02/15/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| HB315 | |
| HB280 | |
| HB238 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HB 315 | TELECONFERENCED | |
| += | HB 280 | TELECONFERENCED | |
| *+ | HB 238 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
February 15, 2010
3:21 p.m.
MEMBERS PRESENT
Representative Kurt Olson, Chair
Representative Mark Neuman, Vice Chair
Representative Mike Chenault
Representative Bob Lynn
Representative Tammie Wilson
Representative Robert L. "Bob" Buch
Representative Lindsey Holmes
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
HOUSE BILL NO. 315
"An Act relating to public accounting; and providing for an
effective date."
- MOVED HB 315 OUT OF COMMITTEE
HOUSE BILL NO. 280
"An Act relating to natural gas; relating to a gas storage
facility; relating to the Regulatory Commission of Alaska;
relating to the participation by the attorney general in a
matter involving the approval of a rate or a gas supply
contract; relating to an income tax credit for a gas storage
facility; relating to oil and gas production tax credits;
relating to the powers and duties of the Alaska Oil and Gas
Conservation Commission; relating to production tax credits for
certain losses and expenditures, including exploration
expenditures; relating to the powers and duties of the director
of the division of lands and to lease fees for the storage of
gas on state land; and providing for an effective date."
- MOVED CSHB 280(L&C) OUT OF COMMITTEE
HOUSE BILL NO. 238
"An Act removing the number of persons under 18 years of age in
the household as a reasonable ground for a landlord to reject a
proposed sublease or assignment."
- MOVED OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
BILL: HB 315
SHORT TITLE: PUBLIC ACCOUNTING
SPONSOR(s): LABOR & COMMERCE
01/27/10 (H) READ THE FIRST TIME - REFERRALS
01/27/10 (H) L&C, FIN
02/10/10 (H) L&C AT 3:15 PM BARNES 124
02/10/10 (H) -- MEETING CANCELED --
02/15/10 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 280
SHORT TITLE: NATURAL GAS
SPONSOR(s): HAWKER, CHENAULT
01/15/10 (H) PREFILE RELEASED 1/15/10
01/19/10 (H) READ THE FIRST TIME - REFERRALS
01/19/10 (H) L&C, RES, FIN
02/08/10 (H) L&C AT 3:15 PM BARNES 124
02/08/10 (H) Heard & Held
02/08/10 (H) MINUTE(L&C)
02/15/10 (H) L&C AT 3:15 PM BARNES 124
BILL: HB 238
SHORT TITLE: LANDLORD REJECTION OF OCCUPANT/SUBLEASE
SPONSOR(s): MILLETT
04/17/09 (H) READ THE FIRST TIME - REFERRALS
04/17/09 (H) L&C, JUD
02/15/10 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
JENNIFER SENETTE, Staff
Representative Kurt Olson, Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified on behalf of the House Labor and
Commerce Committee, chaired by Representative Kurt Olson.
MAX MERTZ, Member
Alaska Board of Public Accountancy (BPA)
Juneau, Alaska
POSITION STATEMENT: Testified in support of HB 315.
REPRESENTATIVE MIKE HAWKER
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as a joint prime sponsor and
answered questions during the discussion of HB 280.
LARRY PERSILY, Staff
Representative Mike Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions on behalf
of a joint prime sponsor, Representative Mike Hawker, during the
discussion of HB 280.
CATHY FOERSTER, Commissioner
Alaska Oil and Gas Conservation Commission (AOGCC)
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 280.
DAN SULLIVAN, Mayor
Municipality of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 280.
KEVIN BANKS, Director
Division of Oil and Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Answered questions during the discussion of
HB 280.
RICHARD GAZAWAY, Advisory Section Manager
Regulatory Commission of Alaska (RCA)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 280.
CHARISSE MILLET
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified as prime sponsor of HB 238.
BRYAN BUTCHER, Director
Governmental Affairs & Public Relations
Alaska Housing Finance Corporation (AFHC)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of HB 238.
ACTION NARRATIVE
3:21:31 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:21 p.m.
Representatives Buch, Chenault, Holmes, T. Wilson, and Olson
were present at the call to order. Representatives Lynn and
Neuman arrived as the meeting was in progress. Representative
Ramras was also in attendance.
HB 315-PUBLIC ACCOUNTING
3:22:03 PM
CHAIR OLSON announced that the first order of business would be
HOUSE BILL NO. 315, "An Act relating to public accounting; and
providing for an effective date."
3:22:12 PM
JENNIFER SENETTE, Staff, Representative Kurt Olson, Alaska State
Legislature, stated that HB 315 bill relates to public
accounting. This bill was drafted with the assistance of the
state Board of Public Accountancy (BPA) and the Alaska Society
of Certified Public Accountants (ASCPA) and is supported by the
board and the society. This bill is widely supported and she
was unaware of any opposition. She reported that 45 states have
passed some version of this bill, which will bring Alaska up to
date and keep Alaskan certified public accountants (CPAs) and
Alaskan accounting firms competitive nationally.
