Legislature(1997 - 1998)

04/24/1997 08:35 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
    JOINT HOUSE SPECIAL COMMITTEE ON OIL AND GAS/                              
         HOUSE RESOURCES STANDING COMMITTEE                                    
                   April 24, 1997                                              
                      8:35 a.m.                                                
OIL & GAS MEMBERS PRESENT                                                      
Representative Mark Hodgins, Chairman                                          
Representative Scott Ogan                                                      
Representative Norman Rokeberg                                                 
Representative Joe Ryan                                                        
Representative Con Bunde                                                       
Representative Tom Brice                                                       
Representative J. Allen Kemplen                                                
OIL & GAS MEMBERS ABSENT                                                       
All members present                                                            
RESOURCES MEMBERS PRESENT                                                      
Representative Bill Hudson, Co-Chairman                                        
(Representative Scott Ogan, Co-Chairman)                                       
Representative Joe Green                                                       
Representative Irene Nicholia                                                  
Representative Reggie Joule                                                    
RESOURCES MEMBERS ABSENT                                                       
Representative Beverly Masek, Vice Chair                                       
Representative Ramona Barnes                                                   
Representative William K. ("Bill") Williams                                    
Representative Fred Dyson                                                      
COMMITTEE CALENDAR                                                             
* HOUSE BILL NO. 250                                                           
"An Act establishing a North Slope Gas Commercialization Team to               
develop recommendations regarding a North Slope gas project; and               
providing for an effective date."                                              
     - MOVED CSHB 250(O&G) OUT OF COMMITTEE                                    
(* First public hearing)                                                       
PREVIOUS ACTION                                                                
BILL:  HB 250                                                                  
SHORT TITLE: NORTH SLOPE GAS COMM. TEAM                                        
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                   
JRN-DATE      JRN-PG                 ACTION                                    
04/14/97      1099    (H)   READ THE FIRST TIME - REFERRAL(S)                  
04/14/97      1100    (H)   OIL & GAS, RESOURCES, FINANCE                      
04/14/97      1100    (H)   FISCAL NOTE (REV)                                  
04/14/97      1100    (H)   GOVERNOR'S TRANSMITTAL LETTER                      
04/22/97              (H)   RES AT 8:30 AM BUTROVICH RM 205                    
04/22/97              (H)   O&G AT 8:30 AM BUTROVICH RM 205                    
04/22/97              (H)   MINUTE(O&G)                                        
04/22/97              (H)   MINUTE(RES)                                        
04/24/97              (H)   RES AT 8:30 AM BUTROVICH RM 205                    
04/24/97              (H)   O&G AT 8:30 AM BUTROVICH RM 205                    
WITNESS REGISTER                                                               
WILSON L. CONDON, Commissioner                                                 
Department of Revenue                                                          
P.O. Box 110400                                                                
Juneau, Alaska  99811-0400                                                     
Telephone:  (907) 465-2300                                                     
POSITION STATEMENT:  Presented HB 250 on behalf of the department              
                     and the Administration.                                   
ACTION NARRATIVE                                                               
TAPE 97-20, SIDE A                                                             
Number 0001                                                                    
CHAIRMAN MARK HODGINS called the Joint House Special Committee on              
Oil and Gas/House Resources Standing Committee meeting to order at             
8:35 a.m.  Present at the call to order from the House Special                 
Committee on Oil and Gas were Representatives Hodgins, Rokeberg,               
Ryan, Brice and Ogan.  Representatives Kemplen and Bunde joined the            
meeting at 8:37 a.m. and 8:50 a.m., respectively.  From the House              
Resources Standing Committee, Representative Joule joined the                  
meeting shortly after the call to order, and Representatives Green,            
Hudson and Nicholia joined the meeting at 8:38 a.m., 8:39 a.m. and             
8:55 a.m., respectively.  Representative Ogan is a member of both              
HB 250 - NORTH SLOPE GAS COMM. TEAM                                            
CHAIRMAN HODGINS announced the purpose of the joint meeting was to             
hear House Bill No. 250, "An Act establishing a North Slope Gas                
Commercialization Team to develop recommendations regarding a North            
Slope gas project; and providing for an effective date."  He                   
advised there was a proposed committee substitute.                             
