Legislature(2015 - 2016)BARNES 124

03/11/2015 03:15 PM LABOR & COMMERCE

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Heard & Held
Moved CSHB 67(L&C) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
          HOUSE LABOR AND COMMERCE STANDING COMMITTEE                                                                         
                         March 11, 2015                                                                                         
                           3:18 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Kurt Olson, Chair                                                                                                
Representative Shelley Hughes, Vice Chair                                                                                       
Representative Jim Colver                                                                                                       
Representative Gabrielle LeDoux                                                                                                 
Representative Andy Josephson                                                                                                   
Representative Cathy Tilton                                                                                                     
Representative Sam Kito                                                                                                         
MEMBERS ABSENT                                                                                                                
Representative Mike Chenault (alternate)                                                                                        
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 67                                                                                                               
"An Act relating to product warranties and required updates to                                                                  
products;   and    relating   to   dealers,    distributors,   and                                                              
     - MOVED CSHB 67(L&C) OUT OF COMMITTEE                                                                                      
HOUSE BILL NO. 123                                                                                                              
"An  Act establishing  the Marijuana  Control  Board; relating  to                                                              
the powers  and duties  of the Marijuana  Control Board;  relating                                                              
to the  appointment, removal,  and duties of  the director  of the                                                              
Marijuana  Control  Board;  relating  to  the  Alcoholic  Beverage                                                              
Control Board; and providing for an effective date."                                                                            
     - HEARD & HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: HB 67                                                                                                                   
SHORT TITLE: PRODUCT WARRANTIES & REQUIRED UPDATES                                                                              
SPONSOR(s): REPRESENTATIVE(s) HAWKER                                                                                            
01/21/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/21/15       (H)       L&C                                                                                                    
03/11/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
BILL: HB 123                                                                                                                  
SHORT TITLE: ESTABLISH MARIJUANA CONTROL BOARD                                                                                  
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
02/23/15       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/15       (H)       L&C, JUD, FIN                                                                                          
03/04/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
03/04/15       (H)       Heard & Held                                                                                           
03/04/15       (H)       MINUTE(L&C)                                                                                            
03/11/15       (H)       L&C AT 3:15 PM BARNES 124                                                                              
WITNESS REGISTER                                                                                                              
REPRESENTATIVE MIKE HAWKER                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions as prime                                                                
sponsor of HB 67.                                                                                                               
JULI LUCKY, Staff                                                                                                               
Representative Mike Hawker                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions on behalf                                                               
of the prime sponsor of HB 67.                                                                                                  
CLYDE (ED) SNIFFEN, JR., Senior Assistant Attorney General                                                                      
Commercial/Fair Business Section                                                                                                
Civil Division (Anchorage)                                                                                                      
Department of Law (DOL)                                                                                                         
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Provided comments and answered questions                                                                 
during the discussion of HB 67.                                                                                                 
CHAD GERONADALE                                                                                                                 
Construction Machinery Industrial                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the discussion of HB 67.                                                                
MICALEA FOWLER, Legislative Liaison                                                                                             
Office of the Commissioner                                                                                                      
Department of Commerce, Community & Economic Development (DCCED)                                                                
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified and answered questions on HB 123.                                                              
CYNTHIA FRANKLIN, Executive Director                                                                                            
Alcoholic Beverage Control Board (ABC Board)                                                                                    
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified and answered questions during the                                                              
discussion of HB 123.                                                                                                           
JAMES BARRETT                                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
ELLEN GANLEY, Member                                                                                                            
Alcoholic Beverage Control Board (ABC Board)                                                                                    
Department of Commerce, Community & Economic Development (DCCED)                                                                
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified during the discussion of HB 123.                                                               
KIM KOLE, Coalition for Responsible Cannabis Legislation                                                                        
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
FRANK BERARDI, Chair                                                                                                            
Coalition for Responsible Cannabis Legislation (CRCL)                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
GIONO BARRETT                                                                                                                   
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
GIRARD GAUL, Senior Spokesman                                                                                                   
Coalition for Responsible Cannabis Legislation (CRCL)                                                                           
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
BRUCE SCHULTE, Public Relations Manager                                                                                         
Coalition for Responsible Cannabis Legislation (CRCL)                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
BRANDON EMMETT                                                                                                                  
Executive Director                                                                                                              
Coalition for Responsible Cannabis Legislation (CRCL)                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in  support of HB 123.                                                                         
ACTION NARRATIVE                                                                                                              
3:18:09 PM                                                                                                                    
CHAIR  KURT OLSON  called the  House Labor  and Commerce  Standing                                                            
Committee  meeting   to  order  at  3:18  p.m.     Representatives                                                              
Josephson, LeDoux,  Tilton, Kito,  Hughes, and Olson  were present                                                              
at  the call  to  order.   Representative  Colver  arrived as  the                                                              
meeting was in progress.                                                                                                        
          HB 67-PRODUCT WARRANTIES & REQUIRED UPDATES                                                                       
3:18:29 PM                                                                                                                    
CHAIR OLSON  announced that the  first order of business  would be                                                              
HOUSE  BILL NO. 67,  "An Act  relating to  product warranties  and                                                              
required   updates  to   products;   and   relating  to   dealers,                                                              
distributors, and manufacturers."                                                                                               
3:18:59 PM                                                                                                                    
REPRESENTATIVE  MIKE HAWKER,  Alaska  State Legislature,  speaking                                                              
as prime  sponsor, stated  that HB  67 came about  as a  result of                                                              
concerns  expressed  by retail  construction  equipment  companies                                                              
with respect to  the responsibility for performing  warranty work.                                                              
He  offered his  belief  that  financial obligations  that  should                                                              
belong to manufacturers are being pushed down on local vendors.                                                                 
3:20:49 PM                                                                                                                    
REPRESENTATIVE  HAWKER  stated  that  HB  67 was  modeled  on  the                                                              
current   statutes  regarding   boat   and  recreational   vehicle                                                              
warranties.     The  bill  would   define  the  relationship   and                                                              
responsibilities between  vendors and manufacturers  of equipment,                                                              
tools,  and  off-road  vehicles  used  in  construction,  resource                                                              
extraction,  development,  snow   removal,  forestry  and  similar                                                              
functions.   Within the bill  are carefully crafted  delineations,                                                              
he  said, that  will  help to  ensure  that Alaska's  dealers  are                                                              
sufficiently and  appropriately reimbursed  for work  and expenses                                                              
incurred on  behalf of  a manufacturer of  certain equipment.   He                                                              
asked to  place very  clearly on  the record  that this  bill does                                                              
not  apply to  motor  vehicles registered  for  highway use  since                                                              
those vehicles fall under a separate class.                                                                                     
3:22:26 PM                                                                                                                    
REPRESENTATIVE HAWKER  stated that HB  67 was limited  to warranty                                                              
work on  defective products and  upgrades on those products.   The                                                              
bill substantively  sets  a minimum reimbursement  rate for  parts                                                              
and labor, requires  the manufacturer to send the  necessary parts                                                              
that  a dealer  or distributor  does not  possess, sets  deadlines                                                              
for approval  and payment  of claims,  and clearly delineates  and                                                              
identifies   the   responsible  party   -   whether   it  is   the                                                              
manufacturer  or the  vendor.   He  reported that  36 states  have                                                              
enacted  similar  laws,  which   he  characterized  as  commercial                                                              
protection laws  regarding warranty work performed  by dealers and                                                              
