Legislature(2005 - 2006)CAPITOL 120

06/02/2006 10:00 AM JUDICIARY


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10:30:49 AM Start
10:30:52 AM HB2003
03:59:03 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed to a Call of the Chair --
*+ HB2002 GAS PIPELINE CONTRACT: COURT JURISDICTION TELECONFERENCED
Scheduled But Not Heard
*+ HB2003 NATURAL GAS PIPELINE CORPORATION TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE JUDICIARY STANDING COMMITTEE                                                                             
                          June 2, 2006                                                                                          
                           10:30 a.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Lesil McGuire, Chair                                                                                             
Representative Tom Anderson                                                                                                     
Representative John Coghill                                                                                                     
Representative Pete Kott                                                                                                        
Representative Peggy Wilson                                                                                                     
Representative Les Gara                                                                                                         
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Nancy Dahlstrom                                                                                                  
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 2003                                                                                                             
"An Act establishing the Alaska  Natural Gas Pipeline Corporation                                                               
to finance,  own, and manage  the state's interest in  the Alaska                                                               
North Slope  natural gas  pipeline project  and relating  to that                                                               
corporation  and  to  subsidiary entities  of  that  corporation;                                                               
relating to owner entities of  the Alaska North Slope natural gas                                                               
pipeline  project, including  provisions concerning  Alaska North                                                               
Slope natural gas pipeline  project indemnities; establishing the                                                               
gas pipeline  project cash reserves  fund in the  corporation and                                                               
establishing the  Alaska natural  gas pipeline  construction loan                                                               
fund in the Department of  Revenue; making conforming amendments;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE BILL NO. 2002                                                                                                             
"An Act  conferring original jurisdiction  on the  Alaska Supreme                                                               
Court for the purpose of  providing judicial review of a contract                                                               
executed  under  the Alaska  Stranded  Gas  Development Act,  and                                                               
setting the  time in which  a contract developed under  that Act,                                                               
or  a statute  of limitations  regarding that  contract, must  be                                                               
legally challenged; and providing for an effective date."                                                                       
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 2003                                                                                                                 
SHORT TITLE: NATURAL GAS PIPELINE CORPORATION                                                                                   
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
05/31/06       (H)       READ THE FIRST TIME - REFERRALS                                                                        
05/31/06       (H)       JUD, FIN                                                                                               
06/02/06       (H)       JUD AT 10:00 AM CAPITOL 120                                                                            
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
STEVEN B. PORTER, Deputy Commissioner                                                                                           
Office of the Commissioner                                                                                                      
Department of Revenue (DOR)                                                                                                     
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Presented a general overview of  HB 2003 on                                                               
behalf of the administration, and responded to questions.                                                                       
                                                                                                                                
LOUISIANA W. CUTLER, Attorney at Law                                                                                            
Preston Gates & Ellis, LLP                                                                                                      
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Presented a  sectional analysis of  HB 2003                                                               
on behalf of the administration, and responded to questions.                                                                    
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  LESIL   McGUIRE  called   the  House   Judiciary  Standing                                                             
Committee  meeting  to order  at  10:30:49  AM.   Representatives                                                             
McGuire, Coghill, Kott,  Gara, and Gruenberg were  present at the                                                               
call to  order.  Representatives  Anderson and Wilson  arrived as                                                               
the meeting was  in progress.  Representative  Dahlstrom was also                                                               
in attendance.                                                                                                                  
                                                                                                                                
HB 2003 - NATURAL GAS PIPELINE CORPORATION                                                                                    
                                                                                                                                
10:30:52 AM                                                                                                                   
                                                                                                                                
CHAIR McGUIRE announced that the  only order of business would be                                                               
HOUSE BILL NO. 2003, "An  Act establishing the Alaska Natural Gas                                                               
Pipeline  Corporation to  finance,  own, and  manage the  state's                                                               
interest in the  Alaska North Slope natural  gas pipeline project                                                               
and relating  to that corporation  and to subsidiary  entities of                                                               
that corporation; relating to owner  entities of the Alaska North                                                               
Slope   natural  gas   pipeline  project,   including  provisions                                                               
concerning  Alaska  North  Slope  natural  gas  pipeline  project                                                               
indemnities; establishing the gas  pipeline project cash reserves                                                               
fund in the  corporation and establishing the  Alaska natural gas                                                               
pipeline  construction loan  fund in  the Department  of Revenue;                                                               
making  conforming amendments;  and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
REPRESENTATIVE GARA spoke briefly on another topic.                                                                             
                                                                                                                                
10:32:24 AM                                                                                                                   
                                                                                                                                
STEVEN   B.   PORTER,   Deputy  Commissioner,   Office   of   the                                                               
Commissioner, Department of Revenue  (DOR), relayed that he would                                                               
be providing  a general overview of  HB 2003 and that  Ms. Cutler                                                               
would be providing details of individual sections.                                                                              
                                                                                                                                
10:33:10 AM                                                                                                                   
                                                                                                                                
LOUISIANA  W. CUTLER,  Attorney at  Law, Preston  Gates &  Ellis,                                                               
LLP,  in  response  to  questions,  distributed  a  copy  of  the                                                               
governor's  transmittal  letter,  which  contained  a  bit  of  a                                                               
sectional  analysis, and  offered  to create  a formal  sectional                                                               
analysis for later distribution to members.                                                                                     
                                                                                                                                
REPRESENTATIVE   GARA   questioned  whether   the   legislature's                                                               
consultants have  provided the  legislature with  any memorandums                                                               
regarding HB 2003.                                                                                                              
                                                                                                                                
[There was brief discussion regarding other legislation.]                                                                       
                                                                                                                                
MS.  CUTLER indicated  that the  [consulting  firm] of  Greenberg                                                               
Traurig, LLP,  has provided  such a memorandum  to her  law firm,                                                               
which  would  be  willing  to   work  with  the  consulting  firm                                                               
regarding  the concerns  outlined in  that memorandum,  which was                                                               
written by  Phillip C.  Gildan on  May 23,  2006, to  Joe Balash,                                                               
staff to the Legislative Budget and Audit Committee.                                                                            
                                                                                                                                
MR.  PORTER added  that once  that was  done, he  and Ms.  Cutler                                                               
could  bring back  amendments intended  to address  any remaining                                                               
concerns that the consulting firm had.                                                                                          
                                                                                                                                
[Members  expressed   a  desire   to  speak  directly   with  the                                                               
consultants and Mr. Balash.]                                                                                                    
                                                                                                                                
MR. PORTER went on to explain  that HB 2003 will create an Alaska                                                               
Natural  Gas Pipeline  Corporation ("ANGPC")  that will  hold and                                                               
finance an ownership interest in  an Alaska gas pipeline and that                                                               
will participate in the decision-making  aspects of moving such a                                                               
project  forward,  thus allowing  Alaska  to  become a  corporate                                                               
partner  -  in  a  proposed  Pipeline  Project  Mainline  Limited                                                               
Liability Company (LLC) Entity ("Mainline  LLC") - with the three                                                               
corporations involved in the Alaska  Stranded Gas Fiscal Contract                                                               
("ASGF Contract"):  BP  Exploration (Alaska) Inc.; ConocoPhillips                                                               
Alaska,  Inc.;  and  ExxonMobil Alaska  Production,  Inc.    Even                                                               
though the  ANGPC will be  a public  corporation, the goal  is to                                                               
make  it is  much like  a private  entity, and  as commercial  an                                                               
entity, as  possible because, from a  decision-making standpoint,                                                               
the four corporations  must function as a single  entity in order                                                               
to move a project of this  magnitude forward, and, via the ANGPC,                                                               
the state will  ensure that it is effectively  positioned to look                                                               
after  the public's  interest while  still being  part of  a very                                                               
commercial entity.                                                                                                              
                                                                                                                                
10:41:38 AM                                                                                                                   
                                                                                                                                
MR.  PORTER said  that furthermore,  the aforementioned  Mainline                                                               
LLC must be as stable as  possible so that all four partners will                                                               
know with  whom they are working  for at least the  next 10 years                                                               
or, if possible, for  the life of the project.   To this end, the                                                               
ANGPC will have a stable  board consisting of two commissioners -                                                               
one  from the  Department  of  Revenue (DOR),  and  one from  the                                                               
Department of  Transportation & Public Facilities  (DOT&PF) - and                                                               
five board members with staggered  six-year terms who can only be                                                               
dismissed  for  cause,  with  the   purpose  being  to  create  a                                                               
financial entity rather than a  political entity.  The ANGPC will                                                               
be exempt from the Open Meetings Act  so as to be able to respond                                                               
quickly to  its Mainline LLC  partners on particular  issues that                                                               
arise, but  the intent,  nonetheless, is for  the ANGPC  board to                                                               
have  regular  public  meetings  in  order  to  keep  the  public                                                               
informed, and, to  that end, will set up  policies and procedures                                                               
for conducting such meetings.                                                                                                   
                                                                                                                                
MR. PORTER said:                                                                                                                
                                                                                                                                
     Another  thing that  we've found,  in negotiating  with                                                                    
     private  corporations,   is  [that]  in   their  world,                                                                    
     everything is  confidential unless they decide  to make                                                                    
     it public.   In our world, everything  is public unless                                                                    
     we decide  to make it  confidential.  And that's  a bit                                                                    
     of a conflict,  ... [and] the private  entities ... are                                                                    
     struggling  with how  to deal  with that  relationship.                                                                    
     So  what  we  have  recommended is  that  we  ...  [be]                                                                    
     subject  to the  Public Records  Act but  that we  have                                                                    
     specific  exemptions, and  we've  listed  them ...  [in                                                                    
     proposed AS 41.42.520(a)].                                                                                                 
                                                                                                                                
MS. CUTLER  mentioned that  HB 2003  contains exemptions  to both                                                               
the Public  Records Act and the  Open Meetings Act, and  that she                                                               
would be  providing more details  of those exemptions  during her                                                               
presentation of the bill's individual sections.                                                                                 
                                                                                                                                
MR.  PORTER indicated  that HB  2003 will  create an  environment                                                               
wherein the  information that private corporations  normally keep                                                               
private will  stay private,  and the  information that  the state                                                               
normally keeps public will stay  public; thus, by partnering with                                                               
the   state,   the   private   corporations   won't   loose   the                                                               
confidentiality rights that  they normally have.   In response to                                                               
a  question,  he relayed  that  the  Mainline  LLC will  own  the                                                               
pipeline  itself and  that the  ANGPC will  be the  [state-owned]                                                               
corporation that is the Alaska partner in the Mainline LLC.                                                                     
                                                                                                                                
[There was  a brief discussion  regarding what types  of statutes                                                               
are currently listed in Title 41.]                                                                                              
                                                                                                                                
10:48:47 AM                                                                                                                   
                                                                                                                                
MR. PORTER  mentioned that if  the ANGPC is established  but then                                                               
changed  in  the  future,  "the  producers"  -  the  other  three                                                               
corporations/owners of the  [Mainline LLC] - want  to ensure that                                                               
their  contractual benefits  will  be maintained.   For  example,                                                               
should the  legislature decide  in the future  that the  ANGPC no                                                               
longer has  any confidentiality  rights and that  all information                                                               
should be made public, this  would result in a materially adverse                                                               
change  to the  ANGPC's ability  to  perform its  functions as  a                                                               
partner in  the Mainline  LLC; therefore,  HB 2003  provides that                                                               
any such  change could  result in the  ANGPC's losing  its voting                                                               
rights or its rights to receive confidential information.                                                                       
                                                                                                                                
