04/14/2010 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB234 | |
| SB243 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 234 | TELECONFERENCED | |
| + | SB 243 | TELECONFERENCED | |
| + | SB 277 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE LABOR AND COMMERCE STANDING COMMITTEE
April 14, 2010
3:23 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
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 234(FIN)
"An Act relating to the voting procedures of the Alcoholic
Beverage Control Board; allowing the Alcoholic Beverage Control
Board to release information contained in the statewide database
of alcohol purchases and shipments to the person who purchased
the alcohol or to whom the alcohol was shipped; relating to the
access of persons under 21 to premises where alcoholic beverages
are sold, served, or consumed; extending the termination date of
the Alcoholic Beverage Control Board; and providing for an
effective date."
- MOVED HCS CSSB 234(L&C) OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 243(FIN)
"An Act relating to geothermal resources; relating to the
royalty obligation for geothermal resources; transferring from
the Department of Natural Resources to the Alaska Oil and Gas
Conservation Commission authority over permitting and inspection
of geothermal wells; providing for a regulatory cost charge for
geothermal wells; and providing for an effective date."
- MOVED HCS CSSB 243(RES) OUT OF COMMITTEE
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 277(RES) AM
"An Act exempting from regulation by the Regulatory Commission
of Alaska and by municipalities certain generators of
electricity from renewable energy resources that sell
electricity to regulated utilities."
- SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 234
SHORT TITLE: ALCOHOLIC BEVERAGE CONTROL BD
SPONSOR(s): SENATOR(s) MEYER
01/22/10 (S) READ THE FIRST TIME - REFERRALS
01/22/10 (S) L&C, FIN
02/25/10 (S) L&C AT 2:00 PM BELTZ 105 (TSBldg)
02/25/10 (S) Moved SB 234 Out of Committee
02/25/10 (S) MINUTE(L&C)
02/26/10 (S) L&C RPT 4DP 1DNP
02/26/10 (S) DP: PASKVAN, DAVIS, THOMAS, MEYER
02/26/10 (S) DNP: BUNDE
03/26/10 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/26/10 (S) Heard & Held
03/26/10 (S) MINUTE(FIN)
03/26/10 (S) FIN AT 1:30 PM SENATE FINANCE 532
03/26/10 (S) Heard & Held
03/26/10 (S) MINUTE(FIN)
04/02/10 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/02/10 (S) Heard & Held
04/02/10 (S) MINUTE(FIN)
04/11/10 (S) FIN RPT CS 4DP 3NR NEW TITLE
04/11/10 (S) DP: HOFFMAN, STEDMAN, THOMAS, EGAN
04/11/10 (S) NR: HUGGINS, OLSON, ELLIS
04/11/10 (S) FIN AT 11:00 AM SENATE FINANCE 532
04/11/10 (S) Moved CSSB 234(FIN) Out of Committee
04/11/10 (S) MINUTE(FIN)
04/12/10 (S) TRANSMITTED TO (H)
04/12/10 (S) VERSION: CSSB 234(FIN)
04/12/10 (H) READ THE FIRST TIME - REFERRALS
04/12/10 (H) L&C, FIN
04/14/10 (H) L&C AT 3:15 PM BARNES 124
BILL: SB 243
SHORT TITLE: GEOTHERMAL RESOURCE:ROYALTY/PERMIT/FEE
SPONSOR(s): SENATOR(s) MCGUIRE
01/27/10 (S) READ THE FIRST TIME - REFERRALS
01/27/10 (S) RES, FIN
02/10/10 (S) RES AT 3:30 PM BUTROVICH 205
02/10/10 (S) Heard & Held
02/10/10 (S) MINUTE(RES)
03/11/10 (S) RES AT 3:30 PM BUTROVICH 205
03/11/10 (S) Heard & Held
03/11/10 (S) MINUTE(RES)
03/18/10 (S) RES AT 3:30 PM BUTROVICH 205