MS. SENETTE explained that HB 315 does three things: First, it
would provide CPAs mobility, which would allow a licensee to
gain practice privilege outside their principal jurisdiction
without additional licensing or fees. It would allow licensed
CPAs and CPA firms in Alaska to practice across state
jurisdictions with greater ease, which is the key to keeping
CPAs and CPA firms nationally competitive. Secondly, the bill
alters the ownership requirements for accounting firms. The
bill would provide for simple majority ownership. Under current
law, an Alaskan accounting firm must be owned 100 percent by
CPAs. The accounting profession has evolved, and many firms
consist of more than just CPAs and many non-CPAs, such as
attorneys and information technology professionals enhance the
firm's ability to serve its clients. Under current law, non-CPA
professionals are barred from ownership. This bill "dials down"
these stringent requirements. Most states allow non-CPAs to
have minority ownership in CPA firms. This provision is aimed
to help CPA firms attract and retain talent. Finally, the bill
would enhance the board's ability to protect the public. This
provision would provide the board jurisdictional authority over
any CPA practicing in the state. Basically, all CPAs providing
public accountancy services in Alaska would fall under the
jurisdiction of the Alaska Board of Public Accountancy to
address any violations of the professional standards. She
restated that 45 states have passed some version of this
legislation, which provides for mobility, simple majority
ownership of CPA firms, and enhanced CPA board authority over
CPAs licensed in other jurisdictions practicing in Alaska to
protect the public.
3:26:29 PM
MAX MERTZ, Member, Alaska Board of Public Accountancy (BPA),
stated he has been a member of the Alaska BPA for six years, and
the chair for four years ending in 2009. He related that the
Alaska BPA worked on the issues addressed in the bill. The
Alaska BPA takes its mission seriously, which is regulating the
accounting profession in Alaska and protecting the public
interest. One main challenge the BPA has faced is to
effectively pursue out-of-state practitioners who do not
properly serve their clients. In the electronic age, out-of-
state practitioners have become commonplace since CPAs can serve
clients without ever speaking to them on the phone. The
mobility initiative commenced after a thorough study by the
American Institute of CPAs and National Association of State
Boards of Accountancy found that each state had its own rules
for out-of-state licensees to provide services in other states.
Additionally, each state had its own enforcement rules, which
resulted in an inefficient system that is difficult to navigate.
Further, compliance and enforcement has been nearly impossible
due to the multiple cumbersome processes and disparity in
requirements in various states.
MR. MERTZ stated that with mobility, the Alaska BPA will gain
automatic jurisdiction over all CPAs practicing in the state.
This will enable Alaska to discipline out-of-state licensees,
whether they are registered and licensed in the state or not.
The mobility bill can be likened to drivers' licensing laws,
which will provide CPAs with mobility to practice in other
states while strengthening our BPA's board to protect public
interest. The effectiveness of mobility laws is contingent upon
passage by all states. Currently, five states remain and three
have pending legislation, including Alaska. The Alaska BPA
unanimously passed a resolution in support of this bill. He
said that he has presented to several society members and groups
and is not aware of any opposition. He asked for the
committee's support for HB 315.
3:29:10 PM
REPRESENTATIVE BUCH asked whether the main thrust of HB 315 is
to authorize reciprocity. He also asked about the term,
"practice privilege," and asked for clarification of the
standard of practice.
MR. MERTZ explained that "practice privilege" is the ability for
those CPAs who are licensed in another state to practice in
Alaska with a permit. The permit applies primarily to firms but
also for individuals, primarily for temporary purposes.
Typically, it would be used by an out-of-state CPA who does not
have an office in Alaska and is not primarily providing services
in Alaska.
REPRESENTATIVE BUCH asked whether this practice is something
that is standard adopted by other states and the industry for
those CPAs in the process of obtaining certification.
MR. MERTZ answered yes. He related a scenario in which an out-
of-state firm has a client who is doing business in Alaska, and
the practice privilege allows the out-of-state accountant to
perform the services. Under mobility, the out-of-state CPA can
provide the services without going through the process of
obtaining a practice permit. Thus, the out-of-state CPA would
provide the services in Alaska and be subject to our laws and
the jurisdiction of the BPA.
3:32:03 PM
REPRESENTATIVE BUCH related his understanding that the standards
for CPAs are uniform standards and HB 315 would update Alaska
with the national standards.
MR. MERTZ agreed.
3:32:20 PM
REPRESENTATIVE T. WILSON asked whether more people will practice
in Alaska and create additional competition.
MR. MERTZ stated that the bill would bring Alaska's statute into
the 21st century. The services are already being provided by
Alaskan CPAs to out-of-state clients and vice versa. This bill
will not necessarily change the groundwork or competitive
environment, but it will change the licensing environment to
"bring it up to speed" with current practice.
REPRESENTATIVE T. WILSON understood that basically CPAs are
breaking the rules now and this will bring them into compliance.
MR. MERTZ agreed that to some degree her statement is accurate.
The American Institute of Certified Public Accountants (AICPA)
study found that of the 54 jurisdictions, 54 different laws
applied. This was confusing and complicated for accountants.
This law makes the requirements uniform.
3:33:37 PM
REPRESENTATIVE T. WILSON asked who would oversee any violations.
MR. MERTZ answered that the BPA oversees violations. In
instances in which a licensee from another jurisdiction
practices without a permit in Alaska and violates state law, the
BPA's ability to prosecute the person is limited and cumbersome.
This bill will make enforcement actions much easier.
3:34:37 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 315.
3:34:52 PM
REPRESENTATIVE LYNN moved to report HB 315 out of committee with
individual recommendations and the accompanying fiscal notes.
There being no objection, HB 315 was reported from the House
Labor and Commerce Standing Committee.
3:35:26 PM
The committee took an at-ease from 3:35 p.m. to 3:39 p.m.
