Legislature(2005 - 2006)CAPITOL 120
04/20/2006 01:00 PM House JUDICIARY
| Audio | Topic |
|---|---|
| Start | |
| HB502 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 502 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
April 20, 2006
1:17 p.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
COMMITTEE CALENDAR
HOUSE BILL NO. 502
"An Act amending the Alaska Stranded Gas Development Act to
eliminate the opportunity for judicial review of the findings
and determination of the commissioner of revenue on which are
based legislative review for a proposed contract for payments in
lieu of taxes and for the other purposes described in that Act;
and providing for an effective date."
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 502
SHORT TITLE: COURT REVIEW OF STRANDED GAS DECISION
SPONSOR(S): JUDICIARY
04/18/06 (H) READ THE FIRST TIME - REFERRALS
04/18/06 (H) JUD
04/19/06 (H) JUD AT 1:00 PM CAPITOL 120
04/19/06 (H) Heard & Held
04/19/06 (H) MINUTE(JUD)
04/20/06 (H) JUD AT 1:00 PM CAPITOL 120
WITNESS REGISTER
PAUL FUHS, Volunteer Lobbyist
for Backbone II
Anchorage, Alaska
POSITION STATEMENT: During discussion of HB 502, expressed
concerns and responded to questions.
LORI BACKES
Fairbanks, Alaska
POSITION STATEMENT: During discussion of HB 502, expressed
concerns and responded to questions.
LARRY OSTROVSKY, Chief Assistant Attorney General - Statewide
Section Supervisor
Oil, Gas & Mining Section
Civil Division (Anchorage)
Department of Law (DOL)
Anchorage, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 502.
STEVEN B. PORTER, Deputy Commissioner
Office of the Commissioner
Department of Revenue (DOR)
Juneau, Alaska
POSITION STATEMENT: Responded to questions during discussion of
HB 502.
ACTION NARRATIVE
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting, which had been recessed on 4/19/06, back to
order at 1:17:03 PM. Representatives McGuire, Coghill, Gara,
Wilson, and Gruenberg were present at the call to order.
Representatives Kott and Anderson arrived as the meeting was in
progress.
HB 502 - COURT REVIEW OF STRANDED GAS DECISION
[Contains brief mention of HB 71.]
1:17:09 PM
CHAIR McGUIRE announced that the only order of business would be
HOUSE BILL NO. 502, "An Act amending the Alaska Stranded Gas
Development Act to eliminate the opportunity for judicial review
of the findings and determination of the commissioner of revenue
on which are based legislative review for a proposed contract
for payments in lieu of taxes and for the other purposes
described in that Act; and providing for an effective date."
CHAIR McGUIRE, in response to comments, relayed that she would
be holding HB 502 over but would not be assigning it to a
subcommittee.
REPRESENTATIVE COGHILL noted that members' packets now contain
both the original version of the Alaska Stranded Gas Development
Act - House Bill 393 - and a later version - CS for House Bill
393(O&G).
1:19:44 PM
PAUL FUHS, Volunteer Lobbyist for Backbone II, indicated that he
has some suggestions for the committee, and then offered some
historical information. He relayed his understanding that one
of the points stipulated in the Alaska Stranded Gas Development
Act is that the legislature shouldn't [simultaneously] be
negotiating about oil [taxes], because the state will get
leveraged against its oil taxes for a gas pipeline. He added,
"The economic limit factor (ELF) wasn't working, so ... we're
not against looking at the production profits tax (PPT); what we
are against is the stated linkages to a gas [pipeline] every
time the testimony is taken" [because] that was one thing that
wasn't supposed to happen.
MR. FUHS offered his understanding that the Alaska Stranded Gas
Development Act also stipulates that it must be shown, via a
best interest finding, that the gas is stranded, which means
that the gas would not otherwise be developed except for the
provisions in "this contract." Furthermore, the findings must
also contain an economic analysis which shows that the project
is not economic without some changes [to the tax laws]. If that
analysis isn't done correctly or is performed "on a political
basis," the Alaska Stranded Gas Development Act stipulates that
one can go to court and claim that the contract is based on a
faulty foundation. That's what the judicial review is about, he
opined, that particular element of the best interest finding
that supposedly illustrates whether the gas is in fact stranded.
