Legislature(1997 - 1998)

03/19/1998 10:10 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
       HOUSE SPECIAL COMMITTEE ON OIL AND GAS                                  
                   March 19, 1998                                              
                     10:10 a.m.                                                
                                                                               
                                                                               
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                                                
                                                                               
MEMBERS ABSENT                                                                 
                                                                               
All members present                                                            
                                                                               
COMMITTEE CALENDAR                                                             
                                                                               
HOUSE BILL NO. 393                                                             
"An Act relating to contracts with the state establishing payments             
in lieu of other taxes by a qualified sponsor or qualified sponsor             
group for projects to develop stranded gas resources in the state;             
providing for the inclusion in such contracts of terms making                  
certain adjustments regarding royalty value and the timing and                 
notice of the state's right to take royalty in kind or in value                
from such projects; relating to the effect of such contracts on                
municipal taxation; and providing for an effective date."                      
                                                                               
     - HEARD AND HELD                                                          
                                                                               
(* First public hearing)                                                       
                                                                               
PREVIOUS ACTION                                                                
                                                                               
BILL: HB 393                                                                   
SHORT TITLE: DEVELOP STRANDED GAS RESOURCES                                    
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                   
                                                                               
Jrn-Date    Jrn-Page           Action                                          
 2/11/98      2280     (H)  READ THE FIRST TIME - REFERRAL(S)                  
 2/11/98      2281     (H)  OIL & GAS, FINANCE                                 
 2/11/98      2281     (H)  2 FISCAL NOTES (DNR, REV)                          
 2/11/98      2281     (H)  GOVERNOR'S TRANSMITTAL LETTER                      
 2/19/98               (H)  O&G AT 11:00 AM CAPITOL 124                        
 2/19/98               (H)  MINUTE(O&G)                                        
 2/24/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 2/24/98               (H)  MINUTE(O&G)                                        
 2/26/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 2/26/98               (H)  MINUTE(O&G)                                        
 3/03/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/03/98               (H)  MINUTE(O&G)                                        
 3/05/98               (H)  MINUTE(O&G)                                        
 3/09/98      2578     (H)  RES REFERRAL ADDED                                 
 3/10/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/10/98               (H)  MINUTE(O&G)                                        
 3/12/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
 3/12/98               (H)  MINUTE (O&G)                                       
 3/19/98               (H)  O&G AT 10:00 AM CAPITOL 124                        
                                                                               
WITNESS REGISTER                                                               
                                                                               
PATRICK CARTER, Legislative Assistant                                          
  to Representative Hodgins                                                    
Alaska State Legislature                                                       
Capitol Building, Room 110                                                     
Juneau, Alaska  99801                                                          
Telephone:  (907) 465-2283                                                     
POSITION STATEMENT:  Testified on CSHB 393(O&G).                               
                                                                               
WILSON CONDON, Commissioner                                                    
Department of Revenue                                                          
P.O. Box 110400                                                                
Juneau, Alaska 99811                                                           
Telephone:  (907) 465-2300                                                     
POSITION STATEMENT:  Testified on CSHB 393(O&G).                               
                                                                               
ACTION NARRATIVE                                                               
                                                                               
TAPE 98-25, SIDE A                                                             
Number 0001                                                                    
                                                                               
CHAIRMAN MARK HODGINS called the House Special Committee on Oil and            
Gas meeting to order at 10:10 a.m.  Members present at the call to             
order were Representatives Hodgins, Ryan, Bunde and Kemplen.                   
Representatives Rokeberg, Ogan and Brice arrived at 10:15, 10:19               
and 10:20 a.m., respectively.                                                  
                                                                               
HB 393 - DEVELOP STRANDED GAS RESOURCES                                        
                                                                               
Number 0068                                                                    
                                                                               
CHAIRMAN HODGINS announced the committee would hear HB 393, "An Act            
relating to contracts with the state establishing payments in lieu             
of other taxes by a qualified sponsor or qualified sponsor group               
for projects to develop stranded gas resources in the state;                   
providing for the inclusion in such contracts of terms making                  
certain adjustments regarding royalty value and the timing and                 
notice of the state's right to take royalty in kind or in value                
from such projects; relating to the effect of such contracts on                
municipal taxation; and providing for an effective date."  He                  
stated that the meeting will be short due to a floor session.  He              
stated that the committee has previously adopted CSHB 393(O&G),                
version B and stated that there are several amendments.  He asked              
Patrick Carter to present the committee's amendments.                          
                                                                               
Number 0168                                                                    
                                                                               
PATRICK CARTER, Legislative Assistant to Representative Hodgins,               
stated that Amendment 1, that the committee is addressing is 0-                
GH2006\B.6, Glover, 3/19/98.  He stated that most of the changes               
are more word smithing.  He stated that he would point out some of             
the substantive changes.  Throughout the bill the term "enter into"            
is changed to "develop" because the executive branch is not                    
entering into the contract, the legislature is authorizing them to             
develop the contract.  He referred to page 10, line 20, delete                 
"enters into a contract" and insert "submits a contract to the                 
governor".  He stated that on page 16, line 31, insert a new                   
subsection to read: "(b) A contract developed under this chapter               
may provide for the assignment to or withdrawal of a qualified                 
sponsor or member of a qualified sponsor group."  He stated that on            
page 18, line 26, following "disclosure" insert "or is not in the              
long-term fiscal interests of the state".                                      
                                                                               