HB 280-NATURAL GAS
3:39:35 PM
CHAIR OLSON announced that the next order of business would be
HOUSE BILL NO. 280, "An Act relating to natural gas; relating to
a gas storage facility; relating to the Regulatory Commission of
Alaska; relating to the participation by the attorney general in
a matter involving the approval of a rate or a gas supply
contract; relating to an income tax credit for a gas storage
facility; relating to oil and gas production tax credits;
relating to the powers and duties of the Alaska Oil and Gas
Conservation Commission; relating to production tax credits for
certain losses and expenditures, including exploration
expenditures; relating to the powers and duties of the director
of the division of lands and to lease fees for the storage of
gas on state land; and providing for an effective date."
3:40:01 PM
REPRESENTATIVE MIKE HAWKER, Alaska State Legislature, explained
that this is the second hearing in this committee. He related
that HB 280 was introduced at the request of the RCA to provide
clarity and determine whether the legislature intends the RCA to
have regulatory authority over gas storage facilities. Some
technical changes are necessary to "clean up" the bill,
incorporated in an amendment labeled 26-LS1185\S.2, Bullock,
2/13/10.
3:41:06 PM
REPRESENTATIVE NEUMAN made a motion to adopt Amendment 1,
labeled 26-LS1185\S.2, Bullock, 2/13/10, which read:
Page 2, line 10:
Delete "operations"
Insert "operation"
Page 2, line 13:
Delete "feet of gas each"
Insert "cubic feet of gas a"
Page 2, line 17:
Delete "operations"
Insert "operation"
Page 2, line 18:
Delete "operations"
Insert "operation"
Page 2, line 20:
Delete "operations ceased"
Insert "the gas storage facility ceases
commercial operation"
Page 2, line 25:
Delete "operations"
Insert "operation"
Page 2, line 26:
Delete "operations"
Insert "operation"
Page 2, line 30, through page 3, line 6:
Delete all material and insert:
"(4) "gas storage facility" means a tank,
depleted or nearly depleted reservoir or pool, or
other structure in the state that is available for the
storage of gas;"
Page 3, following line 10:
Insert a new paragraph to read:
"(7) "pool" has the meaning given in
AS 31.05.170;"
Renumber the following paragraph accordingly.
Page 6, line 6:
Delete "with certificates issued under
AS 31.05.032"
Insert "that qualifies for a tax credit under
AS 43.20.046"
Page 6, line 9:
Delete "operations"
Insert "operation"
Page 6, line 10:
Delete "operations"
Insert "operation"
Page 6, line 12:
Delete "operations"
Insert "operation"
Page 6, line 18:
Delete "AS 38.05"
Insert "this chapter"
Page 6, line 25:
Delete "operations"
Insert "operation"
Page 6, line 26:
Delete "operations"
Insert "operation"
Page 6, line 29, following "a":
Insert "rate or a"
Page 7, line 1:
Delete "from"
Insert "of"
Page 7, following line 19:
Insert a new bill section to read:
"* Sec. 7. AS 42.05.990(4) is amended to read:
(4) "public utility" or "utility" includes
every corporation whether public, cooperative, or
otherwise, company, individual, or association of
individuals, their lessees, trustees, or receivers
appointed by a court, that owns, operates, manages, or
controls any plant, pipeline, or system for
(A) furnishing, by generation,
transmission, or distribution, electrical service to
the public for compensation;
(B) furnishing telecommunications service
to the public for compensation;
(C) furnishing water, steam, or sewer
service to the public for compensation;
(D) furnishing by transmission or
distribution of natural or manufactured gas to the
public for compensation;
(E) furnishing for distribution or by
distribution petroleum or petroleum products to the
public for compensation when the consumer has no
alternative in the choice of supplier of a comparable
product and service at an equal or lesser price;
(F) furnishing collection and disposal
service of garbage, refuse, trash, or other waste
material to the public for compensation;
(G) furnishing injection, storage, and
withdrawal services for natural gas that is owned by a
utility regulated under this chapter;"
Page 8, line 3:
Following "facility":
Insert "described in (b) of this section"
Delete "operations"
Insert "operation"
Page 8, lines 5 - 6:
Delete "beginning after the date the gas storage
facility commences commercial operations"
Insert "in which the gas storage facility
commences commercial operation or the tax year
immediately following"
Page 8, following line 12:
Insert a new subsection to read:
"(b) A gas storage facility qualifying for the
credit in this section must
(1) have a working gas storage capacity of
more than 500,000,000 cubic feet of gas other than
cushion gas;
(2) have a minimum withdrawal capability of
10,000,000 cubic feet a day as certified by the Alaska
Oil and Gas Conservation Commission under
AS 31.05.032;
(3) be available for the storage of gas
that is owned by a utility regulated under AS 42.05;
and
(4) if located on state land and leased or
subject to a lease under AS 38.05.180, be in
compliance with the terms of the lease."
Reletter the following subsections accordingly.