REPRESENTATIVE  GRUENBERG, noting  that private  corporations can                                                               
easily change  their internal structure  via a resolution  by its                                                               
board of  directors, asked  what protection  the state  will have                                                               
under  HB  2003  should  one  of  the  other  partners  effect  a                                                               
substantial change to itself.                                                                                                   
                                                                                                                                
MR. PORTER  said that issue  had been discussed, and  offered his                                                               
belief that the  fact that the other three  corporations can only                                                               
transfer to certain types of  entities will "kind of" protect the                                                               
state.    All  four  partners   should  have  the  same  type  of                                                               
confidentiality obligations, he opined,  and so the only question                                                               
that  could  arise  would  be  whether  a  partner  violated  its                                                               
confidentiality  responsibilities; under  HB 2003,  the penalties                                                               
for doing  so would be  the same  regardless of which  partner it                                                               
was.   He seemed to  indicate that  the state won't  be penalized                                                               
unless state  statutes are  changed in the  future such  that the                                                               
ANGPC  will  no  longer  be  able  to  meet  its  confidentiality                                                               
obligations as set out in the contract.                                                                                         
                                                                                                                                
MS. CUTLER  added that  her understanding  is that  the producers                                                               
feel that they, as private  entities - particularly assuming that                                                               
they are organized under the  corporation laws of Delaware - feel                                                               
that  they  need to  have  as  much  stability as  possible  when                                                               
dealing  with  a  public  corporation   such  as  the  one  being                                                               
established  via  this  legislation.     She  surmised  that  the                                                               
legislature also understands the  importance of having stability.                                                               
And although addressing  issues of confidentiality is  one of the                                                               
main motivations for  seeking certain protections, it  is not the                                                               
only one.                                                                                                                       
                                                                                                                                
MR.   PORTER  offered   his  belief   that   the  three   private                                                               
corporations  would   be  amenable   to  being  subject   to  the                                                               
aforementioned  penalties -  losing  voting rights  or rights  to                                                               
receive  confidential  information  - because  they  would  never                                                               
change  their corporate  bylaws such  that all  their information                                                               
becomes public.                                                                                                                 
                                                                                                                                
10:56:25 AM                                                                                                                   
                                                                                                                                
MS. CUTLER, in response to  a question, said that that particular                                                               
language  is located  on page  11, lines  2-9, under  proposed AS                                                               
41.42.210(a)(22), which reads:                                                                                                  
                                                                                                                                
     (22) except  for a statutory change  made by initiative                                                                    
     or in  response to  a final nonappealable  court order,                                                                    
     to agree that as part of  an agreement to form an owner                                                                    
     entity of  the project that  its voting rights  and its                                                                    
     access to  confidential information  otherwise provided                                                                    
     for under the terms of  the agreement may be restricted                                                                    
     if  this  chapter  is amended  or  another  statute  is                                                                    
     enacted, and that law has  a material adverse effect on                                                                    
     the  corporation's ability  to perform  its obligations                                                                    
     under such  an agreement; however, the  corporation may                                                                    
     not  agree  to any  terms  that  attempt to  limit  the                                                                    
     legislature's  authority to  exercise police  powers of                                                                    
     the state;                                                                                                                 
                                                                                                                                
MR.  PORTER  mentioned that  the  bill  also contains  provisions                                                               
dealing  with  indemnification;  provisions exempting  the  ANGPC                                                               
from the  state's procurement  code -  though the  ANGPC's budget                                                               
would  be subject  to legislative  appropriation; and  provisions                                                               
pertaining to cash  reserve funds.  He indicated  that the equity                                                               
of the ANGPC will be funded  via a general fund appropriation and                                                               
"a  project financing"  with federal  loan guarantees;  such will                                                               
allow  for the  financing of  the  project with  the other  three                                                               
entities,   though  each   might   ultimately  do   "member-level                                                               
financing,"  which will  necessitate the  state having  a certain                                                               
level   of  flexibility   with   regard   to  various   financing                                                               
methodologies.                                                                                                                  
                                                                                                                                
MR. PORTER noted  that [the ANGPC] will have the  right to create                                                               
subsidiaries   for  the   purposes   of   managing  the   ANGPC's                                                               
responsibilities.    For  example,   under  the  project  itself,                                                               
several  entities  such  as  a  gas  treatment  plant  (GTP),  an                                                               
"upstream  theater pipeline,"  or an  entity that  would own  the                                                               
portion  of the  gas pipeline  that passes  through Canada  might                                                               
need to be  created as separate corporations with  the same owner                                                               
- that owner being the ANGPC.                                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  whose laws  would  control  the                                                               
Canadian portion  of Alaska's gas  pipeline:  would it  be Alaska                                                               
state  law,  federal  law, Canadian  law,  or  specific  Canadian                                                               
provincial  or territorial  law.   He  also raised  the issue  of                                                               
[renvoi], indicating  that the  question may  become one  of "who                                                               
decides who decides."                                                                                                           
                                                                                                                                
REPRESENTATIVE GARA  noted that  the administration  is proposing                                                               
that the Mainline LLC be governed by Delaware law.                                                                              
                                                                                                                                
MS. CUTLER  relayed that she  and other  members of her  law firm                                                               
are  the principal  drafters of  the provisions  of HB  2003 that                                                               
pertain to the  ANGPC.  She explained that the  ANGPC will be the                                                               
public  corporation  -  similar  to the  Alaska  Housing  Finance                                                               
Corporation (AHFC), the Alaska  Industrial Development and Export                                                               
Authority (AIDEA),  the Alaska  Railroad Corporation  (ARRC), the                                                               
Alaska  Permanent Fund  Corporation  (APFC) -  that will  perform                                                               
various functions  for state government separate  and independent                                                               
from   state  government   so  that   liabilities  and   revenues                                                               
[resulting from the project] are  insulated from the general fund                                                               
(GF).  The ANGPC will hold  a membership interest in the Mainline                                                               
LLC,  resulting in  a 20  percent  equity interest  in the  whole                                                               
pipeline  project.   Furthermore,  the ANGPC  may hold  interest,                                                               
either directly or through its  subsidiaries, in other aspects of                                                               
the project.   Via the ANGPC,  the state will build,  manage, and                                                               
operate  the  physical  function  of  the  pipeline;  the  ANGPC,                                                               
however, will  not be responsible  for selling any  "gas in-kind"                                                               
it might receive.                                                                                                               
                                                                                                                                
11:09:23 AM                                                                                                                   
                                                                                                                                
MS.  CUTLER said  the "findings  section" of  the legislation  is                                                               
important  because   it  will  lay   out  the   reasoning  behind                                                               
establishing  the ANGPC  to begin  with; so,  notwithstanding any                                                               
dislike the legislature may have  for such provisions, [her firm]                                                               
feels that  it is important  to provide "findings"  which support                                                               
the  purpose of  the ANGPC,  because such  language could  play a                                                               
role in any future litigation engendered by the project.                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG observed  that  courts generally  don't                                                               
think that legislative  findings carry much weight.   So if these                                                               
findings  are  to  carry  the  same  weight  in  court  as  court                                                               
findings, they must have evidentiary  backing and the record must                                                               
contain that  information.   Furthermore if  the findings  in the                                                               
bill are meant to be cited  by a court in any ensuing litigation,                                                               
the legislation  ought to specifically  say that  the legislature                                                               
intends  the  findings  to be  accorded  particular  and  unusual                                                               
weight  for  specific  reasons,  and  then  list  those  reasons.                                                               
Otherwise, a court might well dismiss the legislative findings.                                                                 
                                                                                                                                
REPRESENTATIVE GARA  acknowledged that findings are  often merely                                                               
the  "findings" of  a bill's  sponsor and  not actually  anything                                                               
[that can be proven].  He  characterized a lot of the findings in                                                               
HB 2003 as debatable, and thus he  is inclined to just get rid of                                                               
them; for  example, finding  (9) claims  that it  is in  the best                                                               
interest of the  state to acquire an ownership interest  in a gas                                                               
pipeline  and  that participating  in  the  financing of  such  a                                                               
pipeline will maximize  benefits to Alaskans, and he  is not sure                                                               
that all  legislators would agree with  that finding, considering                                                               
it, as  well as some  of the other  findings, to be  more opinion                                                               
than fact.   Therefore, he remarked, he would prefer  to not make                                                               
findings more binding on the courts.                                                                                            
                                                                                                                                
REPRESENTATIVE GRUENBERG clarified that  his thought is that each                                                               
finding should be addressed/explained by  Ms. Cutler and then the                                                               
committee can decide whether to eliminate it or retain it.                                                                      
                                                                                                                                
CHAIR McGUIRE  asked whether it  is the governor's  position that                                                               
HB 2003 needs to contain the findings currently listed.                                                                         
                                                                                                                                
MS. CUTLER expressed  a preference for continuing  to include all                                                               
of  the  findings  so  as to  demonstrate  the  rationale  behind                                                               
establishing the ANGPC.  She  suggested that legislative findings                                                               
don't necessarily  have to be  factual, but acknowledged  that it                                                               
would  be good  if a  majority of  the legislature  believed that                                                               
acquiring an ownership  interest in the gas pipeline  would be in                                                               
the best interest of the state.                                                                                                 
                                                                                                                                
11:16:32 AM                                                                                                                   
                                                                                                                                
CHAIR McGUIRE remarked  that when it comes right down  to it, the                                                               
important   issue  for   the  legislature   to  address   is  the                                                               
establishment  of the  ANGPC, noting  that  many legislators  may                                                               
feel that findings  are "fluff" and could as  easily be expressed                                                               
in  the form  of a  press release  or a  sponsor statement.   She                                                               
suggested  that  Ms.  Cutler consider  whether  keeping  all  the                                                               
findings in the bill is worth  having to take the time to justify                                                               
each finding  to the point where  a majority of the  committee is                                                               
satisfied with retaining it.                                                                                                    
                                                                                                                                
MS. CUTLER acknowledged that point,  but reiterated that her firm                                                               
feels  it  is  important  to   articulate  the  reasoning  behind                                                               
establishing  the ANGPC,  specifically  that it  is  in the  best                                                               
interest of the state to acquire  an ownership interest and to go                                                               
out and finance  a portion of the pipeline and  to participate in                                                               
the construction of the project.                                                                                                
                                                                                                                                
REPRESENTATIVE  GARA pointed  out  that finding  (9) also  claims                                                               
that it  will be in  the best interest of  the state to  take gas                                                               
in-kind   rather  than   tax  it,   and  yet   the  legislature's                                                               
consultants have stated that doing  so will likely result in less                                                               
money for  the state.   He  said that  he doesn't  want debatable                                                               
findings  included in  the bill,  and that  he doesn't  think the                                                               
findings  are that  important to  the bill,  particularly if  the                                                               
legislature doesn't really believe in them.                                                                                     
                                                                                                                                
MS.  CUTLER then  referred  to  Section 2,  which  inserts a  new                                                               
Chapter 42  into Title 41.   Specifically, proposed  AS 41.42.010                                                               
establishes  the ANGPC  and contains  typical public  corporation                                                               
language, which  ensures that  it is  both an  instrumentality of                                                               
the  state and  legally separate  from  the state.   Proposed  AS                                                               
41.42.015  contains  typical  dissolution  language,  though  one                                                               
difference is  that the ANGPC cannot  be dissolved as long  as it                                                               
has  bond  notes  or  other kinds  of  financing  or  contractual                                                               
obligations outstanding.                                                                                                        
                                                                                                                                
