 
Ms. Shadduck moved to the next item on line 22:                                                                                 
     (8)  redesigning the  payment  process by  implementing                                                                    
     fee  agreements  based  on  performance  measures  that                                                                    
     include  premium  payments  for centers  of  excellence                                                                    
     according   to  nationally   acceptable  criteria   and                                                                    
     penalties    for    hospital    acquired    infections,                                                                    
     readmissions, and failures of outcomes;                                                                                    
Ms.  Shadduck  related that  the  Department  of Health  and                                                                    
Social Services (DHSS) would study  the use of bundled rates                                                                    
for physicians  and diagnosis related groups  for hospitals.                                                                    
She   exemplified  that   the  provision   would  foster   a                                                                    
streamlined approach  instead of  the fee for  service model                                                                    
resulting  in one  bundled rate  for a  procedure such  as a                                                                    
knee  replacement. Alaska  was one  of the  only states  not                                                                    
currently using the practice in its Medicaid program.                                                                           
Ms. Shadduck turned to the following items:                                                                                     
     (9) stakeholder  involvement in setting  annual targets                                                                    
     for quality and cost-effectiveness;                                                                                        
     (10)  to  the  extent   consistent  with  federal  law,                                                                    
     reducing  travel  costs  by requiring  a  recipient  to                                                                    
     obtain  medical   services  in  the   recipient's  home                                                                    
     community,  to  the  extent  appropriate  services  are                                                                    
     available in the recipient's home community.                                                                               
Ms. Shadduck stated  that travel costs needed  to be reduced                                                                    
where possible.  She pointed to incidences  of consolidating                                                                    
different needs within one family  to make one trip to cover                                                                    
various   appointments  as   one   example.  She   addressed                                                                    
subsection (b) beginning on page  3, line 31 that related to                                                                    
the  department's improvements  in  access to  telemedicine.                                                                    
She  related that  the  state's  willingness to  collaborate                                                                    
with  the Alaska  Native Tribal  Health Consortium  (ANTHC),                                                                    
which   had   an   "extensive"  network   for   telemedicine                                                                    
throughout  the  state  to increase  access.  She  moved  to                                                                    
subsection c on page 7  of the bill. The subsection required                                                                    
that DHSS  submit a report  to the  legislature on or before                                                                    
October  15  of each  year  that  contained everything  that                                                                    
legislators needed  to monitor for continuing  reform of the                                                                    
Medicaid   system.  She   listed   some   of  the   required                                                                    
information:  realized  cost   savings  related  to  reform;                                                                    
realized  cost  savings  undertaken  by  the  department;  a                                                                    
statement  of  whether  DHSS  had  met  annual  targets  for                                                                    
quality   and    cost-effectiveness;   recommendations   for                                                                    
legislative  or  budgetary  changes:  impacts  from  federal                                                                    
laws; and  the results of demonstration  projects. She noted                                                                    
that subsection (d) [page 5,  line 10] provided a definition                                                                    
for telemedicine.                                                                                                               
Ms. Shadduck cited Section 3 located  on page 5, line 15 and                                                                    
     Section 3:  Requires the department to design and                                                                          
     implement a demonstration project to reduce nonurgent                                                                      
     use of emergency departments by Medicaid recipients.                                                                       
Ms. Shadduck  remarked that the provision  enhanced what the                                                                    
department  had   already  done  with   its  "super-utilizer                                                                    
program" for individuals using the  ER for primary care. The                                                                    
program  directed individuals  to  the  appropriate type  of                                                                    
care or  provider. She noted  that subsection (5)on  page 6,                                                                    
line  1  delineated  a  process  for  referring  a  frequent                                                                    
emergency room  user (or super-utilizer)  to a  primary care                                                                    
provider within 96 hours after  an emergency room (ER) visit                                                                    
directed  at. The  program  included  strict guidelines  for                                                                    
prescribing  narcotics and  a  prescription drug  monitoring                                                                    
program. She  continued with  Section 4 on  page 6,  line 12                                                                    
and read:                                                                                                                       
     Section 4:  Requires the department and the attorney                                                                       
     general to annually prepare a report regarding fraud                                                                       
     prevention, abuse, prosecution, and vulnerabilities in                                                                     
     the Medicaid program.                                                                                                      
Ms.  Shadduck directed  attention to  Section 5  on page  7,                                                                    
line 6:                                                                                                                         
     Section 5:   Requires the department to  develop one or                                                                    
     more  managed  care  or case  management  demonstration                                                                    
     projects through  a contract with  a third party.   The                                                                    
     managed care program would  be for individuals enrolled                                                                    
     in all Medicaid programs.                                                                                                  
Ms. Shadduck examined  subsection (a) [page 7,  line 9]. She                                                                    
shared  that Alaska  was one  of seven  states that  did not                                                                    
utilize a "managed health  plan" within Medicaid. Recipients                                                                    
would  be managed  by traditional  insurance carriers,  i.e.                                                                    
Aetna or  Premera. Improved outcomes  and more "one  on one"                                                                    
care  were cited  as  benefits of  the  managed health  care                                                                    
model. The provision  included comprehensive care management                                                                    
and  care coordination.  She  exemplified  a pregnant  woman                                                                    
enrolled  in  the  Denali  Kidcare   Program  who  would  be                                                                    
assigned  a primary  care case  manager  and would  check-in                                                                    
regularly with  the manager, in order  to build relationship                                                                    
and  trust.   The  relationship   enabled  the   manager  to                                                                    
encourage healthy  behavior for  the most  positive outcome.                                                                    
The  program  was  focused  on the  whole  person  and  also                                                                    
required  individual  and  family support  and  referral  to                                                                    
community  and  social  support services,  including  career                                                                    
1:49:23 PM                                                                                                                    
Ms. Shadduck noted  subsection (b) starting on  page 7, line                                                                    
29  that required  the department  to  enter into  contracts                                                                    
with one or more  third-party administrators for the managed                                                                    
care program.  Subsection (c),  on page  8, line  5 outlined                                                                    
the  requirements   for  services   and  fees   between  the                                                                    
department  and the  third  party  administrator. She  added                                                                    
that  Subsection  (d)  [on  page 8  line  12]  mandated  the                                                                    
department to  include additional cost-saving  measures that                                                                    
included  innovations  through  a demonstration  project  by                                                                    
reducing  travel through  the expanded  use of  telemedicine                                                                    
for   primary   care.   The  subsection   also   "simplified                                                                    
administrative    procedures   for    providers,   including                                                                    
streamlined  audit,  payment,   and  stakeholder  engagement                                                                    
procedures." She turned to Section 6 on page 8, line 20:                                                                        
     Section 6:  Requires the  department to conduct a study                                                                    
     analyzing  the   feasibility  of   privatizing  certain                                                                    
Ms. Shadduck  reminded the committee  that before  any state                                                                    
service  can  be  privatized a  feasibility  study  must  be                                                                    
performed. The  provision was aimed at  the Alaska Pioneers'                                                                    
Homes,   the  Alaska   Psychiatric  Institute,   and  select                                                                    
facilities of  the Division of  Juvenile Justice  (DJJ). She                                                                    
expounded  that  the  studies  would  be  tailored  for  the                                                                    
specific service.  She exemplified that the  division had an                                                                    
underutilized  facility  in  Nome  where  the  Norton  Sound                                                                    
Health  Corporation  also  operated.  The  state's  facility                                                                    
could  be  handed   over  to  Norton  Sound  to   run  as  a                                                                    
residential  psychiatric  treatment  center,  thus  avoiding                                                                    
forcing  juveniles  to  leave their  community  and  receive                                                                    
"culturally  relevant  care"  paid  for with  a  50  percent                                                                    
Medicaid funding  match instead  of the 100  percent general                                                                    
fund  costs incurred  at DJJ  facilities. She  remarked that                                                                    