Page 8, line 16, following "capacity":
Insert "and withdrawal capability"
Page 8, line 17:
Delete "operations"
Insert "operation"
Page 8, line 19:
Delete "form"
Insert "application"
Page 8, line 21:
Delete "shall submit the form"
Insert "under (d) of this section shall submit
the application"
Page 8, line 23:
Delete "operations"
Insert "operation"
Page 9, line 12:
Delete "determined"
Insert "the capacity certified"
Page 9, line 18:
Delete "operations"
Insert "operation"
Page 9, line 22:
Delete "operations"
Insert "operation"
Page 9, line 23:
Delete "operations"
Insert "operation"
Page 10, line 5:
Delete "(g) and (h)"
Insert "(h) and (i)"
Page 10, line 13:
Delete "operations within 10 calendar years after
the"
Insert "operation within nine calendar years
immediately following the calendar"
Page 10, line 14:
Delete "operations"
Insert "operation"
Page 10, line 16:
Delete "operations"
Insert "operation"
Page 10, line 18:
Delete "operations"
Insert "operation"
Delete "April"
Insert "May"
Page 10, line 19:
Delete "operations"
Insert "operation. The notice required in this
subsection is considered a return for purposes of
AS 43.05.260"
Page 10, line 20:
Delete "operations,""
Insert "operation," "commences commercial
operation,""
Page 10, line 26:
Delete "an expenditure or action taken"
Insert "a lease expenditure incurred"
Page 11, line 19:
Delete "AS 38.05.032"
Insert "AS 31.05.032"
Page 11, lines 29 - 30:
Delete "for activity"
Insert "incurred"
Page 12, line 1:
Delete "for activity"
Insert "incurred"
Page 13, line 18:
Delete "expenditure"
Insert "lease expenditure incurred after
December 31, 2010"
Page 13, line 19, following "well":
Insert "lease"
Page 13, line 23, following "well":
Insert "lease"
Page 13, line 27, following "well":
Insert "lease"
Page 14, line 3:
Delete "an expenditure"
Insert "a lease expenditure incurred"
Page 14, line 5, following "well":
Insert "lease"
Page 14, line 15, following "of":
Delete "the"
Insert "a [THE]"
Page 14, line 16:
Delete "AS 43.20.046 or"
REPRESENTATIVE HOLMES objected for purpose of discussion.
3:41:31 PM
LARRY PERSILY, Staff, Representative Mike Hawker, Alaska State
Legislature, referred to Amendment 2, which he characterized as
an 8-page amendment that contains "clean up" language and one
substantive issue. He referred to Section 7, to page 3, lines
23 - 31, and page 4, lines 1 - 12, of Amendment 1. In response
to a request by the RCA, who could not determine whether gas
regulation falls under its jurisdiction, this language would
amend the definition of utilities that are subject to RCA
regulation. Thus, if an entity is furnishing storage services
for natural gas that is owned by a utility regulated by the RCA,
the storage service would fall under RCA jurisdiction.
3:42:48 PM
REPRESENTATIVE NEUMAN asked for clarification of whether
Amendment 1 would allow rates to utilities to fall under the
RCA.
MR. PERSILY answered yes. He related that the RCA would treat
the natural gas storage like any other utility. The storage
operator would have to present the cost and information, and
obtain approval for the cost of service from the RCA.
3:43:15 PM
REPRESENTATIVE BUCH asked for further clarification. He asked
whether all gas coming into the gas storage facility would be
from a utility. He asked whether the source of natural gas
would be private sector gas and if the RCA would cover other
gas.
MR. PERSILY answered that if the storage operator is providing
storage service for gas owned by a utility, the storage
operation would be regulated. The fact that the utility may
also have other gas owned by someone else, such as a speculator,
someone marketing gas, or a producer, will not matter. Any
natural gas in a facility owned by a utility is subject to RCA
jurisdiction. In further response to Representative Buch, Mr.
Persily explained that the storage is subject to regulation by
the RCA, not necessarily the natural gas. The RCA is not
involved in setting the rates for natural gas, but would
consider the natural gas being stored. The natural gas being
stored could be owned by a utility or someone attempting to gain
access to the gas marketing business.
3:45:08 PM
REPRESENTATIVE HOLMES related that Amendment 1 amends the
definition section. She said basically any entity furnishing
injection, storage, and withdrawal services for natural gas that
is owned by a utility would be regulated under this chapter.
She said it seems somewhat circular since it defines "utility"
as anyone doing something owned by a utility.
MR. PERSILY answered that the natural gas is owned by a utility,
but the utility would not own the storage operation. For
example, some producers have their own storage but they do not
make it available to third parties, but operate the storage for
their own needs, which is not subject to regulation. The
natural gas being placed into storage is not owned by a utility,
although it may later be sold to a utility. This bill would
apply to storage operations that provide services to regulated
utilities.
REPRESENTATIVE HOLMES described a scenario in which a non-
utility built a storage facility, whether it could store gas
without being regulated so long as the natural gas is owned by
them.
MR. PERSILY answered that she is correct. He stated that if a
non-regulated producer builds a storage operation and stores its
own natural gas, and does not store gas owned by a utility, that
gas would not be considered as a regulated storage operation.
3:47:03 PM
REPRESENTATIVE HOLMES related a scenario in which gas is owned
by producer, and then sells the gas to a utility, the gas in
question being sold would not be covered by this definition.
MR. PERSILY agreed. The intent of Amendment 1 is to regulate
storage services which are purchased by regulated utilities.
Just as gas supply contracts are currently subject to the RCA,
these gas supply contracts will eventually come before the RCA.
3:47:45 PM
REPRESENTATIVE NEUMAN understood at the point the non-native gas
is removed from the storage facility for distribution the gas
would fall under authority of the RCA. He further understood
that the costs for storage would not be passed on as excessive
costs to the customer as a regressive tax.
MR. PERSILY agreed.
3:48:40 PM
REPRESENTATIVE HOLMES asked whether the RCA has reviewed
Amendment 1.
CHAIR OLSON answered that the RCA would be testifying.
REPRESENTATIVE HOLMES removed her objection.