REPRESENTATIVE GARA  noted that  proposed AS  41.42.010 specifies                                                               
that the ANGPC  gets to set the pay for  its members, and relayed                                                               
that he is concerned about that  because he doesn't want a state-                                                               
owned  corporation to  be able  pay huge  sums to  its own  board                                                               
members.                                                                                                                        
                                                                                                                                
MS.  CUTLER clarified  that [proposed  41.42.040] establishes  an                                                               
honorarium of $400  for each day or  part of a day  [of work] for                                                               
the public board  members, and provides for payment  of per diem.                                                               
She  reiterated that  the language  in proposed  AS 41.42.010  is                                                               
typical with  respect to the  state's other  public corporations.                                                               
In  response to  further comments,  she also  clarified that  the                                                               
ANGPC will  be setting the  pay scale for the  executive director                                                               
and  staff, and  pointed out  that the  ANGPC's operating  budget                                                               
will still be subject to legislative approval.                                                                                  
                                                                                                                                
11:24:15 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   NANCY  DAHLSTROM,   Alaska  State   Legislature,                                                               
offered her  understanding that the  Senate intends to  amend the                                                               
provision pertaining  to the honorarium  rates and per  diem, and                                                               
intends to clarify whether a  board member would receive money if                                                               
participating in meetings via teleconference.                                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG   noted  that  proposed   AS  41.42.015                                                               
specifies  that the  board may  dissolve the  ANGPC but  that the                                                               
dissolution is not effective until the legislature confirms it.                                                                 
                                                                                                                                
MS.  CUTLER  reiterated that  that  is  a typical  provision  for                                                               
public corporations.   In  response to a  question, she  said the                                                               
intention is that the ANGPC would never be left without a board.                                                                
                                                                                                                                
MS. CUTLER referred  to proposed AS 41.42.020,  which pertains to                                                               
the membership  of the board of  directors, and in response  to a                                                               
question   noted  that   subsection   (b)   specifies  that   the                                                               
commissioners  listed  in  subsection  (a)(1)  and  (2)  may,  in                                                               
writing,  appoint  designees if  they  find  they are  unable  to                                                               
attend a meeting.                                                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  expressed a  preference for  allowing a                                                               
commissioner  to  appoint  a   permanent  designee,  rather  than                                                               
requiring  a   commissioner  to  provide  something   in  writing                                                               
authorizing a designee every time  he/she can't attend a meeting.                                                               
He suggested  adding the words, "or  the commissioner's designee"                                                               
to proposed AS 41.42.020(a)(1) and proposed AS 41.42.020(a)(2).                                                                 
                                                                                                                                
MR. PORTER  agreed to  investigate what  the language  looks like                                                               
for   other  public   corporations  that   allow  for   permanent                                                               
designees.                                                                                                                      
                                                                                                                                
MS. CUTLER  went on to  mention that  the five public  members of                                                               
the board  of directors  will be chosen  from the  private sector                                                               
and  will be  expected  to have  recognized  competence and  wide                                                               
expertise  in  the  oil  and   gas  industries  or  the  finance,                                                               
investments, or  other business management  related fields.   The                                                               
goal is to have board members  that really understand the oil and                                                               
gas  industry and  the  financing  of mega  projects,  and it  is                                                               
extremely important that this board  be as successful as possible                                                               
in  an apolitical  fashion and  in  an appropriately  independent                                                               
manner; she reiterated  that board members can  only be dismissed                                                               
for cause and  will be appointed for six-year  staggered terms so                                                               
as to provide stability.                                                                                                        
                                                                                                                                
11:32:52 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE   WILSON   turned   attention   to   proposed   AS                                                               
41.42.020(c),  which   references  AS  39.05.055(3),   and  asked                                                               
whether that  latter statute specifies  that board  members shall                                                               
be non-political.   She noted that proposed  AS 41.42.020 doesn't                                                               
appear to specify such.   "How is it going to  happen if it's not                                                               
in there," she asked.                                                                                                           
                                                                                                                                
MS.  CUTLER  clarified  that  AS  39.05.055(3)  pertains  to  the                                                               
staggering of  a board's initial  members, and  acknowledged that                                                               
she's not  ever seen the term  "apolitical" used in statute  as a                                                               
criteria for board membership.                                                                                                  
                                                                                                                                
MR.  PORTER noted  that proposed  AS  41.42.020(a)(3)(A) says  in                                                               
part:                                                                                                                           
                                                                                                                                
      (a) The corporation shall be governed by a board of                                                                       
     directors consisting of ...                                                                                                
     (3) five public members appointed by the governor who                                                                      
     (A)  do not  hold any  other state  or federal  office,                                                                    
     position,   or    employment,   either    elective   or                                                                    
     appointive, except as  a member of the  armed forces of                                                                    
     either the United States or this state;                                                                                    
                                                                                                                                
MS. CUTLER  said that she  was using  the term "apolitical"  in a                                                               
broader sense, and suggested that  having members serve very long                                                               
terms and  specifying that they  can only be dismissed  for cause                                                               
is  likely to  result in  board  members making  decisions in  an                                                               
apolitical fashion.   She  also suggested  that not  having board                                                               
members confirmed by the legislature  is one of the attributes of                                                               
a board that is expected to function independently.                                                                             
                                                                                                                                
MR.  PORTER, in  response to  a question,  surmised that  the key                                                               
factor in  whether someone  is appointed  is whether  he/she will                                                               
have  the  desired  expertise,  rather  than  whether  he/she  is                                                               
specifically apolitical.                                                                                                        
                                                                                                                                
REPRESENTATIVE  KOTT  referred to  the  language  in proposed  AS                                                               
41.42.020(a)(3)(A) that  says a public  board member  could serve                                                               
as a  member of the armed  forces of either the  United States or                                                               
Alaska, and asked whether it would  create a conflict if a public                                                               
member  of the  board  were also  a member  of  the Air  National                                                               
Guard, for example,  and thus able to draw both  a state per diem                                                               
check and a federal pay check.                                                                                                  
                                                                                                                                
11:36:47 AM                                                                                                                   
                                                                                                                                
MS.  CUTLER  said she  would  research  that issue  further,  but                                                               
mentioned  that  this  language  was  merely  copied  from  other                                                               
statutes.                                                                                                                       
                                                                                                                                
REPRESENTATIVE  GARA suggested  that  perhaps there  should be  a                                                               
requirement  that a  public board  member not  have donated  to a                                                               
particular party  or gubernatorial  candidate in the  previous 10                                                               
years, or  a requirement  that a  public board  member not  be an                                                               
employee of  or have a  contract with  any of the  other Mainline                                                               
LLC  partners.   He also  mentioned that  a state  employee might                                                               
have  much  to offer  as  a  public  board  member but  would  be                                                               
precluded from doing so under the bill's current language.                                                                      
                                                                                                                                
REPRESENTATIVE GRUENBERG suggested that  they remove the language                                                               
that would  allow a member  of the armed  forces to serve  on the                                                               
ANGPC's board  of directors,  characterizing it  as inappropriate                                                               
to have  active duty military  personnel serving on this  kind of                                                               
board,  particularly given  that active  duty military  personnel                                                               
already  have important  responsibilities  to fulfill.   He  also                                                               
noted that the term, "recognized  competence and wide experience"                                                               
is a subjective term open to interpretation by the governor.                                                                    
                                                                                                                                
MS. CUTLER acknowledged  that point, but posited  that if someone                                                               
was  appointed but  did have  those qualifications,  the argument                                                               
could be made that there had been a violation of the statute.                                                                   
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked   whether  those  holding  local                                                               
office should also be excluded from the board.                                                                                  
                                                                                                                                
MS. CUTLER said  that would be a policy call  for the legislature                                                               
to make.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  GRUENBERG  asked  why the  legislature  shouldn't                                                               
confirm appointees  to this  board.   He also  questioned whether                                                               
doing so would be constitutional.                                                                                               
                                                                                                                                
MS. CUTLER  noted that the AHFC,  the AIDEA, and the  APFC do not                                                               
require legislative  confirmation, though the Alaska  Natural Gas                                                               
Development Authority (ANGDA)  and the ARRC do, so that  too is a                                                               
policy call.                                                                                                                    
                                                                                                                                
MR.  PORTER, in  response to  a question,  explained that  they'd                                                               
looked at different models, and  had simply decided to choose one                                                               
that didn't require legislative confirmation.                                                                                   
                                                                                                                                
REPRESENTATIVE DAHLSTROM  too noted that if  active duty military                                                               
personnel  were  appointed  as  board  members,  they  might  get                                                               
deployed  and  thus wouldn't  be  able  to participate  in  board                                                               
meetings, even via teleconference.                                                                                              
                                                                                                                                
MR. PORTER, in response to  a question, offered his understanding                                                               
that the  designees referenced in proposed  AS 41.42.020(b) could                                                               
be appointed  in advance.   In response  to another  question, he                                                               
relayed that  the thought  was that a  seven-member board  was of                                                               
sufficient  size   to  be  both   effective  and   retain  enough                                                               
expertise.                                                                                                                      
                                                                                                                                
11:48:31 AM                                                                                                                   
                                                                                                                                
MS.  CUTLER  turned  attention   to  proposed  AS  41.42.030  and                                                               
explained that it  pertains to the actual meetings  of the board,                                                               
and described the quorum requirements  listed therein as typical.                                                               
She said  that although the  board is  required to meet  at least                                                               
four times a year, she expects  that it will meet more often than                                                               
that, particularly during the project's  inception.  She referred                                                               
to  proposed AS  41.42.030(b)-(d) and  said these  provisions are                                                               
intended  to   ensure  that  the   board  is  able   to  function                                                               
efficiently; proposed AS 41.42.030(b)-(d) read:                                                                                 
                                                                                                                                
     (b) The board shall meet at the call of its chair.                                                                         
     (c)  The  board  may  meet   and  conduct  business  by                                                                    
     teleconference.   A meeting conducted  by the  board by                                                                    
     teleconference has  the same legal effect  as a meeting                                                                    
     in person.                                                                                                                 
     (d)  AS  44.62.310  -  AS 44.62.312  do  not  apply  to                                                                    
     meetings of the  corporation.  The board  shall adopt a                                                                    
     policy  and procedures  for conducting  one or  more of                                                                    
     its meetings in public each year.                                                                                          
                                                                                                                                
MS. CUTLER  assured the committee that  proposed AS 41.42.030(d),                                                               
the Open  Meetings Act  exemption, is not  intended to  keep from                                                               
the public information that should  be shared, and that the board                                                               
will be  adopting policies and  procedures for conducting  one or                                                               
more  of its  meetings in  public every  year; additionally,  the                                                               
Legislative Budget  and Audit Committee has  audit authority over                                                               
the   ANGPC,  the   ANGPC's  operating   budget  is   subject  to                                                               
legislative  approval, and  an annual  report is  required.   She                                                               
indicated that  some of  the technical  requirements of  the Open                                                               
Meetings  Act  could  create  problems;  for  example,  one  such                                                               
requirement  is that  reasonable  notice be  given,  and yet  the                                                               
courts  have  never  expressly   determined  what  such  entails.                                                               
Instead  the courts  have only  indicated  that what  constitutes                                                               
"reasonable"  notice  will  depend  on  the  how  complicated  or                                                               
controversial an issue is.  Given  that the ANGPC will be dealing                                                               
with  some  pretty  big  decisions, even  if  the  proposed  bill                                                               
specifies a  specific notice period,  it could  still potentially                                                               
run afoul of the Open Meetings Act.                                                                                             
                                                                                                                                