MR. FUHS suggested that these guidelines were meant to address
concerns that there could be situations arising from "a
complete, political free-for-all"; for example, a situation
wherein people from the industry begin using their extensive
economic resources - garnered from developing Alaska's oil - for
the purpose of taking out multimillion-dollar ad campaigns
designed to show legislators in an unflattering light, or
setting up and paying for front groups like "Alaska's Future,"
or threatening the Boy Scouts with "taking away their
contributions," or "filling the legislature" with more lobbyists
than there are legislators. The potential to have such a
situation is of concern to Backbone II, so if some "of the
rules" are going to be changed, at least keep "the referee" in
the game - the referee being the judicial branch - so that the
public has some way to ensure that the findings are based on a
[firm] foundation.
MR. FUHS said that although members of Backbone II are not
lawsuit happy, if this type of legislation winds up with a
provision that takes away the right of the people to petition
their government regarding this contract, it probably will
engender a lawsuit, notwithstanding the likelihood that such a
lawsuit could result in another delay of a gas pipeline. He
then remarked:
If you're going to change all the rules and you're
going to take the referee out, you have to ask: "Why
would [we] even have the [Alaska Stranded Gas
Development Act]?", "What does it even mean anymore?",
[and] "Why would you do that?". If you do that, you
should just pass a gas law of general applicability,
where you can make amendments to it - where it's not
an up or down vote, [and where] you can put in proper
credits and incentives like you're doing with the PPT.
And ... then also look at this [HB 71] ... which would
give an administration the tools that it needed to
actually go after the leases if there was a refusal to
develop them, or for [the administration] ... to sell
[the leases] ... to somebody else. And I think those
are the items which would put the state in a stronger
negotiation position, and also apply some truth serum
to this whole process. ...
1:27:16 PM
REPRESENTATIVE COGHILL indicated that he is considering the
questions of whether the "referee" is in the right place, and
whether the discovery timeframe is appropriate and sufficient.
MR. FUHS noted that the Senate is considering [those issues] as
well, to the point of considering an amendment to place
[judicial review] at the end of the process; this would be
appropriate as long as one is still allowed to challenge the
best interest finding, which goes back to the rules of discovery
because the "line-level" people in the administration will be
asked things like: how did they do the analysis, what
instructions were they following, what was the scope, what was
the analysis they came up with, and were they asked to change
it.
REPRESENTATIVE COGHILL questioned whether that process properly
belongs where it currently is, and whether the amount of
discovery under a judicial review will be more in depth.
MR. FUHS said that by passing HB 502, one could never get to the
discovery process because the Alaska Stranded Gas Development
Act specifically says that the only things that can be the
subject of the court order is whether the application was
complete and correct or whether the best interest finding was
legitimately met. He posited that this stipulation is intended
to keep somebody from filing a lawsuit on the grounds, for
example, that the gas will be used to develop the tar sands in
Canada and thereby pollute the air. In other words, the only
lawsuits will be those challenging the economics of the finding.
1:30:31 PM
REPRESENTATIVE GRUENBERG, in response to a question, offered his
belief that the legislature has the power to subpoena both
records and people. He suggested that in addition to using its
subpoena power, [the legislature] should also have witnesses
testify under oath occasionally.
REPRESENTATIVE COGHILL offered his belief that the discovery
process is not really that public, though the public may be able
to get information. However, the legislature, through its
process, could ensure that information becomes very public. He
indicated that the legislature could investigate whether the
project is economically possible or even economically right
under stranded gas conditions. He suggested going cautiously on
this issue, and that the legislature might be the best body to
ensure that the public gets the information it needs. He also
pondered the question of whether the administration and the
legislature might end up being subject to the court's fiscal
finding.
REPRESENTATIVE GRUENBERG said:
That's called scope of review, and the question of the
scope of review involves what deference you make, as a
court, to either the agency finding, which is what it
normally is, or in this case a legislative finding.