distributor  for  manufacturers.   In  addition,  this bill  would                                                              
extend  the state's  "lemon law"  provisions for  boats, ATVs  and                                                              
new  motor  vehicles  to  the  products   covered  in  this  bill.                                                              
However, this bill  does not change the law with  respect to motor                                                              
vehicles,  but simply  would extend  the  umbrella of  protections                                                              
for inherently defective products, he said.                                                                                     
3:23:43 PM                                                                                                                    
REPRESENTATIVE  HAWKER anticipated  that the  committee will  hear                                                              
testimony   that   the   major  manufacturers   object   to   this                                                              
legislation.     He  stressed   that  this   bill  would   prevent                                                              
manufacturers  from dictatorially  exercising undue influence  and                                                              
economic  hardship  on  independent   vendors  in  Alaska.    Many                                                              
Alaskans depend upon  the heavy equipment industry  to support the                                                              
state's  resource base.    He characterized  this  an instance  of                                                              
evolution  and growth  of state  warranty  protection laws,  which                                                              
expands the  laws that have been  in effect for motor  vehicles to                                                              
boats and  recreational vehicles.   He offered his belief  that it                                                              
is   now  time   to   extend   protections  to   heavy   equipment                                                              
3:25:33 PM                                                                                                                    
REPRESENTATIVE JOSEPHSON  understood the focus of the  bill was on                                                              
industrial equipment.   He asked whether these  changes could also                                                              
apply to stereos.                                                                                                               
3:26:07 PM                                                                                                                    
JULI  LUCKY,  Staff,  Representative  Mike  Hawker,  Alaska  State                                                              
Legislature,   on  behalf  of   the  prime   sponsor  of   HB  67,                                                              
Representative  Mike Hawker,  suggested that  the committee  first                                                              
adopt the proposed  committee substitute (CS) for HB  67 since one                                                              
of the changes  in the CS was  to narrow the items covered  by the                                                              
3:26:30 PM                                                                                                                    
REPRESENTATIVE  HUGHES  moved  to  adopt  the  proposed  committee                                                              
substitute  (CS)  for  HB  67,   labeled  29-LS0129\E,  Bannister,                                                              
3/6/15, as the working document [Version E].                                                                                    
CHAIR OLSON objected for the purpose of discussion.                                                                             
3:27:00 PM                                                                                                                    
REPRESENTATIVE  COLVER   referred  to  a  letter   of  support  in                                                              
members' packets  that points out the manufacturer's  flat fee for                                                              
dealers  to  make  repairs  in the  field  causes  a  hardship  in                                                              
Alaska.   He asked  to be  directed to  the language  in the  bill                                                              
that would cure  this and allow dealers to charge  reasonable fees                                                              
to perform the warranty work.                                                                                                   
REPRESENTATIVE HAWKER deferred to Ms. Lucky.                                                                                    
MS.  LUCKY stated  that there  is  no minimum  time or  reasonable                                                              
time  for  field  repair  work;  however, the  bill  would  set  a                                                              
minimum  labor rate  and  clarify  that there  must  be a  certain                                                              
amount  of time  allowed  for  dealers to  perform  administrative                                                              
work.   She directed  attention to  the labor  rate in  Version E,                                                              
beginning on page  2, line 28 to Sec. 45.45.777.   She read, " ...                                                              
the manufacturer  shall pay  the dealer  or distributor  providing                                                              
the service  at a rate  that is not less  than the highest  of the                                                              
following  for the  labor  of the  technicians:  ...."   Thus  the                                                              
manufacturers  must select  a rate that  was at  least as  high as                                                              
one of  the three  rates listed  in paragraphs  1-3, whichever  is                                                              
the highest.   In  addition, the  bill would  require payment  for                                                              
cleanup,  preparation,  diagnosis, disassembly,  repair,  testing,                                                              
and  final  cleaning  as  needed  to  provide  a  quality  result.                                                              
Although  it doesn't  necessarily  specific  a minimum  amount  of                                                              
time, it  does require that the  time must be adequate  to perform                                                              
all of  these services, she  said.  In  addition, she  referred to                                                              
subsection   (d),  on  page   3,  lines   13-15,  which   requires                                                              
manufacturers  to  pay  a  dealer   or  distributor  an  hour  for                                                              
administrative services.                                                                                                        
3:29:47 PM                                                                                                                    
REPRESENTATIVE LEDOUX  understood the sponsor's intent,  but asked                                                              
for  the rationale  used  to  interfere with  contractual  rights.                                                              
It's easy  to say, "This  is the little  guy and there's  this big                                                              
bad corporation  out there  that's going to  do really  mean awful                                                              
things  to the little  guy  so like let's  change  the law."   She                                                              
said  she once  lived  on an  island and  prices  were higher  but                                                              
government  didn't  set  rate or  price  controls  because  people                                                              
trusted the  free market system.   She  asked why the  free market                                                              
system wasn't working.                                                                                                          
3:31:02 PM                                                                                                                    
REPRESENTATIVE HAWKER  suggested Representative LeDoux  was likely                                                              
aware of  the five legal  elements of a  valid contract,  with one                                                              
being  the  absence   of  any  form  of  duress  on   one  of  the                                                              
contracting parties.   In  fact, duress was  a broad  subject that                                                              
has  been examined  extensively  in the  legal system.   He  noted                                                              
there  are  certainly  levels  of what  might  be  constituted  as                                                              
duress  in relation  to a  contracting  entity, such  as when  one                                                              
party was  in such a  position that the  other party is  unable to                                                              
fairly negotiate  the terms  of an agreement.   In those  types of                                                              
circumstances one  party can dictate  the terms of  the agreement.                                                              
Essentially  this  is what  has  been  occurring with  the  vendor                                                              
relationships  when one  mega  company is  the  manufacturer of  a                                                              
product.     He   asked   to  refrain   from   using  a   specific                                                              
manufacturer,  however,  it  could  apply  to  any  one  of  major                                                              
national or international  manufacturers who dictate  the terms of                                                              
their  franchise  agreements  in  the state.    These  franchisees                                                              
really  don't  have any  choice  except  to  say yes  since  these                                                              
contracts  are  not  negotiable   items  due  to  the  weight  and                                                              
influence  of one party  to the  contract.   Thus these  contracts                                                              
are not  contracts negotiated  at an  "arms-length" among  parties                                                              
of  equal  standing.    He  offered   that  HB  67  would  provide                                                              
guidelines for the  contracts that can keep them  within sidebars.                                                              
This  bill was  crafted  to provide  guidelines  and a  reasonable                                                              
basis  for the  relationships  between manufacturers  and  venders                                                              
without  getting  overly  prescriptive,   and  without  trying  to                                                              
dictate  a  fixed rate  or  other  terms;  instead, to  provide  a                                                              
framework and  a rubric  of guidelines to  create a  fair economic                                                              
relationship between the manufacturers and vendors.                                                                             
3:33:50 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked how  she obtains equal  standing with                                                              
a bank  [under contracts],  since  the bank is  a corporation  and                                                              
she is  an individual.   She pointed  out that government  doesn't                                                              
tell the banks what to charge consumers.                                                                                        
REPRESENTATIVE  HAWKER  replied  that  the  banking  industry,  in                                                              
particular,  the commercial  loan industry,  the residential  loan                                                              
industry,  or the  consumer loan  industry represent  some of  the                                                              
most heavily  regulated industries  in terms  of tax codes,  usury                                                              
statutes,  and  non-discrimination  statutes  under  FIRREA,  [the                                                            
Financial Institutions  Reform, Recovery,  and Enforcement  Act of                                                              
1989].   Under FIRREA any holder  of property always  has recourse                                                              
against  the previous  property holder  for environmental  damage,                                                              
he  said.     He   respectfully  requested   that  the   financial                                                              
institutions  between  small  individuals  and the  mega-banks  is                                                              
exactly  the  kind  of  relationship   being  discussed  here  and                                                              
exactly  why so many  financial  protection laws  are in place  at                                                              
the state and federal level.                                                                                                    
3:35:37 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON asked  how disagreements are  ultimately                                                              
resolved between the manufacturer and the ultimate purchaser.                                                                   
MS.  LUCKY replied  that Ed  Sniffen  with the  Department of  Law                                                              
could more  fully answer that  question; however, the  language in                                                              
this   bill   was   based  on   current   laws   regarding   ATVs,                                                              