Number 0021                                                                    
REPRESENTATIVE SCOTT OGAN made a motion to adopt as a work draft               
version 0-GH0110\F, Chenoweth, 4/23/97.  There being no objection,             
the committee substitute was before the House Special Committee on             
Oil and Gas.                                                                   
Number 0036                                                                    
CHAIRMAN HODGINS briefly discussed changes in the committee                    
substitute.  It reduced the size of the North Slope                            
Commercialization Team.  In addition, it set up a deadline of                  
January 12, 1998, and a sunset provision for that same date.                   
Number 0046                                                                    
WILSON L. CONDON, Commissioner, Department of Revenue, came forward            
to present the bill on behalf of the department and the                        
Administration.  The original version was intended to address a                
couple of specific issues in terms of proceeding, as the                       
legislature indicated it wanted the Administration to proceed, as              
a consequence of passage of CSHCR 1(WTR) this year.  He said to                
move the proposal along as that resolution contemplated, a lot of              
work needs to be done by the executive branch in working with                  
various interested private parties.                                            
COMMISSIONER CONDON said to expedite that process, they believe it             
is important to make absolutely clear how the public records act               
and the public meetings act would apply to that work effort.  That             
is the main problem the bill addresses.  They believe it is                    
important, with respect to records made available to the executive             
branch to pursue this work, that they clearly be authorized by the             
legislature to receive information and documents that can be                   
maintained in a confidential status.  Although they believe they               
currently have that authority, it is not crystal clear.                        
Number 0099                                                                    
COMMISSIONER CONDON said the public meetings act is designed to                
deal with a "particular kind of animal that gets created in the                
government process," a deliberative body that deliberates and                  
votes, or an advisory body that is constituted to make                         
recommendations as a consequence of a deliberative process.  He                
stated, "And unfortunately, what happens from time to time is that             
folks get together and give themselves names, and then the question            
of whether or not the public meetings act applies gets litigated."             
He cited an example that occurred while he was working in the                  
Office of the Attorney General.                                                
COMMISSIONER CONDON noted that provisions of the public meetings               
act requiring advance notice and imposing procedural requirements              
are appropriate for a deliberative body that will take testimony or            
vote.  However they do not fit well with "a bunch of people that               
you're hoping will work expeditiously to get a job done."  Putting             
notices in journals and buying advertisements in newspapers around             
the state in order to meet and get work done is not what they                  
expect from a group of executive branch people who are "tasked"                
with putting together the kind of package that the legislative                 
resolution contemplates.                                                       
COMMISSIONER CONDON said what the Governor's proposed bill and the             
committee substitute do, on this front, are the same.  They                    
identify a group of people who have a specific job to do and make              
it clear how the public records act and the public meetings act                
apply to that particular job.  With respect to proposed changes in             
the committee substitute, the Administration still favors the more             
expanded list of participants proposed in the original bill.  He               
advised that the time frames changed in the committee substitute               
are fine.                                                                      
Number 0159                                                                    
COMMISSIONER CONDON discussed the fiscal note, which totals                    
$238,000.  First of all, they believe it is important to continue              
using Dr. Pedro van Meurs as they put this package together.                   
Commissioner Condon referred to a visit here by Dr. van Meurs,                 
whose specialty is advising governments that are trying to                     
structure their fiscal system to best position themselves in the               
oil and gas market in the world today.  As Dr. van Meurs has                   
conducted a study focusing on this project, Commissioner Condon                
believes it makes sense to continue to use him.                                
COMMISSIONER CONDON advised that the state would really be buying              
Dr. van Meurs' time; they do not contemplate another study but                 
putting together a package.  He believes Dr. van Meurs' advice in              
putting that together and his availability to come and talk about              
what the state has and has not done, and to explain to the                     
legislature "where we are on the map," is important.  They estimate            
that several days a month of Dr. van Meurs' time over a year, plus             
the cost of bringing him up here to work "with you and with us,"               
would cost $75,000.                                                            
Number 0195                                                                    
COMMISSIONER CONDON stated, "We believe that, somewhere along the              
line, you and we are going to want to have a focused, responsible              
socioeconomic study that asks and answers the question, or puts the            
information on the table, I think is a better way to put it, with              
respect to the fiscal modifications that we might be proposing.                
How does that line up with respect to the costs that a project like            
this would impose on the transportation, governmental and social               
infrastructure that would have to be maintained for a construction             
project like this?"                                                            
COMMISSIONER CONDON continued, "We all are fearful that a                      
socioeconomic study focused on a large project like this could                 
become a black hole in terms of spending a lot of money.  I                    
believe, and our fiscal note is based on that belief, that it makes            
sense to plan to do that now and do it in a very focused way.  And             
we believe we can do that in terms of what this fiscal note                    
contains.  It's a figure of $75,000 to do that."                               