And you can say such things as ... that it shall be
affirmed unless it's clearly erroneous - which means
that the review in court is left with a, quote,
"definite and firm conviction that a mistake of fact
has been made" - [or] you can limit it even beyond
that. But what we can deal with in this is broadening
it or narrowing it down as we choose. But I think
that you're right, ... that one of the issues that we
need to address is what the scope of review is.
MR. FUHS said it seems that it would be better to have the
finding declared sound before the legislature takes action on
it. One option might be to simply limit the timeframe in which
someone can bring a challenge; another option might be to
provide some way of expediting the proceedings.
1:35:32 PM
MR. FUHS, in response to a question, surmised that the
legislature has the same power as the court when using subpoena
power, and suggested that the question the legislature would
want to have answered to its satisfaction is whether the gas
would not otherwise be economical, rather than there just being
a finding that the oil industry won't undertake this project
unless it gets everything it wants.
CHAIR McGUIRE questioned whether judges will have the expertise
necessary to determine whether the gas is truly stranded.
Therefore, perhaps the legislature might be the better venue for
review, because of the varied backgrounds of its members.
REPRESENTATIVE GRUENBERG said that is part of this issue of
scope of review, as is the deference that the reviewing court
would make to the lower finding, and it would depend on the kind
of finding that's reviewed. For example, if it's a technical
finding, a court of law would give a lot of deference to the
agency or the legislature because it would lack the expertise,
and an economic finding would normally be subject to a lot of
deference. Also, it is only one judge that's doing the initial
reviewing if the challenge goes to the Alaska Superior Court,
although the legislature could expedite such cases by creating a
statute that says such challenges must go immediately to the
Alaska Supreme Court. Two of the main issues, he surmised, are
scope of review and speed of review.
CHAIR McGUIRE noted that the question of which court such
challenges should go to first has been the subject of
discussions, and suggested that perhaps they could merge that
issue into this bill. It's important, she remarked, that the
committee have a view of how the whole process is going to look
- what's the timeline in which a challenge can be made, to what
court will a challenge be made, to what extent does the
legislature's authority reach, and where does that authority
come in - because it will be harder for the public to digest
what's being done if it's done piecemeal.
REPRESENTATIVE GRUENBERG mentioned that for many years he had
served on the "Supreme Court Appellate Rules Advisory
Committee," and that there is a real question regarding whether
it's really a good idea to have the [Alaska] Superior Court
sitting as a court of appeal; this is because "they" don't give
any deference to the [Alaska] Superior Court, either its
interpretation of law or its interpretation of factual finding -
the only time it really makes a difference would be if the
[Alaska] Superior Court were to remand. Therefore, he relayed,
he would suggest that they have such challenges go directly to
the [Alaska] Supreme Court.
CHAIR McGUIRE and REPRESENTATIVE GARA concurred.
1:41:22 PM
REPRESENTATIVE GARA noted that former Governor Hickel and former
Attorney General Cole have done a lot of work on this issue, and
asked whether Mr. Cole would be available to assist the
committee with creating language for HB 502.
MR. FUHS indicated that Mr. Cole might be available though he is
not directly affiliated with Backbone II.
REPRESENTATIVE GARA offered his understanding that currently the
commissioner comes up with a best interest finding, a finding
that a particular project will be in the best interest of the
state. However, what's relevant to him, he relayed, is not that
the court gets to make that determination, but rather that that
determination - whether a project is in the best interest of the
state - governs what documents are made available to the public.
And so once the issue becomes one of, is this in the best
interest of the state, in the court system that [means] all
documents relevant to whether a project is in the state's best
interest become available to the parties or the public. He
asked, therefore, whether, if he wants to ensure that all
documents relevant to that issue are made available to the
public, getting rid of the best interest finding would also get
rid of the public's right to access those relevant documents.
MR. FUHS offered his understanding that HB 502 wouldn't do away
with the best interest finding, but would raise the question of
whether the public would really have access to what actually
went into making the best interest finding - for example, access
to the models and inputs.
REPRESENTATIVE GARA offered his understanding that it is the
public's right to challenge the best interest finding in court
that gets them access to the documents, but the bill takes away
that right, thus also taking away the public's access to the
documents.