03/18/10 (S) Moved CSSB 243(RES) Out of Committee
03/18/10 (S) MINUTE(RES)
03/22/10 (S) RES RPT CS 1DP 3NR NEW TITLE
03/22/10 (S) DP: MCGUIRE
03/22/10 (S) NR: WIELECHOWSKI, STEVENS, FRENCH
03/29/10 (S) FIN AT 9:00 AM SENATE FINANCE 532
03/29/10 (S) Heard & Held
03/29/10 (S) MINUTE(FIN)
04/02/10 (S) FIN RPT CS 6DP 1NR NEW TITLE
04/02/10 (S) DP: HOFFMAN, STEDMAN, HUGGINS, THOMAS,
EGAN, ELLIS
04/02/10 (S) NR: OLSON
04/02/10 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/02/10 (S) Moved CSSB 243(FIN) Out of Committee
04/02/10 (S) MINUTE(FIN)
04/05/10 (S) TRANSMITTED TO (H)
04/05/10 (S) VERSION: CSSB 243(FIN)
04/06/10 (H) READ THE FIRST TIME - REFERRALS
04/06/10 (H) RES, L&C, FIN
04/09/10 (H) RES AT 1:00 PM BARNES 124
04/09/10 (H) Moved HCS CSSB 243(RES) Out of
Committee
04/09/10 (H) MINUTE(RES)
04/11/10 (H) RES RPT HCS(RES) 5DP
04/11/10 (H) DP: GUTTENBERG, EDGMON, OLSON, JOHNSON,
NEUMAN
04/14/10 (H) L&C AT 3:15 PM BARNES 124
WITNESS REGISTER
JOSH APPLEBEE, Staff
Senator Kevin Meyer
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As staff to the Legislative Budget and
Audit Committee, presented SB 234.
KONRAD JACKSON, Staff
Representative Kurt Olson
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: As staff to the House Labor and Commerce
Standing Committee, presented the changes to the bill.
SHIRLEY GIFFORD
Alcoholic Beverage Control Board (ABC Board)
Department of Public Safety (DPS)
Anchorage, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of SB 234.
PAT DAVIDSON
Legislative Auditor
Division of Legislative Audit
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of SB 234.
ADRIENE ACTIVE, Community Liaison
United Way of Anchorage
Anchorage, Alaska
POSITION STATEMENT: Testified during the discussion of SB 234.
KIANA ACTIVE, Volunteer
United Way of Anchorage
Eagle River, Alaska
POSITION STATEMENT: Testified during the discussion of HB 234.
ANNA SAPPAH, Executive Director
Alaska Addiction Professionals Association; Board Member,
Governor's Advisory Board on Alcoholism & Drug Abuse
Anchorage, Alaska
POSITION STATEMENT:
ANNE CARPENETI, Assistant Attorney General
Legal Services Section
Criminal Division
Department of Law (DOL)
Juneau, Alaska
POSITION STATEMENT: Answered questions during the discussion of
SB 234.
ELLEN GANLEY, Vice-Chair; Public Member
Alcoholic Beverage Control Board (ABC Board)
Department of Public Safety (DPS)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of SB 234.
LARRY HACKENMILLER, General Manager
Alaska Cabaret, Hotel, Restaurant, and Retailers Association
(CHARR)
Fairbanks, Alaska
POSITION STATEMENT: Testified during the discussion of SB 234.
LYNN COOK, Public Member
Alcoholic Beverage Control Board (ABC Board)
Department of Public Safety (DPS)
Cordova, Alaska
POSITION STATEMENT: Testified and answered questions during the
discussion of SB 234.
MIKE PAWLOWSKI, Staff
Senator Lesil McGuire
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Testified during the discussion of SB 243.
CATHY P. FORESTER, Commissioner
Alaska Oil & Gas Conservation Commission (AOGCC)
Department of Administration
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 234.
PAUL THOMSEN, Director
Public Policy and Business Development
ORMAT Technologies, Inc.
Reno, Nevada
POSITION STATEMENT: Testified in support of SB 243.
