Legislature(1995 - 1996)
02/28/1995 10:08 AM O&G
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS February 28, 1995 10:08 a.m. MEMBERS PRESENT Representative Norman Rokeberg, Chairman Representative Scott Ogan, Vice Chair Representative Gary Davis Representative Bill Williams Representative Tom Brice Representative Bettye Davis Representative David Finkelstein MEMBERS ABSENT All Members Present COMMITTEE CALENDAR HJR 26: Urging the United States Congress to uphold Alaska's right to 90 percent of the royalties from oil, gas, and coal leasing on state land as provided by the Statehood Compact adopted by a vote of the people of Alaska on April 24, 1956. PASSED OUT OF COMMITTEE WITNESS REGISTER None PREVIOUS ACTION BILL: HJR 26 SHORT TITLE: OIL & GAS ROYALTIES SPONSOR(S): REPRESENTATIVE(S) ROKEBERG, Ogan, Navarre JRN-DATE JRN-PG ACTION 02/01/95 197 (H) READ THE FIRST TIME - REFERRAL(S) 02/01/95 197 (H) WTR, O&G 02/14/95 (H) WTR AT 05:00 PM CAPITOL 408 02/14/95 (H) MINUTE(WTR) 02/16/95 405 (H) WTR RPT CS(WTR) 6DP 02/16/95 406 (H) DP: PHILLIPS, KUBINA, G.DAVIS 02/16/95 406 (H) DP: WILLIAMS, MULDER, BARNES 02/16/95 406 (H) 2 ZERO FISCAL NOTES (DNR, REV) 02/28/95 (H) O&G AT 10:00 AM CAPITOL 124 ACTION NARRATIVE TAPE 95-6, SIDE A Number 000 The House Special Committee on Oil & Gas was called to order by CHAIRMAN NORMAN ROKEBERG at 10:08 a.m. Members present at the call to order were Representative(s) Rokeberg, Brice, G. Davis, B. Davis, Finkelstein, Ogan, and Williams. HJR 26 - OIL & GAS ROYALTIES CHAIRMAN ROKEBERG stated there is a quorum was present and the committee will hear HJR 26, a resolution supporting Alaska's right to 90 percent of the royalties from oil, gas and coal leasing on federal properties in the state of Alaska. Number 011 CHAIRMAN ROKEBERG said as sponsor of the resolution, he will change hats and give members an explanation of the resolution. He asked if anyone was signed up to testify on the resolution and found none. He then read the following sponsor statement for the record: "HJR 26 is a statement by the Alaska Legislature that the United States cannot unilaterally amend the Statehood Act. Alaska has tried since statehood to avoid a confrontation over issues by working with Congress to ensure that any post-statehood amendments to the Statehood Act did not materially diminish the rights conferred to the State of Alaska by the act of admission into the United States. "There is no question that an act of Congress admitting a new state to the Union constitutes a compact, a legally enforceable contract, between the citizens of the new state and the United States. The first line of Section 4 of PL 85-508, the Alaska Statehood Act, states in part, `As a compact with the United States said State and its people do agree...' Provisions contained in this act that conferred rights to the State of Alaska are valid and can be enforced against the United States. "Section 28, (a) Mines and Mining, of the Alaska Statehood Act states clearly the formula for sharing business bonuses, royalties and rentals under leases shall be distributed 90 percent to the State of Alaska and 10 percent to the Treasury of the United States. 48 U.S.C. 439 dated October 20,1914, was amended to include the above formula. "HJR 26 seeks to reinforce the people of Alaska's resolve to protect our right to the 90-10 sharing formula granted by the United States Congress on July 7, 1958." Number 040 CHAIRMAN ROKEBERG said this issue is important to the committee because of the committee's recent passage of a resolution requesting the United States Congress to open area 1002 in the Arctic National Wildlife Refuge (ANWR) area for oil and gas exploration. At the time this resolution passed out of committee, it was the belief of the chair and the Congressional delegation that the resolution not mention the royalty provisions. There was discussion at that time about the royalty issue and it was decided that the royalty-sharing issue is extremely important to this committee and this legislature, and that the original resolution to open ANWR can be carried forward by the Congressional delegation. He said the committee wishes them success. Number 055 CHAIRMAN ROKEBERG mentioned the delegation should remember that the statehood compact creating Alaska provided for the additional sharing of revenues from federal lands to the state of Alaska. There were specific exceptions made at the time to grant the state of Alaska a greater share as provided for in Section 28, where the Congress amended the Mineral Leasing Act under the citation 30 U.S.C. 191. Chairman Rokeberg reminded the committee that their packets included both the existing code, as well as the historical background on what the code was prior to its latest amendment. Number 068 CHAIRMAN ROKEBERG requested the committee members turn to Appendix A in the bill packet. He pointed out Section 2 in Appendix A of the 1969 Opinion of the Attorney General Number 6, written by G. Kent Edwards to Congressman Aspinall on September 5, 1969, which includes language that was changed by the Statehood Act that provided for the sharing of revenues on all federal property to go 37.5 percent to all the states specifically for the construction of public schools, roads and other public educational institutions. The following is Section 2 of Appendix A: The federal legislation which was confirmed and amended by the Statehood Act, Sec. 28 (b). It provides that the State receives 90 percent of all money received by the United States pursuant to the mineral leasing laws in Alaska, 37 1/2 percent thereof for the construction of public roads or schools and 52 1/2 percent for the disposition of the State Legislature. 