Legislature(2015 - 2016)BARNES 124

02/09/2015 03:15 PM LABOR & COMMERCE

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Audio Topic
03:18:26 PM Start
03:19:57 PM Overview: Department of Commerce, Community & Economic Development - Division of Corporations, Business and Professional Licensing
04:13:27 PM Overview: Alaska Industrial Development and Export Authority
05:03:28 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
- Dept. of Commerce, Community & Economic
- Alaska Industrial Development & Export
- Corporations, Business & Professional Licensing
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
           HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                        February 9, 2015                                                                                        
                            3:18 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Cathy Tilton                                                                                                     
Representative Andy Josephson                                                                                                   
Representative Sam Kito                                                                                                         
MEMBERS ABSENT                                                                                                                
Representative Kurt Olson, Chair                                                                                                
Representative Mike Chenault (alternate)                                                                                        
COMMITTEE CALENDAR                                                                                                            
OVERVIEW: DEPARTMENT OF COMMERCE~ COMMUNITY & ECONOMIC                                                                          
DEVELOPMENT - DIVISION OF CORPORATIONS~ BUSINESS & PROFESSIONAL                                                                 
     - HEARD                                                                                                                    
OVERVIEW:  ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY                                                                   
     - HEARD                                                                                                                    
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
SARA CHAMBERS, Acting Director                                                                                                  
Division of Corporations, Business, and Professional Licensing                                                                  
Department of Commerce, Community, & Economic Development (DCCED)                                                               
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:    Presented  a PowerPoint  overview  of  the                                                            
Division  of Corporations,  Business,  and Professional  Licensing                                                              
(DCBPL),   Department   of   Commerce,    Community   &   Economic                                                              
Development (DCCED).                                                                                                            
TED LEONARD, Executive Director                                                                                                 
Alaska Industrial Development & Export Authority (AIDEA)                                                                        
Department of Commerce, Community,  & Economic Development (DCCED)                                                              
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    Presented  a PowerPoint  overview  of  the                                                            
Alaska Industrial Development and Export Authority (AIDEA).                                                                     
ACTION NARRATIVE                                                                                                              
3:18:26 PM                                                                                                                    
VICE  CHAIR SHELLEY  HUGHES called  the House  Labor and  Commerce                                                            
Standing    Committee   meeting    to   order    at   3:18    p.m.                                                              
Representatives Tilton,  Kito, Josephson, Colver, and  Hughes were                                                              
present at  the call to order.   Representative LeDoux  arrived as                                                              
the meeting was in progress.                                                                                                    
^OVERVIEW:   DEPARTMENT   OF  COMMERCE,   COMMUNITY   &   ECONOMIC                                                              
DEVELOPMENT   -    DIVISION   OF   CORPORATIONS,    BUSINESS   AND                                                              
PROFESSIONAL LICENSING                                                                                                          
     OVERVIEW: DEPARTMENT OF COMMERCE, COMMUNITY & ECONOMIC                                                                 
      DEVELOPMENT - DIVISION OF CORPORATIONS, BUSINESS AND                                                                  
                     PROFESSIONAL LICENSING                                                                                 
3:19:57 PM                                                                                                                    
VICE  CHAIR  HUGHES announced  that  the  only order  of  business                                                              
would be  an overview by the  Department Of Commerce,  Community &                                                              
Economic  Development,  Division  of Corporations,  Business,  and                                                              
Professional Licensing.                                                                                                         
3:20:07 PM                                                                                                                    
SARA  CHAMBERS,   Acting  Director,   Division  of   Corporations,                                                              
Business,  and  Professional  Licensing   (DCBPL),  Department  of                                                              
Commerce, Community,  & Economic  Development (DCCED),  offered to                                                              
give a  PowerPoint overview  to review some  of the concerns  that                                                              
were raised  by the legislature and  the department.   She briefly                                                              
mentioned   components  of   the   division,  including   business                                                              
licensing, corporations,  professional licensing,  investigations,                                                              
and  administration support  [slide  2].   She  said the  division                                                              
licenses businesses  and ensures that corporations  are registered                                                              
in  the state  and file  the appropriate  biennial  reports.   The                                                              
professional   licensing   section  comprises   approximately   84                                                              
percent of  the division's function,  with the investigation  unit                                                              
and  administrative assistance  section providing  support to  the                                                              
board and non-boarded professions.                                                                                              
3:22:27 PM                                                                                                                    
MS. CHAMBERS presented  a brief timeline to highlight  some of the                                                              
issues  the division  faces.   In 2010,  Commissioner Bell  joined                                                              
the  administration   and  appointed   Don  Habeger   as  division                                                              
director.   In 2011, she was  hired as the professional  licensing                                                              
manager.   The  Legislative  Audit  Division conducted  a  special                                                              
legislative audit  that identified concerns on the  division's fee                                                              
setting  methodology,  indirect cost  allocation  methodology  and                                                              
investigative  case  management.    The  legislature  appropriated                                                              
$3.4  million  in 2012  to  offset  an historical  overpayment  of                                                              
indirect  expenses  by  professional   licensing  programs.    The                                                              
division  assessed  indirect  costs  without  allocating  indirect                                                              
expenses  to the  business licensing  or  corporation sections  of                                                              
the DCCED.   Essentially,  the one-time  appropriation repaid  the                                                              
professional  licensing  programs  for the  overpayment,  but  the                                                              
division also agreed  to reconcile expenses for the  past 10 years                                                              
to   ensure  the   accuracy  of   the   division's  finances   and                                                              
3:25:38 PM                                                                                                                    
REPRESENTATIVE   LEDOUX    asked   whether   the    $3.4   million                                                              
appropriation was  refunded to licensees or if  this appropriation                                                              
went from one governmental agency to another.                                                                                   
MS.   CHAMBERS   answered  that   the   appropriation   reimbursed                                                              
professional  licensing  programs   for  the  indirect  allocation                                                              
costs  [for  administrative   support  to  the  boards].     After                                                              
allocating  indirect costs  appropriately, some  programs were  in                                                              
further  deficit,  even  with  the  infusion  of  funds  from  the                                                              
appropriation,   she   said,   but    in   other   instances   the                                                              
appropriation  created a surplus  that put  some programs  in good                                                              
standing and  will benefit future  fee-setting for  its licensees.                                                              
For  example,  in  an  instance in  which  a  program  began  with                                                              
$100,000  surplus,  the  appropriation   may  have  increased  the                                                              
surplus  to $200,000,  which would  "stave off"  any increases  to                                                              
professional licensing fees for the next biennial cycle.                                                                        
3:28:35 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked for further clarification  on the net                                                              
effect of any savings  to the state, the public,  or to licensees.                                                              
She agreed  it's nice to have  the books in order,  but ultimately                                                              
she was  interested in  the ultimate  benefits to license  holders                                                              