the three entities listed employed 1,192 state employees.                                                                       
Ms. Shadduck continued with Sections  7, beginning on page 8                                                                    
line 30:                                                                                                                        
     Section 7:  Requires the  department to amend the state                                                                    
     Medicaid plan  and apply for  any waivers  necessary to                                                                    
     implement the  projects and  programs described  in the                                                                    
     bill.   Requires the Commissioner of  Health and Social                                                                    
     Services to certify to the  reviser of statutes federal                                                                    
     approval of specified measures.                                                                                            
Ms. Shadduck moved to Section 8 [page 9 line 10]:                                                                               
     Section 8:  Allows  the department to adopt regulations                                                                    
     necessary  to implement  the changes  made by  the Act.                                                                    
     The regulations  may not take  effect before  the dates                                                                    
     the relevant provision of the Act takes effect.                                                                            
Ms. Shadduck cited Section 9 located on page 9, line 18:                                                                        
     Section 9:  Conditional effects.                                                                                           
Ms.  Shadduck explained  that conditional  effects protected                                                                    
the  department from  having to  follow a  law in  the event                                                                    
that  the federal  government did  not authorize  a specific                                                                    
state   plan   or   amendments    or   waiver   needed   for                                                                    
implementation.  She  identified   Sections  10  through  14                                                                    
[beginning on page 10, line 7] and read:                                                                                        
     Sections 10  - 14:   Provides  for effective  dates for                                                                    
     provisos that  require waiver and state  plan amendment                                                                    
     approvals from  the United States Department  of Health                                                                    
     and Human Services.                                                                                                        
Ms. Shadduck cited the final section [page 10, line 22]:                                                                        
     Section 15:   Provides an immediate  effective date for                                                                    
     sections 6, 7, and 8.                                                                                                      
HB  190  was  HEARD  and   HELD  in  committee  for  further                                                                    
CSSB 26(FIN)                                                                                                                  
     "An Act  making and amending  appropriations, including                                                                    
     capital  appropriations,  supplemental  appropriations,                                                                    
     reappropriations,  and   other  appropriations;  making                                                                    
     appropriations    to     capitalize    funds;    making                                                                    
     appropriations under art.  IX, sec. 17(c), Constitution                                                                    
     of the State of  Alaska, from the constitutional budget                                                                    
    reserve fund; and providing for an effective date."                                                                         
JOE MICHEL,  STAFF, REPRESENTATIVE STEVE  THOMPSON, provided                                                                    
a brief summary of SB 26.  He relayed that the bill included                                                                    
$113.331  million  in  unrestricted general  funds,  $56.325                                                                    
million  in designated  general  funds,  $62.733 million  of                                                                    
other  state  funds,  and   $1.275.642  billion  in  federal                                                                    
SB  26  was   HEARD  and  HELD  in   committee  for  further                                                                    
HOUSE BILL NO. 123                                                                                                            
     "An  Act  establishing  the  Marijuana  Control  Board;                                                                    
     relating  to the  powers and  duties  of the  Marijuana                                                                    
     Control  Board; relating  to the  appointment, removal,                                                                    
     and  duties of  the director  of the  Marijuana Control                                                                    
     Board;  relating  to  the  Alcoholic  Beverage  Control                                                                    
     Board; and providing for an effective date."                                                                               
CYNTHIA  FRANKLIN,  DIRECTOR,   ALCOHOLIC  BEVERAGE  CONTROL                                                                    
BOARD,  DEPARTMENT  OF   COMMERCE,  COMMUNITY  AND  ECONOMIC                                                                    
DEVELOPMENT,  discussed the  legislation. She  reported that                                                                    
HB 123 created  a five member volunteer board  that would be                                                                    
housed  under  the same  agency  as  the Alcoholic  Beverage                                                                    
Control Board  (ABC). Both boards  would share  one director                                                                    
and a staff  of 16 employees statewide who  were tasked with                                                                    
licensing, enforcement, and administrative duties.                                                                              
Co-Chair Thompson OPENED public testimony.                                                                                      
Co-Chair Thompson CLOSED public testimony.                                                                                      
Representative Wilson questioned the  fiscal note. She cited                                                                    
the $756.4 thousand appropriation  for services and wondered                                                                    
what services were included.                                                                                                    
Ms.  Franklin replied  that the  budget included  an initial                                                                    
outlay of  $500,000 for technology  to track  both licensees                                                                    
and  marijuana.  She  detailed that  the  services  category                                                                    
included  a database  for licensees  and  software to  track                                                                    
marijuana. Software called "Seed  to Sale" was available and                                                                    
was designed  to track marijuana  sold in retail  outlets to                                                                    
ensure it was legally grown.  Once the software and required                                                                    
technology was implemented the costs  in the out-years would                                                                    
be reduced.                                                                                                                     
Representative  Wilson  inquired  about the  remaining  $256                                                                    
Ms. Franklin  answered that the remainder  included expenses                                                                    
for  enforcement vehicles,  office  lease  costs, and  costs                                                                    
associated with additional employees.                                                                                           
Representative  Wilson asked  whether  eventually the  board                                                                    
costs  would  be divided  by  the  number of  licensees  and                                                                    
included in the licensing fees in 2017.                                                                                         
Ms. Franklin  replied in the affirmative.  She expected that                                                                    
the board costs would be "receipt supported."                                                                                   
Representative Wilson wondered what  the estimated cost of a                                                                    
license  would  be  based on  other  states  with  legalized                                                                    
Ms. Franklin  answered that the  closest comparison  was the                                                                    
city of Denver, Colorado with  a population of 650 thousand.                                                                    
The city  issued approximately  900 marijuana  licenses. The                                                                    
city  had 37  full-time employees  at a  total cost  of $5.9                                                                    
million  to  regulate  marijuana.  The  city  had  made  $14                                                                    
million in tax revenue in 2014.                                                                                                 
2:03:11 PM                                                                                                                    
Co-Chair Thompson OPENED public testimony.                                                                                      
LEIF  ABLE, SELF,  KASILOF  (via teleconference),  supported                                                                    
the bill. He  believed that the regulatory  structure set up                                                                    
in HB  123 was  a "good idea"  for regulating  marijuana and                                                                    
associated  costs to  the state.  He felt  Ms. Franklin  had                                                                    
done a good job educating  herself about the topic and would                                                                    
perform her duties as Chair well.                                                                                               
Co-Chair Thompson CLOSED public testimony.                                                                                      
Representative  Kawasaki related  that  the bill  delineated                                                                    
the  required  background  of  potential  Marijuana  Control                                                                    
Board  members and  noted that  the  requirements for  board                                                                    
membership were more extensive than  the ABC board and asked                                                                    
why the difference existed.                                                                                                     
Ms. Franklin answered that the  composition of the ABC board                                                                    
was designated  under Title 4  rules and was limited  to two                                                                    
members from industry  and three public member;  one of whom                                                                    
must be from a rural area.  A Title 4 stakeholders group met                                                                    
and discussed  composition of the ABC  board and recommended                                                                    
revisions that  ABC board members reflected  the composition                                                                    
and requirement  of the Marijuana  Control Board.  The group                                                                    
responded  to concerns  from the  public  safety and  public                                                                    
health partners of the ABC  board to expand the requirements                                                                    
of board members.  She noted that SB  99 (ALCOHOLIC BEVERAGE                                                                    
CONTROL;  ALCOHOL  REG)  contained  the  revised  ABC  board                                                                    
designee requirements.                                                                                                          
Vice-Chair Saddler  asked how the board  would determine the                                                                    
license fees.                                                                                                                   
Ms. Franklin  answered that the  bill contained a  $5000 cap                                                                    
on  licensing  fees. She  added  that  other fee  provisions                                                                    