MS.  CUTLER  said  that  additionally,   the  Open  Meetings  Act                                                               
requires that  notice be  given in  accordance with  the entity's                                                               
regular  practice,  and for  the  ANGPC,  this  may vary  as  the                                                               
project progresses.   For example, during  the construction phase                                                               
of  the project,  in  order  to satisfy  its  obligations to  the                                                               
Mainline LLC, the  ANGPC may need to meet very  frequently and on                                                               
very short  notice.   She acknowledged  that [this  exemption for                                                               
the  Open  Meetings Act]  is  an  unusual  feature for  a  public                                                               
corporation, though the  ARRC has similar language.   With regard                                                               
to the  issue of executive  sessions, although the  Open Meetings                                                               
Act allows public corporations to  go into executive session, the                                                               
courts have not been particularly  clear about what issues can be                                                               
dealt with in executive session.                                                                                                
                                                                                                                                
MS. CUTLER  reiterated that  the proposed  exemption to  the Open                                                               
Meetings  Act  is  not  intended to  keep  information  from  the                                                               
public;  rather, the  board will  adopt  policies and  procedures                                                               
regarding when meetings will be open  to the public and when they                                                               
won't, but won't be tied to  the restrictions imposed by the Open                                                               
Meetings Act and the court's interpretations of that Act.                                                                       
                                                                                                                                
11:54:44 AM                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GARA  asked  Ms.   Cutler  to  consider  drafting                                                               
language  that  would allow  members  of  the public  to  request                                                               
information from the board.   He sought assurance that nothing in                                                               
HB 2003 or  the ASGF Contract will allow the  board to change the                                                               
state's  rights  and  duties  as   listed  in  the  Mainline  LLC                                                               
[agreement] without some sort of state oversight.                                                                               
                                                                                                                                
MR.  PORTER said  the board  can do  nothing to  change the  ASGF                                                               
Contract,  which   will  outline  the  state'   ownership  rights                                                               
regarding  royalties  and  taxes;  however, with  regard  to  the                                                               
Mainline LLC  agreement, there  will be points  in time  when the                                                               
board of  the ANGPC, which, again,  is a partner in  the Mainline                                                               
LLC,  will have  to  make decisions  regarding ownership  issues.                                                               
For  example,  should the  state  ultimately  want to  have  less                                                               
ownership/equity interest  in the project, the  board must retain                                                               
the flexibility to effect such a change.                                                                                        
                                                                                                                                
REPRESENTATIVE GARA  said that  since the state  is taking  on 20                                                               
percent of the  risk, he wants to ensure that  the state gets the                                                               
maximum it can from the sale of  any interest.  He asked who gets                                                               
to make the final decision regarding the sale of such interest.                                                                 
                                                                                                                                
MR. PORTER said the ANGPC's board would make that decision.                                                                     
                                                                                                                                
MS. CUTLER  mentioned that HB  2003 doesn't explicitly  say that,                                                               
but  the state's  interest in  the project  will be  held by  the                                                               
ANGPC, and so  the board is the entity that  will be making those                                                               
types of decisions,  not the governor.  She posited  that if ever                                                               
the  board does  decide  to sell  part [or  all]  of the  state's                                                               
interest, there will be hearings  regarding that process.  Again,                                                               
the idea behind the bill is  to set up a separate and independent                                                               
corporation that  will perform "this  function" on behalf  of the                                                               
state;  therefore, the  decisions will  be made  by the  board of                                                               
that corporation.                                                                                                               
                                                                                                                                
12:01:22 PM                                                                                                                   
                                                                                                                                
MS.  CUTLER mentioned  that  language on  page  22, lines  12-13,                                                               
states that neither the ANGPC nor  an owner entity of the project                                                               
is subject to the Open Meetings Act.                                                                                            
                                                                                                                                
REPRESENTATIVE DAHLSTROM relayed she  has concerns with regard to                                                               
board   members   of  the   ANGPC   being   able  to   vote   via                                                               
teleconference,  and  noted that  the  bill  doesn't specify  any                                                               
residency  requirements  for  the  public members  of  the  ANGPC                                                               
board.                                                                                                                          
                                                                                                                                
CHAIR  McGUIRE  announced that  the  committee  would recess  for                                                               
lunch.                                                                                                                          
                                                                                                                                
1:19:10 PM                                                                                                                    
                                                                                                                                
CHAIR  McGUIRE  called  the House  Judiciary  Standing  Committee                                                               
meeting back  to order.   Representatives McGuire,  Kott, Wilson,                                                               
Gruenberg, and  Coghill were present  at the call back  to order.                                                               
Representative  Gara arrived  as  the reconvened  meeting was  in                                                               
progress.  Representative Dahlstrom was also in attendance.                                                                     
                                                                                                                                
MS. CUTLER,  in response to  earlier comments,  acknowledged that                                                               
HB 2003 does allow meetings to be conducted by teleconference.                                                                  
                                                                                                                                
MR. PORTER  mentioned that Senate committee  members had concerns                                                               
about just  one or  two board  members controlling  the decision-                                                               
making process.   However,  what must be  remembered is  that the                                                               
ANGPC board won't be making  decisions on its own; instead, there                                                               
will  essentially  be  four   separate  boards  making  decisions                                                               
jointly  with each  other.   Another  thing to  consider is  that                                                               
technology  has  advanced  to  the point  that  meetings  can  be                                                               
successfully conducted without  participants necessarily being in                                                               
the  same location;  furthermore,  there could  be  the issue  of                                                               
members  needing to  be  able to  meet and  vote  on issues  very                                                               
quickly  but not  being able  to travel  to a  particular meeting                                                               
location, though the latter would be the preference.                                                                            
                                                                                                                                
MS.  CUTLER,  on  the  issue  of the  bill's  lack  of  residency                                                               
requirements,  said that  any Canadian  subsidiary entity  of the                                                               
Mainline  LLC might  impose Canadian  residency requirements  and                                                               
therefore it might be best to  not stipulate that every member of                                                               
the  ANGPC's board  be  a U.S.  citizen.   She  also offered  her                                                               
belief  that there  are no  constitutional requirements  of such,                                                               
but noted  that some other state-owned  corporations specify that                                                               
there be  a geographical balance  among board members or  that at                                                               
least some  - or certain -  members be [Alaska] residents  or, as                                                               
does  HB 2003,  that  members simply  have  expertise in  certain                                                               
fields.                                                                                                                         
                                                                                                                                
REPRESENTATIVE  DAHLSTROM  acknowledged  that perhaps  there  are                                                               
only  a  handful of  persons  in  the  world with  the  necessary                                                               
expertise  and  thus  the board  might  not  necessarily  consist                                                               
solely of Alaskan or even U.S. citizens.                                                                                        
                                                                                                                                
MR. PORTER  said the  focus thus  far has  been on  the expertise                                                               
members ought  to have, but  the administration is  assuming that                                                               
it would  be seeking Alaskans  as board members, though  it might                                                               
be good to have a board member "with some Canadian expertise."                                                                  
                                                                                                                                
REPRESENTATIVE  DAHLSTROM  said she  would  prefer  to have  that                                                               
issue clarified in the bill.                                                                                                    
                                                                                                                                
MR. PORTER  asked that some flexibility  be provided so as  to be                                                               
able  to  obtain the  needed  expertise  - for  example,  perhaps                                                               
specify that not all five public member need to be Alaskans.                                                                    
                                                                                                                                
1:29:14 PM                                                                                                                    
                                                                                                                                
MS. CUTLER  then referred  to proposed  AS 41.42.035  - regarding                                                               
minutes  of  meetings  -  and   characterized  it  as  a  typical                                                               
provision;  it simply  requires that  the board  keep minutes  of                                                               
each  meeting,   distribute  copies  to  the   governor  and  the                                                               
Legislative  Budget   and  Audit   Committee,  and   make  copies                                                               
available  to the  public, though  it  does specifically  provide                                                               
that information deemed confidential  under proposed AS 41.42.520                                                               
shall be redacted.  She  said that proposed AS 41.42.040 contains                                                               
language regarding  honorariums, and transportation and  per diem                                                               
allowances.    She offered  her  understanding  that members  who                                                               
participate  in meetings  via  teleconference  would receive  the                                                               
honorarium,  adding, however,  that  she would  be doing  further                                                               
research on  that issue.   Members  will also  get transportation                                                               
and per diem as currently provided for in AS 39.20.180.                                                                         
                                                                                                                                
MS.  CUTLER  explained that  proposed  AS  41.42.045 pertains  to                                                               
removal of  the ANGPC's public  board members and the  filling of                                                               
any vacancies on the board.                                                                                                     
                                                                                                                                
REPRESENTATIVE  GARA, referring  back to  proposed AS  41.42.035,                                                               
noted that  there is no  requirement that tape recordings  of the                                                               
board's meetings be kept.                                                                                                       
                                                                                                                                
MS.  CUTLER said  she  is not  aware of  any  legal problem  with                                                               
including such a requirement in the bill.                                                                                       
                                                                                                                                
REPRESENTATIVE KOTT asked why the honorarium amount is $400.                                                                    
                                                                                                                                
MS. CUTLER offered  her recollection that they  merely picked the                                                               
same amount that the APFC specifies for its board members.                                                                      
                                                                                                                                
REPRESENTATIVE KOTT  mentioned that  the ARRC board  members also                                                               
receive that amount.                                                                                                            
                                                                                                                                
MS.  CUTLER   indicated  that  the   goal  was  to   establish  a                                                               
substantial enough  honorarium so as to  attract individuals that                                                               
would be willing  to serve on a  board that has a lot  of work to                                                               
do.                                                                                                                             
                                                                                                                                
MS.  CUTLER  then relayed  that  proposed  AS 41.42.050  contains                                                               
typical language  authorizing the  board to delegate  the ANGPC's                                                               
administration to  an executive director.   The last  sentence in                                                               
proposed AS  41.42.050 - which  says, "The board may  delegate to                                                               
its executive  director, officers, and agents  of the corporation                                                               
those powers and  duties as it considers  necessary or desirable"                                                               
-  is  intended  to  provide  the board  with  the  authority  to                                                               
delegate appropriate powers and  duties to the executive director                                                               
and staff.   For example,  because the  Mainline LLC is  going to                                                               
have  a management  committee as  well as  other committees,  and                                                               
because the board won't be  working every day, the representative                                                               
to  the management  committee  or some  of  the other  committees                                                               
could actually be the executive  director or a higher-level staff                                                               
member.                                                                                                                         
                                                                                                                                
1:35:20 PM                                                                                                                    
                                                                                                                                
MS. CUTLER then  referred to proposed AS  41.42.060 and explained                                                               
that it requires the ANGPC  board to employ an executive director                                                               
-  he/she would  be an  "at  will" employee  of the  board -  and                                                               
authorize him/her to employ other  staff, all of whom would serve                                                               
"at will" to the executive director.   Such staff, as is typical,                                                               
could not be members of the board and would be exempt employees.                                                                
                                                                                                                                
REPRESENTATIVE  KOTT surmised,  then, that  such employees  would                                                               
essentially be employees of the state.                                                                                          
                                                                                                                                
MR. PORTER concurred.                                                                                                           
                                                                                                                                
MS.  CUTLER,  in  response  to   a  question,  relayed  that  the                                                               
executive  director  would  in  effect  be  the  chief  executive                                                               
officer (CEO).                                                                                                                  
                                                                                                                                
REPRESENTATIVE  GARA  pondered  whether   the  state  -  via  the                                                               
governor or commissioner  - should have the right to  say who the                                                               
executive director is.                                                                                                          
                                                                                                                                
MR. PORTER  said such  would be highly  unusual, adding  that the                                                               
individuals with  the expertise -  the ANGPC board members  - are                                                               
in the best position to determine  whom they could best work with                                                               
and who would best suit their requirements.                                                                                     
                                                                                                                                