KEVIN BANKS, Acting Director
Central Office
Division of Oil & Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of SB 243.
ACTION NARRATIVE
3:23:28 PM
CHAIR KURT OLSON called the House Labor and Commerce Standing
Committee meeting to order at 3:23 p.m. Representatives Olson,
Holmes, Neuman, T. Wilson, Buch were present at the call to
order. Representatives Chenault and Lynn arrived as the meeting
was in progress.
3:23:35 PM
SB 234-ALCOHOLIC BEVERAGE CONTROL BD
3:23:43 PM
CHAIR OLSON announced that the first order of business would be
CS FOR SENATE BILL NO. 234(FIN), "An Act relating to the voting
procedures of the Alcoholic Beverage Control Board; allowing the
Alcoholic Beverage Control Board to release information
contained in the statewide database of alcohol purchases and
shipments to the person who purchased the alcohol or to whom the
alcohol was shipped; relating to the access of persons under 21
to premises where alcoholic beverages are sold, served, or
consumed; extending the termination date of the Alcoholic
Beverage Control Board; and providing for an effective date."
3:24:29 PM
JOSH APPLEBEE, Staff, Senator Kevin Meyer, Alaska State
Legislature, stated that AS 04.06.010 established the Alcoholic
Beverage Control Board (ABC Board). The Division of Legislative
Budget and Audit described this board is "a work in progress."
The division conducted three audits in the past seven years.
This is a board that needs additional attention. The auditors
recommended a one-year extension, but would like to come back
next year with a more comprehensive extension bill. The changes
contained in the committee substitute add three additional
provisions to the bill. The auditor recommended removing the
executive director's authorization to cast a tie-breaking vote.
The executive director is not an appointee and the board had
recommended that the person not have the ability to vote on
policy matters. The second change would allow the subject of
the database to have access to the information collected about
him/her or any business listed. The third change repeals the
provision that removes the use of underage persons in compliance
checks. He anticipated hearings would be held during the
legislative interim and a more comprehensive bill would be
introduced next year.
3:27:12 PM
REPRESENTATIVE LYNN asked for clarification on the use of
"underage persons" for compliance check.
MR. APPLEBEE explained that the Senate Finance Committee
inserted the two provisions that repealed statutory language
pertaining to the ABC Board's use of underage persons in
undercover operations. The committee did not believe that it
was proper to use underage persons to purchase alcohol.
REPRESENTATIVE LYNN related that it is also not proper for law
enforcement to lie, but they sometimes must lie during covert
operations in order to perform their duties. He asked how
compliance checks could occur for selling alcohol to underage
persons unless an underage person attempts to buy alcohol.
3:28:40 PM
REPRESENTATIVE NEUMAN moved to adopt the proposed House
committee substitute (CS) for SB 234, labeled 26-LS1350\P,
Bullard, 4/13/10, as the work draft. There being no objection,
Version P was before the committee.
3:29:30 PM
KONRAD JACKSON, Staff, Representative Kurt Olson, Alaska State
Legislature, on behalf of the House Labor and Commerce Standing
Committee, explained the changes contained in the proposed House
committee substitute (HCS). The HCS deletes Section 4, which
read:
AS 04.16.049(f) and 94.16.060 (f) are repealed.
MR. JACKSON explained that by repealing the two statutes the
effect will be to allow investigators to use underage persons
for investigations of underage purchases of alcohol. In
response to Representative T. Wilson, he referred to page 2,
line 25, of the CSSB 234(FIN) for the citation.
3:31:16 PM
CHAIR OLSON explained that a problem arose when an underage
person was asked for identification and the server kept the
person's driver license. He recalled that "a scene was made" by
the officer in an attempt to obtain the license back. He
related his understanding that the matter has been resolved
administratively and it was not likely that any additional
problems would occur.
3:31:50 PM
REPRESENTATIVE NEUMAN asked when a business serves alcohol,
whether anyone under the age of 21 can be in the establishment.