30 U.S.C. 191. Number 082 REPRESENTATIVE ROKEBERG referred to the amendment and said at the time of statehood, Congress reserved a special grant to the state of Alaska, namely 52.5 percent by amending the Mineral Act, which is 30 U.S.C. 191, so that the state could receive additional amounts of money. He asked the members to turn to page 10 of Opinion Number 6, and he then read the following two paragraphs of the opinion into the record: "The question which is raised by the conflict of the two percent royalty with the Alaska Statehood Act is the following." CHAIRMAN ROKEBERG interrupted the reading of the letter to say that the various opinions revolved around the granting of a two percent royalty in order for the state to move to the conclusion which ultimately became Alaska Native Claims Settlement Act (ANCSA) and resolved the sharing of revenues with the Native community of the state. So all these opinions and the research that relates to this act are focused on the two percent royalty sharing provision. CHAIRMAN ROKEBERG continued reading from page 10 of the Attorney Generals Opinion Number 6: "May the United States unilaterally enact legislation in direct conflict with the Statehood Act? The answer to this is that the United States may not constitutionally enact effective legislation in direct conflict with compact provisions of the Statehood Act unless there is an amendment to the Constitution of the state of Alaska because a Statehood Act constitutes a compact in the nature of a contract between the two sovereign governments." Number 123 CHAIRMAN ROKEBERG interpreted the opinion to say that the Congress of the United States cannot unilaterally change the law, from 90-10 to 50 percent without a constitutional change. He then read from a supplement to Opinion No. 6 which is not part of the package: "For Congress to unilaterally rewrite those terms would be to dishonor its grant of the royalty and to breach one of the conditions on which Alaska consented to be bound by the Statehood Act. This arrangement cannot be otherwise viewed than as a solemn compact between Alaska and the United States, which is entitled to the same constitutional protection afforded all such obligations." Number 136 CHAIRMAN ROKEBERG added that the above citation only emphasizes the nature of the compact. He noted that Opinion Number 6 was conveniently lost at the time other Attorney General Opinions were bound and then had to be located during the discussions surrounding the creation of Alaska National Interest Lands Conservation Act (ANILCA). An opinion from Attorney General Condon was included in the committee packets, which explains why Opinion Number 6 was not issued at the time John Havelock served as Attorney General. CHAIRMAN ROKEBERG asked the committee members to refer to an April 2, 1981, letter from Attorney General Wilson Condon to Hugh Malone, which states on page 2: "What is clear is that the Unites States cannot unilaterally amend the Statehood Act to the state's detriment without the state's consent or acquiescence." CHAIRMAN ROKEBERG then read from footnote 1, on page 2 of the letter: "No action was taken to ensure prompt resolution of pending Native claims. Governor Egan, on behalf of the state, consented to those amendments and the state did not litigate the issue within the time specified by Section 10 of ANCSA." CHAIRMAN ROKEBERG said that the Alaska Native Land Claims Settlement Act could have been found to be unconstitutional, but since the state acquiesced to it, there was no litigation and the act went forward. Number 186 CHAIRMAN ROKEBERG added that it is his opinion that if the 90-10 provision is not enforced, and if ANWR is ever opened up, a lawsuit could be brought by any citizen of the state that could hold up development of the refuge. He reminded the members that at the time of statehood, the people of Alaska relied on the royalty percentage in order to become a state. CHAIRMAN ROKEBERG then turned to the historical provision of 30 U.S.C. 191, and explained that presently, 50 percent rather than 52.5 percent, of all revenues go to the reclamation funds of other states and Alaska has reserved 40 percent in addition to that. The 37.5 percent which changed to 50 percent, and the 40 percent received by the state of Alaska then become the exception because of the change in the reclamation fund. He pointed out that Alaska is the only state in the union with an exception to this code. Number 217 CHAIRMAN ROKEBERG said that he, and Representatives Ogan and Navarre have offered this resolution for the committee's consideration. He then asked the members to refer to the second fiscal note, which states: "At current prices, discovery of a one billion barrel oil field with a conventional 12.5 percent royalty and the 90 percent royalty share would mean something on the order of $1.125 billion over the life of the field or as much as $125 million a year at peak production. A 50 percent share would reduce this to approximately $70 