snowmachines, and boats.                                                                                                        
3:36:24 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  asked  about the  issue  of  electronic                                                              
notice  to the  manufacturer  from  the vendor  when  there was  a                                                              
defect or  need for repair.   He asked whether that  was something                                                              
that could reasonably be added.                                                                                                 
MS. LUCKY  offered her  belief that  Representative Josephson  was                                                              
referring  to the  certified mail  requirement for  the lemon  law                                                              
provisions.   She explained  that the  certified mail  requirement                                                              
exists  in all  lemon law  provisions  in current  statute and  it                                                              
provides  a proof  of  mailing and  proof  of  receipt.   However,                                                              
there currently isn't  any standard for a proof of  mailing for e-                                                              
mail and  proof of receipt.   For example, the aggrieved  party in                                                              
this case  could send  an e-mail  that shows  the date  stamp, but                                                              
the  manufacturer   could  say  it  never  received   the  e-mail.                                                              
Therefore,  there currently  is  not any  real  standard of  proof                                                              
except for certified mail, she said.                                                                                            
3:38:49 PM                                                                                                                    
CLYDE  (ED)  SNIFFEN,  JR.,  Senior  Assistant  Attorney  General,                                                              
Commercial/Fair  Business  Section,  Civil  Division  (Anchorage),                                                              
Department   of   Law   (DOL),   introduced   himself   said   his                                                              
responsibilities  included  enforcement   of  consumer  protection                                                              
laws,  including ATV  and motor  vehicle lemon  law statutes.   He                                                              
said he  has been  doing consumer  protection  for about 15  years                                                              
and  has  encountered  some situations  that  might  address  some                                                              
questions previously asked.                                                                                                     
3:39:22 PM                                                                                                                    
REPRESENTATIVE  LEDOUX   acknowledged  that   what  Representative                                                              
Hawker was  addressing were  instances when significant  disparity                                                              
exists, which she referred to as an adhesion contract.                                                                          
MR. SNIFFEN agreed.                                                                                                             
REPRESENTATIVE  LEDOUX  asked  whether  the courts  or  the  state                                                              
normally substitute  their own provisions or if  the courts simply                                                              
declare  that the  contract is  null and  void, which  would be  a                                                              
method of getting out of the contract.                                                                                          
3:40:23 PM                                                                                                                    
MR.  SNIFFEN  answered  that  it  can be  a  little  tricky.    He                                                              
explained that the  courts look to the intent of  the parties when                                                              
they decide  what a  contract should  look like  if a  contract of                                                              
adhesion  issue arises.   He  said  the Alaska  Supreme Court  has                                                              
handled contracts  in different  ways.   If the consumer  couldn't                                                              
reasonably  understand   the  contract  and  there   was  not  any                                                              
"meeting of  the minds," contracts  could sometimes be  voided, he                                                              
3:41:11 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked  what  would happen  if the  consumer                                                              
understands the process, but doesn't have any other alternative.                                                                
MR.  SNIFFEN answered  that  she just  identified  the reason  for                                                              
lawyers, but  in the event a  factual or legal dispute  arises and                                                              
it  is a  legitimate  dispute, a  jury  or judge  will  ultimately                                                              
3:41:45 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  related   a  scenario  in  which  a  small                                                              
community  with  one grocery  store  charges really  high  prices.                                                              
She  asked whether  the  state or  the  court  would intervene  on                                                              
behalf of the customers.                                                                                                        
MR. SNIFFEN  answered that he  also enforces anti-trust  statutes.                                                              
He stated  that with the  recent closure  of one grocery  store in                                                              
Bethel  there  will  only  be one  store  left,  which  creates  a                                                              
natural  monopoly.   He  suggested  that  the state  doesn't  rate                                                              
pricing  on products  for  a monopoly  so  the  store will  likely                                                              
charge whatever rates  it feels the customers will  bear; however,                                                              
the state  would only get  involved if predatory  pricing contract                                                              
exists.  For  example, if the store  was engaging in some  type of                                                              
unilateral  conduct to  force out  another competitor,  or if  the                                                              
price  was  set  through  some  collusion  to  artificially  raise                                                              
prices without the  benefit of true market competition,  the state                                                              
would  intervene.   In  terms of  an equipment  supplier  entering                                                              
into a warranty  contract with a retailer, he  suggested that what                                                              
the bill attempts  to do is similar  to laws pertaining  to ATV or                                                              
auto  manufacturers,  who  have   so  much  power  that  they  can                                                              
essentially  dictate terms  of  the contracts.    This bill  would                                                              
provide some  mechanism for  vendors to be  paid fairly,  which of                                                              
course,  are all  policy decisions.    The Department  of Law  has                                                              
reviewed  HB  67  and believes  it  would  provide  good  consumer                                                              
protection and did  not find anything inconsistent  with this bill                                                              
that isn't already done with other manufacturers.                                                                               
3:44:48 PM                                                                                                                    
REPRESENTATIVE   LEDOUX    asked   whether   HB   67    would   be                                                              
philosophically   inconsistent,   assuming   there   weren't   any                                                              
predatory practices  occurring, pointing  to the earlier  scenario                                                              
in which one store  in one community can charge what  it wanted to                                                              
MR. SNIFFEN  understood the  concern, but  answered that  it would                                                              
be a policy  decision whether to  regulate pricing in  those types                                                              
of situations.                                                                                                                  
3:45:28 PM                                                                                                                    
REPRESENTATIVE  HAWKER  commended  Mr. Sniffen  for  his  accurate                                                              
portrayal  of the  bill.   He  clarified that  this  bill was  not                                                              
about  regulating pricing  or transactions  that  relates to  bulk                                                              
commodities,  but  it specifically  relates  to  the  relationship                                                              
between manufacturers  and  sellers that  involve products  with a                                                              
product  warranty  from the  manufacturer.   For  example,  Quaker                                                              
Oats doesn't put  a warranty on oatmeal, he said.   This bill does                                                              
not  regulate any  industry, pricing,  or  specific terms  between                                                              
the  manufacturers and  vendors;  however, the  bill  does put  on                                                              
some sidebars  to provide  reasonable protections  for vendors  in                                                              
instances   in   which   a   dictatorial   opportunity   for   the                                                              
manufacturer  exists.   Again,  it  would  only apply  to  product                                                              
warranty issues and is limited to warranty issues, he said.                                                                     
3:47:21 PM                                                                                                                    
MS. LUCKY  said the  bill would cover  warranty work  and required                                                              
updates in  instances when the  manufacturer wants  something done                                                              
and the dealer  provides that work on behalf  of the manufacturer,                                                              
such  as  a  product  defect  fixed,  a  safety  modification,  or                                                              
necessary  improvement must  be done.   The  first half  of HB  67                                                              
covers  this work,  she  said, and  the second  half  of the  bill                                                              
would address lemon law provisions, she said.                                                                                   
3:48:11 PM                                                                                                                    
MS. LUCKY  referred to  Version E  and stated  that the  bill will                                                              
require the  manufacturer to  provide warranty  to the  dealer and                                                              
the dealer  to provide the warranty  and necessary manuals  to the                                                              
ultimate purchaser  of the  item, with  the dealer or  distributor                                                              
to  subsequently  provide  warranty   service  on  behalf  of  the                                                              
3:48:40 PM                                                                                                                    
MS.  LUCKY described  the "meat  of  the bill"  as the  provisions                                                              
related  to minimum  payments.   She said  the manufacturer  would                                                              
not  be allowed  to restrict  the  parts, the  number  or type  of                                                              
parts necessary  to perform this  work.  The payment  for required                                                              
services must meet  a minimum payment in terms of  labor rates and                                                              
time.  For example,  the bill would provide a minimum  of one hour                                                              
for   administration  of   the  claim,   plus  reimbursement   for                                                              
transportation and  lodging costs  when providing this  service in                                                              
the field.   In  instances in  which a  product cannot  be shipped                                                              
back to  the dealer or distributor  for warranty work,  the vendor                                                              
has currently  been bearing  the cost of  sending a  technician to                                                              
the  field, often  via a  flight  to a  remote site.   The  dealer                                                              
loses  the  employee's  work  for   the  day  plus  has  not  been                                                              