There being no objection, Amendment 1 was adopted.
3:49:30 PM
REPRESENTATIVE NEUMAN made a motion to adopt the next amendment,
which was referred to as Amendment 3, which read [original
punctuation provided]:
Page 2, line 22:
Delete "operations"
Insert "operation"
REPRESENTATIVE HOLMES objected for the purpose of discussion.
MR. PERSILY explained that Amendment 3 is a technical amendment
to fix one instance which was previously missed. Thus,
"operations" is changed to "operation".
REPRESENTATIVE HOLMES removed her objection.
There being no objection, Amendment 3 was adopted.
3:50:54 PM
CHAIR OLSON asked whether the AOGCC will be able to comply with
the provisions in HB 280.
CATHY FOERSTER, Commissioner, Alaska Oil and Gas Conservation
Commission (AOGCC), Department of Administration, answered yes.
She added that the AOGCC will not have a fiscal note associated
with the bill.
CHAIR OLSON asked whether the process will work.
MS. FOERSTER responded that with respect to the AOGCC, the
process will work and is consistent with the commission's work.
CHAIR OLSON asked whether she thought offshore reservoirs in
Cook Inlet could be used for storage.
MS. FOERSTER suggested that if an operator follows the AOGCC's
regulations for gas storage, it does not matter whether the
facility is offshore or onshore. The AOGCC insures that when an
operator operates a storage reservoir, it is accomplished to
maintain and protect the integrity of the reservoir. This means
the operator must ensure the mechanical integrity of every well
that penetrates the reservoir. She related an incident that
happened in Hutchison, Kansas, in which a storage reservoir at
the Yaggy field, located approximately 5 miles outside of town
caused problems in the town of about 50,000 people. The gas
storage approval process did not take into account the complex
geology of the reservoir until several buildings in the town
exploded. Since then an operator must prove the gas reservoir
has integrity and acts as a closed system, every well has
mechanical integrity, and the gas will not seep into unexpected
places. If an operator met the AOGCC's requirements for gas
storage, the facility would be safe on shore or offshore. She
related that the cost or logistics of the reservoir falls
outside of the AOGCC's jurisdiction.
3:54:24 PM
REPRESENTATIVE CHENAULT asked whether the AOGCC is the
controller when gas is reinjected into a reservoir. He related
a scenario in which a storage facility is located in an area in
which a private party owns the mineral rights. He offered that
the party may have an expectation for compensation on gas when
it is injected and again when it is removed from the reservoir.
MS. FOERSTER explained that the AOGCC would play a role in
protecting correlative rights. The operator would need to
demonstrate ownership or approval of all owners in the acreage.
3:55:44 PM
REPRESENTATIVE NEUMAN remarked that the AOGCC would ensure the
gas fields do not leak.
MS. FOERSTER agreed.
3:56:56 PM
REPRESENTATIVE HOLMES recalled prior testimony that AOGCC
foresees no problems in complying with the terms of the bill.
She asked whether the AOGCC is "already signing off."
MS. FOERSTER offered a scenario in which an operator indicates
it wants to inject gas into a reservoir. The operator must
inform the AOGCC of the anticipated maximum pressure it will
subject the reservoir, provide geological information of the
reservoir boundaries, and prove that every penetration of the
reservoir has sufficient mechanical integrity to withstand the
anticipated pressures. The AOGCC checks the data, and using the
beginning and ending pressure, as well as a good production
history or physical description of the reservoir, the AOGCC can
obtain a good estimate of the amount of gas will be stored. She
stated this is something the AOGCC already performs and their
estimates are very close.
3:59:07 PM
REPRESENTATIVE HOLMES asked whether the requirements in HB 280
are acceptable.
MS. FOERSTER suggested that the AOGCC may need to tweak the
regulations to require operators to provide more information,
similar to the process the AOGCC uses as technology changes.
3:59:51 PM
REPRESENTATIVE HOLMES asked for the gas or reservoir capacity in
the Cook Inlet that is in use, authorized, or pending.
MS. FOERSTER explained that the AOGCC has three physical areas
of approval. She recalled that five or six storage injection
orders have been approved, but these orders encompass three
basic geographical areas. Additionally, two more applications
for storage injections have been received. She detailed that
two of the three areas with approved storage include the Kenai
and Sterling, with 6 billion cubic feet (Bcf). However, given
that the start and end pressure entails only 100 pounds
increment, which is a tiny increment, the reservoir could store
up to 25 Bcf of gas. Thus, every 100 pounds per square inch
(psi) of pressure would yield approximately 25 more Bcf of gas.
She related that at some point the wells would not have
mechanical integrity and the AOGCC would not allow the producer
to go above that amount, noting the AOGCC has not been asked to
do so. The Kenai and Sterling Area comprise 25 Bcf of gas
storage. The Pretty Creek gas storage facility has two
intervals using that same method of determining volume have a
storage capacity composite of 2.5 Bcf. Swanson River has three
reservoirs intervals have a composite of 5.3 Bcf of storage
capacity. The Department of Natural Resources (DNR) may show a
lower capacity based on the operator's intent, but for
authorized pressures the operator has more ability. She noted
that Aurora Gas, LLC, has applied for storage injection order at
Nicolai Creek for another 0.8 Bcf, and another operator has
applied for 3 Bcf at Ivan River, for a total of 36 to 37 Bcf of
gas storage capacity that is approved or in the approval
process.
4:02:48 PM
REPRESENTATIVE HOLMES asked how much gas is being used for
storage at the current time.