REPRESENTATIVE COGHILL  surmised that  the ANGPC board  could act                                                               
quickly  should  any  action against  an  executive  director  be                                                               
necessary.                                                                                                                      
                                                                                                                                
MR.  PORTER  opined  that  although   the  personnel  funding  is                                                               
currently  available,  it is  really  the  responsibility of  the                                                               
ANGPC  board  to pick  its  own  executive director  and  his/her                                                               
responsibility to in turn pick his/her own staff.                                                                               
                                                                                                                                
CHAIR McGUIRE agreed, noting that  if an executive director is at                                                               
odds with the board it will result in a dysfunctional situation.                                                                
                                                                                                                                
REPRESENTATIVE GARA opined that  they should insert language that                                                               
would provide the  state with additional oversight  in the hiring                                                               
of the executive director.                                                                                                      
                                                                                                                                
MR.   PORTER  suggested   that   as  a   practical  matter,   the                                                               
administration  might  make  recommendations  regarding  who  the                                                               
first executive director  ought to be, but it will  still fall to                                                               
the ANGPC board to make  the final determination regarding who it                                                               
hires for  that position,  since it should  be someone  the board                                                               
can work with.                                                                                                                  
                                                                                                                                
1:41:50 PM                                                                                                                    
                                                                                                                                
MS. CUTLER  pointed out that  there will be two  commissioners on                                                               
the board  anyway, [and so they  can provide input on  that issue                                                               
from the State's perspective].                                                                                                  
                                                                                                                                
REPRESENTATIVE KOTT asked  whether there are any  other boards or                                                               
commissions that  are allowed to  establish the pay scale  of its                                                               
employees, and whether  there is currently an upper  limit on pay                                                               
for the staff of the ANGPC  board.  He expressed concern that the                                                               
executive  director  could   end  up  being  paid   more  than  a                                                               
commissioner.                                                                                                                   
                                                                                                                                
MR. PORTER  said the latter  could very well happen  because [the                                                               
state] generally  doesn't offer wages commensurate  with what one                                                               
with  sufficient  expertise could  get  working  for the  private                                                               
sector,  and the  board  needs to  hire  someone of  professional                                                               
quality  and  pay him/her  sufficiently  because  he/she will  be                                                               
representing the  state in  negotiations with  the aforementioned                                                               
producers.   He  noted that  the Alaska  Natural Gas  Development                                                               
Authority  (ANGDA)  board  also  sets  its  executive  director's                                                               
salary, and  that [that amount]  is submitted to  the legislature                                                               
via  the DOR  and  is  subject to  legislative  approval via  the                                                               
budget process.  The same would  be true of the ANGPC's executive                                                               
director's  salary recommendation,  and so  the legislature  will                                                               
have the  final say regarding  what the board's staff  is getting                                                               
paid.                                                                                                                           
                                                                                                                                
MS.  CUTLER  also  pointed  out  that  language  in  proposed  AS                                                               
41.42.060(b) specifies  that the  value of the  compensation paid                                                               
to  the  executive  director  cannot  exceed  the  value  of  the                                                               
services he/she provides to the board.                                                                                          
                                                                                                                                
REPRESENTATIVE  KOTT remarked,  however,  that  if the  executive                                                               
director is hired while the legislature  is not in session, it is                                                               
unlikely  that   the  legislature,  during  the   next  session's                                                               
budgetary  process, would  cut that  salary even  if it  were too                                                               
high.    On  a  previous  topic, he  noted  that  his  staff  has                                                               
conducted  some  research  and  has found  that  the  AHFC  board                                                               
members do receive the honorarium  when participating in meetings                                                               
via teleconference.                                                                                                             
                                                                                                                                
REPRESENTATIVE WILSON  surmised that the  board will have  to pay                                                               
quite a bit in order to  draw someone of the quality necessary to                                                               
serve as its executive director.                                                                                                
                                                                                                                                
REPRESENTATIVE COGHILL  asked whether  the phrase, "the  value of                                                               
the  consideration  provided  to  the  corporation"  is  standard                                                               
language, and how the value of that will be determined.                                                                         
                                                                                                                                
1:47:11 PM                                                                                                                    
                                                                                                                                
MS. CUTLER said  it is not necessarily  standard language, though                                                               
it  is language  that was  recommended  by other  members of  her                                                               
firm.                                                                                                                           
                                                                                                                                
REPRESENTATIVE COGHILL  indicated that  the question of  how that                                                               
value will be  determined must still be  addressed, and suggested                                                               
that they add language that would do so.                                                                                        
                                                                                                                                
REPRESENTATIVE GARA  opined that it  is unlikely that  the amount                                                               
of  an executive  director's salary  would be  challenged on  the                                                               
basis  that it  doesn't meet  the statutory  requirement that  it                                                               
equal the  value of  the service provided;  in other  words, once                                                               
the salary  is set by  the board, that will  be it.   He relayed,                                                               
therefore,  that  he will  be  offering  an amendment  that  will                                                               
require State oversight when setting  both the board's salary and                                                               
the  staff's   salary  -  oversight   provided  by   perhaps  the                                                               
commissioner of the DOR.                                                                                                        
                                                                                                                                
REPRESENTATIVE COGHILL  said such  an amendment would  in essence                                                               
be providing veto power to one of the board members.                                                                            
                                                                                                                                
CHAIR  McGUIRE opined  that any  question of  whether someone  is                                                               
overcompensated  ought to  be addressed  by the  legislature, and                                                               
expressed  concern with  providing  the commissioner  of the  DOR                                                               
with special powers,  particularly given that he/she  is meant to                                                               
be a member of the board.                                                                                                       
                                                                                                                                
MR.  PORTER, in  response to  a  question, indicated  that it  is                                                               
anticipated that the  executive director would serve  both as the                                                               
board's administrator  and as  the project  manager; furthermore,                                                               
he/she would most  likely serve as the  State's representative on                                                               
the  Mainline LLC's  management  committee,  and therefore  would                                                               
have to have substantial amount  of expertise and ability to lead                                                               
"the staff and the team forward."                                                                                               
                                                                                                                                
MS. CUTLER indicated that the  language regarding how the ANGPC's                                                               
board  chooses  its executive  director  and  how he/she  chooses                                                               
other staff  is similar to  the language currently  governing the                                                               
APFC board.   She expressed  the hope that the  salary authorized                                                               
by  the  board   will  be  sufficient  to   attract  a  competent                                                               
individual.                                                                                                                     
                                                                                                                                
1:54:00 PM                                                                                                                    
                                                                                                                                
MS.  CUTLER,   turning  attention   to  proposed   AS  41.42.070,                                                               
explained  that the  attorney general  would act  as the  ANGPC's                                                               
legal advisor and would hire  legal firms as necessary to provide                                                               
any additional  expertise that's  needed.  Proposed  AS 41.42.080                                                               
contains typical  language, she  remarked, and states  that board                                                               
members and the  executive director are subject  to the financial                                                               
disclosure provisions of AS 39.50, and  that if they or any other                                                               
member  of the  staff acquire,  own, or  control any  kind of  an                                                               
interest -  direct or indirect  - in any  kind of an  entity that                                                               
has  anything to  do with  the  pipeline project,  then they  are                                                               
required to  disclose such interest; such  disclosure will become                                                               
a matter  of public record  and will  be included in  the board's                                                               
minutes.                                                                                                                        
                                                                                                                                
MS.  CUTLER  relayed  that proposed  AS  41.42.200  outlines  the                                                               
purposes of  the ANGPC, and  that proposed AS  41.42.210 outlines                                                               
the ANGPC's powers  - both typical powers and  powers specific to                                                               
the ANGPC.   And  although some of  the specific  powers outlined                                                               
may seem  overly specific,  they will ensure  that the  ANGPC has                                                               
the flexibility it  needs to function as it should  over the many                                                               
years  of the  project.    Furthermore, "power"  (24)  acts as  a                                                               
"catchall power" in that it would  allow the ANGPC to "act in any                                                               
manner,  or perform  any function,  necessary  or incidental,  to                                                               
effectuate other  powers enumerated in or  necessarily implied by                                                               
this chapter";  the purpose of this  power is to ensure  that any                                                               
necessary actions can be taken in  the future to deal with as yet                                                               
unforeseen circumstances.                                                                                                       
                                                                                                                                
MS.  CUTLER, referring  to  some of  the  other specific  powers,                                                               
explained that  they will ensure that  the ANGPC will be  able to                                                               
obtain  an  ownership  interest   in  the  project;  operate  the                                                               
project;  issue   bonds  or  incur   other  forms   of  financing                                                               
obligations  as necessary;  obtain,  sell, or  lease interest  in                                                               
property, including its ownership  interest in the project, when,                                                               
in the  judgment of the ANGPC,  doing so is necessary  to further                                                               
its    purposes;    enter     into    agreements    with    other                                                               
countries/governments;  apply  for  permits and  licenses;  enter                                                               
into any  contracts or  agreements to carry  out the  project and                                                               
perform all  of its obligations  under any such; obtain  lines of                                                               
credit  and   borrow  money;   purchase  insurance;   enter  into                                                               
indemnification or  confidentiality agreements; and  accept money                                                               
or gifts from other entities.                                                                                                   
                                                                                                                                
2:00:28 PM                                                                                                                    
                                                                                                                                
MS.  CUTLER referred  to  power  (22) and  explained  that it  is                                                               
intended to provide stability by  assuring the potential partners                                                               
that the  ANGPC may lose some  of its voting rights  or access to                                                               
confidential  information if  another statute  is enacted  by the                                                               
legislature that  can be shown to  have an adverse effect  on the                                                               
ANGPC's ability to perform its  obligations.  However, power (22)                                                               
specifies that the ANGPC may not  agree to any terms that attempt                                                               
to limit the legislature's authority to exercise police powers.                                                                 
                                                                                                                                
MR.  PORTER opined  that  a  similar change  in  statute via  the                                                               
initiative process ought  to be viewed the same as  a change made                                                               
via statute; therefore, perhaps the  language of power (22) ought                                                               
to be changed to reflect that point.                                                                                            
                                                                                                                                
MS. CUTLER  referred to power  (23) and explained that  it allows                                                               
the ANGPC to  authorize any payments or distributions  owed to it                                                               
to  be  paid  to  anyone  it  specifies  in  furtherance  of  the                                                               
satisfaction  of its  obligations.   For  example,  if the  ANGPC                                                               
issues revenue bonds, it could  instruct that the dividend stream                                                               
from the Mainline  LLC go directly to the payoff  of those bonds,                                                               
thus making them more marketable.   She offered her understanding                                                               
that this concept  is not new, though under HB  2003, it can also                                                               
be applied  to any other project  and financing costs -  not just                                                               
bonds.                                                                                                                          
                                                                                                                                
MR.  PORTER noted  that  power (23)  will  essentially allow  the                                                               
Mainline LLC  to deduct  its operating  costs from  any dividends                                                               
submitted  to the  state.   In response  to comments,  he relayed                                                               
that the  bill also creates  some structure upon which  the state                                                               
can  negotiate the  Mainline LLC;  in  other words,  some of  the                                                               
clauses  in HB  2003 may  well also  end up  in the  Mainline LLC                                                               
agreement.                                                                                                                      
                                                                                                                                
2:09:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA asked whether  a draft Mainline LLC agreement                                                               
exists yet.                                                                                                                     
                                                                                                                                
MR. PORTER  indicated that the  formulation of that  agreement is                                                               
still in progress, and as soon  as a final template is arrived at                                                               
it will be submitted to the legislature and the public.                                                                         
                                                                                                                                