3:33:50 PM
SHIRLEY GIFFORD, Alcoholic Beverage Control Board (ABC Board),
Department of Public Safety (DPS), answered that allowing
underage persons in businesses that serve alcohol is acceptable,
so long as the person is with his/her parent since parents have
the right to do so, unless the underage person has a health or
safety issue. She related that the two statutes that were
deleted in Version P. She explained that AS 04.16.049(f) and
94.16.060 (f), provide authority to peace officers since some
local agencies conduct compliance check and allow them to employ
underage person to assist them. Otherwise, it would be illegal
for them to attempt to purchase alcohol, she stated.
3:35:18 PM
REPRESENTATIVE NEUMAN restated his question, asking whether a
person under 21 years of age must be with his/her parent if they
are in a business such as a pizza parlor that serves beer or
wine.
MS. GIFFORD offered that the ABC Board issues restaurant
designation permits and persons under the age of 21 are allowed
in the restaurant. The establishments apply for restaurant
permit, submit floor plans and indicate how they plan to operate
prior to the ABC approves the permit.
REPRESENTATIVE NEUMAN said it was not clear in the bill and he
was only concerned about unintended consequences.
MS. GIFFORD referred to AS 04.16.049 (f), which read:
(f) A person under 21 years of age does not violate
this section if the person enters or remains on
premises licensed under this title at the request of a
peace officer, if the peace officer accompanies,
supervises, or otherwise observes the person's entry
or remaining on premises, and the purpose for the
entry or remaining on premises is to assist in the
enforcement of this section.
MS. GIFFORD related that statute addresses the person under
21 years of age that assists a police officer for
compliance checks. She stated that AS 04.16.09 and AS
04.16.060 provide more detail about when persons under the
age of 21 can be on premises where alcohol is served.
3:38:09 PM
MS. GIFFORD, in response to Representative Lynn, explained the
statutes provide some leeway to allow parents, guardians, and
spouses to accompany children. Additionally, the ABC Board has
developed a form for use by teachers or chaperones that allow
students to eat in restaurants. She stated that after a game, a
teacher or coach frequently will take the team to a pizza place.
She affirmed the statute does allow for those types of events.
3:39:24 PM
REPRESENTATIVE T. WILSON asked whether the 11 ABC Board
employees are located in areas around the state.
MS. GIFFORD replied yes. She offered that the ABC Board has one
investigator assigned in Fairbanks, one in Juneau, and the rest
of the employees reside in Anchorage. In further response to
Representative T. Wilson, she stated that before a license is
issued an inspection is required. In the event that the ABC
Board's staff is not available, an Alaska State Trooper (AST) or
local law enforcement person will assist in the inspection.
REPRESENTATIVE T. WILSON referred to the signage on premises for
establishments that are interested in a permit to sell alcohol.
She asked for clarification on who posts the signage.
MS. GIFFORD responded that the ABC Board counts on the local
governing body to assist with compliance. The statutes provide
that local police and local governing bodies must help enforce
the statutes and regulations. In instances in which the local
authorities assist, the ABC Board will refund or return
licensing fees to the local body. She characterized the
relationship of the ABC Board with local governing bodies as "a
very good close working relationship."
3:41:32 PM
REPRESENTATIVE T. WILSON related her understanding that the
Fairbanks North Star Borough has always assumed the Alcoholic
Beverage Control Board (ABC) posts notices in Fairbanks.
MS. GIFFORD related that the ABC Board has a good working
relationship with the Fairbanks North Star Borough. She asked
if Representative T. Wilson was referring to the requirement for
a business to post notices in the city hall, the U.S. Post
Office, and the location three weeks in advance of acquiring a
liquor license.
REPRESENTATIVE T. WILSON agreed. She related an instance that
was problematic involving a pizzeria.
MS. GIFFORD offered to look into the specific situation.
3:42:56 PM
PAT DAVIDSON, Legislative Auditor, Division of Legislative
Audit, Alaska State Legislature, explained the Division of
Legislative Audit conducted its audit and recommended the ABC
Board be extended for four years, until June 30, 2014. There
were some improvements in some of the administrative
deficiencies, but some of the issues were not resolved.