or the state.                                                                                                                   
MS.  CHAMBERS advised  members  that  the division  experienced  a                                                              
serious trust  issue with its 20  boards since boards  didn't have                                                              
any  confidence in  the  indirect cost  allocation  figures.   She                                                              
explained that licensees  must cover 100 percent  of their program                                                              
costs, including  the division's  cost to administer  their boards                                                              
and  conduct any  investigations.   The  appropriation offset  the                                                              
incorrect indirect  costs, she said, but other  issues surfaced as                                                              
a byproduct of the process.                                                                                                     
3:31:15 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked whether the $3.4 million  went to the                                                              
MS.  CHAMBERS answered  yes; that  the reimbursement  went to  the                                                              
licensing programs.                                                                                                             
3:31:38 PM                                                                                                                    
VICE   CHAIR   HUGHES   related   her   understanding   that   the                                                              
reimbursement was  made to boards,  but checks were not  issued to                                                              
license  holders.    She  asked   whether  a  minimum  amount  was                                                              
recommended in  the audit report for  a base level to  prepare for                                                              
potential  investigations.     She   further  asked   whether  the                                                              
division  put in  place  any  safeguards so  reimbursement  didn't                                                              
result  in  expenditures  for  extra  projects,  given  that  $3.4                                                              
million spread over 20 boards would results in sizable funds.                                                                   
MS. CHAMBERS  answered that  the details  were worked out  between                                                              
the  administrative   services  manager   and  the  division   and                                                              
management was  informed; however,  in many instances  the day-to-                                                              
day staff  had less  of an  awareness of  the accounting  actions.                                                              
She recalled  that spreading $3.4  million among the  40 licensing                                                              
programs  affected  programs  through   the  accounting  function.                                                              
Further,  the expenditure  of funds  requires adequate  safeguards                                                              
through the procurement and approval process, she said.                                                                         
3:34:43 PM                                                                                                                    
VICE CHAIR HUGHES  asked whether she could explain  the difference                                                              
in  the number  of programs  since  she mentioned  20 boards,  but                                                              
there are 40 licensing programs.                                                                                                
MS.  CHAMBERS  answered  that the  licensing  programs  are  split                                                              
between 21  boards and 22  non-board professions, including  a few                                                              
new programs authorized by the legislature.                                                                                     
3:35:13 PM                                                                                                                    
MS. CHAMBERS  returned to the timeline,  noting that in  2013, the                                                              
division  provided   the  legislature  with  its   annual  report,                                                              
including   a  six-year   review  of   the  division's   licensing                                                              
MS.  CHAMBERS  reported that  House  Bill  187 was  introduced  to                                                              
address some of  the concerns.  This committee  recognized some of                                                              
the  problems  programs  face  with  fee-setting  methodology  and                                                              
investigator  cost-sharing.    There   has  not  been  a  standard                                                              
recommendation  in terms  of  providing safeguards  for  potential                                                              
investigation,   but  the   statute  requires   fees  be   set  in                                                              
consultation with  the boards.   This process allows  the division                                                              
and  the boards  to  anticipate  and forecast  potential  expenses                                                              
over  the next  two-year cycle  to  help ensure  the programs  can                                                              
3:37:33 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked if  the greatest  power  afforded                                                              
the  boards  was the  ability  to  write regulations  that  affect                                                              
their  professions,  even though  22  programs  do not  have  that                                                              
authority.   He asked whether  boards receive any  other benefits,                                                              
such as travel costs.                                                                                                           
MS.  CHAMBERS   answered  that  board  governance   varies  widely                                                              
depending on  the statutes,  but the boards  meet in person  for a                                                              
specified    number    of    meetings    and    hold    additional                                                              
teleconferences.    The  boards   have  the  ability  to  initiate                                                              
regulations,  but   they  must  follow  the  same   procedures  to                                                              
promulgate  regulations as any  other agency.   She reported  that                                                              
the division partners  with boards on fee setting  and regulations                                                              
that  apply  to all  programs,  which  she  described as  being  a                                                              
parallel process.   The non-board  program areas  are administered                                                              
by the  division, with the  commissioner and staff  performing any                                                              
public noticing, she said.                                                                                                      
3:40:16 PM                                                                                                                    
MS. CHAMBERS highlighted  the issues addressed in  the Legislative                                                              
Budget  and   Audit  Committee  (LB&A),  including   fee  setting,                                                              
indirect   expenditures,    board   travel,    and   investigative                                                              
procedures [slide 3].                                                                                                           
MS.   CHAMBERS   outlined   issues    related   to   investigative                                                              
procedures,  including an  awareness that  board members are  part                                                              
of the  "gate" to determine  whether to initiate  an investigation                                                              
[slide  4].   Board members  also provide  guidelines for  consent                                                              
agreement  negotiations  and  make   final  decisions  on  license                                                              
disciplines.     The  professional   investigators  use   standard                                                              
procedures and  also use guidelines  the boards establish  to help                                                              
ensure consistency in investigations.                                                                                           
3:42:44 PM                                                                                                                    
VICE CHAIR HUGHES  asked whether the division's  investigators are                                                              
fulltime state employees or contract employees.                                                                                 
MS. CHAMBERS answered they are state employees.                                                                                 
VICE  CHAIR  HUGHES  further  asked   whether  this  is  the  most                                                              
economical method to obtain expertise for all the areas.                                                                        
MS. CHAMBERS  agreed it  may take time  for investigators  to "get                                                              
up  to speed."   However,  the division  has put  into place  some                                                              
processes to  help ensure  this, including  adding more  "hands on                                                              
supervision"  and "quality  control" for  investigators.   Several                                                              
boards  have   unique  processes,  for  example,   the  division's                                                              
investigators  may  attend  board-approved  training  specific  to                                                              
real estate  appraisers.  In addition,  the division may  bring in                                                              
expert witnesses  for situations  that requires precise  expertise                                                              
and  the board  does not  have the  expertise  or for  professions                                                              
administered  by  the  division  [in  non-board  areas].    Expert                                                              
witnesses  are vetted  to ensure  they have the  expertise  but do                                                              
not have any conflict of interest.                                                                                              
VICE CHAIR  HUGHES acknowledged  this committee  is not  a finance                                                              
subcommittee, but  these are the types of questions  the committee                                                              
must also keep in mind.                                                                                                         
3:45:43 PM                                                                                                                    
REPRESENTATIVE KITO  disclosed that  he also holds  a professional                                                              