reimbursed adequately for any travel and lodging costs incurred.                                                                
MS. LUCKY  related that  the bill would  establish a  timeline for                                                              
the payment  of claims,  specifically the  manufacturer will  have                                                              
30 days  to approve or  deny the claim,  and if not  denied within                                                              
30 days would  be deemed approved,  with an additional  30 days to                                                              
remit payment.                                                                                                                  
3:50:05 PM                                                                                                                    
MS. LUCKY referred  to page 4, line 15, which  addresses the lemon                                                              
law provisions.   She commented that the lemon  law provisions are                                                              
similar  to   ones  for   other  items,   such  as  boats,   ATVs,                                                              
snowmachines,  and  motor  vehicles.     She  explained  that  the                                                              
purchaser can send  a letter to the manufacturer  that states that                                                              
despite a reasonable  number of attempts the product  still is not                                                              
functional.    The  manufacturer  shall  either  provide  the  new                                                              
product or  reimburse the purchase  price minus an amount  for the                                                              
use of the product.                                                                                                             
3:51:02 PM                                                                                                                    
MS. LUCKY  directed attention  to page 6,  lines 9-19,  of Version                                                              
E,  which outlines  the exemptions  and  establishes a  rebuttable                                                              
presumption  for  "reasonable  number  of attempts"  to  remedy  a                                                              
defect in order to claim a replacement or refund.                                                                               
3:51:21 PM                                                                                                                    
MS. LUCKY  directed attention to  page 7, lines 2-19,  to proposed                                                              
Sec. 45.45.787,  that defines  what products  are covered  by this                                                              
legislation,   which  read,  "(1)   equipment,  tools,   or  motor                                                              
vehicles if the  equipment, tools, or motor vehicles  are designed                                                              
to  be  used  primarily  for  construction,  road  building,  snow                                                              
removal, mining,  oil projects,  gas projects, forestry,  resource                                                              
development,  or a  similar type  of project.  in this  paragraph,                                                              
"motor vehicle"  means a motor  vehicle that  is not 8  subject to                                                              
registration under AS 28.10.011; or".                                                                                           
3:52:06 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked  whether motor  vehicles are  covered                                                              
under a similar act.                                                                                                            
MS.  LUCKY  answered yes;  she  was  unsure  how similar  the  law                                                              
covering  the  auto   industry  was;  however,  she   related  her                                                              
understanding that  the auto industry has been  working on details                                                              
of their warranty provisions under AS 45.45.                                                                                    
3:52:45 PM                                                                                                                    
REPRESENTATIVE LEDOUX  asked whether the dealers  are working with                                                              
the manufacturers.                                                                                                              
MS.  LUCKY  answered that  she  was  not  privy to  any  specifics                                                              
between  the  auto  dealer  franchises  and  their  manufacturers,                                                              
since  the  auto dealers  are  clearly  exempted from  this  bill.                                                              
However,  she related her  understanding  that the auto  industry,                                                              
wanted  an exemption  from  this  bill since  the  industry has  a                                                              
separate provision in statute.                                                                                                  
3:53:41 PM                                                                                                                    
REPRESENTATIVE  HAWKER reiterated  that he  was not  aware of  any                                                              
work  being addressed  related  to  automotive warranties.    This                                                              
bill was developed  specifically to exempt  automobile warranties,                                                              
and HB  67 relates  to qualified equipment  under AS  45.45.787 as                                                              
previously discussed, he said.                                                                                                  
3:54:36 PM                                                                                                                    
REPRESENTATIVE HUGHES  referred to page  7 of Version E,  and said                                                              
she noticed that  construction and road building  was covered, but                                                              
she  did not  notice  road maintenance;  however,  she did  notice                                                              
language "or  a similar type of  project."  She asked  whether the                                                              
sponsor was confident  that will cover projects  such as equipment                                                              
that places  gravel on roads as  well as other big  equipment used                                                              
in road maintenance.                                                                                                            
REPRESENTATIVE  HAWKER answered  that was  absolutely the  intent.                                                              
The   bill  doesn't   delineate  specific   tools,  but   mentions                                                              
equipment,  tools or  motor  vehicles designed  for  construction,                                                              
road building,  snow removal,  or similar  type of project,  which                                                              
would  imply  other  work.    He  offered  his  belief  that  this                                                              
language would very  definitely include it, with  the exception of                                                              
any equipment subject to title and registration for on-road use.                                                                
3:56:07 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  assumed  that  the period  of  warranty                                                              
service  are  typically  mention,  and not  any  surcharges  being                                                              
foisted on vendors.                                                                                                             
REPRESENTATIVE    HAWKER    said    that    was    a    reasonable                                                              
characterization;  however, he  suggested  that the  manufacturers                                                              
or vendors could better answer the specifics.                                                                                   
REPRESENTATIVE  JOSEPHSON asked  what would  stop Kubota  [Tractor                                                              
Corporation] from tacking on a surcharge for backhoe uses.                                                                      
3:57:33 PM                                                                                                                    
REPRESENTATIVE HAWKER  answered that was where competition  in the                                                              
marketplace  takes  places,  for  example, if  Kubota  raises  the                                                              
price of its skid  loader by 15 percent, but  John Deere [Products                                                              
and Services]  or other  manufacturer do  not, market  forces come                                                              
into play.                                                                                                                      
3:58:19 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  asked why  motor  vehicles  should not  be                                                              
covered  by the  bill  since  all of  the  same problems  will  be                                                              
MS.  LUCKY answered  that this  bill  was crafted  not to  include                                                              
auto  dealers   because   it  was  not   a  problem   constituents                                                              
requested.   She requested that  legislators often bring  up bills                                                              
at the request  of constituents.   The auto dealers did  not raise                                                              
issues in  terms of reimbursement  on warranty work.   She related                                                              
her  understanding  that similar  efforts  occurred  in 2009  with                                                              
boats,  ATVs,  and snowmachines.    Since  the auto  dealers  have                                                              
statutes that  address their products,  this bill will  be limited                                                              
to off road  motor vehicles.  Further,  it would be a  policy call                                                              
for the  legislature and  the committee to  discuss, but  from the                                                              
sponsor's perspective,  HB 67 was limited to  address the specific                                                              
problem  raised.    Finally,  the  auto  dealers  indicated  their                                                              
preference to address their products separately.                                                                                
4:00:31 PM                                                                                                                    
REPRESENTATIVE   HAWKER  emphasized   that  HB   67  addresses   a                                                              
different  and unique  market  segment,  rather than  the  highway                                                              
motor  vehicle industry  that  already has  a  functioning set  of                                                              
statutes.   Further, HB 67 was limited  to a gap in  the statutory                                                              
protections for the commercial community.                                                                                       
4:00:58 PM                                                                                                                    
CHAIR  OLSON  suggested that  the  2009  bill  set up  a  firewall                                                              
between the  auto industry and  the off road vehicles,  equipment,                                                              
and boats.   He  surmised one  reason that  the auto industry  has                                                              
not testified since industry issues have been addressed.                                                                        
4:01:24 PM                                                                                                                    
MS. LUCKY pointed out there was a zero fiscal note.                                                                             
CHAIR OLSON  removed his objection  to adopting Version E.   There                                                              
being no further objection, Version E was before the committee.                                                                 
4:01:56 PM                                                                                                                    
CHAIR OLSON opened public testimony on HB 67.                                                                                   
4:02:14 PM                                                                                                                    
CHAD GERONADALE,  Construction Machinery Industrial  (CMI), stated                                                              
he works  for CMI,  and has worked  in the construction  equipment                                                              
industry for  28 years, including as  a dealer as well  as for the                                                              
manufacturers.   He  offered  to provide  some  examples that  can                                                              
help  identify some  of  the  situations equipment  dealers  face.                                                              
There  are  times in  which  the  equipment  industry has  had  to                                                              
comply  with emission  regulations  that required  making  changes                                                              
with  engines.   In addition,  the Tier  IV upgrades;  The Tier  4                                                              