required  that  half  of  the  licensing  fees  must  be  be                                                                    
refunded  to  municipalities  if   a  licensed  premise  was                                                                    
located within  a municipality. She  detailed that  fees for                                                                    
alcohol  licensing  varied   from  approximately  $1,250  to                                                                    
$3500. on  a biennial (renewed  every other year)  basis and                                                                    
increases were recommended  by the Title 4  group to reflect                                                                    
the   work  and   time  associated   with  regulation.   She                                                                    
anticipated that the marijuana fees  would cost close to the                                                                    
$5000 cap  based on sister states  (Colorado and Washington)                                                                    
that  had legalized  marijuana, the  state's alcohol  liquor                                                                    
license, and  the work involved in  licensing and regulation                                                                    
in  order for  the board  to be  properly funded  by program                                                                    
Representative  Guttenberg  wondered  about the  ability  to                                                                    
track marijuana as a new  legal industry. He wondered how it                                                                    
was  possible to  track an  industry  that was  not able  to                                                                    
bank.  He  referred  to  a   National  Conference  of  State                                                                    
Legislatures (NCSL) conference  that invited representatives                                                                    
from the  banking industry  and the  state of  Colorado that                                                                    
concluded that  the marijuana  industry was  prohibited from                                                                    
banking.  He wondered  how the  legalized states  dealt with                                                                    
receiving   money  from   an  industry   that  the   federal                                                                    
government considered an illegal source.                                                                                        
Ms.  Franklin agreed  that the  banking  industry issue  was                                                                    
challenging.  She  shared   that  initially,  the  marijuana                                                                    
industry in  the state would  be "unbanked." She  noted that                                                                    
Colorado had come  up with banking solutions  for 40 percent                                                                    
of the industry and  was considered "underbanked." The state                                                                    
would   analyze   the   Colorado  solutions   for   possible                                                                    
resolutions  in  Alaska.   The  "Cole  Memorandum"  [federal                                                                    
guidance  on   marijuana  enforcement  issues]   required  a                                                                    
"strict  enforcement   scheme  that  lessens   or  minimizes                                                                    
criminal  activity" for  states with  legal recreational  or                                                                    
medical  marijuana. The  states of  Washington and  Colorado                                                                    
had  dealt with  the banking  issue by  collecting taxes  in                                                                    
cash. The state was working  with the tax division to ensure                                                                    
that if  taxes were missed  on growing operations  the state                                                                    
had  the  statutory  authority to  collect  taxes  from  any                                                                    
licensed establishment that obtained  marijuana that had not                                                                    
been taxed. She conveyed that  the statute prevented a black                                                                    
market   or  criminality   in  the   "downstream"  marijuana                                                                    
industry  (retail shops).  She  indicated that  the Seed  to                                                                    
Sale  software  tracking system  was  an  essential tool  in                                                                    
Washington and  Colorado to ensure  that the  marijuana sold                                                                    
was  legally grown.  She believed  the task  was formidable,                                                                    
but could be achieved.                                                                                                          
Representative  Guttenberg asked  whether specific  tracking                                                                    
software existed to meet Alaska's needs.                                                                                        
Ms. Franklin  answered that there  were several  options for                                                                    
the software. She referred to  software in use by Washington                                                                    
and Colorado called "Biotrack."  Twenty-two other states had                                                                    
medical  marijuana  and  used tracking  systems.  The  board                                                                    
intended  to  research  software best  suited  for  Alaska's                                                                    
Representative  Gattis  wondered  why dealing  in  cash  was                                                                    
legal   since  cash   money  was   issued  by   the  federal                                                                    
Ms. Franklin answered  that the issue of using  cash had not                                                                    
been legally challenged for use in the marijuana industry.                                                                      
Vice-Chair  Saddler wondered  how other  states tracked  the                                                                    
sale of marijuana.                                                                                                              
Ms.  Franklin  replied  that other  states  utilized  an  ID                                                                    
tagging  system.   She  explained  that  in   legal  states,                                                                    
marijuana was  grown from cuttings from  mother plants. When                                                                    
the plant  reached 8 inches  tall the plant was  tagged. The                                                                    
tag  remained with  the product  from bud,  leaf, trim,  and                                                                    
even THC  extraction and followed it  throughout its product                                                                    
life in any form via sales.                                                                                                     
2:15:35 PM                                                                                                                    
Representative   Pruitt  referred   to   the  license   fees                                                                    
contained  in the  bill. He  acknowledged that  license fees                                                                    
were determined by the board  but felt that the state should                                                                    
benefit from the value of the licenses.                                                                                         
Ms. Franklin responded that the  ABC board had the statutory                                                                    
authority under AS  1738 to determine how  to issue licenses                                                                    
or  whether  to  issue   population  limits.  The  Marijuana                                                                    
Control  Board  would  have   the  same  authority.  Alcohol                                                                    
regulation  contained  a   population  limited  system  with                                                                    
transferability.  Discussion  among  the ABC  board  on  the                                                                    
"concept of a  secondary market value" had  taken place. The                                                                    
board  had considered  the  concept of  going  with a  high-                                                                    
quality merit  based matrix system where  an applicant would                                                                    
receive  points for  meeting qualifications.  Licenses would                                                                    
be issued to the highest  quality applicants as opposed to a                                                                    
minimum qualification  system chosen by lottery  as employed                                                                    
in  Washington  State.   The  minimum  qualification  system                                                                    
potentially lead  to businesses  least likely to  succeed or                                                                    
comply with  regulations. The merit based  matrix system did                                                                    
not  limit licenses  on  the front  end.  However, AS  17.38                                                                    
clearly   established  municipalities'   authority  to   set                                                                    
numerical  limits   on  licenses.  The  combination   of  no                                                                    
population  limits   and  a   merit  based   system  without                                                                    
transferability so that the licenses  would transfer back to                                                                    
the  state in  the event  of  a business  failure was  being                                                                    
discussed among  the preliminary regulations team  and would                                                                    
be openly  and publically  debated in the  actual regulation                                                                    
Representative  Pruitt   wondered  if  the  board   had  the                                                                    
authority to  increase licensing  fees based on  the board's                                                                    
expenses if a merit based system was adopted.                                                                                   
Ms. Franklin replied that the  license selection process and                                                                    
fee rate  were intended to  be set by regulation.  She added                                                                    
that the  $5 thousand  limit on license  fees was  placed in                                                                    
the referendum  to limit the  ability of the  legislature or                                                                    
regulatory entity to institute extremely  high fees as a way                                                                    
to discourage licensure.                                                                                                        
Representative Pruitt asked for a definition of high fees.                                                                      
Ms. Franklin  indicated that  in one  state the  initial fee                                                                    
was  $25  thousand  and naturally  limited  the  ability  of                                                                    
applicants from entering the industry.  She believed if fees                                                                    
were  set "logically"  reflecting the  board's workload  and                                                                    
services, the  fee would be deemed  reasonable. She believed                                                                    
the  fee   approach  was   supportable  versus   setting  an                                                                    
arbitrarily high fee structure.                                                                                                 
Representative Pruitt  did not want a  barrier to recovering                                                                    
licensing and regulatory costs because of the cap.                                                                              
Ms.  Franklin answered  that the  initiative  stated that  a                                                                    
regulatory  body shall  implement "reasonable"  fees not  to                                                                    
exceed  $5 thousand.  She communicated  that once  the board                                                                    
and licensure  was established and  it became  apparent that                                                                    
$5 thousand would  not cover the services  required to issue                                                                    
the licenses  the board would  take appropriate  action. She                                                                    
expressed confidence that a legal  solution could be reached                                                                    
if  the cap  was inadequate  to  cover costs  and the  board                                                                    
maintained  proof of  insufficient funds.  The division  did                                                                    