civil engineer license.   He stated that the Board  of Architects,                                                              
Engineers,  and  Land  Surveyors  (ALES)  funded  an  investigator                                                              
dedicated  to   the  board   since  it  has   a  fair   number  of                                                              
investigations or unique  ones.  He suggested that  House Bill 187                                                              
was an  effort to control the  costs of investigations  and spread                                                              
the costs among  the licensees to avoid significant  fee increases                                                              
in any given year.                                                                                                              
3:46:38 PM                                                                                                                    
MS.   CHAMBERS,  returning   to   the  investigative   procedures,                                                              
reported  that the  division has  put in  place internal  controls                                                              
that have reduced legal expenses by 34 percent since 2011.                                                                      
MS. CHAMBERS directed  attention to other issues  addressed in the                                                              
Legislative Budget  and Audit  Committee, including board  travel.                                                              
The division resolved  all of the issues raised  by the committee.                                                              
For  example, board  members  are now  able  to coordinate  travel                                                              
through   the  division   using   the  state   travel  agent,   or                                                              
associations   are  authorized  to   book  travel  through   their                                                              
processes.  In  addition, the legislature approved  reimbursements                                                              
for board travel to be credited to the boards.                                                                                  
3:48:42 PM                                                                                                                    
VICE CHAIR HUGHES  asked whether the division or  boards have used                                                              
video conferencing.                                                                                                             
MS.  CHAMBERS  answered  that board  members  prefer  face-to-face                                                              
conferences;   however,   staff    have   sometimes   used   video                                                              
conferences or teleconferences for some board meetings.                                                                         
3:49:55 PM                                                                                                                    
MS.  CHAMBERS  directed  attention   to  the  indirect  allocation                                                              
methodology [slide 6].   She stated that the division  reduced its                                                              
indirect costs by  nearly $1 million, by finding  efficiencies and                                                              
scrutinizing   indirect  costs.     In   addition,  the   division                                                              
published  its  first  annual  report  on  professional  licensing                                                              
boards that provides  a thorough explanation of  the allocation of                                                              
direct and indirect expenses.                                                                                                   
3:51:31 PM                                                                                                                    
REPRESENTATIVE  KITO asked  for  a listing  of  the indirect  cost                                                              
items that  are billed  to the  boards and  the percentage  of the                                                              
indirect allocation.                                                                                                            
MS. CHAMBERS agreed to provide it.                                                                                              
3:51:55 PM                                                                                                                    
VICE  CHAIR   HUGHES  asked   whether  the   indirect  costs   are                                                              
attributed to the  boards, some to administrative  services, or to                                                              
the commissioner.                                                                                                               
MS. CHAMBERS  answered that the  indirect costs include  statewide                                                              
costs from the  Department of Administration (DOA)  that filter to                                                              
administrative  services and  to the commissioner.   The  division                                                              
allocates those costs to the boards.                                                                                            
3:52:57 PM                                                                                                                    
VICE CHAIR  HUGHES asked  whether  some of the  indirect costs  in                                                              
license fees  are attributed  to administrative services  division                                                              
and the commissioner.                                                                                                           
MS. CHAMBERS answered yes.                                                                                                      
VICE CHAIR HUGHES  asked how much of these costs  was for overhead                                                              
and whether these costs are the same for all the professions.                                                                   
MS. CHAMBERS offered to provide indirect costs to the committee.                                                                
3:53:22 PM                                                                                                                    
VICE CHAIR  HUGHES asked for an  assessment of the  indirect costs                                                              
for boards and non-board licensing programs.                                                                                    
MS. CHAMBERS answered that there is no difference.                                                                              
3:53:40 PM                                                                                                                    
VICE CHAIR HUGHES  asked for the range of license  fees for the 43                                                              
MS.  CHAMBERS  answered  that  several  programs  have  the  least                                                              
expensive  fees   of  $50,  but  the  most   expensive  [biennial]                                                              
licensing fee is $1,700 for midwifery fees.                                                                                     
3:54:34 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked for  clarification that  the division                                                              
does not license physicians and attorneys.                                                                                      
MS. CHAMBERS  answered that the  Alaska State Medical  Board falls                                                              
under the division, but attorneys do not.                                                                                       
REPRESENTATIVE  LEDOUX   asked  for  further   clarification  that                                                              
licensing  fees for  midwives  are more  than  licensing fees  for                                                              
MS. CHAMBERS answered yes; fees for midwives are higher.                                                                        
3:55:19 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  expressed concern that the  division may                                                              
go  overboard  with  its  recordkeeping,   such  that  staff  must                                                              
document all its time.                                                                                                          
MS.  CHAMBERS  answered  that most  staff  are  assigned  specific                                                              
programs  so their timesheets  are focused  on specific  licensing                                                              
programs.    Some  staff have  multiple  licensing  functions  and                                                              
their time  was entirely  billed  out to indirect  costs since  it                                                              
would be too difficult to track the time.                                                                                       
REPRESENTATIVE JOSEPHSON  pointed out  that in the  private sector                                                              
in the practice  of law, about five percent of their  time is lost                                                              
in tracking billable hours.                                                                                                     
3:57:04 PM                                                                                                                    
REPRESENTATIVE  KITO, speaking  from  his experience  working  for                                                              
the  Department of  Transportation &  Public Facilities  (DOT&PF),                                                              
reported   that  the   department  developed   an  indirect   cost                                                              
allocation  plan.  For  example, the  commissioner's office  would                                                              
estimate the  amount of  time spent on  the Alaska Marine  Highway                                                              
System (AMHS) to  generally allocate the commissioner's  time.  He                                                              
offered his  belief that the  Department of Commerce,  Community &                                                              
Economic  Development   (DCCED)  similarly  tries   to  provide  a                                                              
reasonable  assessment of  the  time spent  for  oversight of  the                                                              
3:57:57 PM                                                                                                                    
VICE  CHAIR  HUGHES  surmised  that  the  professions  paying  $50                                                              
versus $1,700 for  licensing fees would pay substantially  less in                                                              
indirect costs.                                                                                                                 
MS.  CHAMBERS agreed  that licensing  fees must  cover all  costs,                                                              
including indirect  costs.  Thus each program  shares the indirect                                                              
costs using the  indirect cost allocation methodology.   It varies                                                              
depending on the  number of staff that provide  support, which has                                                              
been refined in  the last year to ensure the costs  are defensible                                                              
and transparent.   For example, the direct expenses  for the Board                                                              
of Nursing  would be spread  over 18,000 licensees  whereas direct                                                              