Therefore, the auditors recommended a shorter timeframe for the
sunset review. The auditors acknowledged a new executive
director was hired in January 2009 and while most of the
improvements had been made, some deficiencies remained. The ABC
Board had not yet established a quantifiable and objective
enforcement goal. The auditors found a dominance of compliance
check activities in the areas where the investigators were
located. The geographic location should not be the driver for
enforcement, she stated. An enforcement plan should be a well
thought out plan, which was one of the auditor's recommendations
She identified some administrative deficiencies the auditors
found, including poor recordkeeping and licensing procedures,
lack of reconciliation, insufficient training for the data entry
staff resulted in errors that "crept in," and the board lacked
insufficient procedures to ensure accuracy and completeness of
the information recorded in the Board's Restricted Alcohol
Purchasers Statewide Data Base.
3:45:38 PM
MS. DAVIDSON, in response to Representative Buch, agreed that
the updated status on the outstanding recommendations for the
ABC Board would be available to the legislature at the beginning
of the session.
3:46:20 PM
ADRIENE ACTIVE, Community Liaison, United Way of Anchorage,
stated that she is currently working on a Substance Abuse Mental
Health Services Administration Grant. She works as a liaison
for four partners, including United Way, Southcentral
Foundation, Cook Inlet Tribal Council, and the Municipality of
Anchorage (MOA) to specifically reduce access and demand and
increased resiliency of alcohol use among youth in Anchorage.
She oversees recipients, including Volunteers of America, who
has implemented an environmental strategy, a grass roots
advocacy group in Anchorage to reduce access of alcohol for
minors. She related that she is in the second grant year and
part of the strategy is to conduct compliance checks and
"shoulder tap" programs since the practice reduces demand and
access. She mentioned she is beginning to enter a contract with
the ABC Board to increase the number of the compliance checks in
Anchorage. She offered her belief that the funding includes
$15,000 for one additional officer outside Anchorage. She
related that an important part of the grant is to reduce alcohol
use by minors in Anchorage.
3:49:10 PM
KIANA ACTIVE, Volunteer, United Way of Anchorage, stated that
she works on compliance check operations. She advocated for
continuing compliance checks since kids can go to restaurants,
liquor stores, and bars and buy alcohol. She stated that she is
18 and has been served a Corona at a restaurant, but the wait
staff removed it after checking her identification three
separate times. She stated that it is important for kids and
teens not to have alcohol because it "kills their brain" or
impairs their behavior. She said that kids are not ready to
drink alcohol.
3:50:23 PM
ANNA SAPPAH, Executive Director, Alaska Addiction Professionals
Association; Board Member, Governor's Advisory Board on
Alcoholism & Drug Abuse, stated that she serves as a Beneficiary
Member on the Governor's Advisory Board on Alcoholism & Drug
Abuse. She stated that she is deeply concerned about
discontinuing compliance checks on establishments that sell
alcohol, which directly contradicts Alaska's plan to reduce
underage drinking.
3:51:30 PM
ANNE CARPENETI, Assistant Attorney General, Legal Services
Section, Criminal Division, Department of Law (DOL), said the
Department of Law supports the committee substitute which
deletes the two sections. She explained that compliance checks
have made a huge difference in reducing alcohol from being
served to minors in the state.