Number 0221                                                                    
COMMISSIONER CONDON said a temporary staff person has been working             
full time for a good part of this year doing analytical work                   
pertaining to this project.  They would like to keep him on staff              
until next year.  Again, they have made an investment in that                  
person and his work; they believe it would be cost-effective to                
continue to make use of what he knows and can do.  The amount in               
the fiscal note reflecting the cost of keeping him on, in a                    
temporary status, is $50,000.                                                  
COMMISSIONER CONDON advised that the last item in the fiscal note              
is travel.  He said to the extent they must deal with commercial               
parties, "they can come to us just as well as we can go to them."              
However, staff in Anchorage and Juneau must get together from time             
to time.  It is not yet cost-effective to use video conferencing               
for a small number of people.  In addition, they hope to interest              
the federal government in taking steps to help promote this                    
COMMISSIONER CONDON said the entity that walks away with "the most             
money in their jeans" as a consequence of this project is the                  
federal treasury, which can make relatively small up-front                     
adjustments that would dramatically change the economics of the                
project.  Trying to interest them in doing that is very much in                
their interest and the state's.  But to do so requires travel to               
Washington, D.C., which they believe is absolutely necessary.                  
Number 0270                                                                    
REPRESENTATIVE JOE GREEN asked whether the estimate of one year was            
predicated on the estimated amount of work.  He further asked                  
whether that could be compressed into one-half year because of the             
sunset provision.                                                              
COMMISSIONER CONDON replied, "It is my belief that if we come                  
forward with this package, that members of the legislature are                 
going to want to spend some, and maybe a significant amount of,                
time with Dr. van Meurs if we have used him to help put this                   
together.  And so by the time we think about the likely legislative            
deliberations that would go on with respect to this package, it                
really takes it out to a full year."                                           
COMMISSIONER CONDON said they are very hopeful the work would be               
done to bring before the legislature at the beginning of the                   
session.  It is entirely possibly the legislature would take care              
of it in the first couple of weeks.  However, his own experience               
has been that things like this often take time.                                
Number 0293                                                                    
REPRESENTATIVE GREEN said his concern was not so much with the                 
amount of time or money relating to Dr. van Meurs.  He asked                   
whether the hope of having it by the first of the session is                   
COMMISSIONER CONDON replied, "Yes, it is a very strong hope.  It               
depends on, as we work through, whether what we bring to you is an             
agreement among representatives of the state and representatives of            
the commercial parties.  And if what's expected from us at that                
point is an agreement, then we can't make other people agree.  On              
the other hand, in terms of getting our own work done, we'll have              
it done."                                                                      
Number 0307                                                                    
REPRESENTATIVE BILL HUDSON said he has seen little about potential             
changes in the federal tax structure or other federal changes.  He             
asked whether Commissioner Condon had held preliminary discussions             
with the congressional delegation in that regard.                              
COMMISSIONER CONDON indicated although they had held fairly                    
extensive discussions, he did not want to say much about them.                 
Number 0321                                                                    
REPRESENTATIVE TOM BRICE asked about the appropriateness of                    
charging this team to also make recommendations to the federal                 
delegation, as well as trying to have some of those changes dealt              
with in the current congress.  He suggested it was necessary to get            
the ball rolling as soon as possible.                                          
Number 0332                                                                    
COMMISSIONER CONDON replied, "We agree that it's important to move             
now, and we intend to do so."                                                  
REPRESENTATIVE BRICE stated, "I see a lot of charges for this                  
commercialization team, and some of those charges deal with the                
state issues.  I don't see where you're being, or asking to be,                
authorized to go to congress on some of this stuff too, and whether            
or not this is the appropriate vehicle for that."                              
COMMISSIONER CONDON responded, "I believe we have the authority to             
do that, although it's not spelled out here."  He said this hooks              
up to the job the executive branch has been told to do.                        
Number 0349                                                                    
REPRESENTATIVE CON BUNDE asked how spending another $238,000 would             
change what the Administration is already "tasked" to do.                      
Number 0354                                                                    
COMMISSIONER CONDON replied, "You have asked us to move this matter            
along on a fast track.  And in terms of the resources that are                 
available to do that, we don't have, and here I am the commissioner            
of Revenue, which is hardly, under normal circumstances, what you              
would think of as the center of an effort to try to bring a gas                
project into being.  And the only reason that it's centered in the             
Department of Revenue is because it happens to be something that               
I'm very interested in and know a fair amount about."                          