not know the cost  of regulation because marijuana licensure                                                                    
was entirely  new. The  fiscal note  costs to  establish the                                                                    
board  were  initially  much higher  and  had  been  trimmed                                                                    
because  of  the  state's  fiscal  situation.  The  division                                                                    
attempted to  implement the voter  initiative in  the safest                                                                    
way  possible for  the least  amount of  money and  keep the                                                                    
second and third year  costs conservative while implementing                                                                    
the will of the voter in a fiscally conservative way.                                                                           
Representative  Pruitt  asked  the   division  to  keep  the                                                                    
legislature apprised if the fee  was not sufficient to cover                                                                    
Representative Wilson  MOVED to REPORT CSHB  123(JUD) out of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
CSHB  123(JUD) was  REPORTED  out of  committee  with a  "do                                                                    
pass"  recommendation  and  with  two  previously  published                                                                    
fiscal impact notes: FN2 (ADM) and FN3 (CED).                                                                                   
2:27:03 PM                                                                                                                    
AT EASE                                                                                                                         
2:29:23 PM                                                                                                                    
HOUSE BILL NO. 154                                                                                                            
     "An Act allowing appropriations to the civil legal                                                                         
     services fund from court filing fees."                                                                                     
2:29:38 PM                                                                                                                    
REPRESENTATIVE  BRYCE EDGMON,  SPONSOR,  explained that  the                                                                    
bill  created  a stable  funding  mechanism  for the  Alaska                                                                    
Legal Services Corporation (ALSC).   He stated that the bill                                                                    
allowed up  to 25  percent of  the filing  fees paid  to the                                                                    
Alaska  Court System  from the  previous fiscal  year to  be                                                                    
appropriated into  the existing  Civil Legal  Services Fund.                                                                    
The corporation provided legal services  to a growing number                                                                    
eligible applicants; the number  doubled from 41,000 to over                                                                    
100,000 within  30 years. The  funding sources for  ALSC was                                                                    
comprised of  state funds, local funds,  federal funds, from                                                                    
private donations,  and native organizations. He  noted that                                                                    
the bill established a stable source of state funding.                                                                          
Representative  Pruitt  wondered  how much  money  would  be                                                                    
appropriated to the fund.                                                                                                       
Representative Edgmon  replied that in the  past year, court                                                                    
filing fees amounted to $2.2  million and 25 percent equated                                                                    
to $563  thousand. He noted  that the current  year's budget                                                                    
for the corporation was cut to $450 thousand.                                                                                   
Representative  Wilson clarified  that  the legislation  did                                                                    
not appropriate  money it only authorized  the appropriation                                                                    
into the fund.                                                                                                                  
Representative  Edgmon   replied  in  the   affirmative.  He                                                                    
offered that HB 154 created the receipt authority.                                                                              
Vice-Chair Saddler  asked how often  court filing  fees were                                                                    
adjusted or changed.                                                                                                            
NANCY MEADE,  GENERAL COUNSEL, ALASKA COURT  SYSTEM, replied                                                                    
that the court  system had not increased its  filing fees in                                                                    
the  past 10  to  12  years; the  court  system  was in  the                                                                    
process of  implementing much higher fees  effective July 1,                                                                    
2015.  She noted  that  last year's  filing  fees were  $2.2                                                                    
million  and  would  increase an  additional  $1.2  million,                                                                    
which totaled $3.4 million.                                                                                                     
Co-Chair Thompson OPENED public testimony.                                                                                      
DENISE  DANIELLO, EXECUTIVE  DIRECTOR, ALASKA  COMMISSION ON                                                                    
AGING, spoke in support of  the legislation. She shared that                                                                    
the corporation served 850 seniors in the past year.                                                                            
PATRICK  REINHART, GOVERNOR'S  COUNCIL  ON DISABILITIES  AND                                                                    
SPECIAL    EDUCATION,   ANCHORAGE    (via   teleconference),                                                                    
testified  in support  of the  legislation. He  believed the                                                                    
legislation would  positively impact low  income individuals                                                                    
with disabilities. He relayed  that approximately 40 percent                                                                    
of  the  corporation's  clients were  disabled  individuals.                                                                    
Typical services  were provided for illegal  eviction due to                                                                    
disability, assistance with civil  protective orders to stop                                                                    
abuse, denial  of federal  healthcare coverage  or benefits,                                                                    
and  family  caregivers  in securing  healthcare  and  other                                                                    
domestic services. He  remarked that some clients  had to be                                                                    
turned away due to lack of funds.                                                                                               
Vice-Chair  Saddler understood  that many  of the  council's                                                                    
clients used  Alaska Legal Services and  wondered whether it                                                                    
would be  helpful if the  legislature implemented  a similar                                                                    
funding source for the Alaska Disability Law Center.                                                                            
Mr. Reinhart responded that  the agencies provided different                                                                    
types  of  legal  services  for  the  disabled.  The  Alaska                                                                    
Disability Law Center had a  different revenue source and he                                                                    
did not know the answer.                                                                                                        
NIKOLE  NELSON, EXECUTIVE  DIRECTOR, ALASKA  LEGAL SERVICES,                                                                    
ANCHORAGE  (via  teleconference),  spoke  in  favor  of  the                                                                    
legislation.  She shared  that the  agency was  a non-profit                                                                    
agency  that  provided free  legal  services  to low  income                                                                    
individuals for 45 years. The  critical civil legal services                                                                    
provided  helped to  stabilize families,  secure safety  and                                                                    
self-sufficiency and  provided access  to the  civil justice                                                                    
system. The agency assisted parents  who had been in abusive                                                                    
relationships,  families  with  domestic paperwork  such  as                                                                    
enrolling children  in school, and veterans  denied benefits                                                                    
for  disabilities.   She  expounded  that   the  corporation                                                                    
operated  with  staff  attorneys,  a  network  of  pro  bono                                                                    
attorney's,  and  its   self-help  and  community  education                                                                    
network. The  corporation served over 2,500  Alaskans in 162                                                                    
communities.  Last   year  ALSC  turned  away   hundreds  of                                                                    
families  due to  lack of  resources.  Eight-six percent  of                                                                    
ALSC   client's  cases   had   positive   results  and   the                                                                    
corporation  was   remarkably  cost  efficient.   Each  case                                                                    
averaged  $600  due  to  resolving cases  out  of  court  80                                                                    
percent of the time. She  furthered that ALSC attorneys were                                                                    
paid  well below  the market  rate.  Resources and  services                                                                    
were leveraged  in the  amount of  $500 million.  She voiced                                                                    
that ALSC helped  achieve justice for all  and urged support                                                                    
for the legislation.                                                                                                            
Co-Chair Thompson CLOSED public testimony.                                                                                      
Representative  Edgmon  corrected  that  the  bill  did  not                                                                    
create  program receipt  authority; it  established language                                                                    
to  authorize  the appropriation  of  funds  from the  court                                                                    
filing fees from the previous year.                                                                                             
Representative Wilson  thought the testimony  was confusing.                                                                    
She believed that the legislature  could appropriate as much                                                                    
money into the fund as the legislature wanted.                                                                                  
Representative  Edgmon  replied  that  the  bill  created  a                                                                    
funding mechanism for 25 percent  of court filing fees to be                                                                    
appropriated  to the  corporation. The  legislature did  not                                                                    
guarantee the  money. It provided  the legislature  with the                                                                    
authority to appropriate the money into the fund.                                                                               
Representative Wilson clarified that  the bill did not limit                                                                    
the  amount of  money that  could be  appropriated into  the                                                                    
fund above the 25 percent of court fees.                                                                                        
Representative Edgmon replied in the affirmative.                                                                               
Representative  Wilson  clarified  that  the  bill  did  not                                                                    
appropriate any money.                                                                                                          
Vice-Chair Saddler  asked whether  the sponsor was  aware of                                                                    