REPRESENTATIVE  GARA expressed  concern  that the  bill would  in                                                               
essence  allow the  ANGPC to  accept the  Mainline LLC  agreement                                                               
even if it contains clauses  that the legislature doesn't approve                                                               
of.                                                                                                                             
                                                                                                                                
MR. PORTER remarked that it  won't be possible to legislate every                                                               
detail of a  potential Mainline LLC agreement;  instead the state                                                               
hopes to  arrive at a final  draft template upon which  the state                                                               
will then negotiate five or six agreements.                                                                                     
                                                                                                                                
REPRESENTATIVE GARA opined that the  legislature ought to be able                                                               
to  review  that  draft  template before  it  completes  work  on                                                               
legislation establishing the ANGPC and its powers.                                                                              
                                                                                                                                
MR. PORTER opined  that the ANGPC ought to have  been created two                                                               
years ago  so that it could  now be negotiating the  Mainline LLC                                                               
agreement, and  pointed out  that nothing in  the bill  says that                                                               
the ANGPC must  sign the template agreement.  Once  a template is                                                               
arrived at,  the ANGPC  will sit down,  under direction  from the                                                               
legislature, and  renegotiate [a  final] Mainline  LLC agreement;                                                               
although  this process  will take  some time,  it is  the ANGPC's                                                               
responsibility  to  do it's  own  negotiating  on behalf  of  the                                                               
state, but it must first be established.                                                                                        
                                                                                                                                
REPRESENTATIVE GARA offered his  understanding that the ANGPC, as                                                               
a minority owner, won't be able  to stop the other three partners                                                               
from doing  something that they three  all agree upon.   He asked                                                               
whether  the  legislature  will  end up  having  to  approve  the                                                               
proposed  ASGF  Contract -  because  certain  deadlines elapse  -                                                               
before it  gets a chance  to see,  and perhaps change,  the draft                                                               
Mainline LLC agreement.                                                                                                         
                                                                                                                                
2:15:24 PM                                                                                                                    
                                                                                                                                
MR. PORTER  said he  would research that  issue, adding  that the                                                               
intent all along has  been to get the ANGPC and  its board set up                                                               
so  that  its  members  can   review  the  [draft]  Mainline  LLC                                                               
agreement and  the proposed  ASGF Contract, and  get fully  up to                                                               
speed and make decisions regarding  whether to sign the agreement                                                               
as it exists  or whether to renegotiate its terms.   If the ANGPC                                                               
and  its board  is not  set up  in a  timely fashion,  conforming                                                               
amendments   will   be   considered  that   would   provide   the                                                               
commissioners  with  the  authority  to  move  forward  with  the                                                               
project.                                                                                                                        
                                                                                                                                
CHAIR  McGUIRE expressed  a  preference for  going  the route  of                                                               
establishing  the  ANGPC  and  its  board,  and  asked  when  the                                                               
aforementioned alternative would be triggered.                                                                                  
                                                                                                                                
MR. PORTER indicated that there  is still a window of opportunity                                                               
for the ANGPC and its board to be  set up if HB 2003 is passed in                                                               
the next  few days;  currently the  administration is  working on                                                               
setting up  board members  so that they  may choose  an executive                                                               
director who  in turn  can be  briefed on the  contract so  as to                                                               
have a  working knowledge of  the project.   He posited  that any                                                               
board  members  chosen will  have  the  expertise and  experience                                                               
needed  to start  working on  the  project right  away.   Ideally                                                               
several  of the  Mainline LLC  agreements necessary  to move  the                                                               
project forward will be ready to  be signed at the same time that                                                               
the  proposed ASGF  Contract is  ready  to be  signed; this  will                                                               
allow  the  project to  move  forward  immediately, but  it  also                                                               
requires that the state continue  negotiating on the Mainline LLC                                                               
agreements  in  the meantime.    Otherwise  the process  will  be                                                               
delayed until  the state, in  whatever form, has  sufficient time                                                               
to execute those agreements.                                                                                                    
                                                                                                                                
CHAIR McGUIRE expressed her hope  that the committee can focus on                                                               
the merits of  the ANGPC and what the committee  thinks it should                                                               
look like, and  that to the extent that the  committee would like                                                               
to make amendments regarding how the  board is set up or how much                                                               
its members or staff are paid,  that the committee would be ready                                                               
to start  amending the bill.   To the extent that  members oppose                                                               
the proposed  ASGF Contract as  a whole  or have opinions  on the                                                               
Mainline  LLC agreements,  she suggested  that members  will have                                                               
further opportunity  to voice those concerns,  particularly given                                                               
that this bill must still go to the House Finance Committee.                                                                    
                                                                                                                                
[Following  was a  brief discussion  regarding how  the committee                                                               
intended to proceed over then next few days.]                                                                                   
                                                                                                                                
The committee took an at-ease from 2:22 p.m. to 2:35 p.m.                                                                       
                                                                                                                                
MS. CUTLER, with regard to  public corporations taking membership                                                               
interests in  LLCs, pointed  out that the  APFC already  does so,                                                               
though  she acknowledged  that that  is  not the  same as  what's                                                               
being proposed via  HB 2003.  The legal  structure being proposed                                                               
is to set  up a separate and independent  public corporation that                                                               
will hold  the state's interest  and manage the  state's interest                                                               
in the  project, and  that it  will be the  board of  that public                                                               
corporation  that  will  hold  the  membership  interest  in  the                                                               
Mainline  LLC  and  will  therefore  be  the  entity  making  the                                                               
decisions regarding whether to agree  to the forthcoming Mainline                                                               
LLC agreement.  She reminded  members that there is precedent for                                                               
this concept though  it is a bit different simply  because of the                                                               
magnitude of  the project and  what will be required  to complete                                                               
it.                                                                                                                             
                                                                                                                                
2:37:57 PM                                                                                                                    
                                                                                                                                
MS. CUTLER,  with regard to  the question of  whether legislative                                                               
confirmation   of   the   ANGPC's    board   members   would   be                                                               
constitutional, said that she has just  been told that there is a                                                               
court case  which held  that at  least under  some circumstances,                                                               
legislative confirmation  can be unconstitutional if  the [Alaska                                                               
State]  Constitution  doesn't  expressly  provide  for  it.    In                                                               
response to  a request, she  indicated that she would  attempt to                                                               
provide the committee with something in writing on this issue.                                                                  
                                                                                                                                
REPRESENTATIVE  GRUENBERG questioned  whether there  will be  tax                                                               
consequences of proceeding as HB 2003 proposes.                                                                                 
                                                                                                                                
MS. CUTLER said  that whether the ANGPC will obtain  a tax exempt                                                               
ruling from  the Internal Revenue  Service (IRS) is  unknown, but                                                               
her understanding  is that the  intent is  for the ANGPC  to seek                                                               
just that.                                                                                                                      
                                                                                                                                
MR.  PORTER noted  that the  [ANGPC]  probably won't  be able  to                                                               
create a tax exempt organization in  Canada, and so to the extent                                                               
that  there is  a Canadian  tax  liability, the  [ANGPC] will  be                                                               
taxed.                                                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG  asked whether  it would be  possible to                                                               
insert a  tax rebate  provision in  any agreement  developed with                                                               
Canada.                                                                                                                         
                                                                                                                                
REPRESENTATIVE GARA  asked whether there is  anything proposed in                                                               
the bill - with regard to setting  up the ANGPC - that they ought                                                               
to do  differently so  as to  get a favorable  ruling on  the tax                                                               
consequences on the bill.                                                                                                       
                                                                                                                                
MS. CUTLER  said her firm  tried to draft  the bill with  that in                                                               
mind,  attempting to  put the  ANGPC in  the best  light for  tax                                                               
purposes, though it is not assured  that the ANGPC will receive a                                                               
tax  exempt ruling.    She  indicated that  [her  firm] would  be                                                               
willing to  consider any additional suggestions  that Legislative                                                               
Legal and Research Services could provide.                                                                                      
                                                                                                                                
REPRESENTATIVE GARA expressed a  preference for having more input                                                               
from tax experts regarding whether  the bill should be changed so                                                               
that a tax exempt ruling is more likely.                                                                                        
                                                                                                                                
2:43:00 PM                                                                                                                    
                                                                                                                                
MS.  CUTLER then  referred to  proposed AS  41.42.220, and  noted                                                               
that  it would  authorize  the ANGPC  to  establish wholly  owned                                                               
subsidiary  entities  ("Ancillary  LLCs")   for  the  purpose  of                                                               
owning, financing,  or operating  any portion  of the  project in                                                               
order to  carry out the  ANGPC's purposes.  These  Ancillary LLCs                                                               
may  be   either  profit  or   nonprofit  entities  and   may  be                                                               
established in jurisdictions outside  of Alaska, though they must                                                               
be set  up in a  manner that is  consistent with the  purposes of                                                               
[proposed AS  41.42].  Ancillary LLCs  may be necessary -  and in                                                               
the state's  best interest  or in the  project's best  interest -                                                               
for the portion of the project  that runs through Canada, for the                                                               
GTP, for a "liquids extraction  plant," for feeder lines, and for                                                               
perhaps other elements of the project.                                                                                          
                                                                                                                                
MS.  CUTLER said  that Ancillary  LLCs will  be doing  the actual                                                               
work, but  would be  set up  and controlled  by the  ANGPC board,                                                               
which  would determine  the powers  and assets  of the  Ancillary                                                               
LLCs and would  choose, with the governor's  consent, the members                                                               
of their  boards; furthermore, Ancillary LLC  board members would                                                               
serve at  the pleasure of the  ANGPC board.  Under  this concept,                                                               
the ANGPC will  be the entity, legally, that  controls the entire                                                               
project.   She mentioned  that the  State's Canadian  counsel has                                                               
advised the  State that  there might  be particular  things about                                                               
Canadian  law, in  a particular  jurisdiction  or province,  that                                                               
would require a board  to be set up in a certain  way, and so for                                                               
this reason the language in the  bill governing the set up of any                                                               
Ancillary  LLC and  its  board  does not  look  exactly like  the                                                               
language pertaining  to the set  up of  the ANGPC and  its board.                                                               
However,  the  bill  does  specify   that  certain  provisions  -                                                               
principally those  found in  Article 4 of  the bill,  proposed AS                                                               
41.42.400  through  proposed  AS  41.42.440 -  do  apply  to  any                                                               
Ancillary LLC established under "this chapter."                                                                                 
                                                                                                                                
MS. CUTLER  relayed that "this is  one area" [of the  bill] about                                                               
which  her  firm   is  very  interested  in   speaking  with  the                                                               
legislature's consultants,  because her firm  doesn't necessarily                                                               
agree with suggestions made the  consultants.  "We're going to be                                                               
dealing with different  jurisdictions, and we need  to give these                                                               
[Ancillary LLCs] the flexibility to  meet the requirements of the                                                               
law of  those jurisdictions, and  so that is  why this is  set up                                                               
flexibly  and not  as strictly  as some  might suggest  it should                                                               
be,"  she remarked.   In  response to  a question,  she indicated                                                               
that her  firm would  particularly like to  discuss the  issue of                                                               
[Ancillary LLCs] with the legislature's consultants.                                                                            
                                                                                                                                