standards provide  manufacturers with a flexibility  provision and                                                              
include  an  interim step  -  Tier  4-I  [interim] upgrades.    He                                                              
related that  a manufacturer  might have a  piece of  equipment in                                                              
Barrow  experiencing problems  with its  emission control  system.                                                              
The  dealer  would provide  a  synopsis  of  the symptoms  of  the                                                              
problem, and  in turn, the  manufacturer would respond  with ideas                                                              
and  which parts  to replace  or  sometimes the  dealer would  not                                                              
hear  back,  but  would  send  the  dispatcher/technician.    Upon                                                              
arrival,  the technician  may discover  a  certain component  that                                                              
was not  functioning,  and if possible  would  change it,  if not,                                                              
would  bring the  part to  the branch,  and  once the  replacement                                                              
part was  available, would fly back  to Barrow with the  part, and                                                              
replace  it.   However, the  manufacturer might  only offer  three                                                              
hours to replace  the part, but  would not pay travel  time.  This                                                              
could  mean the  equipment dealer  or  the customer  must pay  for                                                              
both flights  to Barrow,  plus and room  and board,  if necessary,                                                              
since the  mechanic may  not be  able to  accomplish the  work and                                                              
take  a return  flight.   In addition,  a repair  that might  take                                                              
three hours  in California, could take  six hours in the  20 below                                                              
zero weather conditions  in Barrow without a shop.   He emphasized                                                              
that  the additional  labor  hours  are  not reimbursed,  and  the                                                              
dealers seek relief.                                                                                                            
4:06:16 PM                                                                                                                    
MR.  GERONADALE said  that typically  the manufacturer  warranties                                                              
take a "cookie  cutter" approach, which may include  four hours of                                                              
labor, and  no reimbursement or  limited reimbursement of  an hour                                                              
for travel  time.  These programs  may work in many  other states,                                                              
but in  Alaska due  to the remoteness  and geographical  nature of                                                              
the state,  don't work  well.   In addition,  the change  from the                                                              
emissions  control   issues,  the   engines  are  now   controlled                                                              
electronically,  which may require  software updates,  which again                                                              
means  flying  or  driving  to the  machines  and  performing  the                                                              
upgrades.    When the  machines  lie  off  the  road system  or  a                                                              
lengthy drive, for  example, at Coldfoot, means  a four-hour drive                                                              
to  perform an  upgrade that  might take  20-30 minutes;  however,                                                              
the  mechanic   would  be  gone   for  the  whole  day,   yet  the                                                              
manufacturer  may only  allow reimbursement  of  one-half hour  to                                                              
one hour.                                                                                                                       
4:08:46 PM                                                                                                                    
CHAIR  OLSON, after  first determining  no one  further wished  to                                                              
testify, closed public testimony on HB 67.                                                                                      
4:09:13 PM                                                                                                                    
REPRESENTATIVE  HUGHES  moved  to report  the  proposed  committee                                                              
substitute  for   HB  67,  Version   E,  out  of   committee  with                                                              
individual  recommendations  and  the accompanying  fiscal  notes.                                                              
There being no  objection, the CSHB 67(L&C) was  reported from the                                                              
House Labor and Commerce Standing Committee.                                                                                    
4:10:06 PM                                                                                                                    
The committee took an at-ease from 4:10 p.m. to 4:12 p.m.                                                                       
            HB 123-ESTABLISH MARIJUANA CONTROL BOARD                                                                        
4:12:32 PM                                                                                                                    
CHAIR OLSON  announced that the  final order of business  would be                                                              
HOUSE BILL  NO. 123,  "An Act establishing  the Marijuana  Control                                                              
Board;  relating  to  the  powers  and  duties  of  the  Marijuana                                                              
Control Board;  relating to the  appointment, removal,  and duties                                                              
of the  director of the Marijuana  Control Board; relating  to the                                                              
Alcoholic Beverage  Control Board; and providing  for an effective                                                              
4:12:38 PM                                                                                                                    
CHAIR OLSON  said questions  on the  fiscal note  arose.   He then                                                              
reported that the fiscal note has been revised.                                                                                 
4:13:16 PM                                                                                                                    
MICALEA  FOWLER,  Legislative  Liaison,  Department  of  Commerce,                                                              
Community  &  Economic  Development  (DCCED),  stated  that  in  a                                                              
previous hearing,  the committee  discussed moving the  funds from                                                              
the  Governor's  FY  16  budget   into  the  FY  16  appropriation                                                              
request.  She  explained that the DCCED's fiscal  note was revised                                                              
to reflect the FY 16-FY 21 projected costs.                                                                                     
4:14:09 PM                                                                                                                    
CYNTHIA FRANKLIN,  Executive Director, Alcoholic  Beverage Control                                                              
Board (ABC  Board), Department of  Commerce, Community  & Economic                                                              
Development  (DCCED),  explained   that  HB  123  would  create  a                                                              
Marijuana  Control  Board  (MCB),   with  the  executive  director                                                              
serving  both the  Alcoholic Beverage  Control  Board (ABC  Board)                                                              
and the Marijuana  Control Board (MCB).  She  explained details in                                                              
the  fiscal  note,  such  that the  personal  services  adds  four                                                              
fulltime  employees  in FY  16.   She  directed  attention to  the                                                              
narrative section  of the fiscal note that contemplated  six added                                                              
positions   to   implement   proposed   regulations   related   to                                                              
marijuana.   Two positions were added  in FY 15 to respond  to the                                                              
substantial  work necessary  to  regulate marijuana.    In FY  16,                                                              
three   investigator   positions   and  one   business   licensing                                                              
examiner.   The  travel section  includes  travel for  enforcement                                                              
and   compliance,   noting  that   enforcement   officers   travel                                                              
throughout the  state to ensure  that licensees are  in compliance                                                              
and  to  ensure  that  licensees  are  not  providing  alcohol  to                                                              
minors.   She anticipated  a similar  need for enforcement  travel                                                              
to oversee marijuana licensees.                                                                                                 
MS. FRANKLIN  explained that the  new board would be  comprised of                                                              
five  members, set  up in  a similar  fashion to  the current  ABC                                                              
board.   She  reviewed  costs, in  the  first  year, including  an                                                              
anticipated  $50,000  FY  16  for   board  related  travel.    She                                                              
reviewed  services,  which included  legal  services,  information                                                              
technology   services,   employee   support   costs,   enforcement                                                              
vehicles,   printing  and   public   notices.     The   department                                                              
anticipates  needing additional  legal  services due  to the  need                                                              
for massive  regulations.  Colleagues  in Washington  and Colorado                                                              
have indicated a  great deal of interest arose on  data around the                                                              
regulation   of  recreational   marijuana,   that  the   Alcoholic                                                              
Beverage  Control Board (ABC  Board) was  currently a  paper-based                                                              
agency, but  the agency will need  necessity a database  to better                                                              
track and provide information.                                                                                                  
4:17:25 PM                                                                                                                    
MS.  FRANKLIN related  that the  database  includes software  that                                                              
has  the ability  to track  marijuana from  "seed to  sale."   She                                                              
explained  that the  services costs  include the  initial cost  of                                                              
the  database  and development  in  out  years.   The  commodities                                                              
expenditures  would include  the cost  of moving  staff since  the                                                              
current office  location cannot  accommodate the additional  staff                                                              
required to implement the initiative.                                                                                           
4:18:22 PM                                                                                                                    
MS. FOWLER  added that the  fiscal note includes  the supplemental                                                              
costs, including  expedited regulation  timeframe and the  cost of                                                              
the initial staff.                                                                                                              
4:18:49 PM                                                                                                                    
REPRESENTATIVE LEDOUX  said the cost of moving  offices appears to                                                              
cost more  than the actual  staff salaries  and costs.   She asked                                                              
whether commodities includes the office relocation.                                                                             
MS.  FRANKLIN   answered  that  commodities   includes  equipment,                                                              
office   space,   furniture,  moving   expenses,   and   equipment                                                              
purchases;  however, the  one-time  costs are  not included  after                                                              
the first year.   She directed attention  to FY 16 at  $134.5, and                                                              
in the  out years  commodities was  budgeted  at $106.1, with  the                                                              
difference between the two representing the cost of the move.                                                                   