expenses  for  midwives   would  be  absorbed  by   a  handful  of                                                              
4:00:00 PM                                                                                                                    
VICE CHAIR  HUGHES related her  understanding that  indirect costs                                                              
are the  same or  similar for  all programs.   She  asked for  the                                                              
percentage or dollar amount for indirect costs.                                                                                 
MS. CHAMBERS  answered that  the division  estimated in  2014, the                                                              
indirect  cost was $43  per licensee,  which covered  the cost  of                                                              
such  items  as  electricity,  heating,   parking,  and  telephone                                                              
service.   Further, the  Board of Nursing  has nine staff  members                                                              
whereas one  examiner might cover  four other licensing  programs.                                                              
She acknowledged  there is quite  a bit of disparity  and indirect                                                              
costs may vary widely for programs.                                                                                             
4:01:44 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  was  uncertain  how much  staff  time  was                                                              
required  for  the timekeeping.    She  asked how  division  staff                                                              
calculates  their   time  and  whether  the  time   is  calculated                                                              
similarly  to the  process  law firms  use,  with staff  assessing                                                              
every  7-15 minutes  to bill  to  a client,  or if  the costs  are                                                              
allocated   more  generally,   similarly  to   how  the   DOT&PF's                                                              
allocates its costs.                                                                                                            
MS. CHAMBERS  explained that  the commissioner and  administrative                                                              
services  allocate  indirect  expenses,   similar  to  how  DOT&PF                                                              
calculates expenses.   The division's  staff tracks time  on task;                                                              
however, the  nine staff  working for the  Board of Nursing  would                                                              
not  track  time since  all  their  expenses  are charged  to  one                                                              
4:04:58 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  asked  for further  clarification  on  the                                                              
difference between direct and indirect expenses.                                                                                
MS. CHAMBERS  identified direct expenses  as ones  attributable to                                                              
a  specific board,  for  example,  time spent  processing  license                                                              
renewals  for  one profession.    Further,  the front  desk  staff                                                              
answers  calls for  all programs,  but  do not  track their  time;                                                              
instead,  front  desk  staff  time   is  all  billed  as  indirect                                                              
expenses.  In response  to a question, she agreed  that it doesn't                                                              
make any  sense for staff  assigned to one  board to  track direct                                                              
4:06:37 PM                                                                                                                    
MS. CHAMBERS  directed attention to  fee setting, noting  that the                                                              
2011  audit raised  issues  with respect  to  deficiencies in  fee                                                              
setting  [slide 7].   The  division  has revised  its fee  setting                                                              
including refining  its methodology  to forecast future  expenses.                                                              
Some   programs  have   historical  deficits   and  the   division                                                              
discussed amortizing  this deficit  over time,  since it  would be                                                              
very difficult to  overcome the deficit "in one fell  swoop."  The                                                              
division  worked  with  the  LB&A, agreeing  that  it  might  take                                                              
several biennial  licensing cycles to  achieve a surplus  for some                                                              
programs.   In  fact,  the  professional licensing  unit  recently                                                              
ended  up in  a surplus  position for  the first  time in  several                                                              
years.   The  division  worked  with  the Legislative  Budget  and                                                              
Audit on  several other  issues, including  fee spikes  created by                                                              
unanticipated  investigations  or appeals,  keeping  in mind  that                                                              
programs can't  predict investigations.   Again, the  division has                                                              
been  working  to refine  its  indirect  costs since  these  costs                                                              
increase license fees.   Further, she stated that  the majority of                                                              
revenue  was  collected  every other  year  through  the  biennial                                                              
license renewal process,  which forces the programs  to operate in                                                              
a deficit for one year.                                                                                                         
4:10:43 PM                                                                                                                    
VICE  CHAIR  HUGHES   asked  for  the  average   annual  cost  for                                                              
investigations and appeals for all the professions.                                                                             
MS. CHAMBERS offered to provide the figures.                                                                                    
4:11:20 PM                                                                                                                    
MS.  CHAMBERS  highlighted  that  the division  has  acquired  new                                                              
licensing programs,  including licensure of  pawnbrokers, athletic                                                              
trainers, massage  therapists, and  behavior analysts.   The state                                                              
currently   licenses   67,000  professionals,   up   from   50,000                                                              
licensees in 2007.                                                                                                              
4:12:10 PM                                                                                                                    
VICE  CHAIR HUGHES  asked whether  the increase  in licensure  was                                                              
due to population growth or from adding more boards.                                                                            
MS. CHAMBERS  answered that the increase  in licensees was  due to                                                              
several reasons, noting  that 12 new licensing  programs have been                                                              
since 1987, including  nurse aides - consisting of  a large number                                                              
of licensees.   She  surmised that having  an Alaska  license also                                                              
has  a certain  amount  of  cachet,  so licensees  maintain  their                                                              
licenses  in Alaska,  but  may not  practice  in the  state.   She                                                              
recapped that the  division has 43 programs, with  63 professional                                                              
licensing or investigative staff.                                                                                               
^OVERVIEW:  ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY                                                                  
  OVERVIEW:  ALASKA INDUSTRIAL DEVELOPMENT AND EXPORT AUTHORITY                                                             
4:13:27 PM                                                                                                                    
VICE  CHAIR HUGHES  announced  that the  final  order of  business                                                              
would  be OVERVIEW:    Alaska  Industrial Development  and  Export                                                              
4:13:57 PM                                                                                                                    
TED LEONARD, Executive  Director, Alaska Industrial  Development &                                                              
Export  Authority (AIDEA),  Department of  Commerce, Community,  &                                                              
Economic  Development   (DCCED),  offered   to  provide   a  quick                                                              
overview of AIDEA,  discuss current projects, and  to specifically                                                              
discuss the  jack-up rig,  Pentex acquisition,  and due  diligence                                                              
4:15:17 PM                                                                                                                    
MR.  LEONARD  explained  that AIDEA  is  the  development  finance                                                              
authority for  the State of  Alaska and  it represents one  of the                                                              
largest  development  authorities in  the  country.   He  reported                                                              
that AIDEA  was capitalized  with approximately  $333 million  and                                                              
has  repaid  approximately  $356  million,  with  assets  of  $1.1                                                              
billion.    The  AIDEA's  mission  is  to  promote,  develop,  and                                                              
advance  economic   growth  and   diversification  in   Alaska  by                                                              
providing  various  means  of financing  and  investment.    AIDEA                                                              
fulfills  its mission  by  providing  access to  affordable  long-                                                              
term, asset financing, he said [slide 2].                                                                                       
4:16:37 PM                                                                                                                    
MR.  LEONARD   directed  attention  to  AIDEA's   seven  different                                                              
programs,    including    infrastructure    development,    energy                                                              
development, project  development loan participation,  and conduit                                                              