MS. FOERSTER related her understanding that a small volume is
being stored, but not near the full capacity.
REPRESENTATIVE HOLMES expressed interest in the reason gas is
not being stored if the producer has the capacity to do so.
MS. FOERSTER suggested this question is better answered by the
operator.
4:03:44 PM
REPRESENTATIVE NEUMAN related his interest in knowing the
mechanics of a scenario in which a development plan was
proposed, but was disapproved by the department. He offered to
pass on the question for now.
4:04:15 PM
REPRESENTATIVE BUCH understood an agent or producer has been
storing and shipping Liquefied Natural Gas (LNG). He inquired
as to whether this is under the AOGCC's purview.
MS. FOERSTER answered that the AOGCC's authority stops at the
wellhead.
REPRESENTATIVE CHENAULT, in response to Representative Buch,
clarified that 32 Bcf of gas per year is being shipped out of
state until 2011.
4:05:45 PM
REPRESENTATIVE CHENAULT asked to put on the record that without
having the ability to access the storage facility that recently,
at times, not enough gas would have been available to run the
consumer utilities. He related that the LNG facility has been
an integral part to the overall gas storage and distribution
system in the Cook Inlet. He suggested while some people may
believe that if the LNG facility went out of business it would
provide a solution to the Cook Inlet gas supply, their belief is
not based on fact.
CHAIR OLSON pointed out that Representative Chenault is
referring to a process called "peak shaving" when some of loads
destined for Japan have been shorted several times in the past
few years to provide additional gas to Southcentral during the
cold winters.
REPRESENTATIVE CHENAULT, in response to Chair Olson, stated he
did not recall the number of times that has occurred.
4:06:53 PM
REPRESENTATIVE BUCH clarified he wanted to place on the record
that the state has a mechanism, integral to consumers in a
utility, and gas storage is a component which should also be
considered.
4:07:36 PM
DAN SULLIVAN, Mayor, Municipality of Anchorage, expressed
condolences for the loss of Jim Bowles, President, Conoco
Phillips, who was recently killed in a tragic accident. He
emphasized that HB 280 is important to Anchorage and to
Southcentral Alaska. He had the opportunity, as part of the
Municipality of Anchorage's Energy Task Force, to meet with
Representative Hawker on the bill. The three main areas this
bill covers are essential to the long-term energy future of Cook
Inlet gas, including the ability to create gas storage, provide
incentives to maintain and increase gas production in Cook
Inlet, and to clear any regulatory hurdles that may occur as
these types of contracts are being considered. He stressed it
is also important to keep the consumer in mind during this
process. The Municipality of Anchorage is concerned about the
declining production of natural gas, in particular, as it
relates to pressure. He stated that pressure is the key to
deliverability on cold winter days. He pointed out events in
the last two or last three years that resulted in deliverability
concerns. He characterized the Cook Inlet gas issue as not one
of shortage, but of pressure in the fields. Gas storage
facilities are important since they will help control pressure.
The MOA has taken several steps, including instituting the
Energy Watch Program, which requests consumers turn down their
thermostats for heat and turn off lights to conserve energy.
Initially, the results of this program have been outstanding,
but the state cannot rely on energy conservation alone as a
long-term solution.
4:10:10 PM
MAYOR SULLIVAN recalled during a discussion of the proposed gas
line and bullet line that someone once remarked "the solution to
Cook Inlet is Cook Inlet." He agreed. He surmised that Cook
Inlet holds 10 to 15 years of the necessary natural gas supply,
not counting any new discoveries. This bill, HB 280, does
several things the MOA supports, including the strong
requirement that any financial benefit from incentives in the
bill would flow through to the utilities to the benefit of their
consumers. He offered his belief that the 40 percent credit for
exploration expenses against production taxes provides a great
incentive to garner increased production in Cook Inlet.
Finally, directing the Department of Law to consider the impact
on consumers is important in the event the RCA rejects a
utility's gas supply contract. Thus, these three key elements
in HB 280 are reasons the MOA supports the bill. He related
that he would not go into the financial aspects of the bill.
4:12:14 PM
REPRESENTATIVE HOLMES asked how much of the gas storage capacity
in Cook Inlet is actually being used and any reasons it is not
being used.
KEVIN BANKS, Director, Division of Oil and Gas, Department of
Natural Resources (DNR), offered his belief that Ms. Foerster's
answer is correct, but to obtain a precise answer, it would be
necessary to ask the operators. He suspected the increased
capacity that results in gas storage costs money so an operator
would consider whether to drill another well or add compression
to the existing well. Gas storage may not be needed unless the
operator has customers to purchase the gas. He surmised that if
a producer has a market due to contract supply obligations, the
producer would likely spend to increase the capacity. He
suggested decisions for gas storage thus far may have been made
because it was less expensive to construct gas storage than
drill new wells since new wells might not be as productive as
older wells used to be.
4:14:27 PM
REPRESENTATIVE HOLMES stated that she does not have any specific
objections to the bill. She related that she was considering
many aspects of natural gas in Cook Inlet, including that new
wells are not being drilled, that the current Liquefied Natural
Gas (LNG) facility will be closing, any supply contracts, and
many other factors. She acknowledged the effort made in the
bill and expressed her interest is to be certain that everything
is considered in order to obtain sustainable gas in Cook Inlet.
CHAIR OLSON noted three people from the Department of Revenue
are available to answer tax questions.