the court systems intent to increase its fees.                                                                                  
Representative Edgmon replied in the affirmative.                                                                               
Co-Chair  Thompson clarified  that  there  was no  guarantee                                                                    
that the court system would actually increase the fees.                                                                         
Representative   Pruitt    declared   that    currently   AS                                                                    
09.17.020(j) required  that 50  percent of  awarded punitive                                                                    
damages were  deposited into  the general  fund for  use for                                                                    
the Civil Legal  Services Fund. He wondered  why the sponsor                                                                    
was creating another fund.                                                                                                      
Representative Edgmon  replied that  the intent of  the bill                                                                    
was to  provide a more  solid, stable funding source  in the                                                                    
future given  the state's  current fiscal  difficulties than                                                                    
the  general fund  appropriation.  He expressed  uncertainty                                                                    
regarding the  level of future  funding for  the corporation                                                                    
from the general  fund. He noted that ALSC  received over $1                                                                    
million from  the state in  the 1980s  and had to  turn away                                                                    
hundreds of families due to the decline in state revenues.                                                                      
TIM  CLARK, STAFF,  REPRESENTATIVE BRYCE  EDGMON, elaborated                                                                    
that at  the time  the Alaska Legal  Services Fund  had been                                                                    
established  the capitalization  was designed  to come  from                                                                    
punitive damages.   In the  last three years, the  state had                                                                    
collected zero punitive funds and the fund was empty.                                                                           
Representative  Pruitt   identified  that   the  legislation                                                                    
allowed for  appropriations from  both the  punitive damages                                                                    
fund and  the Civil  Legal Services  Fund. He  wondered when                                                                    
the last  deposit from punitive money  was appropriated into                                                                    
the fund.                                                                                                                       
Mr. Clark replied in the  affirmative to the first question.                                                                    
He  elaborated that  the  legislation  did not  "concretely"                                                                    
appropriate  money  into  the  fund  and  only  provided  an                                                                    
authorization to appropriate. He  felt that the existence of                                                                    
the funds  and appropriation authorization  acknowledged the                                                                    
importance  of  the  services the  corporation  provided  to                                                                    
Vice-Chair Saddler wondered whether  there was more than one                                                                    
organization   that  provided   civil   legal  services   to                                                                    
Mr. Clark was not aware  of any other providers. He deferred                                                                    
the question to Alaska Legal Services.                                                                                          
Ms.   Nelson   addressed   whether  there   had   been   any                                                                    
appropriations    from    the    punitive    damages    fund                                                                    
authorization.  She   answered  that  there  had   been  one                                                                    
appropriation of  $110,000 in  2011 from  the years  2007 to                                                                    
2011.   Secondly,  she   replied  that   there  were   other                                                                    
organizations that  provided free legal services  in Alaska;                                                                    
however,  Alaska  Legal  Services  was  the  only  statewide                                                                    
provider of  comprehensive free  legal services.  She shared                                                                    
that  other  legal  services providers  delivered  niche  or                                                                    
restricted legal services.                                                                                                      
2:55:35 PM                                                                                                                    
Vice-Chair  Saddler  asked   whether  other  legal  services                                                                    
providers received money from the legal services fund.                                                                          
Ms.  Nelson   replied  that  to   her  knowledge   the  only                                                                    
appropriation was the $110,000 to ALSC.                                                                                         
Representative Gara  recalled that the constitution  did not                                                                    
allow dedicated  funds but pointed out  that the legislature                                                                    
was inclined  to "honor"  accounts of  this type  when money                                                                    
was available.  He though that  HB 154 "worked  better" than                                                                    
existing law because determining  25 percent of court filing                                                                    
fees was easily calculated. He  related that even though the                                                                    
state was entitled  to 50 percent of  punitive damages; when                                                                    
parties  settled cases  most of  the awarded  settlement was                                                                    
described as compensatory rather  than punitive damages. The                                                                    
current    mechanism    was    designed    to    incentivize                                                                    
underreporting of punitive damages.  He stated that the bill                                                                    
provided  a quantifiable  amount of  money for  deposit into                                                                    
the fund.                                                                                                                       
Representative  Wilson  MOVED  to   REPORT  HB  154  out  of                                                                    
committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal note.                                                                                                       
HB 154 was REPORTED out of committee with a "do pass"                                                                           
recommendation and with one previously published zero                                                                           
fiscal note: FN1 (AJS).                                                                                                         
2:58:30 PM                                                                                                                    
AT EASE                                                                                                                         
3:02:03 PM                                                                                                                    
HOUSE BILL NO. 105                                                                                                            
     "An  Act relating  to  the programs  and  bonds of  the                                                                    
     Alaska  Industrial  Development and  Export  Authority;                                                                    
     related  to  the  financing authorization  through  the                                                                    
     Alaska Industrial  Development and Export  Authority of                                                                    
     a liquefied  natural gas  production plant  and natural                                                                    
     gas  energy projects  and distribution  systems in  the                                                                    
     state;  amending  and   repealing  bond  authorizations                                                                    
     granted  to  the   Alaska  Industrial  Development  and                                                                    
     Export  Authority;  and   providing  for  an  effective                                                                    
3:02:03 PM                                                                                                                    
Representative Wilson MOVED to ADOPT the proposed committee                                                                     
substitute for HB 105, Work Draft 29-GH1019\N (Shutts,                                                                          
4/12/15). There being NO OBJECTION, it was so ordered.                                                                          
JANE PIERSON, STAFF, REPRESENTATIVE STEVE THOMPSON,                                                                             
explained the changes in the Committee Substitute (CS). She                                                                     
read from an explanation of changes:                                                                                            
     Sec 1: No change                                                                                                           
     Sec 2:  Inserts new language into  allowing an Interior                                                                    
     Alaska  utility  that  is  owned   and  operated  by  a                                                                    
     political  subdivision   of  the  state   and  receives                                                                    
     financing from the  sustainable energy transmission and                                                                    
     supply  development fund  to  exempt  the utility  from                                                                    
    rate regulation, under AS 44.88.660, by resolution.                                                                         
     Sec 3: No change                                                                                                           
     Sec 4: No change                                                                                                           
     Sec 5: No change                                                                                                           
     Sec 6: No change                                                                                                           
     Sec  7:  Removes  subsection (1)  regarding  the  AIDEA                                                                    
     acquisition  of  gas   reserves  (discussion  moved  to                                                                    
     section 8). Language in  subsection (2) is incorporated                                                                    
     into  (c) and  modified. The  words "negotiate  or" are                                                                    
     removed.  Language  "to  provide  natural  gas  to  the                                                                    
     Interior Alaska as a primary  market" are added on page                                                                    
     6, lines 29-30.  The words "uses to  serve customers in                                                                    
     Interior Alaska" are added on page 7, lines 2-3.                                                                           
     Sec   8:   Inserts   new   Section   8,   amending   AS                                                                    
     44.88.690(a),  regarding the  AIDEA sustainable  energy                                                                    
     transmission  and supply  development fund,  to require                                                                    
     AIDEA to  obtain legislative approval before  using the                                                                    
     fund  to purchase  or  acquire gas  reserves  or a  gas                                                                    
     lease or become  a working interest owner  of a natural                                                                    
     gas lease.                                                                                                                 
     Sec 9: Version  E Section 8 renumbered as  Section 9 in                                                                    
     Version N.                                                                                                                 
     Sec  10:  New  Section  10  inserted,  providing  AIDEA                                                                    
     bonding authorization up to  $50,000,000 to finance the                                                                    