1:44:45 PM
MR. FUHS characterized that summation as correct, but noted that
the legislature could still compel those documents to be
brought, and he encouraged the legislature to do just that
regardless of what happens to HB 502.
REPRESENTATIVE ANDERSON asked whether a challenge is eminent.
MR. FUHS pointed out that Backbone II is concerned that "these
lawsuits" will be filed and further delay the project.
REPRESENTATIVE ANDERSON suggested that the public could be given
too much latitude regarding discovery and the right to challenge
the project.
MR. FUHS offered his belief, however, that everyone wants a gas
pipeline, and so if it's a real deal, no one will try to block
it. The biggest factor that people are concerned about is
whether the contract will really compel the industry to build
the project, or whether it will merely be a way of delaying the
project further.
REPRESENTATIVE GARA clarified that his concern pertains to what
documents will be made available to the public. The current
process makes the documents available to the public, and so if
that process is not replaced with some meaningful method of
ensuring public access to the documents, the public won't get a
change to provide meaningful input. He added:
I'm not going to trust that the administration is
going to give me the documents I want to see because
they haven't even let me see the contract; if they're
not forthcoming with the contract ever, after three
months of people saying, "Let us see the contract,"
how are we going to trust that they're going to be
forthcoming with the documents that we want to see
that backs up the findings.
REPRESENTATIVE WILSON raised the issue of protecting the oil
companies from discovery with regard to trade secrets.
REPRESENTATIVE GRUENBERG responded:
There are two different questions. Number one is what
is produced to this committee, and number two [is]
what is made available to the public. And the
subpoena, for example, could require that certain
classes of documents be produced to this committee,
and then presumably the entity that was producing the
documents would either, in advance, submit a
memorandum requesting a protective order, or, at the
time, do so and say, "We would like an order from this
committee" under such and such a statute or something
"that these documents are only reviewable by the
committee in a confidential setting," and you sign a
confidential agreement, and potentially [documents]
... could even be given back at the end of that time.
But that is easily solvable.
MR. FUHS added that what one would expect is to not need to have
that proprietary information; rather, what the legislature would
be looking at is a finding regarding profitability in order to
come to the conclusion that the gas is in fact stranded and is
therefore not economic unless there are changes in the tax laws
- that's what would justify the tax changes.
1:51:42 PM
REPRESENTATIVE COGHILL noted that AS 43.82.400(a) says:
(a) If the commissioner develops a proposed
contract under AS 43.82.200 - 43.82.270, the
commissioner shall
(1) make preliminary findings and a determination
that the proposed contract terms are in the long-term
fiscal interests of the state and further the purposes
of this chapter; and
(2) prepare a proposed contract that includes
those terms and shall submit the contract to the
governor.
REPRESENTATIVE COGHILL surmised, therefore, that AS
43.82.400(a)(2) could be amended if they wished to ensure that
the contract is also delivered to the legislature.
REPRESENTATIVE GRUENBERG concurred, pointing out that AS
43.82.410(2) already states that the commissioner shall provide
copies of the contract and supporting documentation to the
legislature.
MR. FUHS remarked these are the rules that the legislature set
out for itself - these are not rules imposed on the legislature
by either the court system or the executive branch.
1:54:54 PM
LORI BACKES said she has great concern with HB 502 because it
would remove a very important piece of a carefully crafted
process that is the Alaska Stranded Gas Development Act. She
went on to say:
I understand the legislature's interest in removing
impediments to a gas [pipeline] project. However,
with this action, I don't believe you're removing a
potential unnecessary delay but in effect removing
legitimate judicial review of whether the contract and
associated findings conform to the intent of the
[Alaska Stranded Gas Development Act]. I believe that
to remove the opportunity for judicial review from
this step in the process would effectively render any
judicial review moot, because, for example, the
[Alaska Stranded Gas Development Act] specifically
prohibits including oil taxes in the gas [pipeline]
contract - a provision deliberately and for good
reason included in the act - and yet the
administration has ignored that provision in its
negotiations and is now insisting that you take action
to change it, [and therefore] if the legislature, in
the passage of one or more pieces of legislation,
approves the contract and amends the [Alaska Stranded
Gas Development Act] to make the law conform to that
contract, then any judicial review of that would be
based on the newly amended law - not on the law that
was in place during the negotiations.