4:15:19 PM
REPRESENTATIVE HOLMES asked whether Amendment 1 addresses the
concerns that the RCA had about jurisdiction.
RICHARD GAZAWAY, Advisory Section Manager, Regulatory Commission
of Alaska (RCA), answered that the RCA did ask for guidance on
jurisdiction over gas storage and the intent of the drafters is
clear. He offered that the RCA did not participate in drafting
so while the intent is clear, some improvements could be made in
the drafting.
4:16:35 PM
MR. GAZAWAY, in response to Representative Holmes, suggested
that the DOL could review the language. He referred to page 4,
line 12 of Amendment 1, which read:
(G) furnishing injection, storage, and
withdrawal services for natural gas that is owned by a
utility regulated under this chapter;"
MR. GAZAWAY suggested that the latter clause could use
clarification.
MR. GAZAWAY, in response to Representative Holmes, agreed to the
specific cite in Amendment 1.
MR. GAZAWAY, in response to Chair Olson, agreed that the RCA
could work to improve the specified language at next committee.
4:18:00 PM
REPRESENTATIVE NEUMAN asked whether this bill would complement
an industrial user of gas who may need the flexibility to use
different volumes of gas.
MR. BANKS related his understanding that the expectation is that
storage would be similar to when an industrial user would shut
down during peak demand and inject gas to the local market. He
surmised that physically this would happen. Currently,
industrial users such as the LNG facility also do not have
storage relationships with the local consumers of gas. Thus,
unlike the proposed gas storage destined for consumers, with
presumably transparent pricing for the service, a similar
transparent pricing does not exist for the LNG plant.
Additionally, there is not necessarily a market for gas that is
redirected by the producer from the LNG facility. It is part of
their normal supply contract obligation. He restated that the
LNG plant does not participate in the local market in the same
way as the proposed storage facility would participate.
CHAIR OLSON characterized that the proposed storage facility as
operating more like a bank, with the owner having the ability to
pull out its gas when needed, but can also deposit any excess
gas.
MR. BANKS answered that is correct. He said to the extent gas
is owned by the utility, the state has some indication and
regulation over the price of the storage. However, price
indicators are not present in other situations, including the
LNG and producer-owned storage facilities.
4:21:32 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 280.
4:21:50 PM
REPRESENTATIVE NEUMAN related his understanding of the need to
regulate gas facilities.
REPRESENTATIVE NEUMAN moved to report HB 280, Version 26-
LS1185\S, as amended, out of committee with individual
recommendations and the accompanying fiscal notes.
There being no objection, CSHB 280 (L&C) was reported out of the
House Labor and Commerce Standing Committee.
4:24:10 PM
HB 238-LANDLORD REJECTION OF OCCUPANT/SUBLEASE
CHAIR OLSON announced final order of business would be HOUSE
BILL NO. 238, "An Act removing the number of persons under 18
years of age in the household as a reasonable ground for a
landlord to reject a proposed sublease or assignment."
4:24:19 PM
CHARISSE MILLET, Alaska State Legislature, explained that HB 238
removes a potentially discriminatory clause from the Uniform
Residential Landlord Tenant Act which refers to the "number of
persons under 18 years of age in the household." She elaborated
on the bill. Section 1, AS 34.03.060 (d) lists a number of
reasons for which a landlord may refuse consent to a sublease or
assignment of a lease. Included in the list of reasonable
grounds for rejecting the sublease to the tenant is the "number
of persons under 18 years of age in the household." According to
the Department of Housing and Urban Development's (HUD) Office
of Fair Housing and Equal Opportunity this provision could be
interpreted by the public to allow housing discrimination in
violation of federal law. "Familial status" is a protected class
under federal fair housing law. AS 34.03.060 (d)(3) could be
interpreted to allow discrimination because it not only allows,
but appears to propose that a landlord may refuse to sublease on
the reasonable grounds of "the number of persons under 18 years
of age in the household."
REPRESENTATIVE MILLETT explained that HB 238 is intended to
bring Alaska's Landlord Tenant Act into line with the Federal
Fair Housing Act. Not only will this proposed bill help insure
that Alaska continues to receive federal housing program funding
under the federal programs, including the Home Investment
Partnership Act, the Community Development Block Grant, and the
Emergency Shelter Grant Program, which averages $6 million per
year. Additionally, the bill helps insure that landlords treat
potential tenants fairly regardless of their family situation.
4:25:37 PM
REPRESENTATIVE NEUMAN asked how the issue was brought to her
attention.
REPRESENTATIVE MILLETT responded that the amount of money from
federal programs would be affected. She also did not want to
negate the matching funds.
4:26:01 PM
REPRESENTATIVE MILLETT, in response to Representative Neuman,
explained that the current language in existing statutes
includes a list of reasonable grounds for rejecting the sublease
to the tenant, which includes the number of persons under 18
years of age in the household. She wanted to be certain that
Alaska law does not discriminate against families.
4:26:48 PM
BRYAN BUTCHER, Director, Governmental Affairs & Public
Relations, Alaska Housing Finance Corporation (AFHC), explained
that the AHFC received a copy of a letter dated July 18, 2007
from the U.S. Department of Housing and Urban Development (HUD)
which brought to the AHFC's attention an issue raised by the
HUD's Office of Fair Housing and Equal Opportunity. The HUD
advised that the issue of potential discrimination could affect
HUD's future acceptance of the State of Alaska's certifications
to affirmatively further fair housing and compliance with anti-
discrimination laws. The HUD's Office of Fair Housing and Equal
Opportunity pointed out that the state law cannot allow
landlords to discriminate against potential tenant's subleases
based on the number of persons in the household under the age of
18. He explained that if the state does not change this
provision in AS 34.03.060 (d)(3), which can be potentially
interpreted to allow familial status discrimination, that the
state could lose up to $6 million for three programs previously
mentioned by the sponsor. He advised that Mark Romick,
Director, Planning & Program Development, AHFC is also available
for questions.