     acquisition,  design,   and  construction  of   a  port                                                                    
     facility and  equipment related to the  development and                                                                    
     operation  of a  bulk  commodity  loading and  shipping                                                                    
     terminal, to be located at Point MacKenzie.                                                                                
     Sec 11:  Version E Section  9 renumbered as  Section 11                                                                    
     in Version N and "prepares  a project plan and receives                                                                    
     legislative  approval of  the  plan"  is replaced  with                                                                    
     "approves a project plan" on page 7, line 16.                                                                              
     Sec 12: Version  E Section 10 renumbered  as Section 12                                                                    
     in Version N.                                                                                                              
     Sec 13: Version  E Section 11 renumbered  as Section 13                                                                    
     in  Version  N is  modified  to  remove the  repeal  of                                                                    
     "Section 2,  ch. 27, SLA  1993, as amended by  sec. 19,                                                                    
     ch.  111" pertaining  to  the  Point MacKenzie  bonding                                                                    
     Sec 14: Inserts a  new Section 14 providing legislative                                                                    
     authority  for AIDEA  to issue  up  to $120,000,000  of                                                                    
     bonds  to finance  the infrastructure  and construction                                                                    
     costs of Sweetheart Lake hydroelectric project.                                                                            
     Sec 15: Inserts a  new Section 15 providing legislative                                                                    
     authority for  the Alaska Energy  Authority to  loan an                                                                    
     amount up to $3,000,000 from  the power project fund to                                                                    
     the  City   of  King  Cove  for   the  Waterfall  Creek                                                                    
     hydroelectric project.                                                                                                     
     Sec 16: Version  E Section 12 renumbered  as Section 16                                                                    
     in Version N.                                                                                                              
     Sec 17:  Inserts new Section  17 repealing  Sections 14                                                                    
     and 15 of this act June 30, 2019.                                                                                          
     Sec 18: Version  E Section 13 renumbered  as Section 18                                                                    
     in Version N.                                                                                                              
FRED  PARADY, DEPUTY  COMMISSIONER, DEPARTMENT  OF COMMERCE,                                                                    
COMMUNITY, AND  ECONOMIC DEVELOPMENT, provided  a PowerPoint                                                                    
presentation  titled "Interior  Energy Project"  dated April                                                                    
13, 2015 (copy on file). He addressed slide 2:                                                                                  
     IEP: GOALS UNDER SB23                                                                                                      
     Supply natural gas to Interior Alaska:                                                                                     
     -At the lowest cost possible                                                                                               
     -As many Alaska customers as possible                                                                                      
     -As soon as possible                                                                                                       
     IEP  investments  compliment  eventual sources  of  gas                                                                    
     supply from a natural gas pipe line                                                                                        
     Lower PM2.5 in nonattainment areas of Interior                                                                             
Mr.  Parady  emphasized  that the  Interior  Energy  Project                                                                    
(IEP)  lowered  the  PM2.5 in  nonattainment  areas  of  the                                                                    
Interior, which was among the  highest level of pollution in                                                                    
the United States. He reviewed slides 3:                                                                                        
     IEP: OVERVIEW                                                                                                              
     Meet  the  goals  set  by  the  legislature  to  supply                                                                    
     affordable energy to Interior Alaska                                                                                       
     Project is  complex, which is why  the legislature took                                                                    
     Now  evaluating infrastructure  to deliver  natural gas                                                                    
     from any source, including Cook Inlet                                                                                      
     AIDEA   financing   the   buildout   of   natural   gas                                                                    
     distribution in Fairbanks and North Pole                                                                                   
Mr. Parady moved to slide 4:                                                                                                    
     IEP: HB 105                                                                                                                
     HB 105 gives  AIDEA flexibility to use  SB 23 financing                                                                    
    tools with a non-North Slope liquefaction location                                                                          
     -Current version of HB 105 also authorizes financing                                                                       
     propane and small diameter pipeline (under 12"                                                                             
     diameter) projects to meet the goals of the IEP                                                                            
Mr. Parady  highlighted slide 5,  "North Slope  Project Map"                                                                    
and slide  6, "Cook  Inlet Project  Map." He  explained that                                                                    
the  only  project  authorized   under  SB  23  (AIDEA:  LNG                                                                    
PROJECT; DIVIDENDS;  FINANCING) [Adopted  May 30,  2013] was                                                                    
the  North Slope  Natural Gas  Supply and  Liquefied Natural                                                                    
Gas  (LNG) Production  plant.  The  legislation allowed  the                                                                    
project  to  "flip"  from  north to  south  and  consider  a                                                                    
natural  gas supply  from Cook  Inlet instead  of the  North                                                                    
Slope.  He turned  to the  chart  on slide  7, "Cook  Inlet,                                                                    
North  Slope,  And  Other Alternatives"  that  outlined  the                                                                    
options  for the  project. He  reviewed that  the supply  of                                                                    
natural  gas from  Cook Inlet  was  currently uncertain  but                                                                    
indications  for increased  supply were  'positive." On  the                                                                    
North Slope,  where some existing  contracts were  in place,                                                                    
natural  gas   was  "abundant"  and   at  low   cost.  Other                                                                    
alternatives  that  were  considered for  the  project  were                                                                    
propane from  Canada or  a small  pipeline from  Cook Inlet,                                                                    
which might  be preferred  over a rail  or truck  option. He                                                                    
relayed that  in consideration  of LNG  plant costs,  a Cook                                                                    
Inlet plant was cheaper to  construct and operate as opposed                                                                    
to  designing and  constructing an  LNG plant  on the  North                                                                    
Slope, which was expensive due  to conditions. He added that                                                                    
construction  and   operation  of  an  LNG   plant  was  not                                                                    
necessary  for Canadian  Propane  or a  small pipeline  from                                                                    
Cook Inlet.                                                                                                                     
Mr.  Parady examined  the LNG  "transportation logistics  of                                                                    
trucking and  rail and concluded  that Cook Inlet  had lower                                                                    
trucking costs,  large trailer  potential, and  rail options                                                                    
as opposed to  the North Slope where  trucking was feasible,                                                                    
but more expensive. He pointed  to the recent closure of the                                                                    
Dalton Highway due to an ice  jam as a drawback. He reported                                                                    
that  a combination  of "marine,  rail,  and trucking"  were                                                                    
possible  for   propane.  He  indicated  that   storage  and                                                                    
distribution  was  inherent  to  either  Cook  Inlet,  North                                                                    
Slope, or alternative options.                                                                                                  
NICK SZYMONIAK, FINANCE  OFFICER, ENERGY DEVELOPMENT, ALASKA                                                                    
INDUSTRIAL  DEVELOPMENT  AND   EXPORT  AUTHORITY,  addressed                                                                    
slide 8,  "North Slope LNG  Project" and slide  9,"Cook Inlet                                                                   
LNG Alternative" and  explained that  the  graphics on  each                                                                    
slide compared  the "value  chain" for  each option  and the                                                                    
evaluative approach  employed by the IEP  team. He discussed                                                                    
slide 8 and delineated that  the North Slope project (SB 23)                                                                    
began  with two  existing gas  supply agreements  with North                                                                    
Slope producers  and interior utilities. The  LNG production                                                                    
plant   third  party   developer  had   not  been   selected                                                                    
(subsequently  a Concession  Agreement with  MWH Global  was                                                                    
chosen) and a  plan was in place to contract  with a private                                                                    
trucking company  for transportation needs. The  LNG storage                                                                    
and   regasification   distribution   systems   were   being                                                                    
negotiated  with   the  Interior   Gas  Utility   (IGU)  and                                                                    
Fairbanks  Natural  Gas  (FNG)  entities  with  talks  still                                                                    
continuing.  He remarked  that  the LNG  costs  for a  North                                                                    
Slope project under the concession  agreement was deemed too                                                                    
high  and subsequently  terminated. The  current legislation                                                                    
authorized the flexibility  for consideration of alternative                                                                    
Mr. Syzmoniak discussed  slide 9 relating to  the Cook Inlet                                                                    
alternative. He  relayed that the  difference in  gas supply                                                                    
between both projects was an  absence of existing agreements                                                                    
between Interior utility companies  and Cook Inlet producers                                                                    
other  than an  existing .95/bcf  agreement between  FNG and                                                                    
Hilcorp.  An   LNG  developer  had  not   been  chosen.  The                                                                    