4:20:11 PM                                                                                                                    
REPRESENTATIVE  LEDOUX  asked  for  the rationale  for  the  board                                                              
composition  and   whether  the  rules  were  different   for  the                                                              
marijuana industry  than for the  alcohol industry.   She wondered                                                              
why the two boards would be treated differently.                                                                                
MS. FRANKLIN answered  that the Marijuana Control  Board (MCB) was                                                              
modeled after  the revised Alcoholic  Beverage Control  Board (ABC                                                              
Board),  which means  that it  took into  account the  substantial                                                              
work  the  stakeholders   group  underwent  during   the  Title  4                                                              
revisions,   including  to   ensure   that  the   ABC  Board   was                                                              
representative of  the industry, public safety, and  public health                                                              
sectors affected by  the substance.  She said that  a bill has not                                                              
yet been  introduced to reflect  the proposed changes to  Title 4,                                                              
but  the  language  in  the  Marijuana  Control  Board  (MCB)  was                                                              
modeled after the revisions.                                                                                                    
4:21:28 PM                                                                                                                    
REPRESENTATIVE   LEDOUX,   assuming   the   revisions   would   be                                                              
introduced  and that the  bill passed  both bodies, asked  whether                                                              
the two board would be similar boards.                                                                                          
MS. FRANKLIN answered yes.                                                                                                      
4:21:42 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  related   his  understanding  that  the                                                              
budget  that  moved out  of  House  Finance Committee  today  does                                                              
include any funds for marijuana regulation.                                                                                     
MS. FRANKLIN answered that was also her understanding.                                                                          
4:22:00 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON  offered   his  belief  that  the  $1.57                                                              
million would be an addition to state spending if HB 123 passed.                                                                
MS.  FOWLER answered  that the  House  Finance subcommittee  asked                                                              
the  department  to include  all  costs for  regulating  marijuana                                                              
associated  with the  initiative that  passed be  included in  the                                                              
fiscal note for  HB 123 rather than requesting these  costs in the                                                              
DCCED's budget request.                                                                                                         
4:22:39 PM                                                                                                                    
REPRESENTATIVE  JOSEPHSON   asked  whether  the  out   years  also                                                              
reflect $1.4 million.                                                                                                           
MS.  FOWLER answered  that  if the  bill  passed  with the  fiscal                                                              
note,  the  department  would  not  need  to  come  back  with  an                                                              
additional request for the out years.                                                                                           
4:23:01 PM                                                                                                                    
REPRESENTATIVE  HUGHES asked  how the  annual amount  for the  out                                                              
years compared to  the ABC Board's budget.  She  asked whether the                                                              
investigator  positions were  solely based  on Alcoholic  Beverage                                                              
Control Board (ABC  Board) or if the department  anticipated there                                                              
will be more marijuana businesses.                                                                                              
MS.  FRANKLIN  answered  that  currently  the  Alcoholic  Beverage                                                              
Control  Board   (ABC  Board)  oversees  1,875  licensees.     The                                                              
original  cost  estimate  to  implement  ballot measure  2  was  a                                                              
"mirror image" of  the ABC Board's staff.  She  commented that the                                                              
ABC  Board  currently  has  five  investigators  statewide,  three                                                              
licensing employees,  and two administrative  staff.   She trimmed                                                              
the  estimate  for  FY  16,  since  it  is  not  likely  that  the                                                              
Marijuana  Control  Board  (MCB)   will  have  as  many  licensees                                                              
initially;  however,  no decisions  have  been  made as  to  limit                                                              
licenses, similar to  the way the state limits  liquor licenses in                                                              
the  state.   She  said  the potential  exists  for  the need  for                                                              
additional staff  in the  out years; however,  it is  difficult to                                                              
estimate  until  the  state  knows how  restrictive  or  open  the                                                              
industry might be and what the level of interest might be.                                                                      
4:25:21 PM                                                                                                                    
REPRESENTATIVE HUGHES  asked for the  number of inquiries  she has                                                              
had plus any  feedback on inquiries that Colorado  has experienced                                                              
as compared to the number of businesses that have opened.                                                                       
MS. FRANKLIN  explained that  the closest analogy  population-wise                                                              
to  Alaska would  be  the City  of Denver,  which  issues its  own                                                              
marijuana   licenses.     The  City  of   Denver  anticipated   an                                                              
additional  16 employees,  but they  added 21  more for next  year                                                              
bringing the  total to  37.5 fulltime  employees for a  population                                                              
of 650,000,  serving approximately  900 marijuana  licenses.   She                                                              
compared the  types of employees,  and said that depending  on how                                                              
the  licensing  process is  structured  there  could be  a  fairly                                                              
urgent need  for additional  staffing in  future years.   However,                                                              
all of the  positions in the City  of Denver were fully  funded by                                                              
the  tax revenues  received from  regulating the  substance.   She                                                              
reported that  Denver collected over  $6 million in 2014  with the                                                              
37.5 fulltime employees,  with the cost to the city  at about $4.5                                                              
million.   She suggested that in  moving forward to  establish the                                                              
industry,  given that  it  may be  easier  to  ask for  additional                                                              
staffing once the tax revenue becomes apparent.                                                                                 
4:27:46 PM                                                                                                                    
REPRESENTATIVE  LEDOUX asked  whether  the City  of  Denver has  a                                                              
similar board that oversees alcohol.                                                                                            
MS.  FRANKLIN   explained   that  the  state   has  10   employees                                                              
statewide, including  5 enforcement officers   The  City of Denver                                                              
regulates marijuana  through its  Division of Revenue,  regulating                                                              
alcohol,  marijuana, and  gaming without  a board.   She said  the                                                              
marijuana enforcement  division  employees 55 fulltime  employees,                                                              
of which about half are investigators.                                                                                          
4:28:46 PM                                                                                                                    
REPRESENTATIVE LEDOUX  how many staff  the City of  Denver employs                                                              
to oversee the  alcohol industry, noting the city  may regulate it                                                              
differently than in  Alaska.  She recalled that Alaska  has 5 or 6                                                              
staff to assist the  ABC Board.  She asked to hone  in on how many                                                              
staff regulate  alcohol in  Denver to  help her determine  whether                                                              
the city was doing things more or less efficiently.                                                                             
MS. FRANKLIN  answered that she  did not have the  comparison, but                                                              
she has  reviewed the  State of  Washington's structure,  which is                                                              
similar  to Alaska's  system,  with a  liquor  control board  that                                                              
regulates  marijuana   and  alcohol.     She  reported   that  297                                                              
employees  cover regulations  of alcohol,  with approximately  120                                                              
assigned  to marijuana  licensing  and control.   For  comparison,                                                              
she  stated  that  Washington has  15,000  liquor  licenses,  with                                                              
significantly  more   people  working  on  alcohol   than  on  the                                                              
marijuana industry  with fewer licensees.   She used  Washington's                                                              
figures to  help her determine  staffing for marijuana  control in                                                              
Alaska, noting  that Alaska has  10 staff assigned to  the alcohol                                                              
regulation, and  potentially will  be adding six  employees, which                                                              
she said seemed fairly even.                                                                                                    
CHAIR OLSON  requested the  information be  sent to the  committee                                                              
so it can be posted and distributed to committee members.                                                                       
4:31:00 PM                                                                                                                    
REPRESENTATIVE  COLVER  asked  about   timing  of  the  regulation                                                              
MS.  FRANKLIN answered  that  the  marijuana initiative  gave  the                                                              
Department of Commerce,  Community & Economic  Development (DCCED)                                                              
nine months  from February  24, 2015  to get regulations  approved                                                              
by  the board,  whether it  happens within  the ABC  Board or  the                                                              
Marijuana  Control  Board  (MCB).   She  anticipated  the  process                                                              
would  begin  as   soon  as  session  ends,  once   the  statutory                                                              
framework  is known.    Further, she  reported  that Colorado  and                                                              
Washington,  who have marijuana  programs,  have been helping  and                                                              
will continue  to help Alaska.   In addition, she  has information                                                              
from the  Title 4 revisions to  review, all of which  represents a                                                              
good  starting  place.    The ABC  Board  released  a  preliminary                                                              
document so it has a good start, she said.                                                                                      
4:32:38 PM                                                                                                                    