3:52:05 PM
ELLEN GANLEY, Vice-Chair, Public Member, Alcoholic Beverage
Control Board (ABC Board), Department of Public Safety (DPS),
stated that the ABC Board opposes the elimination of compliance
checks. Compliance checks, which are funded from federal grant
monies, have made a huge difference in how alcohol is not served
to minors in the state. At the time the compliance checks began
the failure rate was significantly higher. In 2009, 787
licensees successfully passed the compliance checks, which
represented 87 percent of the checks performed last year. She
offered her belief that continued compliance checks and regular
enforcement will keep the ABC Board moving towards reaching its
goal of 95 percent compliance. The compliance checks are part
of a larger statewide effort to prevent underage drinking. The
state plan to reduce underage drinking is a joint effort by 12
statewide agencies and associations. In fact, the state plan
recommends that compliance checks be increased rather than
eliminated. Underage drinking is a problem in all states,
although the numbers in Alaska are "turning in an encouraging
direction." The Alaska Youth Risk Behavior Survey shows that in
1995, 47.5 of the teens who completed survey had consumed
alcohol in the last 30 days. In 2009, that dropped to 33
percent. Alaska leads the nation with the lowest percentage of
youth who purchase their own alcohol. She stated that the ABC
Board does not think that compliance checks are the only reason
for the changes. The changes in key behaviors are the result of
many groups working together, she stated. Compliance checks
have resulted in alcoholic beverage licensees regularly checking
identification and not selling to underage Alaskans. She urged
members to not eliminate the ABC Board compliance checks.
3:55:03 PM
REPRESENTATIVE BUCH asked for her opinion on the section of the
bill that removes the ability of the executive director to vote.
MS. GANLEY responded that she did not view this as a problem.
She related that in some instances, a situation may arise that
could delay the ABC Board's decision, but she believed the board
could work around it. She commented that the need for a tie-
breaking vote does not often happen.
3:55:51 PM
LARRY HACKENMILLER, General Manager, Alaska Cabaret, Hotel,
Restaurant, and Retailers Association (CHARR), stated that he
was unsure of the success rate for the sting operations or the
decrease in violations. He explained that one of the most
famous impacts is the civil fine imposed on minors who enter
premises where alcohol is sold. He offered his belief that
civil fines have had the greatest impact on minor consumption in
package stores or on-premise location. He referred to the
Senate version of the bill, Version E. He related his
understanding that during a sting operation, a liquor premise
typically has kept the identification card and subsequently sues
the minor. He stated that CHARR has increased membership
awareness on the importance of checking identification cards.
He said he does not understand the need for compliance checks.
Normally during a compliance check or a sting, law enforcement
identifies a problem area, which is generally based on numerous
reports of illegal activity. He reported that Fairbanks does
not have any instances, or has few instances, of minors arrested
on premises. He stated that the odds are down to ten percent.
He stated that licensees are aware of the compliance checks. He
said, "This industry basically is not against anything that has
to do with keeping underage people from drinking, but if we
thought there was a great problem in it our local law
enforcement would be on top of it."
3:58:41 PM
REPRESENTATIVE T. WILSON recalled the incidence rate on sales of
alcohol to underage persons. She asked for clarification that
the incidence of actual sales to underage persons was one in ten
times.
MR. HACKENMILLER related his understanding that the "failure
rate" was ten percent. He asked whether the state is interested
in making criminals of employees or in reducing minor consuming.
3:59:28 PM
LYNN COOK, Public Member, Alcoholic Beverage Control Board (ABC
Board), Department of Public Safety (DPS), asked the committee
not to remove the compliance checks from the statutes. She
offered her belief compliance checks have curbed underage
drinking and if they are not performed that the statistics for
underage drinking would likely increase. She remarked that
Alaska has one of the highest rates of substance abuse in the
U.S. She urged members to retain the compliance checks for
businesses where alcohol is sold.
4:00:59 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 234.
CHAIR OLSON withdrew his objection.
4:01:21 PM
REPRESENTATIVE LYNN asked whether someone involved in assisting
in an underage sting operation was sued, and if so, if that
matter was resolved.
MS. GIFFORD answered she was unsure. She offered her belief
that lawsuit Mr. Hackenmiller referenced related to an underage
person being fined.
REPRESENTATIVE LYNN wanted to ensure civil liability protection
for any person who assists a peace officer.
REPRESENTATIVE HOLMES stated that she read the specific
statutory references. She explained that the two subsections
that were deleted in Version E of the bill are the sections that
protect the underage person who participates in the sting. She
suggested that if the committee adopted Version P, that the
youth participating in stings would be protected.