4:27:47 PM
REPRESENTATIVE NEUMAN asked what programs would be affected if
the $6 million were redirected.
MR. BUTCHER responded that most of the funding is for a block
grant to the Department of Commerce, Community, and Economic
Development for the development of low income housing, the
Community Development Block Grants (CDBG) primary objective is
to develop viable communities by providing decent housing and a
suitable living environment and by expanding economic
opportunities, principally for persons of low to moderate
income. The Emergency Shelter Grant Program (ESGP) provides
homeless persons with basic shelter and essential supportive
services. The funds can assist with the operational costs of
the shelter facility, and for the administration of the grant.
This grant program also provides short-term homeless prevention
assistance to persons at imminent risk of losing their own
housing due to eviction, foreclosure, or utility shutoffs.
4:29:17 PM
REPRESENTATIVE T. WILSON posed a scenario in which a landlord
has a 2-bedroom apartment for rent. If a prospective tenant has
four children, but the apartment under consideration is too
small for six people, whether the landlord would need another
reason to decide not to rent to them.
MR. BUTCHER stated that too many occupants is an acceptable
reason to decline, but if a landlord had a six-bedroom house,
and decided it would be acceptable to rent to a family of six,
the landlord could not base a decision not to rent to a family,
solely based on the fact that they had children under the ages
of 18.
REPRESENTATIVE T. WILSON clarified that a landlord could decide
the number of people, but could not base a decision not to rent
to someone based on those under 18 years of age.
MR. BUTCHER answered yes. He stated that the state statutes
refer to a list of items a landlord can ask prospective tenants
in their rental agreement for sublease or assignment of lease.
The state statute refers to reasonable grounds for rejecting a
sublease and lists the "number of persons under 18 years of age
in the household" as one of the items. The HUD found that
asking prospective tenants the specific question may appear to
propose that the landlord might refuse consent to a sublease
based solely on the number of children in a household, which is
in violation of federal law.
4:31:14 PM
REPRESENTATIVE LYNN related a scenario in which a landlord has
an apartment to rent. He offered his understanding that the
landlord could not limit the number of people who could rent the
apartment, or the number of people who could sublease the
apartment.
MR. BUTCHER answered that a landlord could still legitimately
limit the number of people an apartment can hold for a lease or
a sublease, so long as it is reasonable. In further response to
Representative Lynn, he stated what is at issue is that a
landlord cannot specifically discriminate in the sublease,
against a prospective tenant based on some of the family members
are children being under the age of 18.
REPRESENTATIVE LYNN understood that the landlord could still
limit the number of persons who could occupy an apartment, in
either the lease or the sublease.
MR. BUTCHER agreed.
4:32:34 PM
MR. BUTCHER, in response to Representative Neuman, answered that
a landlord can make decisions on the number of people allowed in
a unit, but cannot specifically discriminate against children.
For example, if a landlord decides that it is reasonable for
five people to rent a two-bedroom apartment, the landlord could
not decide to discriminate in a sublease by not allowing
children. He emphasized that landlords can legitimately decide
to set limits on the occupancy to five. The federal law is very
detailed about what constitutes discrimination. He recalled
reviewing the federal law, and the list of prohibitions was
quite lengthy, so it did not surprise him that the federal
agency found a discrepancy in the state's law.
4:34:32 PM
REPRESENTATIVE LYNN disclosed that one of his daughters, who
resides in Indiana, has eight children, and rents.
4:34:50 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on HB 238.
4:35:05 PM
REPRESENTATIVE NEUMAN remarked that the bill makes sense and
will clean up Alaska statutes. He thanked Representative
Millett for her commitment to making Alaska the best place for
children.
REPRESENTATIVE NEUMAN moved to report HB 238 out of committee
with individual recommendations and the accompanying fiscal
notes. There being no objection, HB 238 was reported from the
House Labor and Commerce Standing Committee.
4:35:32 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:35 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB280 Fiscal Note-CED-RCA-02-08-10.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 280 |
| HB315 ver A.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB280 Fiscal Note-DOA-AOGCC-02-08-10 (2).pdf |
HL&C 2/15/2010 3:15:00 PM |
|
| HB315 Sponsor Statement.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB315 Sectional Analysis.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB315 Fiscal Note-CED-CBPL-2-11-10.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB315 American Institute of CPAs FAQ.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB315 AICPA Mobility.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB315 AICPA Mobility Table.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB315 ASCPA Resolution.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 315 |
| HB238 Sponsor Statement.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 238 |
| HB238 Fiscal Note-CED-COM-2-11-10.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 238 |
| HB238 AHFC Comments.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 238 |
| HB238 HUD Letter 7-18-07.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 238 |
| HB280 Amendment S.2.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 280 |
| HB280 Sectional Analysis ver S as amended by S.2.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 280 |
| HB280 Summary of Amendments ver S.2.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 280 |
| HB280 Gas Storage Map.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 280 |
| HB280 Amendment S.3.pdf |
HL&C 2/15/2010 3:15:00 PM |
HB 280 |