bonds [slide 3].                                                                                                                
MR.  LEONARD highlighted  the tools  that AIDEA  has available  to                                                              
provide   financing   for   Alaska   businesses,   projects,   and                                                              
infrastructure    necessary   to    support   Alaska's    economic                                                              
development.    He offered  that  AIDEA  can participate  in  loan                                                              
participations  or   provide  access  to  long-term   capital  for                                                              
Alaska's  businesses.    In addition,  AIDEA  can  provide  direct                                                              
loans,  conduit  bonds,  where  AIDEA  acts  as  the  conduit  for                                                              
businesses to access  taxable and tax-exempt bonds.   Finally, the                                                              
AIDEA  can also  provide investments  to  projects through  direct                                                              
ownership or  by investing  in a corporation  or LLC that  own the                                                              
project or infrastructure [slide 4].                                                                                            
4:17:50 PM                                                                                                                    
MR. LEONARD  directed attention to  a map depicting  AIDEA's seven                                                              
assets:   the  Snettisham  Hydroelectric Facility,  the  Ketchikan                                                              
Shipyard,  the Skagway  Ore Terminal  facility, an  armory on  the                                                              
Joint  Base  Elmendorf-Richardson   (JBER),  the  Federal  Express                                                              
Maintenance  Facility, the Mustang  Oil Processing  Facility/Road,                                                              
and the DeLong  Mountain Transportation System.   In addition, the                                                              
AIDEA has  a partial ownerships in  the LLC that owns  the Mustang                                                              
Oil Processing Facility [slide 5].                                                                                              
4:18:34 PM                                                                                                                    
VICE CHAIR  HUGHES asked  whether  these projects  add up to  $1.1                                                              
MR.  LEONARD answered  that it  was  one leg  of the  three-legged                                                              
stool.   He explained  that AIDEA  has approximately $400  million                                                              
in direct  loans; $400  million in projects;  and $500  million in                                                              
investments that  allow AIDEA the  ability to invest  in projects,                                                              
as well  as providing debt  capacity.  Thus  these assets  are one                                                              
portion of the asset base [slide 5].                                                                                            
4:19:19 PM                                                                                                                    
REPRESENTATIVE  KITO asked  whether the seven  assets are  salable                                                              
MR.  LEONARD answered  that  they  could be  salable  assets.   He                                                              
explained that AIDEA  holds several projects because  they serve a                                                              
public  purpose, such  as  Delong Mountain  Transportation  System                                                              
since that  system can  be used more  than Red  Dog.  However,  he                                                              
confirmed the  assets are salable.   For example, the  Mustang Oil                                                              
Processing Facility  was structured for AIDEA to phase  out of the                                                              
investment in 5-7  years and the rig was also  structured so AIDEA                                                              
will  be  out  within  five.    Thus  it  really  depends  on  the                                                              
economics AIDEA  is trying  to promote, as  well as the  community                                                              
and the type of asset, he said.                                                                                                 
4:20:23 PM                                                                                                                    
REPRESENTATIVE  KITO  asked  whether   these  assets  are  revenue                                                              
generating assets or if there is a mix.                                                                                         
MR. LEONARD  answered that these  seven assets are  all performing                                                              
assets.   He characterized  the Ketchikan  shipyard as  being more                                                              
of an  asset that is  held, noting  AIDEA receives about  $20,000-                                                              
30,000  from  the asset.    However,  the Ketchikan  shipyard  was                                                              
purchased for  $2 million, and the  federal government has  put in                                                              
about  $75  million so  it  is now  valued  at  $80 million.    He                                                              
offered  his belief  that  the Ketchikan  shipyard  will become  a                                                              
performing asset  based on the contracts  as the new  Alaska Class                                                              
Ferries (ACFs) come into play.                                                                                                  
4:21:30 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked why  the projects AIDEA  was involved                                                              
in were not being done by the private sector.                                                                                   
MR. LEONARD  answered  that it  is based  on the  type of asset  -                                                              
infrastructure.     For   example,   with   the  Delong   Mountain                                                              
Transportation  System, a $260  million asset,  AIDEA was  able to                                                              
issue  a 40-year  bond  to allow  the private  sector  to use  the                                                              
infrastructure  over a  long-term period  and repay  AIDEA.   Thus                                                              
AIDEA  has the  ability to  have  patient capital.   In  addition,                                                              
AIDEA  can  step  in  for  a  public   purpose  such  as  economic                                                              
development.    For  example,  AIDEA  purchased  the  Skagway  Ore                                                              
Terminal, worked  with the  private sector to  clean up  the area,                                                              
and  then built  a new  ore terminal.    Infrastructure funds  can                                                              
require 15-18  percent rate  of return,  but AIDEA's typical  rate                                                              
of return at 5-7  percent promotes more than one  owner to invest,                                                              
such as  the aforementioned  Skagway Ore  Terminal, which  has 4-5                                                              
users.   Therefore those  types of  assets allow  AIDEA to  assist                                                              
for a public purpose and to encourage economic development.                                                                     
4:23:41 PM                                                                                                                    
REPRESENTATIVE   LEDOUX  suggested   that   the  Federal   Express                                                              
[Corporation  (Fed-Ex)]  represents  a  large  public  enterprise.                                                              
She asked  for the  reason the  company would  not just  build its                                                              
own facility.                                                                                                                   
MR. LEONARD answered  that the state provided  the infrastructure,                                                              
which  incentivized the  company to  come into  Anchorage and  the                                                              
Anchorage  International Airport  System  (AIAS).   He said  there                                                              
are  times where  development finance  authority  can utilize  the                                                              
lower  rate  of  return  and  patient  capital  to  incentivize  a                                                              
private sector company.   He related his understanding  that FedEx                                                              
did not  want to  own a long-term  hangar at  the time  so AIDEA's                                                              
ability  to build  the  Fed-Ex  Maintenance Facility  allowed  the                                                              
corporation   to  provide   the   economic   development  to   the                                                              
Municipality of Anchorage (MOA).                                                                                                
4:24:56 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked whether  Fed-Ex wasn't present  prior                                                              
to AIDEA building the facility.                                                                                                 
MR. LEONARD  was unsure,  recalling that this  became an  asset in                                                              
2002, but he offered to provide information to the committee.                                                                   
4:25:14 PM                                                                                                                    
VICE  CHAIR HUGHES  commented  that  partnering with  the  private                                                              
sector  is more  apt  to happen  in Alaska  rather  than Lower  48                                                              
since the rate of return is lower.                                                                                              
MR. LEONARD  agreed that is one  main reason, but  the legislature                                                              
provided authorization  to partner with LLCs and  corporations and                                                              
blending AIDEA's  capital with more expensive private  capital, it                                                              
makes the projects more feasible.                                                                                               
4:26:19 PM                                                                                                                    
MR.  LEONARD  highlighted  the breakdown  of  AIDEA's  investments                                                              
since FY  2001 [slide  6].   Since 2000,  AIDEA has invested  $1.5                                                              
billion, with write-down  on loans of approximately  $1.8 million,                                                              
although  AIDEA has  not had any  write-down on  projects that  it                                                              