COMMISSIONER CONDON continued, "We don't have the resources in our             
department's budget ... to pay for the continued service of Dr. van            
Meurs, and I think that that is ... every bit as important for the             
legislative deliberations on this as it is for the work that the               
executive would do.  Similarly, I think that moving now to do a                
socioeconomic study, if we get in and do a good job and do it                  
efficiently, we're likely to get what we want for something like               
the amount I've talked about, rather than spending a half a million            
dollars or a couple of million dollars, which is what I think it               
might well turn into if we do it a couple of years down the line."             
He said that is a judgment call.  In terms of travel, again, the               
kind of traveling that goes to get this job done is not budgeted               
for him or his staff.                                                          
Number 0379                                                                    
REPRESENTATIVE BUNDE commented that the bill and increased funding             
are predicated on speeding up the process.  He suggested if they               
were less concerned about that, normal state functions could be                
Number 0385                                                                    
COMMISSIONER CONDON said Representative Bunde was partially                    
correct.  In terms of the temporary staff position, their own staff            
could do that over a longer time.  In terms of having an outside               
consultant like Dr. van Meurs, which he believes is necessary, that            
money must be spent somewhere along the line.  Similarly, a                    
socioeconomic study is something the staffs of several agencies                
could do over time.  However, he believes it will be treated as                
more credible if done by a contractor.  In his experience with                 
energy project proposals and developments, they had always turned              
to an outside contractor to pull that sort of thing together.                  
Number 0401                                                                    
REPRESENTATIVE GREEN asked whether they ran the chance that either             
bill infringes upon jurisdictional boundaries.  Although passed by             
the legislature, they direct members of the executive branch to                
COMMISSIONER CONDON stated his belief that it is perfectly                     
appropriate for the legislature to "tell the executive to go get a             
job done."                                                                     
Number 0409                                                                    
REPRESENTATIVE GREEN noted that it does not request something of               
the Governor but specifies parts of his staff.  Although a great               
idea, he wonders whether it is treading on thin ice.                           
COMMISSIONER CONDON replied that there is a point where                        
micromanaging crosses over into the realm of the executive.  "I                
just don't think that's true here," he stated.                                 
Number 0416                                                                    
REPRESENTATIVE REGGIE JOULE referred to the make-up of the team.               
He asked Commissioner Condon to address how the difference between             
the two bill versions may affect the outcome.                                  
COMMISSIONER CONDON replied that it is a judgment call.  The two               
commissioners in the Governor's bill that were removed in the                  
committee substitute are from the Department of Labor and the                  
Department of Commerce and Economic Development (DCED).  The                   
commissioner of the former was included because of the shared                  
policy goal between the executive and legislative branches to try              
to maximize opportunities for Alaskan hire.  If that commissioner              
is not included, they will still turn to the commissioner to pursue            
that objective.                                                                
COMMISSIONER CONDON said they are talking about promoting the                  
export of an Alaska resource into a foreign market; that area has              
been the responsibility, over the last couple of decades, of the               
DCED, which is therefore included.  If that commissioner is not on             
the task force, they would still turn to the DCED for their                    
expertise and contribution.                                                    
COMMISSIONER CONDON acknowledged having too many people in the                 
process could slow it down.  He said he understands that judgment              
call.  Although he did not know whether that was the consideration             
for the committee substitute, it was a consideration in drafting               
the bill.                                                                      
Number 0450                                                                    
CHAIRMAN HODGINS asked how focused the socioeconomic study would be            
and on what areas.                                                             
COMMISSIONER CONDON replied that it should pull together the                   
material and allow legislators and interested citizens to weigh the            
costs and benefits of making changes in the fiscal system against              
the effects of a large construction project.  It should take                   
maximum advantage of what happened when the oil pipeline was                   
constructed and what people want to happen differently this time.              
If that information is pulled together correctly, then citizens and            
legislators can decide whether it is worth it.                                 
Number 0473                                                                    
CHAIRMAN HODGINS asked whether anyone else wished to testify.  He              
suggested keeping the fiscal note as-is, as any adjustments could              
be made in the House Finance Committee.                                        
Number 0482                                                                    
REPRESENTATIVE BRICE stated his wish, given the focus of the                   
committee substitute on Alaskan hire and the safety of Alaskan                 
workers, to discuss whether the commissioner of the Department of              
Labor should be added back in.  He asked whether there was a                   
particular reason that department was removed.                                 