4:03:16 PM
REPRESENTATIVE NEUMAN moved to report the proposed House
committee substitute (CS) for SB 234, labeled 26-LS1350\P,
Bullard, 4/13/10, out of committee with individual
recommendations and the accompanying fiscal notes. There being
no objection, the HCS SB 234(L&C) was reported from the House
Labor and Commerce Standing Committee.
4:04:06 PM
The committee took an at-ease from 4:04 p.m. to 4:06 p.m.
4:06:15 PM
SB 243-GEOTHERMAL RESOURCE:ROYALTY/PERMIT/FEE
4:06:20 PM
CHAIR OLSON announced that the next order of business would be
CS FOR SENATE BILL NO. 243(FIN), "An Act relating to geothermal
resources; relating to the royalty obligation for geothermal
resources; transferring from the Department of Natural Resources
to the Alaska Oil and Gas Conservation Commission authority over
permitting and inspection of geothermal wells; providing for a
regulatory cost charge for geothermal wells; and providing for
an effective date."
[Before the committee was HCS CSSB 243(RES).]
4:06:26 PM
MIKE PAWLOWSKI, Staff, Senator Lesil McGuire, Alaska State
Legislature, stated that SB 243 really "opens the door for
commercial development of geothermal energy in Alaska and puts
that development under a regulatory regime that exists in every
other state that is an oil and gas producing region. Under
current law, geothermal resources would pay a 10 to 15 percent
royalty rate. When the state originally considered the
appropriate rate, the sponsor contemplated the rate should be
zero since the product is hot water, is not exported, and any
royalty would be passed on to consumers in the form of higher
electric rates. However, after working with Department of
Natural Resources (DNR), the sponsor agreed that the leasing of
land for geothermal resource actually is the equivalent of a
"property right" so some form of royalty made sense.
MR. PAWLOWSKI referred to page 1 line 12 and to page 2, line 8,
which refers to the proposed royalty rate for geothermal in
Alaska on state land of 1.5 percent on the gross value of
production, during the first ten years, and 3.5 percent
following those ten years. This royalty rate is the same as on
federal land, he noted. The goal was to achieve a reasonable
rate that comports with the federal land and does not create any
real competition. A 10 to 15 percent royalty rate was written
20 to 30 years ago, and was "picking a number out of thin air,
not knowing what makes geothermal economic."
MR. PAWLOWSKI explained that the other sections of the bill
divide the authority between the Alaska Oil and Gas Conservation
Commission (AOGCC) and the Department of Natural Resources (DNR)
to regulate geothermal resources. He referred to page 2, lines
9-15, to Section 3 to the commission's authority over geothermal
wells, which read: "The commission has jurisdiction under this
chapter over geothermal wells to prevent waste, to protect
correlative rights, and to ensure public safety." He stated
that this language provides the regulation of the drilling,
exploration, and actual use of the resource. The DNR would have
control over the leasing, the unitization, and land issues that
DNR typically performs with oil and gas matters. The geothermal
system would be very similar to oil and gas management, he
stated. This change should save the state money since DNR does
not have in-house expertise to carry out what he characterized
as an outdated regulatory system. More importantly, looking at
the map that shows state land ownership, under current law DNR
has authority over state land but there might be geothermal
development that is not on state land. He explained that only
the AOGCC can regulate to protect the public safety on all land
outside state lands. That change represents the critical piece
to ensure safe development of a renewable energy that actually
pays a royalty to the treasury. He paraphrased from the sponsor
statement, which read [original punctuation provided]:
Electric power generated from geothermal sources is a
clean, sustainable, and environmentally friendly
alternative to fossil fuels. It can play a major part
in meeting the future energy needs of the railbelt and
other regions.
The problem for any company seeking to build a
commercial grade geothermal plant in Alaska is high
capital costs that run 25-50 percent higher than the
Lower-48. Operational costs could run 100 percent
higher than the rest of the country.
Senate Bill 243 assists companies in developing
geothermal resources discovered in commercial
quantities on state land by lifting the 10 to 15
percent royalty payment obligation currently in state
statute.