REPRESENTATIVE  COLVER asked  about concepts  for a definition  of                                                              
public place.                                                                                                                   
MS.  FRANKLIN answered  that the  ABC  Board met  in an  emergency                                                              
meeting on  February 24, 2015 and  defined public place  using the                                                              
definition from  Title 11, AS 11.81.900  (53).  The  board defined                                                              
the term  "in public" as  given in AS  17.38.040 and has  used the                                                              
definition in Title  11 for "public place" for  the prohibition of                                                              
consumption of  marijuana "in  public."  She  stated that  the ABC                                                              
Board  will  meet  again  on  April   9,  2015  in  the  Anchorage                                                              
Legislative Information  Office (LIO) to take public  testimony on                                                              
whether  to  make  that  regulation   permanent.    She  said  she                                                              
received  some   initial  feedback   that  the  definition   could                                                              
potentially shut  down the possibility  of businesses  ever having                                                              
Cannabis cafés,  in which  businesses could  invite members  in to                                                              
smoke marijuana  together.   The overlay  of smoking  prohibitions                                                              
in   many  communities   in  Alaska   makes  it   a  second   year                                                              
consideration  since  the  MCB   board  would  like  to  put  some                                                              
baseline rules  in first, prior  to making decisions on  the types                                                              
of  businesses  that  will  be   allowed.    She  said  that  both                                                              
Washington  and  Colorado  have  struggled with  this  issue,  but                                                              
started  with  the  position  of  not  including  those  types  of                                                              
businesses in their initial regulations.                                                                                        
4:34:59 PM                                                                                                                    
REPRESENTATIVE  KITO related  his understanding  that the  initial                                                              
concept was to  regulate marijuana like alcohol,  but he suggested                                                              
some significant  differences  exist in the  way these  businesses                                                              
operate.     For   example,  marijuana   would  have   production,                                                              
manufacturing,  testing,  and sales  functions,  he said,  stating                                                              
that Alaska  has sales  types of  businesses  in alcohol,  but the                                                              
department  does  not  anticipate   allowing  "consume  in  place"                                                              
businesses.   Currently,  the  state  doesn't have  statutes  that                                                              
govern the four  types of [marijuana] businesses.   He stated that                                                              
the  board  structure  was  meant to  regulate  the  licensing  of                                                              
marijuana;  however, at this  point, the  state doesn't  know much                                                              
about the proposed marijuana businesses.                                                                                        
REPRESENTATIVE  KITO anticipated  that the  board would  initially                                                              
spend  most of  its  time developing  regulations.   He  expressed                                                              
concern over a lack  of expertise identified on the  board for the                                                              
start-up period.   During this initial  period, the board  will be                                                              
generating   significant   new   regulations  that   will   govern                                                              
operations  of businesses,  yet  the  state doesn't  know  exactly                                                              
what it  will need to  regulate.  He  asked whether the  state can                                                              
identify who  should be  on board  and if the  state would  need a                                                              
transition  phase  to  provide   expertise  to  board  members  in                                                              
developing  regulations   that  will   allow  for  the   effective                                                              
operation of the marijuana businesses.                                                                                          
MS.  FRANKLIN   answered  that   under  the  ballot   measure,  AS                                                              
17.38.110 would give  the ABC Board regulatory  authority unless a                                                              
separate board was  created and it does outline the  four types of                                                              
licenses,  including  manufacturing  or  cultivating,  processing,                                                              
retail,  and  testing  facilities.    She  acknowledged  AS  17.38                                                              
provided  a sketchy outline  of the  four types  of licenses.   In                                                              
terms  of composition  of  the  proposed Marijuana  Control  Board                                                              
(MCB)  and  representation   of  the  types  of   businesses,  she                                                              
reported  that   in  Title  4   manufacturing  was  kept   out  of                                                              
representation on  the ABC board,  primarily with the  way alcohol                                                              
regulation developed  over the years as a tiered system.   She was                                                              
unsure on whether  a similar tiered system would  be developed for                                                              
marijuana;  however, the  differences between  the two  substances                                                              
makes it unlikely.   In fact, prohibition has not  been written in                                                              
as an  industry tier.   Theoretically,  the proposed board  member                                                              
industry  representatives in  HB  123 could  be representative  of                                                              
any of the four  types of licensees.  Initially,  it might present                                                              
some  challenges  to  identify  industry  representation  for  the                                                              
board;  however, the  agency  has  not had  a  shortage of  people                                                              
coming  forward who  want  to be  part  of the  board.   Thus  the                                                              
governor  could evaluate  applicants, she  said.   Of course,  the                                                              
difficulty will arise  in finding an experienced  grower since the                                                              
industry is currently  illegal.  However, she has  some confidence                                                              
that  the voters'  will  in passing  the  ballot  measure will  be                                                              
honored and that  people will be able to openly  speak about their                                                              
experiences  in  the industry.    For  example, some  people  have                                                              
already  attested to  having acquired  experience of  40 years  as                                                              
growers  and  these  people  have  appeared  at  local  government                                                              
meetings in the Mat-Su valley, she said.                                                                                        
4:39:53 PM                                                                                                                    
MS. FRANKLIN  suggested that  the board will  be able  to identify                                                              
people in  the short  run who claim  to be  part of the  industry.                                                              
However, the  state will need to  get an industry going  before it                                                              
can  ascertain   this,  although   the  transition   sections  and                                                              
staggered terms  may enable the  governor to appoint  someone into                                                              
shorter term  board positions.   If  it turned  out that  a person                                                              
represented him/herself  as part of the industry, but  did not end                                                              
up having  the necessary  expertise, the  governor could  turn the                                                              
seat  over  to  another  person.    It  may  be  that  people  who                                                              
supported  the   ballot  measure   or  who  participated   in  the                                                              
Coalition for  Responsible Cannabis  Legislation (CRCL)  might not                                                              
necessarily   qualify  as   industry   representatives,  but   the                                                              
governor's selection  process can identify the  necessary business                                                              
background.    She  said  she  has   been  contacted  by  numerous                                                              
businesses  who have  expressed an  interest in  the industry  and                                                              
some  existing businesses  may provide  appropriate experience  to                                                              
fill one of the shorter-term appointments.                                                                                      
4:41:31 PM                                                                                                                    
REPRESENTATIVE KITO  said her response  helped, but  people simply                                                              
having the  desire to serve doesn't  give him confidence  that the                                                              
potential  board   members  will  end  up  having   good  business                                                              
experience.    He  acknowledged  the  need  for  a  public  health                                                              
member, a  public safety  member, a general  public member,  and a                                                              
rural   member.      However,  by   statute   the   two   industry                                                              
representatives  do not need business  experience since  the state                                                              
doesn't have  a marijuana industry  in Alaska.  He  maintained his                                                              
concern that the  board might end up without the  board having the                                                              
expertise  to  develop  regulations  that will  regulate  all  the                                                              
types of businesses dispensing marijuana.                                                                                       
4:42:29 PM                                                                                                                    
CHAIR OLSON assured  members it was important to  spend sufficient                                                              
time on  the bill to  address concerns  and ensure the  regulatory                                                              
board and system was appropriate.                                                                                               
4:42:57 PM                                                                                                                    
CHAIR OLSON opened public testimony on HB 123.                                                                                  
4:43:14 PM                                                                                                                    
JAMES BARRETT  began his  testimony by  stating he was  interested                                                              
in  entry into  the marijuana  industry.   He  offered his  belief                                                              
that  Alaska  has   an  awesome  opportunity  to   establish  this                                                              
industry, recalling  that historically the state  has assisted new                                                              
industries, for  example, the state  helped establish  the fishing                                                              
industry.    A   black  market  once  existed   with  the  fishing                                                              
industry,  just   as  it  currently  exists  with   the  marijuana                                                              
industry.   He suggested  that the  Marijuana Control  Board (MCB)                                                              
members  will  help   bring  expertise,  but  he   emphasized  the                                                              
necessity of  doing it right  the first  time.  He  suggested that                                                              
it  was important  to have  marijuana  controlled separately  from                                                              