REPRESENTATIVE  GARA asked  whether compromise  language such  as                                                               
"shall  be organized  under Alaska  law  except where  necessary"                                                               
would  be   sufficient  to  alleviate  concerns   regarding  what                                                               
jurisdiction  the  [Ancillary  LLCs]   fall  under,  while  still                                                               
providing for some  flexibility.  He also  expressed a preference                                                               
for  the ANGPC  to  be  organized under  Alaska  law rather  than                                                               
Delaware   law,   because,   according   to   the   legislature's                                                               
consultants,  Delaware   law  is  less  protective   of  minority                                                               
shareholder rights.                                                                                                             
                                                                                                                                
MS. CUTLER clarified  that it's the Mainline LLC,  not the ANGPC,                                                               
that would be organized under Delaware law.                                                                                     
                                                                                                                                
CHAIR  McGUIRE said  the ANGPC  would be  organized under  Alaska                                                               
law.                                                                                                                            
                                                                                                                                
MS. CUTLER  concurred.   She offered her  hope that  the Mainline                                                               
LLC agreement  that is  in the process  of being  negotiated will                                                               
become the template for all  the various segments of the project.                                                               
Currently, however, [it specifically  pertains] to the portion of                                                               
the project  that is the  main pipeline in Alaska.   Furthermore,                                                               
it  is anticipated  that other  agreements will  be necessary  in                                                               
order to acquire an interest  in other aforementioned segments of                                                               
the project.   She reiterated  her argument that  flexibility for                                                               
the   Ancillary  LLCs   will   be   necessary,  particularly   if                                                               
jurisdictional  issues come  into  play.   Also,  there are  many                                                               
business-related  issues  to  consider  when  deciding  where  to                                                               
incorporate an  entity, and  so the  decision regarding  where to                                                               
incorporate [an Ancillary LLC] will need  to be made by the ANGPC                                                               
in conjunction with its partners in the Mainline LLC.                                                                           
                                                                                                                                
MS. CUTLER suggested that the  language offered by Representative                                                               
Gara may  not necessarily  be the most  appropriate, but  if this                                                               
issue is  of concern  to a  majority of  the committee,  her firm                                                               
will try  to come  up with  suitable language,  perhaps something                                                               
along  the lines  of,  "unless  conflicts with  the  laws of  the                                                               
resident jurisdiction".   Canadian  counsel has the  concern, she                                                               
relayed, that the  state might be put in a  position of not being                                                               
able to  take advantage of incorporation  in Canada.  And  in the                                                               
interest of  making [the ANGPC]  a flexible entity,  the drafters                                                               
have deliberately not provided for interlocking directorships.                                                                  
                                                                                                                                
2:55:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GRUENBERG  referred to  language on page  11, line                                                               
18,  and  suggested  that  the   term  "wholly  owned  subsidiary                                                               
entities" ought to be made more  flexible in case there is a need                                                               
for something that isn't wholly owned  or isn't a subsidiary.  He                                                               
also  suggested that  proposed AS  41.42.220 shouldn't  limit the                                                               
organizational  jurisdictions  of  the  Ancillary  LLCs  to  just                                                               
Canada and the  United States.  He then referred  to the language                                                               
of proposed AS 41.42.220(c) and  observed that it gives the ANGPC                                                               
board  members  total  carte blanche  over  the  Ancillary  LLCs'                                                               
boards.  He  expressed concern that this  provision won't provide                                                               
the state with enough oversight of any Ancillary LLCs.                                                                          
                                                                                                                                
MR. PORTER  pointed out that the  ANGPC, via the bill,  will have                                                               
already been given  total authority to manage  the entire project                                                               
as  it sees  fit, and  proposed  AS 41.42.220  merely allows  the                                                               
ANGPC to  establish other  entities as  necessary to  fulfill its                                                               
responsibilities.                                                                                                               
                                                                                                                                
REPRESENTATIVE GRUENBERG  indicated that he  is a little  wary of                                                               
allowing such to  occur because the Ancillary  LLCs could neither                                                               
be controlled by nor have to report to the legislature.                                                                         
                                                                                                                                
MS. CUTLER relayed that Canadian  counsel [wanted to ensure] that                                                               
the  boards of  Ancillary LLCs  would  be selected  by the  ANGPC                                                               
board, and that her firm  had legal concerns because Article III,                                                               
Section 22, of the Alaska State  Constitution says in part:  "All                                                               
executive and  administrative offices, departments,  and agencies                                                               
of the  state government and their  respective functions, powers,                                                               
and duties  shall be allocated by  law among and within  not more                                                               
than twenty principal departments, so as  to group them as far as                                                               
practicable  according to  major purposes."   There  is case  law                                                               
stating that  public corporations are appropriately  public under                                                               
the Alaska State Constitution, and her  firm wanted to be able to                                                               
argue that  subsidiary entities established  under HB  2003 would                                                               
be under the  purview of Alaska's executive  branch, but Canadian                                                               
counsel  has  warned that  Canadian  law  requires the  principal                                                               
board  to appoint  the  board  of a  subsidiary.   Therefore  the                                                               
language  currently  in  proposed  AS 41.42.220  is  intended  to                                                               
address both  concerns.  She indicated  that the goal is  to have                                                               
the  ANGPC exhibit  control  over  all Ancillary  LLCs  so as  to                                                               
preclude the development of any "rogue" entity.                                                                                 
                                                                                                                                
MS. CUTLER,  in response to  questions, said it is  expected that                                                               
the governor  will give  his/her consent  of Ancillary  LLC board                                                               
members in  writing, and offered  her belief that the  ANGPC will                                                               
have  the  authority to  establish  [its  own internal  operating                                                               
procedures].                                                                                                                    
                                                                                                                                
CHAIR McGUIRE relayed  that she is attempting to  arrange for the                                                               
legislature's consultants to  be available at a  later meeting to                                                               
discuss  issues of  concern  to members,  one  of those  concerns                                                               
being  that HB  2003 merely  authorizes  a handoff  of power  and                                                               
responsibility to  entities that the  State will have  no control                                                               
over.  She offered her belief,  though, that the language on page                                                               
11, line  23, which says,  "in a  manner that is  consistent with                                                               
the purposes of  this chapter" will link any  Ancillary LLCs with                                                               
the ANGPC.                                                                                                                      
                                                                                                                                
REPRESENTATIVE GARA  asked Ms.  Cutler to  draft an  amendment to                                                               
proposed  AS 41.42.220  such  that any  Ancillary  LLCs would  be                                                               
organized  under "Alaska  law except  where necessary  to proceed                                                               
with the project or minimize tax liabilities to the state".                                                                     
                                                                                                                                
3:09:36 PM                                                                                                                    
                                                                                                                                
MS.  CUTLER  then  referred  to  Article 3  of  the  bill  -  the                                                               
financial  provisions -  and said  it allows  the ANGPC  to issue                                                               
bonds  and enter  into other  forms of  financing obligations  as                                                               
necessary.   She  offered her  belief that  it contains  language                                                               
similar to  other public corporations  of the state,  adding that                                                               
the  expectation  is  that  most  financing  will  occur  through                                                               
straight revenue bonds  or revenue bonds "with  the state's moral                                                               
obligation."  She noted that language  on pages 22 and 23 defines                                                               
"financing  obligations"  and  essentially  provides  for  things                                                               
other than bonds.                                                                                                               
                                                                                                                                
MS.  CUTLER, in  response  to a  question  about dividends  being                                                               
returned directly to the state,  referred to her earlier comments                                                               
regarding power (23) outlined in proposed AS 41.42.210.                                                                         
                                                                                                                                
REPRESENTATIVE   GRUENBERG   asked    whether   certificates   of                                                               
participation  ought   to  be  included  in   the  aforementioned                                                               
definition.                                                                                                                     
                                                                                                                                
MS. CUTLER  surmised that  such would  be covered  under "interim                                                               
certificates" and "grant anticipation  notes", but said she would                                                               
research that issue further.                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA asked  whether the language on  page 16, line                                                               
26, would  allow the  ANGPC to  sell all or  part of  the state's                                                               
interest  in   the  pipeline  for   a  price  that   perhaps  the                                                               
legislature wouldn't be happy with.                                                                                             
                                                                                                                                
MS. CUTLER said  that that language is standard  for "validity of                                                               
pledge" provisions regarding bonds,  and simply clarifies that if                                                               
the  revenues from  this project  are already  pledged to  a bond                                                               
issue,  and then  the ANGPC  later  decides to  sell the  state's                                                               
interest, the  ANGPC would  not prohibited  from doing  so unless                                                               
the sale  is restricted by  the actual pledge itself  through the                                                               
trust agreement.                                                                                                                
                                                                                                                                
3:14:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  said he  wants to  ensure that  somewhere in                                                               
the bill is  a provision that will preclude the  ANGPC board from                                                               
selling the  state's assets for  a price that the  state wouldn't                                                               
agree to.                                                                                                                       
                                                                                                                                
MS.  CUTLER  said  that  the bill  contains  no  such  provision;                                                               
similar to  the APFC -  which doesn't get permission  from either                                                               
the administration  or the legislature  before selling  or buying                                                               
assets -  the ANGPC is  completely separate and  independent from                                                               
the state in that regard.                                                                                                       
                                                                                                                                
REPRESENTATIVE GARA said that concerns him.                                                                                     
                                                                                                                                
REPRESENTATIVE WILSON suggested adding  language to the bill such                                                               
that the  legislature would be  informed of any  potential action                                                               
that would adversely affect the state's revenue.                                                                                
                                                                                                                                
MS. CUTLER, in  response to questions regarding  vacancies on the                                                               
ANGPC board,  pointed out that  language on page 6,  lines 29-31,                                                               
allows the  governor to "promptly  make an appointment to  fill a                                                               
vacancy on the board", and that  such authority is not limited to                                                               
the  public members,  though she  acknowledged  that perhaps  the                                                               
latter point could be made clearer in the bill.                                                                                 
                                                                                                                                
CHAIR  McGUIRE returned  to the  issue of  the ANGPC  selling the                                                               
state's  assets,  and  suggested  that perhaps  the  validity  of                                                               
pledge provision  could be narrowed  to ensure that  the entirety                                                               
of the  state's interest could not  be sold without some  sort of                                                               
state approval.                                                                                                                 
                                                                                                                                
MR. PORTER acknowledged that point.                                                                                             
                                                                                                                                
CHAIR McGUIRE  referred to  the APFC board  and pointed  out that                                                               
there has  always been a  tension between it and  the legislature                                                               
regarding how much latitude should  be given and how much control                                                               
should be  retained when  deciding what should  be done  with the                                                               
state's assets.                                                                                                                 
                                                                                                                                
MS. CUTLER,  in response to  a question, offered her  belief that                                                               
the language  in Article  3 is standard  language except  for the                                                               
term, "or  other financing obligations".   Referring  to language                                                               
on page  15, lines  9-11, she  said that one  would only  want to                                                               
establish  capital   reserve  funds   if  it  will   enhance  the                                                               
marketability of bonds or other financing obligations.                                                                          
                                                                                                                                
3:25:01 PM                                                                                                                    
                                                                                                                                
MS.  CUTLER went  on  to  explain that  Article  4  of the  bill,                                                               
proposed  AS 41.42.400  through proposed  AS 41.42.440  - details                                                               
the  operations   of  the  ANGPC.     Specifically,  proposed  AS                                                               
41.42.400 establishes  a gas pipeline project  cash reserves fund                                                               
consisting of  appropriations from  the legislature and  money or                                                               
other assets transferred  to it by the ANGPC.   She characterized                                                               
the language  of this  provision as  typical language  similar to                                                               
that governing the state's other  public corporations.  Assets in                                                               
this fund  may be pledged to  pay bonds, get lines  of credit, or                                                               
otherwise meet "capital call" or  other financial requirements of                                                               
the ANGPC.   All payments  out of this  fund must be  reported to                                                               
the  legislature and  governor.   She  relayed  that proposed  AS                                                               
41.42.410  pertains   to  the  ANGPC's  operating   budget;  that                                                               
proposed AS 41.42.420  contains typical language and  is aimed at                                                               
addressing  tax  exempt status  concerns;  and  that proposed  AS                                                               
41.42.430 specifies  that the State Procurement  Code won't apply                                                               
to the ANGPC or "an owner entity of the project".                                                                               
                                                                                                                                