SB 243 is a common sense effort to make geothermal
power projects economically viable and produce more
affordable and reliable electric power for homes and
businesses.
Geothermal electrical generation has been used for
decades all over the world and creates "green" jobs.
Alaska can now join other states and nations using
geothermal sources to create a safe and secure source
of electricity.
I urge all my colleagues to support SB 243 and move
our state towards a secure energy future.
4:10:05 PM
REPRESENTATIVE T. WILSON asked whether this bill regulates
geothermal resources on private property.
MR. PAWLOWSKI answered that the regulation on private land would
be subject to AOGCC. It would not apply to the royalty sections
since the state does not own the subsurface rights.
4:11:06 PM
MR. PAWLOWSKI explained the House Resources Standing Committee
made a change that set an important policy provision. He
referred to page 7, to proposed Section 17, and the definition
of commercial use. He read: "(1) commercial use" means the
sale of heat or power to a third party;" which he said does not
affect personal ground source heat pumps that people may use for
their homes or for small scale geothermal energy use for
personal use."
4:12:02 PM
REPRESENTATIVE HOLMES related that she did not think the change
creates any problem, but if somewhere "down the line" the
resources are being deleted, the problem could be dealt with at
that time. She thought this change represented a reasonable
step at this point.
4:12:42 PM
REPRESENTATIVE T. WILSON asked if she has a business on her
property and uses the geothermal resource whether that use would
be considered personal use.
MR. PAWLOWSKI answered yes, that since the person would be using
the geothermal resource for his/her own use and is not selling
the heat or power that the use would not be considered a
commercial use of geothermal energy.
4:14:00 PM
CATHY P. FORESTER, Commissioner, Alaska Oil & Gas Conservation
Commission (AOGCC), Department of Administration, stated that
the AOGCC strongly supports SB 243. She explained that the bill
would transfer from Department of Natural Resources (DNR) to the
AOGCC a function that is more appropriately handled by the
AOGCC. She offered her belief that the DNR also supports this
transfer.
4:14:41 PM
PAUL THOMSEN, Director, Public Policy and Business Development,
ORMAT Technologies, Inc., stated that ORMAT was delighted to win
the leases at Mt. Spur and is excited to develop a large scale
commercial geothermal project near Anchorage. This bill will
move us forward in developing that project and reducing the
royalties to the federal level brings the royalty taxes on par
to allow projects to compete with resources in the Lower 48.
Additionally, SB 243 will help "pave the way" to develop
additional geothermal resources in Alaska. He stated that ORMAT
Technologies strongly supports SB 243. He commented on the
previous discussion on commercial applications. This bill
reduces an existing royalty rate of 10 percent to the federal
level. He offered that people would pay a 10 percent royalty if
the project is defined as commercial. He indicated that in the
event the use is not defined as commercial, the owner could take
comfort that he/she will be taken care of with Senator McGuire's
amendment that was previously adopted.
4:16:23 PM
KEVIN BANKS, Acting Director, Central Office, Division of Oil &
Gas, Department of Natural Resources (DNR), explained that DNR
has been "saddled" with the responsibilities of managing
geothermal land. This bill surgically carves out of the DNR
statutes the ones that are more appropriate to the AOGCC. The
bill does not add any further regulation, but would provide for
safety and correlative rights and conservation of the resource.
This bill also creates a relationship with the AOGCC and the DNR
that is similar to what the DNR shares in oil and gas matters.
He offered DNR's support for this bill.
4:17:46 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 243.
4:18:13 PM
REPRESENTATIVE T. WILSON moved to report the HCS CSSB 243(RES)
out of committee with individual recommendations and the
accompanying fiscal notes. There being no objection, HCS CSSB
234(RES) was reported from the House Labor and Commerce Standing
Committee.
4:19:12 PM
ADJOURNMENT
There being no further business before the committee, the House
Labor and Commerce Standing Committee meeting was adjourned at
4:19 p.m.