has invested  in since 2000.   Currently, AIDEA does not  have any                                                              
non-performing assets, he said.                                                                                                 
4:27:14 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked for further clarification  on AIDEA's                                                              
non-performing  assets.   She asked  how many  assets AIDEA  has -                                                              
similar  to the  Ketchikan  Shipyard -  that  are not  technically                                                              
non-performing  assets.     She  pointed  out  that   the  project                                                              
consists of $7 million  in state funds and another  $75 million of                                                              
federal funds, yet it only produces $20,000 in dividends.                                                                       
MR. LEONARD  argued that  in actuality  the Ketchikan Shipyard  is                                                              
one  of  AIDEA's  best performing  assets  in  terms  of  economic                                                              
development.   The Ketchikan Shipyard  facility provides  over 200                                                              
jobs for  Ketchikan.  When  AIDEA considers performing  assets, it                                                              
does not  just consider dividend  payment.  The  performing asset,                                                              
the Ketchikan  Shipyard, does  not cost the  state any  funds, but                                                              
it  represents  huge  economic  development  for the  area.    For                                                              
example,  it provides  a shipyard  for the  Alaska Marine  Highway                                                              
System (AMHS),  and the  shipyard was just  awarded a  contract to                                                              
build the  two Alaska  Class Ferries (ACFs),  which will  be built                                                              
by  Alaskans.   He said  that considering  all  of AIDEA's  assets                                                              
together,  the corporation  provides dividends,  but again,  while                                                              
the  Ketchikan Shipyard  is  not considered  an  income-generating                                                              
asset, it is a very big economic development asset in the state.                                                                
4:29:19 PM                                                                                                                    
REPRESENTATIVE  LEDOUX argued that  money has  a cost since  money                                                              
on the  open market might  earn "x" dollars,  but AIDEA  will earn                                                              
"y" dollars, which is significantly less.                                                                                       
MR.  LEONARD replied  that  as  a development  finance  authority,                                                              
AIDEA  must generate  funds to  invest  in the  state and  provide                                                              
loans and capital for businesses and projects.                                                                                  
4:30:29 PM                                                                                                                    
MR.  LEONARD emphasized  that  the  aforementioned  project is  an                                                              
asset  and  without AIDEA  stepping  in  as  the conduit  for  the                                                              
federal  government  to  invest in  the  Ketchikan  region,  there                                                              
would be  significantly fewer jobs  in Ketchikan.  He  agreed that                                                              
if  AIDEA was  an  investment bank  that  it would  be  different;                                                              
however, the  Ketchikan Shipyard is  a flagship asset  in economic                                                              
4:31:08 PM                                                                                                                    
REPRESENTATIVE  KITO  asked  for  the economic  viability  of  the                                                              
Ketchikan  Shipyard  once  the  Alaska  Class  Ferries  (ACF)  are                                                              
built.   He suggested  that unless  the state  continues to  build                                                              
ships, the  shipyard will need to  have projects to  continue into                                                              
the future.                                                                                                                     
MR. LEONARD  apologized that he  may have miscommunicated.   While                                                              
the Ketchikan  Shipyard hasn't been  a large cash  flow performing                                                              
asset  for  AIDEA,  it generates  sufficient  funds  as  a  viable                                                              
business in Ketchikan.   Vigor Alaska has been  building ships, he                                                              
said, and  based on  the investment,  the shipyard  is one  of the                                                              
state-of-the-art   shipyard  building   halls   in  the   country,                                                              
consisting  of  a six-story  structure  that  allows ships  to  be                                                              
built inside.   He cautioned that  he did not want  to communicate                                                              
that this wasn't  a viable asset since it definitely  is one.  One                                                              
of the reasons AIDEA  exists is that it has the  ability to take a                                                              
long-term,  patient capital view  and hold  assets to ensure  that                                                              
they are promoting the economic development needed in the state.                                                                
4:33:21 PM                                                                                                                    
REPRESENTATIVE   LEDOUX  related   her   understanding  that   the                                                              
Ketchikan Shipyard  builds more than  ferries.  She  asked whether                                                              
the shipyard  was designed  for or could  be modified to  build an                                                              
MR. LEONARD  deferred to Vigor Alaska  to answer, but  offered his                                                              
understanding  that the shipyard  can build  ships over  200 feet,                                                              
but he will furnish the committee with the response.                                                                            
4:34:01 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked whether this shipyard  built the boat                                                              
that Wasilla is dealing with now.                                                                                               
MR. LEONARD  answered yes; the  most current vessel  completed was                                                              
the Arctic Prowler, a fishing trawler.                                                                                          
4:34:28 PM                                                                                                                    
VICE  CHAIR  HUGHES   asked  whether  the  research   vessel  (RV)                                                              
Sikuliaq,  a   research  vessel  was   also  built  there.     She                                                              
acknowledged that someone in the audience is nodding "no."                                                                      
4:34:43 PM                                                                                                                    
MR.   LEONARD  referred   to  AIDEA's   2014  activity   overview,                                                              
including  completing  the  $15   million  National  Guard  Armory                                                              
expansion for the  US Coast Guard, completing construction  of the                                                              
Mustang   Road  and  Pad   for  approximately   $20  million   and                                                              
committing  $50  million in  funding  for the  Mustang  Operations                                                              
Center.  The  AIDEA completed construction of a  steel fabrication                                                              
facility at the  Ketchikan Shipyard.  In addition,  AIDEA approved                                                              
over $43  million in  loan participations,  issued $51  million in                                                              
conduit revenue  bonds to expand  Fairbank's hospital,  and issued                                                              
$23.1 million  in loans  to build out  the distribution  system in                                                              
Fairbanks under the Interior Energy Project [slide 7].                                                                          
4:35:50 PM                                                                                                                    
MR.  LEONARD  predicted  that these  investments  will  create  or                                                              
retain  1,046 jobs  and 1,462  construction  jobs [slide  8].   He                                                              
reported that AIDEA  has $149.4 million in investments  funded and                                                              
committed as  part of the $835.4  million in total  project costs.                                                              
He  estimated that  AIDEA's  projects  through this  process  will                                                              
leverage   approximately   $686    million   of   private   sector                                                              
4:36:35 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON   asked  for  the  leaseholder   of  the                                                              
Mustang Road and Pad project.                                                                                                   
MR. LEONARD answered  that there are several  different investors,                                                              
including Brooks Range Petroleum Corporation.                                                                                   
4:36:58 PM                                                                                                                    
VICE  CHAIR HUGHES  asked  for  further clarification  that  these                                                              
activities  are  solely  2014 activities  and  not  from  previous                                                              
MR. LEONARD answered yes.                                                                                                       
VICE CHAIR  HUGHES said  the number  of permanent  jobs is  pretty                                                              
MR. LEONARD commented that 2014 was a very good year.                                                                           
4:37:23 PM                                                                                                                    
MR. LEONARD  reviewed AIDEA's 2015  activity, such that  AIDEA has                                                              
approved  and   funded  $33.6  million  in   loan  participations.                                                              