transportation plan  remained the  same but the  project was                                                                    
also exploring Alaska Railroad  options. The current version                                                                    
of HB 105 also allowed  for a small diameter pipeline, which                                                                    
eliminated   the   need   for   an  LNG   plant   or   other                                                                    
transportation  needs.  A  propane  option  was  also  under                                                                    
He moved to slide 10:                                                                                                           
     Project Execution Plan                                                                                                     
     Natural Gas supply: Facilitate commercial discussions                                                                      
     between producers and utilities                                                                                            
     Liquefaction: Competitive solicitation to select                                                                           
     private partner to develop LNG capacity                                                                                    
     Transportation: Private trucking, Alaska railroad,                                                                         
     small diameter pipeline, propane                                                                                           
     Storage, Regasification, and Distribution: Buildout of                                                                     
     system continues Summer 2015PROJECT                                                                                        
Mr.  Syzmoniak indicated  that the  Department of  Commerce,                                                                    
Community  and Economic  Development DCCED)  was taking  the                                                                    
lead  on discussions  between  producers  and utilities.  He                                                                    
added   that  Alaska   Industrial  Development   and  Export                                                                    
Authority  (AIDEA)   would  not  sign  any   contracts,  buy                                                                    
reserves or retain  any interests in a natural  gas field in                                                                    
Cook Inlet nor enter into  a contractual relationship in the                                                                    
LNG  plant. He  conveyed  that  the team  was  "open to  and                                                                    
encouraging" alternatives to Cook Inlet.                                                                                        
3:16:20 PM                                                                                                                    
GENE  THERRIAULT, DEPUTY  DIRECTOR, STATEWIDE  ENERGY POLICY                                                                    
DEVELOPMENT,   ALASKA   ENERGY  AUTHORITY,   DEPARTMENT   OF                                                                    
COMMERCE,  COMMUNITY  AND  ECONOMIC  DEVELOPMENT,  spoke  to                                                                    
slide 11:                                                                                                                       
     IEP SUMMARY                                                                                                                
          The goals remain as established by SB23                                                                               
          HB 105 authorizes the tool kit to best achieve                                                                        
          goals of IEP                                                                                                          
          Market driven process                                                                                                 
               -Accomplishing IEP goals requires adaptation                                                                     
               to current market and operating realities                                                                        
Representative Gara  related that he supported  the original                                                                    
plan  established   in  SB  23.  He   wondered  whether  the                                                                    
legislation  allowed the  IEP  to revert  to  a North  Slope                                                                    
natural  gas supply  if the  supply became  cheaper or  more                                                                    
abundant than a Cook Inlet option.                                                                                              
Mr. Therriault  answered that the  language in the  bill did                                                                    
not  preclude  a  North Slope  producer  from  submitting  a                                                                    
completive  bid and  might even  entice a  bid from  a North                                                                    
Slope entity.                                                                                                                   
Vice-Chair Saddler  asked whether  AIDEA would become  a gas                                                                    
utility under the IEP.                                                                                                          
Mr. Therriault replied that  currently AIDEA was considering                                                                    
a  purchase  of  Pentex  [FNG parent  company]  assets  that                                                                    
included  a  FNG  distribution system.  He  elaborated  that                                                                    
AIDEA  intended to  contractually  operate the  distribution                                                                    
system. Ownership  by AIDEA  facilitated the  integration of                                                                    
FNG  and the  developing IGU  distribution systems  with the                                                                    
future  possibility of  morphing into  one system.  The goal                                                                    
was to  ultimately sell the  asset to  the IGU or  a private                                                                    
Vice-Chair Saddler referred  to the use of  the term "market                                                                    
driven  solution" related  to the  project. He  deduced that                                                                    
the AIDEA involvement made the  project a less market driven                                                                    
and more government driven solution.                                                                                            
Representative Munoz wondered what  the fiscal note had been                                                                    
for the original gas trucking  proposal [SB 23] and what the                                                                    
remaining balance of the fund was.                                                                                              
Mr.  Parady answered  that  the  original funding  contained                                                                    
approximately  $150 million  in bonds,  $125 million  in the                                                                    
Sustainable  Energy  Transmission  and  Supply  Fund  (SETS)                                                                    
loans  and   $57.5  million  in   grants.  He   shared  that                                                                    
approximately  $55   million  from  the  loan   program  was                                                                    
committed to the distribution systems.                                                                                          
Mr.  Therriault interjected  that the  $150 million  bonding                                                                    
authorization  and   $125  million   in  SETS   funding  was                                                                    
designated for loans expected to be "ultimately" repaid.                                                                        
Representative Munoz requested further clarification.                                                                           
Mr. Parady reported that out  of the $57.5 million in grants                                                                    
$12.4  million  was  expended  for  the  North  Slope  plant                                                                    
construction,  design, engineering,  and  storage study.  He                                                                    
added that $52.78  million of the SETS  funds were committed                                                                    
to  two loans  for the  distribution system;  a $15  million                                                                    
loan to FNG and a $37.78  million loan to IGU. He noted that                                                                    
$72.2 million remained in the SETS fund.                                                                                        
Representative  Pruitt  asked  what the  project's  expected                                                                    
daily volume of gas was.                                                                                                        
Mr.  Parady answered  that at  peak build  out the  Interior                                                                    
Alaska demand was  expected to be 9.5/bcf per year  and on a                                                                    
daily average was 26 million cubic feet (mcf) per day.                                                                          
Representative  Pruitt asked  what impact  the amount  would                                                                    
have on the overall reserves in Cook Inlet.                                                                                     
Mr. Parady answered that demand  was approximately less than                                                                    
10 percent of Cook Inlet  reserves. He shared that ten years                                                                    
of  Interior  demand  amounted  to  80/bcf  and  Cook  Inlet                                                                    
reserves were estimated in trillion board feet.                                                                                 
Representative Pruitt observed that  there was a complex web                                                                    
of ownership throughout Cook Inlet  and wondered whether the                                                                    
amount   of   Cook   Inlet  reserves   were   "realistically                                                                    
Mr.  Szymoniak replied  in the  affirmative. He  assured the                                                                    
committee that the figure represented developed reserves.                                                                       
Representative  Pruitt  asked   for  verification  that  the                                                                    
agency felt comfortable going forward  with a Cook Inlet gas                                                                    
supply. He maintained  that the Cook Inlet  gas supply until                                                                    
recently, was thought  to be dwindling. He  alluded to other                                                                    
demands  on the  Cook  Inlet  supply. He  did  not want  the                                                                    
Southcentral energy  crisis to turn into  a Fairbanks crisis                                                                    
if Cook Inlet gas supply  was not sustainable over the long-                                                                    
Mr. Parady believed the question  was germane and the amount                                                                    
of  available Cook  Inlet gas  reserves were  being assessed                                                                    
further  by the  Department of  Natural Resources  (DNR) and                                                                    
the IEP gas  supply team. He expounded  that the indications                                                                    
were  favorable and  pointed to  "ample reserves."  However,                                                                    
more analysis was needed. He  engaged in a conversation with                                                                    
Enstar, who  reported that its  gas supply was  firm through                                                                    
the  first   quarter  of   2018.  Enstar   serviced  134,000                                                                    
customers  in   Southcentral,  Alaska.  He   disclosed  that                                                                    
current data  from DNR reported .4tcf  [trillion cubic feet]                                                                    
increase in gas supply in Cook Inlet since 2009.                                                                                
3:28:06 PM                                                                                                                    
Representative Pruitt queried whether  HB 105 maintained the                                                                    
legislature's  approval authority  over AIDEA's  decision on                                                                    
which gas supply to move the project forward with.                                                                              
Mr. Therriault  cited the  CS, on page  7, lines  18 through                                                                    
     (1) identify the source of the natural gas or propane;                                                                     
     2 (2) include the estimated cost of the project; and                                                                       