The legislature and the public accepted and obeyed the
terms of the [Alaska Stranded Gas Development Act],
yet the governor excluded other proposals that in his
opinion did not strictly conform to the [Alaska
Stranded Gas Development Act] while manipulating the
process without regard to compliance, and now is
expecting you to pass legislation, giving
responsibility for approving that action to you. It's
been said that there will be plenty of opportunity for
public comment prior to the legislature taking action
on the contract. But public comment, unlike judicial
review, can be ignored. An aggrieved party that might
take issue with the best interest findings would not
have any legal recourse and, in fact, would not have
the ability to justify their position because there
would be no mechanism in place to require access to
the documents they would need and the models that
would be the basis for those findings.
It doesn't make sense for this legislature to amend
the [Alaska Stranded Gas Development Act] prior to
seeing a contract, in order to able to determine, with
full information and input, whether this or any
amendment is truly necessary and wise. If the
legislature can amend the [Alaska Stranded Gas
Development Act] to effectively take away the public's
right to review by the court in order to remove
unnecessary delay, how can the public be assured
[that] the next step won't be to remove the 30-day
public [comment period] as well. The public does not
have a lot of trust in the way this process has been
going so far. Therefore you and the other branch of
government, the judiciary, are really ... [the
public's] only hope. I would caution you not to risk
damage to the public trust that you have already by
removing [the public's] ... only other recourse.
Thank you.
1:58:58 PM
REPRESENTATIVE GARA asked whether the governor could enter into
a contract of this sort without the legislature's approval.
LARRY OSTROVSKY, Chief Assistant Attorney General - Statewide
Section Supervisor, Oil, Gas & Mining Section, Civil Division
(Anchorage), Department of Law (DOL), relayed that the governor
has said he will follow the process set out under the Alaska
Stranded Gas Development Act. He also remarked that sometimes
the court will sever unconstitutional provisions of legislation
from constitutional ones, and he thinks that there is probably a
good argument to be made that when the legislature passed the
provision in the Alaska Stranded Gas Development Act acquiring
legislative approval, that that was part and parcel of the
package and not some secondary, easily-severable provision. In
conclusion, he offered his belief that it is unlikely that the
governor would sign a contract without legislative approval.
REPRESENTATIVE GARA clarified that his question is whether it is
still an open legal question as to whether the legislature has a
constitutional right to say yes or no to a contract negotiated
by the governor.
MR. OSTROVSKY said, "I think it's a unique statute and there
might be unique issues."
REPRESENTATIVE GARA noted that that response doesn't answer the
question.
MR. OSTROVSKY said he doesn't mean to be evasive but it isn't an
issue he came prepared to talk about.
2:05:04 PM
REPRESENTATIVE GARA offered a hypothetical situation in which
the court determines that the legislature doesn't have the
constitutional right to approve the contract and the legislature
also passes legislation removing judicial review. Wouldn't that
leave no one, outside of the governor's office, with the ability
to review whether the governor's contract satisfies the terms of
the Alaska Stranded Gas Development Act?
STEVEN B. PORTER, Deputy Commissioner, Office of the
Commissioner, Department of Revenue (DOR), characterizing that
as a pretty unique hypothetical situation, offered his belief
that someone could still make the claim that the contract was
not consistent with the Alaska Stranded Gas Development Act and
so all those questions could be addressed in that litigation.
REPRESENTATIVE GARA disagreed, and pointed out that the bill
stipulates that there will be no court review of that type of
issue.
MR. PORTER agreed, but opined that someone could still bring
suit on the issue of the contract itself.
REPRESENTATIVE GARA asked to be shown the current statutory
provision that describes what issues would be left for the
public to challenge on.
MR. OSTROVSKY offered his understanding that there is case law
that says administrative decisions are always reviewable.
REPRESENTATIVE GARA again asked to be shown where in the Alaska
Stranded Gas Development Act is the list of the other items
about which someone could challenge the contract.