Further AIDEA has  approved an additional $28 million  in loans to                                                              
build out  the distribution system  in Fairbanks, has  issued $8.1                                                              
million   in  conduit  revenue   bonds  for   a  Juneau   business                                                              
expansion,  and  is  in the  construction  mode  for  the  Mustang                                                              
Operations  Center  anticipated  to  be  completed  in  the  first                                                              
quarter  of 2016  [slide 9].   The AIDEA  typically  has 10  to 15                                                              
projects in the pre-feasibility to construction stage, he said.                                                                 
MR. LEONARD offered  that AIDEA anticipates investing  $70 million                                                              
in Mustang  Operations Center 1,  LLC, an oil processing  facility                                                              
for the  Mustang field,  estimated to  cost $200-$225 million  and                                                              
able to  deliver 15,000  barrels of  oil per day  [slide 10].   He                                                              
stated that  AIDEA works to leverage  private sector funds  and in                                                              
this  instance, AIDEA  anticipates leveraging  about $540  million                                                              
over the life of the field.                                                                                                     
4:39:37 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON wondered why  the royalty reduction  and                                                              
exploration  development   credits  offered  to   Mustang  weren't                                                              
enough to  make this viable.   He asked for further  clarification                                                              
on how the project came about.                                                                                                  
MR.  LEONARD  said  that  besides  bringing  lower  cost  capital,                                                              
Brooks  Range Petroleum  came to  AIDEA due  to the  corporation's                                                              
ties  to investment  banks  and infrastructure  funds.   Thus  the                                                              
relationships had  ties to international  funds willing  to invest                                                              
in this project  since AIDEA had performed the due  diligence.  He                                                              
characterized  it  as  an  instance  in which  AIDEA  could  be  a                                                              
conduit for Brooks  Range Petroleum to find the  necessary capital                                                              
to make this field viable.                                                                                                      
4:41:00 PM                                                                                                                    
MR.  LEONARD  highlighted  several  new  projects  that  AIDEA  is                                                              
considering, including  BlueCrest Energy, an onshore  oil rig that                                                              
would be used to  tap the oil reserves in the  Cosmopolitan field,                                                              
which was one of  the fields used by the Endeavor  rig to discover                                                              
a large oil and gas reserve in Cook Inlet [slide 11].                                                                           
MR. LEONARD  reported that  AIDEA was in  the due diligence  phase                                                              
of a  $50 million  project with  Furie Gas  Production to  build a                                                              
mono-pod   rig,  pipeline,   and   onshore  processing   facility,                                                              
estimated  to produce  up to  100 million  cubic feet  per day  of                                                              
natural  gas  production.    He  said  AIDEA  has  currently  been                                                              
undergoing a rigorous  due diligence to verify the  project is one                                                              
that warrants AIDEAs  involvement, that it receive  an appropriate                                                              
rate of  return, and  will be  repaid for  its investment.   These                                                              
due diligence  efforts can  take months  or even up  to a  year to                                                              
accomplish, he said.                                                                                                            
4:42:36 PM                                                                                                                    
REPRESENTATIVE  KITO wondered  if there has  been any  legislative                                                              
change in legislation that changed AIDEA's risk profile.                                                                        
MR. LEONARD acknowledged  that some changes have  allowed AIDEA to                                                              
reduce  its risk  profile.   In the  past, in  essence, AIDEA  was                                                              
required to  own the full  project and could  lease it out.   Over                                                              
the past  two or three  years, AIDEA has  acquired the  ability to                                                              
invest in  corporations and not be  the full owner.   For example,                                                              
with the  jack up rig, AIDEA  invested 20-30 percent of  the total                                                              
investment, plus  investing through  corporation helps  to protect                                                              
AIDEA's assets.   He  acknowledged that  this has changed  AIDEA's                                                              
risk profile  by expanding  the type  of projects  that AIDEA  can                                                              
invest in;  however, through the  due diligence structure,  it has                                                              
not  increased the  risk profile.    Instead, it  has reduced  the                                                              
risk  profile by  allowing  AIDEA to  invest  in projects  without                                                              
having 100 percent ownership.                                                                                                   
4:44:07 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  asked for the  size of AIDEA's  Board of                                                              
Directors (BOD).                                                                                                                
MR. LEONARD  answered that  AIDEA's BOD  consists of five  private                                                              
sector  members  plus the  commissioners  from the  Department  of                                                              
Revenue  and the  Department  of  Commerce, Community  &  Economic                                                              
4:44:31 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked   for  further  clarification  on                                                              
whether the final go ahead is a matter of public record.                                                                        
MR.  LEONARD  answered  yes;  then elaborated  that  for  all  its                                                              
projects  AIDEA  must  perform full  due  diligence,  provide  the                                                              
board  with   a  finance   plan,  and   obtain  local   government                                                              
concurrence.    He agreed  that  the  whole  process is  a  public                                                              
4:45:06 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON, speaking from  his experience  with the                                                              
Alaska  Supreme  Court,  commented  that  the  Board  of  Director                                                              
process  typically   means  that  it  is  less  likely   to  be  a                                                              
contentious process.                                                                                                            
4:45:26 PM                                                                                                                    
MR.  LEONARD pointed  out  a slide  was  missing,  slide 13,  that                                                              
provides an update  on the jack-up rig.  He reminded  members that                                                              
AIDEA  brought up  a jack-up  rig  to drill  for gas  exploration.                                                              
AIDEA's  investment  was  $23.6   million  of  approximately  $123                                                              
million  total  cost,  leveraging  approximately  $96  million  of                                                              
private  sector  capital between  the  overseas Chinese  bank  and                                                              
Australia-based Buccaneer  Energy Limited and Ezion  Holdings Ltd.                                                              
of Singapore.  Some  issue arose with the rig not  modified in the                                                              
Singapore  shipyard,  which  required modifications  in  Homer  to                                                              
drill in Cook  Inlet.  He said  that AIDEA acknowledged  it is not                                                              
an expert in jack-up  rigs, so through the new  due diligence cost                                                              
overruns  would  be  borne  by the  common  equity  owners,  which                                                              
occurred.   He  reported  that the  jack-up  rig  drilled for  one                                                              
season, used  to discover the Cosmopolitan  field.  Due  to a lack                                                              
of long-term  commitment, AIDEA sold  its share to  Ezion Holdings                                                              
Ltd so the  rig could be moved.   The rig was moved  last December                                                              
and AIDEA,  received $25 million.   Based on the  structure, AIDEA                                                              
knew about  the risks, and received  a 6.6 percent rate  of return                                                              
while the state obtained a field discovery.                                                                                     
4:49:22 PM                                                                                                                    
MR. LEONARD briefed  members on the Interior Energy  Project [IEP]                                                              
status [slide 14].   He said that the IEP's goals  were to provide                                                              
low cost  affordable gas as soon  as possible to as  many Interior                                                              
customers as  possible.  In  addition, this project  would enhance                                                              
the proposed  natural gas  pipeline and  to lower the  particulate                                                              
matter 2.5 in the  nonattainment areas of the Interior.   Over the                                                              