million a year. Regardless of royalty share, the state would continue to assess production taxes on any oil and gas produced within state sovereign territory." CHAIRMAN ROKEBERG noted that although this resolution would bring in money to the state, because of the speculative nature of the resolution, the fiscal note is zeroed out. He then closed his testimony on the resolution and asked if there was testimony from the audience. Hearing none, he closed the public testimony. CHAIRMAN ROKEBERG introduced an amendment to the resolution. Amendment 1: Page 1, line 3: delete "Statehood Compact" and insert "Alaska Statehood Act, approved by the United States Congress on July 7, 1958, in which the Congress accepted, ratified, and confirmed the Constitution of the State of Alaska previously." REPRESENTATIVE TOM BRICE expressed concern over whether the Mineral Leasing Act should be included in the resolution, considering that amendments were being made to the Mineral Leasing Act. REPRESENTATIVE ROKEBERG suggested the amendment be amended to cite the U.S. Code. He asked that the members label the second amendment, Amendment 2 and clarified that Amendment 1 simply clarifies the title of the resolution. He then asked if there was any discussion on Amendment 1. Number 288 REPRESENTATIVE OGAN moved to accept the first amendment as introduced. REPRESENTATIVE ROKEBERG said hearing no objections, it is so ordered. Amendment 1 was adopted. He then introduced Amendment 2: Page 2, Line 8, delete lines 8 and 9 and insert "WHEREAS, the Congress intended the 37 1/2 percent royalty be paid by the Unites States Treasury for the construction and maintenance of public roads, support of public schools or other public educational institutions; WHEREAS, the remaining 52 1/2 percent royalty shall be paid directly to the state of Alaska for disposition by the legislature in lieu of payment to the reclamation fund created by Congress;" Number 309 REPRESENTATIVE BRICE suggested the amendment be amended to add "(30 U.S.C. 191)" after the word "Congress" in paragraph one and insert "as set forth in 30 U.S.C. 191" after the word "royalty" in the second paragraph. He then suggested the first WHEREAS be amended to mention that the Mineral Leasing Act is amended. REPRESENTATIVE ROKEBERG added that the act is confusing and the Mineral Leasing Act could be referred to in the resolution to clarify it. REPRESENTATIVE OGAN restated the amendments and REPRESENTATIVE BRICE AND CHAIRMAN ROKEBERG clarified that the words "Mineral Leasing Act (30 U.S.C. 191)" be inserted after line 7 of the resolution. Hearing no objections, it was so ordered. CHAIRMAN ROKEBERG entertained a motion to move Amendment 2. REPRESENTATIVE GARY DAVIS moved Amendment 2. Hearing no objections, it was so ordered. REPRESENTATIVE G. DAVIS asked why page 2 line 17 included the word "coerce," because it implies that the United States is trying to be coercive. Number 419 REPRESENTATIVE BRICE said that line 16 clarifies the question because it specifically states "in the attempt," meaning, in the future, if there are attempts to coerce the state, versus present or past. CHAIRMAN ROKEBERG thanked REPRESENTATIVE BRICE for clarifying the matter. REPRESENTATIVE DAVIS asked REPRESENTATIVE ROKEBERG if use of the word "coerce" was considered before he arrived at the committee meeting or in the drafting of the resolution. CHAIRMAN ROKEBERG responded that the word was considered while drafting the resolution, but that any help in clarifying the resolution would be appreciated. REPRESENTATIVE G. DAVIS asked the committee to suggest adding less threatening words to replace "coerce." REPRESENTATIVE BRICE said that the word "coercion" has specific implications that is "forcing the state to accept something less" and that it doesn't have. The type of attempt to get the state to accept revisions to the 90-10, could be described as an act of coercion, such as, for example, if Congress tries to take away our federal highway funds. REPRESENTATIVE ROKEBERG asked for further discussion. REPRESENTATIVE BETTYE DAVIS asked that REPRESENTATIVE G. DAVIS read the statement he is considering might replace the word "coerce." Number 482 REPRESENTATIVE G. DAVIS read his suggestion: "Be it resolved that any attempts by the U.S. Congress or the President of the United States to consider or impose on the state of Alaska, anything less than what was promised at statehood, penalizes the people of Alaska." REPRESENTATIVE G. DAVIS said that the word "coerce" might give other legislators concern on the floor. CHAIRMAN ROKEBERG lead discussion about the merits of the words "coerce" and "impose." REPRESENTATIVE G. DAVIS moved that "to coerce" be deleted on Page 2, line 17, and the words "to impose" be added. REPRESENTATIVE BRICE stated his objection to the amendment. REPRESENTATIVE G. DAVIS clarified that the language would be "of the United States, imposed on the state of Alaska anything less." Number 560 CHAIRMAN ROKEBERG said hearing no objections, the amendment is adopted. He asked if there were any additional amendments. He then entertained a motion to move CS for HJR 26 (Oil & Gas), as amended with individual recommendations, and accompanying fiscal notes. Hearing no objections, the resolution was passed out of committee. ADJOURNMENT CHAIRMAN ROKEBERG adjourned the meeting at 10:53 a.m.