MR. PORTER  predicted that  the other  three corporations  of the                                                               
Mainline LLC  wouldn't be  able to meet  the requirements  of the                                                               
State Procurement Code anyway.                                                                                                  
                                                                                                                                
MS.  CUTLER  relayed  that  AS  41.42.440  outlines  which  other                                                               
statutes would  not apply to  the ANGPC unless proposed  AS 41.42                                                               
specifically provides otherwise.                                                                                                
                                                                                                                                
REPRESENTATIVE  GRUENBERG noted  that language  on page  18, line                                                               
30, specifically  provides that AS  37.10.070 would apply  to the                                                               
ANGPC, and  suggested, therefore, that  the language on  page 19,                                                               
lines 28-29,  be altered to  clarify that  point.  He  also asked                                                               
whether AS  37.10.070 is currently  written in  such a way  as to                                                               
satisfy what will be needed with regard to the ANGPC.                                                                           
                                                                                                                                
MR. PORTER said it is.                                                                                                          
                                                                                                                                
3:31:42 PM                                                                                                                    
                                                                                                                                
MS. CUTLER said  that AS 37.10.070 was  specifically not included                                                               
as  an exception  in proposed  AS 41.42.440  because the  idea is                                                               
that the fund will be managed  according to AS 37.10.070 but will                                                               
not be considered residual funds in the treasury.                                                                               
                                                                                                                                
MS.  CUTLER turned  attention  to Article  5,  which pertains  to                                                               
financial  information   and  control,   reporting  requirements,                                                               
public information,  and confidential  information.   She relayed                                                               
that proposed AS 41.42.500, which  she characterized as a typical                                                               
provision,  would   allow  the   Legislative  Budget   and  Audit                                                               
Committee to  audit the ANGPC  and requires the ANGPC  to provide                                                               
quarterly financial statements on or  before a certain day in the                                                               
year.     Proposed   AS  41.42.510   -   regarding  reports   and                                                               
publications - was "cribbed" from  the APFC, she remarked, adding                                                               
her belief  that everyone is proud  of the APFC's report,  and so                                                               
the idea was  to create something similar for the  ANGPC in order                                                               
that it  could keep  the public  informed of  its progress  in an                                                               
easily-understood format.  The drafters  deliberately did not use                                                               
the phrase "newspaper of general  circulation" because that has a                                                               
particular meaning in  case law but does not  mean that something                                                               
would necessarily  be published in  a newspaper that  Alaskans in                                                               
small communities would get.                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA opined  that the public ought  to have access                                                               
to information about  how the Mainline LLC  is conducting itself,                                                               
not just  to information about the  ANGPC.  Language on  page 20,                                                               
line 15-17, says that the  Legislative Budget and Audit Committee                                                               
may  not  audit  or  evaluate the  expenditures,  operations,  or                                                               
performance of an  entity that is not wholly owned  by the ANGPC.                                                               
He suggested,  therefore, inserting  language that  would mandate                                                               
that  the state  receive an  independent audit  of the  [Mainline                                                               
LLC].                                                                                                                           
                                                                                                                                
MR.  PORTER pointed  out that  the partners  of the  Mainline LLC                                                               
always have the right to audit  each other, and that a portion of                                                               
the  information  garnered from  any  such  audit would  be  made                                                               
available to  the public,  though not  the entire  audit.   So an                                                               
audit can be  conducted, but it must be done  by the ANGPC acting                                                               
on behalf of the state.                                                                                                         
                                                                                                                                
3:37:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARA  suggested  that they  include  a  provision                                                               
stipulating that the ANGPC shall  ask for an independent audit of                                                               
the [Mainline LLC]  every two years and that the  results of that                                                               
audit  shall be  made available  to the  public except  for items                                                               
that should remain confidential.                                                                                                
                                                                                                                                
MR. PORTER  indicated that it  has been difficult coming  up with                                                               
language that  will ensure that  the public gets  the information                                                               
it  ought  to  while  also ensuring  that  the  producers'  trade                                                               
secrets are kept confidential.                                                                                                  
                                                                                                                                
REPRESENTATIVE GARA suggested simply  including references to the                                                               
portions  of the  bill that  specify the  items that  must remain                                                               
confidential.                                                                                                                   
                                                                                                                                
MS.  CUTLER   said  they  would  take   those  suggestions  under                                                               
consideration, but asked  members to keep in mind  that the state                                                               
has  other  public  corporations  that have  engaged  in  outside                                                               
investments  with  private  companies,  and  while  those  public                                                               
corporations can be  audited by the Legislative  Budget and Audit                                                               
Committee and  have a  similar right to  audit the  management of                                                               
those outside investments,  not every detail that  is revealed by                                                               
such  audits   is  necessarily  made  public;   furthermore,  the                                                               
Legislative Budget and Audit Committee  doesn't have the right to                                                               
audit those  private companies,  and the language  in HB  2003 is                                                               
simply setting up  something similar for the ANGPC  as it engages                                                               
in a partnership with the producers by way of the Mainline LLC.                                                                 
                                                                                                                                
MR.  PORTER concurred,  adding that  information about  a private                                                               
corporation  doesn't automatically  become public  simply because                                                               
it does business with a public corporation of the state.                                                                        
                                                                                                                                
MS. CUTLER and  MR. PORTER, in response  to questions, reiterated                                                               
that the  ANGPC and any of  its wholly owned subsidiaries  can be                                                               
audited by the  Legislative Budget and Audit  Committee, but that                                                               
the Legislative Budget  and Audit Committee won't  have the right                                                               
to  audit  the other  partners  in  the  Mainline LLC,  and  that                                                               
although the  ANGPC can audit  its partners in the  Mainline LLC,                                                               
not  all  information garnered  from  such  audits will  be  made                                                               
public.                                                                                                                         
                                                                                                                                
MS. CUTLER offered her understanding  that Representative Gara is                                                               
simply suggesting the  ANGPC request an audit of  its partners in                                                               
the Mainline LLC every two years.                                                                                               
                                                                                                                                
MR. PORTER,  in response to  a question,  said there should  be a                                                               
provision  in the  Mainline LLC  agreement that  would allow  the                                                               
ANGPC  to   share  certain  confidential  information   with  the                                                               
Legislative   Budget   and   Audit  Committee,   though   perhaps                                                               
confidentiality   statements    might   have   to    be   signed.                                                               
Furthermore, the ANGPC, as much  as it can, will make information                                                               
public via a "financing statement."                                                                                             
                                                                                                                                
MS. CUTLER noted  that the confidentiality provisions  of HB 2003                                                               
stipulate that  confidential information  may be shared  with the                                                               
entire legislature and not just  the Legislative Budget and Audit                                                               
Committee,  because   the  legislature  must  be   able  to  make                                                               
decisions regarding appropriations.                                                                                             
                                                                                                                                
REPRESENTATIVE  GRUENBERG expressed  concern  with the  provision                                                               
that precludes  the Legislative Budget  and Audit  Committee from                                                               
conducting audits  of entities that  are not wholly owned  by the                                                               
ANGPC.                                                                                                                          
                                                                                                                                
3:47:48 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARA  said he is  comfortable with  that provision                                                               
as  long as  some  auditor that  owes  a duty  to  the state  can                                                               
conduct an audit  of entities not wholly owned by  the ANGPC - in                                                               
this instance it would be an  audit conducted by the ANGPC, which                                                               
does owe a duty  to the state.  He again  mentioned that he wants                                                               
to add  language stipulating  that a  substantial portion  of the                                                               
information garnered  from any audits  conducted by the  ANGPC of                                                               
the Mainline LLC shall be made available to the public.                                                                         
                                                                                                                                
MR. PORTER clarified that  proposed AS 41.42.520(c)(3) stipulates                                                               
that certain  confidential information may be  disclosed when its                                                               
production  is  required  for  a  confidential  briefing  of  the                                                               
governor, the legislature, or a legislative committee.                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG asked whether  the bill limits the power                                                               
of  the   Legislative  Budget  and  Audit   Committee  and  other                                                               
committees to issue subpoenas.                                                                                                  
                                                                                                                                
MR. PORTER offered his belief  that HB 2003 actually enhances the                                                               
power  of the  legislature  to  receive confidential  information                                                               
from  the ANGPC  and the  Mainline LLC  via the  ANGPC; the  next                                                               
stage  would be  to  then  provide a  financial  summary of  that                                                               
confidential information to the public, and that is the intent.                                                                 
                                                                                                                                
REPRESENTATIVE GRUENBERG  observed that the language  on page 20,                                                               
lines  15-17, would  seem to  divest the  Legislative Budget  and                                                               
Audit  Committee  of  its  ability   to  evaluate  operations  or                                                               
performances of entities not wholly owned by the ANGPC.                                                                         
                                                                                                                                
MR.  PORTER pointed  out that  the Legislative  Budget and  Audit                                                               
Committee never  had that ability;  instead, the ANGPC  will have                                                               
that ability  and can therefore  keep the Legislative  Budget and                                                               
Audit  Committee apprised  such that  the Legislative  Budget and                                                               
Audit Committee  can fulfill its duties  to the state.   In other                                                               
words,  the   Legislative  Budget  and  Audit   Committee  has  a                                                               
relationship  with the  ANGPC but  not with  the Mainline  LLC or                                                               
other entities  not wholly owned by  the ANGPC, and so  it is the                                                               
ANGPC  that is  responsible for  providing information  about the                                                               
Mainline LLC to the Legislative Budget and Audit Committee.                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  opined that the term  "newspaper" as it                                                               
is used  in proposed  AS 41.42.510  ought to  be defined  in some                                                               
way.                                                                                                                            
                                                                                                                                
MS. CUTLER observed that doing so would be a policy call.                                                                       
                                                                                                                                
MR. PORTER  explained that they  sought to use broad  language so                                                               
as  to have  the report  be as  accessible to  as many  people as                                                               
possible.   He  offered his  understanding that  the report  will                                                               
also be made available on a web site.                                                                                           
                                                                                                                                
MS. CUTLER  said she has  reviewed the language  regarding audits                                                               
and evaluations  as they  pertain to the  APFC, and  has surmised                                                               
that it too emphasizes the fact  that just because the state does                                                               
business  with or  invests in  a private  company, that  does not                                                               
mean that the  Legislative Budget and Audit  Committee is allowed                                                               
to [directly] audit or evaluate that private company.                                                                           
                                                                                                                                
REPRESENTATIVE GRUENBERG asked whether  the statute pertaining to                                                               
the  APFC  speaks  to  the  issue of  publishing  its  report  in                                                               
newspapers.                                                                                                                     
                                                                                                                                
MS.  CUTLER  said she  would  research  that issue  further,  but                                                               
believes that that  statute uses the term,  "newspaper of general                                                               
circulation".                                                                                                                   
                                                                                                                                
[HB 2003 was held over.]                                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
3:59:03 PM                                                                                                                    
                                                                                                                                
The House Judiciary Standing Committee was recessed at 3:59 p.m.                                                                
to a call of the chair.  [The meeting was reconvened on June 3,                                                                 
2006.]                                                                                                                          

Document Name Date/Time Subjects