     3 (3) include the estimated price of natural gas                                                                           
     supplied to natural gas utilities…                                                                                         
Mr.  Therriault  communicated  that the  bill  required  the                                                                    
AIDEA board  to approve  a plan  that included  the required                                                                    
information.  He  voiced  that   the  AIDEA  board  had  the                                                                    
authority to  make the determination like  any other project                                                                    
AIDEA undertook.                                                                                                                
Representative Pruitt  asked for verification  that approval                                                                    
authority was "out of the legislature's hands."                                                                                 
Mr. Therriault replied in the affirmative.                                                                                      
Representative  Pruitt worried  that  the legislature  would                                                                    
lose control over a "policy decision."                                                                                          
Vice-Chair  Saddler  asked  what the  Cook  Inlet  estimated                                                                    
reserve figure was based on.                                                                                                    
Mr.  Parady answered  that the  figure  was based  on a  DNR                                                                    
evaluation and was "proven plus probable."                                                                                      
Vice-Chair  Saddler  asked how  recent  the  figure was.  He                                                                    
requested a copy of the report.                                                                                                 
Mr. Parady responded that the data was from February 2015.                                                                      
Mr.   Therriault  noted   that   the   CS  contained   other                                                                    
hydroelectric projects.  He delineated that a  hydro project                                                                    
through  AIDEA was  subjected to  the  same "due  diligence"                                                                    
process as  the process  the supply of  natural gas  will be                                                                    
based on.  When AIDEA was  "empowered" to make  the decision                                                                    
it was  based on whether  the project had a  sales agreement                                                                    
that "supported or "underpinned the financing.                                                                                  
PATRICE LEE, SELF, FAIRBANKS  (via teleconference), spoke in                                                                    
favor of the legislation.  She thanked AIDEA for recognizing                                                                    
the severity of the air  pollution problem in Fairbanks. She                                                                    
shared two  concerns on the  CS version of  the legislation.                                                                    
She believed  that Section  8 restricted  the options  for a                                                                    
"free market" source  of gas. She worried that  the price of                                                                    
gas seemed  high. She hoped  the project would  be expedited                                                                    
to  serve the  100,000 citizens  of the  Interior. She  felt                                                                    
that the project could be an  asset to the Anchorage area if                                                                    
the Cook  Inlet option was  chosen by increasing  the market                                                                    
share and bargaining power.                                                                                                     
MERRICK  PEIRCE,   SELF,  FAIRBANKS   (via  teleconference),                                                                    
supported  the  legislation.  He stated  concerns  over  the                                                                    
health risks of the high  particulate matter leading to poor                                                                    
air quality  of Fairbanks.  He referenced  a study  from the                                                                    
British  Medical Journal  that  concluded  exposure to  high                                                                    
particulate matter was linked  to mortality from strokes. He                                                                    
appreciated  the   various  options  being   considered  and                                                                    
thought  a  "phased  approach"  might   be  a  part  of  the                                                                    
solution. He  stated that propane  had many  advantages over                                                                    
LNG and  stored well.  He wanted  affordable energy  for the                                                                    
Interior  for  residential  purposes   and  to  attract  new                                                                    
industry  and job  creation. He  was troubled  by Section  8                                                                    
that prohibited AIDEA from  directly entering into contracts                                                                    
with Cook Inlet suppliers.                                                                                                      
PAMELA   THROOP,  SELF,   FAIRBANKS  (via   teleconference),                                                                    
supported the legislation. She related  that she worked as a                                                                    
commercial real  estate broker and  her biggest  concern was                                                                    
the cost of living and  doing business in Fairbanks directly                                                                    
related to  high utility  costs. She  discerned that  in the                                                                    
event the IEP initially utilized  a Cook Inlet Source of gas                                                                    
via pipeline to Fairbanks  and subsequently consumed natural                                                                    
gas  via pipeline  from the  North Slope  the two  pipelines                                                                    
could be connected and natural  gas could flow to Anchorage.                                                                    
She  urged AIDEA  and IEP  to  consider any  kind of  energy                                                                    
source for Fairbanks.                                                                                                           
JIM  DODSON,  FAIRBANKS  ECONOMIC  DEVELOPMENT  CORPORATION,                                                                    
FAIRBANKS  (via teleconference),  spoke  in  support of  the                                                                    
legislation. He  stressed that  clean air  was vital  to the                                                                    
health of the community's children.  He spoke to the need to                                                                    
build  a  "road map"  starting  in  Fairbanks, to  providing                                                                    
affordable  energy  to  the  entire   state.  He  urged  the                                                                    
legislature to support the legislation.                                                                                         
JOMO  STEWART, FAIRBANKS  ECONOMIC DEVELOPMENT  CORPORATION,                                                                    
FAIRBANKS  (via teleconference),  echoed the  testimony from                                                                    
Mr. Dodson. He urged  the legislature to act "expeditiously"                                                                    
with passage of the bill to move the project forward.                                                                           
3:42:01 PM                                                                                                                    
LISA HERBERT, EXECUTIVE  DIRECTOR, GREATER FAIRBANKS CHAMBER                                                                    
OF COMMERCE, FAIRBANKS (via  teleconference), spoke in favor                                                                    
of  the  legislation.   She  represented  approximately  700                                                                    
businesses  as   executive  director  and   maintained  that                                                                    
reducing the  high cost of  energy was the  chambers highest                                                                    
priority. She  specifically supported the CS.  She supported                                                                    
the goals of the IEP to  serve the greatest number of people                                                                    
as possible,  as affordable as  possible, and as  quickly as                                                                    
possible.   She  encouraged   the   legislature  to   remain                                                                    
committed to the goals.                                                                                                         
DEREK MILLER, FAIRBANKS CHAMBER  OF COMMERCE, FAIRBANKS (via                                                                    
teleconference),  spoke in  support of  the legislation.  He                                                                    
noted his  previous work as  a legislative aide and  for the                                                                    
University of  Alaska, Fairbanks. He stated  his support for                                                                    
the  original  bill,  SB  23   and  the  three  major  goals                                                                    
previously  stated. He  was opposed  to various  restrictive                                                                    
provisions  in the  House  Resources  Committee version.  He                                                                    
appreciated the concerns raised  about the Cook Inlet supply                                                                    
and expressed confidence that the  CS accomplished the goals                                                                    
of the IEP.                                                                                                                     
LUKE  HOPKINS,  MAYOR,   FAIRBANKS  NORTHSTAR  BOROUGH  (via                                                                    
teleconference),  favored the  legislation. He  believed the                                                                    
amendments  in  the  CS  addressed  the  three  area  mayors                                                                    
concerns  and  advanced   the  project  without  restricting                                                                    
AIDEA's  decision   making  authority.  He  felt   that  the                                                                    
greatest  issues  were providing  low  cost  energy for  the                                                                    
community and businesses as quickly as possible.                                                                                
Co-Chair Thompson CLOSED public testimony.                                                                                      
Representative Wilson  reminded the  committee that  the gas                                                                    
industry  in  Cook  Inlet   received  generous  credits  and                                                                    
subsidies  from  the state  and  that  the gas  belonged  to                                                                    
HB  105  was  HEARD  and   HELD  in  committee  for  further                                                                    
Co-Chair  Thompson addressed  the agenda  for the  following                                                                    
3:49:31 PM                                                                                                                    
The meeting was adjourned at 3:49 p.m.                                                                                          

Document Name Date/Time Subjects
HB 154 Additional Documentation--ALSC Restrictions Clarification.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--Alaska Childrens Trust.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Additional Documentation--Civil Legal Services Fact Sheet.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--Alaska Coalition on Housing.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--Alaska Mental Health Board.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--ANDVSA.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--Facing Foster Care in Alaska.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--Governor's Council on Disabilities.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support for Senate Companion Legislation--VCI.jpg HFIN 4/13/2015 1:30:00 PM
HB 154
HB 154 Support Letter ACoA.pdf HFIN 4/13/2015 1:30:00 PM
HB 154
CS for proposed CS HB 105 H-Fin ver N Sectional Analysis AIDEA 4-13-15.pdf HFIN 4/13/2015 1:30:00 PM
HB 105
Explaination of changes HB 105 version E to version N.pdf HFIN 4/13/2015 1:30:00 PM
HB 105
Explaination of changes HB 105 version H to version E.pdf HFIN 4/13/2015 1:30:00 PM
HB 105
HB 105 CS WORKDRAFT FIN.pdf HFIN 4/13/2015 1:30:00 PM
HB 105
HB 105 HFIN AIDEA IEP.pdf HFIN 4/13/2015 1:30:00 PM
HB 105
Waterfall Creek-King Cove HB143.pdf HFIN 4/13/2015 1:30:00 PM
HB 143
HB 105 Juneau Hydropower.pdf HFIN 4/13/2015 1:30:00 PM
HB 105
HB 190 Sponsor Statement.pdf HFIN 4/13/2015 1:30:00 PM
HB 190
HB 190 Sectional.pdf HFIN 4/13/2015 1:30:00 PM
HB 190