past year,  AIDEA has been  working with  private sector on  P3 to                                                              
build a  facility on  North Slope pursued  development of  a North                                                              
Slope supply  of LNG with a  private partner through  a concession                                                              
agreement format.   He  reported that  the cost came  in 20  to 30                                                              
percent higher  than the  original feasibility  analysis,  and the                                                              
dramatic  reduction  in the  cost  of  oil  also happened  so  the                                                              
equivalent  of heating  fuel was  $30/mcf and  is now at  $20/mcf.                                                              
However, AIDEA  does not believe  that it can stop  moving forward                                                              
on  this  project  since  oil prices  won't  stay  at  that  level                                                              
forever.   Further, it is  important for  the Interior to  find an                                                              
alternative  to heating  fuel based  on cost  and health.   As  an                                                              
update, the project  came to the City of Fairbanks  at $13-14/mcf,                                                              
with the cost of  distribution at $5-6, so cost at  the burner tip                                                              
is $19-20 based  on North Slope facility.  Thus AIDEA  has taken a                                                              
step  back to  evaluate alternative  sources of  gas, which  could                                                              
include Cook Inlet.                                                                                                             
4:53:03 PM                                                                                                                    
MR. LEONARD  advised that AIDEA  has set  up a new team  dedicated                                                              
to this project,  consisting of Alaska Energy Authority  and AIDEA                                                              
employees  will concentrate  on alternatives  exist to ensure  the                                                              
lowest cost  possible to make it  through to the  proposed natural                                                              
gas pipeline.                                                                                                                   
4:53:50 PM                                                                                                                    
VICE  CHAIR  HUGHES  asked  whether   the  refocused  alternatives                                                              
happened since December.                                                                                                        
MR. LEONARD  recalled that  this occurred  after January  7, 2015,                                                              
since  the AIDEA  worked with  MWH Global  through December  2014.                                                              
In the  agreement certain conditions  had to be met  for financial                                                              
closure, including  that the  price had to  meet the goals  of the                                                              
IEP,  MWH  Global  had to  obtain  long-term  contracts  from  the                                                              
utilities as  well as  meet other conditions.   Since  those goals                                                              
were  not  met,  AIDEA  canceled   the  concession  agreement  and                                                              
reevaluated  how   to  move   forward,  including  refocusing   to                                                              
consider alternatives.                                                                                                          
4:55:06 PM                                                                                                                    
REPRESENTATIVE KITO  expressed concern that it appears  that there                                                              
are two  separate efforts,  finding the  gas source and  build-out                                                              
of the  local infrastructure.   He  said he  was a little  worried                                                              
that  if   the  build-out   begins  and   supplying  gas   becomes                                                              
challenging,  that lots of  infrastructure  in Fairbanks will  not                                                              
have any gas supply.                                                                                                            
MR.  LEONARD  answered  that  AIDEA is  moving  forward  with  the                                                              
build-out since it  will be needed at some point  in time gas will                                                              
become  available  for  the distribution  system.    First,  AIDEA                                                              
believes  Cook  Inlet  gas  exists  and gas  on  the  North  Slope                                                              
exists; it  is just necessary to  ensure that it comes  at a price                                                              
that meets  the goals.   Essentially, AIDEA  was given  the Senate                                                              
Bill 23  monies and the  broad latitude on  the length of  time to                                                              
pay  back the  rates that  could be  used.   He acknowledged  that                                                              
this  project is  a challenging  project  and it  is correct  that                                                              
four  phases exist,  including gas,  transportation, storage,  and                                                              
distribution that all  has to be built simultaneously  to meet the                                                              
community  needs.  Despite  these challenges,  AIDEA believes  the                                                              
project infrastructure  needs to  move forward since  waiting will                                                              
mean  delaying  gas  by  two  more years.    He  has  learned  the                                                              
importance of timing  with this project due to  the considerations                                                              
or  the  window  will  be missed.    He  characterized  it  as  an                                                              
orchestrated build-out of all components so risk exists.                                                                        
4:58:10 PM                                                                                                                    
REPRESENTATIVE KITO  maintained his  concern about not  having gas                                                              
for the distribution  system.  He asked for  further clarification                                                              
on the detriments of having the infrastructure waiting for gas.                                                                 
4:58:26 PM                                                                                                                    
VICE CHAIR  HUGHES pointed  out that the  press release  on Pentex                                                              
came as  a surprise.   She asked  for an  explanation of  why that                                                              
was  necessary, why  the  legislature was  not  informed, and  the                                                              
long-term goal.                                                                                                                 
MR.  LEONARD answered  that as  AIDEA got  through the  evaluation                                                              
North Slope  gas, AIDEA believes  it must concentrate on  the full                                                              
chain, not just the  gas, but to look at how to  lower the cost of                                                              
distribution  and  one  way  to  do  that  is  through  integrated                                                              
utility  system, which  was  one  of the  things  that AIDEA  must                                                              
consider.    Structuring   the  letter  of  intent   provides  the                                                              
framework  to  do the  due  diligence  to  see  if what  is  being                                                              
proposed  will  lower  the  costs,   which  are  critical  to  the                                                              
project.   He  described  the roll  out, such  that  this was  the                                                              
framework that they  [Pentex] required and needed.   As previously                                                              
stated,  AIDEA  is still  moving  quickly,  that  the goal  is  to                                                              
obtain  gas as  quickly  as possible  to  provide  Fairbanks.   He                                                              
described  this as  the start  of the  due diligence  and not  the                                                              
end.   He reported that  the next AIDEA  board meeting will  be in                                                              
February, and he  regrets the press release was worded  as it was.                                                              
He said  that how  it was  presented on  his shoulders,  but AIDEA                                                              
believes it is very important to have an integrated system.                                                                     
5:01:16 PM                                                                                                                    
REPRESENTATIVE COLVER  asked him to highlight a  couple of points.                                                              
He  related  his  understanding  that  AIDEA  bought  the  holding                                                              
company,  Pentex, honoring  Hilcorp's  purchase of  the Titan  LNG                                                              
plant.    Secondly,  the  intent  of  acquiring  the  distribution                                                              
system  was  that   AIDEA  already  has  $23  million   in  equity                                                              
financing  of  the  distribution  system.    He  said  a  lack  of                                                              
investment in  one of the utilities  exists, so the intent  is not                                                              
to   expand   the   distribution   network,   but   to   get   the                                                              
infrastructure  expanded for  Fairbanks consumers.   He  suggested                                                              
AIDEA  provide information  on how  it is  assisting utility  that                                                              
have  capital constraints,  which  is a  key component  - the  two                                                              
MR. LEONARD offered to provide more information at a later date.                                                                
5:03:28 PM                                                                                                                    
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
5:03 p.m.                                                                                                                       

Document Name Date/Time Subjects
DCCED-CBPL Overview to HLC 02-09-2015.pdf HL&C 2/9/2015 3:15:00 PM
CBPL Presentation
DCCEC-AIDEA Matrices Presentation to HLC 02-09-2015.pdf HL&C 2/9/2015 3:15:00 PM
AIDEA Matrixes
DCCED-AIDEA Overview to HLC 02-09-2015.pdf HL&C 2/9/2015 3:15:00 PM
AIDEA Presentation
AIDEA presentation to Sen Energy 2-5-15.pdf HL&C 2/9/2015 3:15:00 PM
AIDEA for Reference