alcohol since the  substances are not the same,  although they can                                                              
be similarly  regulated.   He offered  his support  for this  bill                                                              
and  concluded   by  commending   Ms.  Franklin's  knowledge   and                                                              
CHAIR  OLSON agreed  Ms.  Franklin has  been  doing an  incredible                                                              
4:45:17 PM                                                                                                                    
ELLEN  GANLEY,  Member,  Alcoholic  Beverage  Control  Board  (ABC                                                              
Board), Department  of Commerce, Community &  Economic Development                                                              
(DCCED),  stated  that  substantial  discussion  has  occurred  on                                                              
whether it  would be best  to have one board  or two boards.   She                                                              
initially   thought  that   marijuana   should   fall  under   one                                                              
regulatory  board,  but  since   then  she  has  reevaluated  this                                                              
viewpoint,  in particular,  given the  amount of  work that  board                                                              
must  accomplish.   In  addition,  she has  been  involved in  the                                                              
current work of  the ABC Board, which oversees  1,800 licenses, as                                                              
well as during  the two years it  has taken to draft  a rewrite of                                                              
Title 4,  which will require significant  time to implement.   She                                                              
concluded that she believes it makes sense to have two boards.                                                                  
4:46:20 PM                                                                                                                    
KIM KOLE, Coalition  for Responsible Cannabis  Legislation (CRCL),                                                              
who  initially started  the  Anchorage  chapter of  CRCL,  offered                                                              
support  for HB  123,  which would  set  up a  separate  Marijuana                                                              
Control  Board (MCB)  under the  direction of  Ms. Franklin.   She                                                              
suggested that  this structure seemed  to make sense for  a number                                                              
of  reasons, including  reducing  financial  costs  by having  one                                                              
administrator  serve the  Marijuana  Control Board  (MCB) and  the                                                              
Alcoholic  Beverage  Control  Board   (ABC  Board),  and  to  help                                                              
identify  regulations  for  this  industry.   She  said  that  the                                                              
language  allows  up  to  two  board  members  who  represent  the                                                              
cannabis industry  to serve.   She encouraged members  support two                                                              
board  members from  the  industry, including  representatives  of                                                              
cultivators,  processors of non-consumables  such as  concentrates                                                              
and lotions,  processors of consumable  and edible products.   She                                                              
hoped that  ultimately retail stores,  beer gardens or  cafes will                                                              
sell  or serve  marijuana products.    Since the  industry is  son                                                              
bard,  no  one  person  can  know  all  aspects  of  the  cannabis                                                              
industry,  she  said,  which  emphasized  the  need  to  have  two                                                              
industry  representatives  on  the  board.   She  appreciated  the                                                              
importance  of the  business  perspective  and background  on  the                                                              
board;  however, she  argued  that it  wasn't  imperative to  have                                                              
someone with only  a business background since it  was possible to                                                              
have  an  array  of backgrounds  represented  by  people  who  are                                                              
really passionate about this new industry.                                                                                      
4:47:56 PM                                                                                                                    
FRANK   BERARDI,  Chair,   Coalition   for  Responsible   Cannabis                                                              
Legislation (CRCL),  offered the  CRCL's support  for HB 123.   He                                                              
said the  board supported having  a separate autonomous  Marijuana                                                              
Control  Board  (MCB)  housed  under the  same  framework  as  the                                                              
Alcoholic  Beverage Control  Board  (ABC Board),  directed by  Ms.                                                              
Franklin.    In   terms  of  the  vetting  process   for  industry                                                              
representatives, the  coalition believes that the  CRCL membership                                                              
has  extensive business  experience,  noting  that several  people                                                              
have an educational  background in business and  some have already                                                              
completed business  plans for this  venture.  The  coalition would                                                              
like  to see  the  process  be an  open  process that  will  allow                                                              
people  be  vetted for  the  positions.    He said  he  personally                                                              
supported initial  one-year terms  for board  members just  to see                                                              
how "this thing  shakes out."  In closing, he offered  support for                                                              
HB 123.                                                                                                                         
4:49:28 PM                                                                                                                    
GIONO BARRETT asked  to testify in support of HB 123.   He said it                                                              
was  a good  idea  to put  the  regulations in  the  hands of  the                                                              
Alcoholic  Beverage Control  Board (ABC  Board), especially  since                                                              
Ms. Franklin  and her staff  have done a great  job thus far.   He                                                              
stated that he  was registered for medical marijuana  and has been                                                              
a long-time  marijuana user.  He  offered his belief that  the key                                                              
to  the regulation  of the  industry  was education  since it  can                                                              
take  years  to  learn  the  industry.    He  suggested  that  Ms.                                                              
Franklin has  covered a  lot of information  really well,  that he                                                              
has an  interest in  the industry  and has found  her to  be "spot                                                              
on."    In  closing,  he said  he  would  trust  Ms.  Franklin  to                                                              
regulate marijuana properly.                                                                                                    
4:50:34 PM                                                                                                                    
GIRARD   GAUL,  Senior   Spokesman,   Coalition  for   Responsible                                                              
Cannabis  Legislation  (CRCL),  asked  to  support  HB  123.    He                                                              
further supported  having the Marijuana  Control Board (MCB)  as a                                                              
separate  committee  working  alongside   the  Alcoholic  Beverage                                                              
Control  Board  (ABC  Board)  under  Ms.  Franklin.    He  thanked                                                              
members for the  work on this bill and offered his  belief that HB                                                              
123 looked great.                                                                                                               
4:51:15 PM                                                                                                                    
BRUCE   SCHULTE,   Public   Relations   Manager,   Coalition   for                                                              
Responsible Cannabis  Legislation (CRCL), testified  in support of                                                              
HB  123.    He   said  that  historically  this   group  has  been                                                              
advocating  for   a  separate   Marijuana  Control   Board  (MCB);                                                              
however, given  the combined constraints  of schedule  and budget,                                                              
he believed  the hybrid board  would be  a terrific solution.   He                                                              
said he  has tremendous faith in  Ms. Franklin's ability  to guide                                                              
both   boards.     He  echoed   Ms.  Kole's   comments  on   board                                                              
representation,  noting  this  bill   would  allow  at  least  two                                                              
members with  experience to  serve on the  board.  He  pointed out                                                              
that the  schedule has  actually begun  on the regulatory  process                                                              
and  the  board  has  until  November  24  to  complete  it.    He                                                              
suggested that this [bill] has become the critical process.                                                                     
4:52:53 PM                                                                                                                    
BRANDON  EMMETT,  Executive Director,  Coalition  for  Responsible                                                              
Cannabis  Legislation (CRCL)  asked to  testify in  support of  HB                                                              
123.    He  suggested  that  HB  123  was  a  step  in  the  right                                                              
direction.   As Mr.  Schulte stated,  the CRCL's initial  position                                                              
was to  support a  completely autonomous  Marijuana Control  Board                                                              
(MCB), but  the CRCL now prefers  a hybrid board nested  under the                                                              
Alcoholic  Beverage Control  Board  (ABC Board)  to  help the  MCB                                                              
adopt regulations  and rules in  a timely fashion.   He emphasized                                                              
the importance of  having several board members  with expertise in                                                              
the  marijuana industry.   He  offered his  belief that  marijuana                                                              
industry  board members  will  be unfettered  by  any conflict  of                                                              
interest that  could affect  a board  member directly  involved in                                                              
the alcohol industry.                                                                                                           
4:54:24 PM                                                                                                                    
CHAIR OLSON said he would hold public testimony open on HB 123.                                                                 
[HB 123 was held over.]                                                                                                         
4:54:43 PM                                                                                                                    
There being  no further business  before the committee,  the House                                                              
Labor and  Commerce Standing  Committee meeting  was adjourned  at                                                              
4:54 p.m.                                                                                                                       

Document Name Date/Time Subjects
HB67 ver W.PDF HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Sponsor Statement.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Fiscal Note-LAW-CIV-03-06-15.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Supporting Documents-Letter CMI Construction.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Opposing Documents-Email John Deere 2-16-15.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Opposing Documents-Letter CNH Industrial 2-25-15.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Opposing Documents-Letter AEM 3-05-15.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Draft Proposed Blank CS ver E.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB67 Sectional Analysis for Draft Proposed Blank CS ver E.pdf HL&C 3/11/2015 3:15:00 PM
HB 67
HB123 Letter from DOA-OAH regarding fiscal note revision.pdf HL&C 3/11/2015 3:15:00 PM
HB 123
HB123 Fiscal Note-DCCED-ABC-03-09-15.pdf HL&C 3/11/2015 3:15:00 PM
HB 123
HB67 Opposing Documents-Email CNH Industrial with Letter 3-10-15.pdf HL&C 3/11/2015 3:15:00 PM
HB 67