MR. OSTROVSKY and MR. PORTER cited AS 43.82.440, which read:
Sec. 43.82.440. Judicial review.
A person may not bring an action challenging the
constitutionality of a law authorizing a contract
enacted under AS 43.82.435 or the enforceability of a
contract executed under a law authorizing a contract
enacted under AS 43.82.435 unless the action is
commenced within 120 days after the date that the
contract was executed by the state and the other
parties to the contract.
MR. OSTROVSKY, in response to questions, offered his belief that
currently a person could challenge the commissioner's
determination that the gas is stranded, but not if HB 502 is
adopted.
REPRESENTATIVE GRUENBERG noted that if a challenge is not
brought on either of the two theories listed in AS 43.82.440,
then that provision - and thus its 120-day statute of
limitations - won't apply.
MR. OSTROVSKY offered his understanding that there is also a 30-
day statute of limitations on challenges of a final agency
determination.
REPRESENTATIVE GRUENBERG characterized that as a typical appeal
period, and noted that AS 43.82.440 provides for four times that
amount of time.
2:17:13 PM
REPRESENTATIVE GARA reiterated that he simply wants the public
to be able to look at all of the relevant documents that it
needs to in order to be able to provide meaningful input during
the public comment period, and pointed out that passage of
HB 502 will take away the public's right to access documents
through the court process, and therefore he wants something put
in its place. He said he believes that it is the legislature's
right to determine whether the contract is a good contract or a
bad contract, but simply passing HB 502 leaves no way for the
public to access documents other than those the administration
wants to let the public to see.
MR. PORTER offered his belief that passage of HB 502 won't
change the amount of information the public can access, and that
a Public Records Act information request could be used to obtain
that information in the same timeframe as the judicial process
under current law.
REPRESENTATIVE GARA argued that such a request would take far
longer and result in less documentation being accessed. He said
he wants there to be a provision of law that provides the public
with an expedited method of accessing the information, as well
as an expedited method of appeal should the administration not
produce the relevant information.
MR. PORTER raised the issue of confidentiality.
REPRESENTATIVE GARA asked Mr. Porter and Mr. Ostrovsky to
provide the committee with suggestions for statutory language
that will satisfy his concerns - language that will provide the
public with quick and full access to the documents and with a
meaningful review process.
MR. PORTER said he has staff working full time trying to collect
every available document used in making the determination, that
his staff has been doing this for months, and that he is
attempting to organize it in such a way that the public can make
use of it.
REPRESENTATIVE GARA asked the committee to formally request from
the administration suggestions for new statutory language.
CHAIR McGUIRE agreed to have the committee make that request.
REPRESENTATIVE GARA, in response to a question, said that if
current law provides an enforceable way for the public to get
access to all the relevant documents in time for it to make
public comment, and a way to resolve all issues regarding the
withholding of those documents, then he wants substitute
language that will also provide those things, since adoption of
HB 502 is going to delete the current provisions.
CHAIR McGUIRE remarked that the bill will look different if and
when it passes from committee; therefore, to the extent that the
administration wants to continue to be a part of the process, it
should consider providing the committee with suggestions for
change that the administration can support, such as perhaps
language that will modify the Public Records Act.
2:26:00 PM
MR. OSTROVSKY said that it is the administration's intent to
release relevant documents, though he also raised the issue of
confidentiality. However, under the Alaska Stranded Gas
Development Act, once a proposed contract is forwarded,
"documents lose the protection" of the Alaska Stranded Gas
Development Act and all records become public records subject to
all the normal privileges. He also remarked that the timelines
under the Public Records Act information requests are probably
the tightest in law, and thus it is a very fast process. He
offered his believe that there are adequate provision in law to
ensure the release of documents that aren't otherwise protected
under a privilege, which is a point decided by a judge.
CHAIR McGUIRE reiterated that that the bill will look different
if and when it passes from committee, and so to the extent that
the administration can assist the committee, the more satisfied
it might be with the end product.
[HB 502 was held over.]
ADJOURNMENT
2:28:40 PM
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 2:28 p.m.
| Document Name | Date/Time | Subjects |
|---|