CHAIRMAN HODGINS replied that their philosophy was keeping the team            
as small and concise as possible, understanding that, as                       
Commissioner Condon said, they will utilize other departments for              
needed information.  The emphasis was on getting the agreement,                
finding out who the producers and players were, and going forward.             
This will come back for review with the legislature, and there will            
be time for interaction between other departments.                             
Number 0501                                                                    
REPRESENTATIVE BRICE agreed the smaller the team, the more                     
successful they will be.  He advised that he would not offer an                
amendment to add back the commissioner of the Department of Labor              
but would bring it up at another time.  He stated that to have a               
good representation of Alaskan workers on this team, it is                     
important to consider adding the Department of Labor, specifically             
as an advocate to hire Alaskan workers and use Alaskan businesses.             
Number 0511                                                                    
CHAIRMAN HODGINS suggested there would be plenty of opportunity to             
make those adjustments in the future.                                          
Number 0513                                                                    
CO-CHAIRMAN OGAN said they need to know they have a project and                
that the players are identified before negotiating labor                       
agreements.  At the appropriate time, they would be brought into               
the loop.                                                                      
REPRESENTATIVE HUDSON commented that if they were trying to put                
together a team that can analyze the Alaskan hire situation or                 
major public policy changes, such as changes in state or federal               
tax structures, it would be wise to think of the Alaska Industrial             
Development and Export Authority (AIDEA), because this is the kind             
of thing they do.                                                              
REPRESENTATIVE HUDSON stated, "And I think, Mr. Chairman, somewhere            
before we're done here, there ought to be at least somebody from               
the House and somebody from the Senate on an ad hoc basis, not                 
necessarily a part of the ongoing day-to-day, but so that the                  
legislature, who is ultimately going to have to vote on the public             
policy issues here, as to whether or not it's in our best interest             
to make these recommendations to the full body next year, that we              
have a representation as it develops."  He advised that those were             
issues he and Co-Chair Ogan could look at in the House Resources               
Standing Committee.                                                            
Number 0530                                                                    
CHAIRMAN HODGINS stated, "We looked at the idea of having just such            
a structure of ad hoc or actual members of the legislature sitting             
on this.  And we felt that there should be a division, a separation            
of powers.  The Administration would come forward with their                   
recommendations and we as a legislature will hear it."  He                     
indicated as chairman, he intends to hold meetings of the House                
Special Committee on Oil and Gas through the interim "and to be a              
monitor and a focus for a public forum for what is going on with               
the negotiations and with the commercialization team."                         
REPRESENTATIVE HUDSON responded that he had suggested ad hoc                   
members because the legislature would not be at the table.  He                 
expressed the hope that this would remain an open issue.                       
Number 0541                                                                    
CO-CHAIRMAN OGAN made a motion to move the committee substitute, 0-            
GH0110\F, Chenoweth, 4/23/97, from the House Special Committee on              
Oil and Gas, with the attached fiscal note and individual                      
recommendations.  He asked unanimous consent.                                  
Number 0544                                                                    
REPRESENTATIVE BUNDE objected.  He stated, "As I indicated by my               
earlier remarks, I don't see anything that this committee is going             
to do that couldn't be accomplished through the regular legislative            
process.  Certainly the socioeconomic study is something that ought            
to take place in committee and through the legislative process.                
The only reason in this day and age of cutting budgets to spend                
this extra money is if you buy into the notion that it's an extreme            
time limit here.  I do not.  I think these are not bananas that                
will go overripe and have to be thrown away.  I think our gas will             
increase in value in the foreseeable future, and I don't agree that            
we have to spend money and rush to judgment."                                  
Number 0552                                                                    
CO-CHAIRMAN OGAN stated his desire that the House Finance Committee            
scrutinize the fiscal note and address the spending.  "And I hope              
they make that absolutely minimum," he added.                                  
Number 0556                                                                    
CHAIRMAN HODGINS requested a roll call vote.  Voting for moving                
CSHB 250(O&G) out of committee were Representatives Brice, Ryan,               
Ogan and Hodgins.  Voting against it was Representative Bunde.                 
Representatives Kemplen and Rokeberg were absent.  So CSHB 250(O&G)            
moved out of the House Special Committee on Oil and Gas.                       
Number 0562                                                                    
CHAIRMAN HODGINS adjourned the Joint House Special Committee on Oil            
and Gas/House Resources Standing Committee meeting at 9:18 a.m.                

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