Number 0519                                                                    
                                                                               
REPRESENTATIVE JOE RYAN asked what would be kept confidential that             
is not in the long-term fiscal interests of the state.  He stated              
the legislature is conducting the public's business and he asked               
how would a public body keep things other than proprietary                     
information confidential.                                                      
                                                                               
MR. CARTER replied that there would be numerous aspects of the                 
contract that would need to be kept confidential.  He referred the             
question to Commissioner Condon.                                               
                                                                               
Number 0652                                                                    
                                                                               
WILSON CONDON, Commissioner, Department of Revenue, replied that is            
a policy call that the legislature can make.  It would permit the              
state to kept sensitive information to itself.  He stated that                 
there may be situations that the legislature will not want to                  
disclose regarding the deal.                                                   
                                                                               
Number 0732                                                                    
                                                                               
MR. CARTER referred to page 20, lines 21-23, delete all material               
and insert "submit the contract to the governor."  Page 21, lines              
4-8, delete all material and insert "previously submitted a                    
proposed contract to the governor, the".  He stated that on page               
21, line 9, delete "existing" and insert "currently proposed".  He             
stated that on page 23, lines 2-3, delete "The commissioner may not            
execute a contract developed under this chapter and a" and insert              
"The governor may transmit a contract developed under this chapter             
to the legislature together with a request for authorization to                
execute the contract. A".                                                      
                                                                               
Number 0864                                                                    
                                                                               
REPRESENTATIVE RYAN asked why are we giving the governor the                   
discretion on page 23, line 21-23.                                             
                                                                               
MR. CARTER replied that he believed it was in regards to a previous            
separation of power discussion.  The governor submits the contract             
to the legislation for ratification but is not required by law to              
do so.                                                                         
                                                                               
REPRESENTATIVE RYAN stated that in Alaska there is a public trust              
and the legislature is the trustee of the resources that belong to             
the people.  He stated that the primary duty of the trustee is to              
ensure the maximum benefit to the beneficiaries.  He stated that to            
allow the Governor and the commissioner to enter into a contract               
without having the legislature's final approval on it, negates the             
legislative authority and power.  It would allow the governor to               
dispose of the resource without the legislature's approval.  He                
stated that he does not want to be a part of that.                             
                                                                               
Number 0954                                                                    
                                                                               
COMMISSIONER CONDON replied that if the result of this proposed                
amendment where to lead to that result he would agree.  What the               
amendment does is it gives the Governor the discretion to not send             
the contract to the legislature "but it can not become effective               
unless the legislature -- the legislature retains the yes or no, no            
matter what -- this simply would authorize the governor, at the                
conclusion of this whole process to decide to stop but it would not            
result in a binding contract.  No way the contract would be binding            
unless the Governor exercises his discretion and sends it to the               
legislature and the legislature authorizes the signing."                       
                                                                               
REPRESENTATIVE RYAN stated that is now part of the public record               
and he would take his word for it.                                             
                                                                               
Number 1035                                                                    
                                                                               
MR. CARTER stated that on page 24, line 22, delete "each of the                
affected municipalities" and insert "municipality".  He stated that            
on page 26, lines 18-20, delete all material and insert "expects               
will be restricted from imposing a tax, or a portion of a tax, as              
a result of implementation of a contract developed under this                  
chapter".  He stated that the definition of economic proximity has             
been revised.  He stated that page 27, line 11, delete "uneconomic             
or uncompetitive to develop" and insert "not being marketed due to             
prevailing cost or price conditions".  He stated that on page 27,              
line 23, delete "with the commissioner of revenue under AS                     
43.82.010" and insert "approved by the legislature as a result of              
submission of a proposed contract developed under AS 43.82", this              
was duplicated through out the bill.                                           
                                                                               
Number 1222                                                                    
                                                                               
REPRESENTATIVE CON BUNDE made a motion to adopt Amendment 1, 0-                
GH2006\B.6, Glover, 3/19/98.                                                   
                                                                               
CHAIRMAN HODGINS asked if there was an objection.  Hearing none                
Amendment 1 0-GH2006\B.6, Glover, 3/19/98 was adopted.                         
                                                                               
Number 1299                                                                    
                                                                               
REPRESENTATIVE RYAN stated that he had some amendments starting on             
Page 2, line 1 insert "alleged".                                               
                                                                               
CHAIRMAN HODGINS asked if he was going to follow his amendment                 
list.                                                                          
                                                                               
REPRESENTATIVE RYAN stated that there is a problem as there are                
numerous committee substitutes that had been drafted and it is kind            
of confusing as there is a lack coordination.                                  
                                                                               
REPRESENTATIVE ROKEBERG asked if the amendment was to version B of             
the bill.                                                                      
                                                                               
REPRESENTATIVE RYAN replied that is correct.                                   
                                                                               
REPRESENTATIVE ROKEBERG stated that he is looking at Representative            
Ryan's cover page B.1 through B.5 and he can't find the amendment              
that Representative Ryan was speaking to.  He stated that he                   
objected to this as it is not in the proper format and he can not              
follow along.  He stated that he can't track the amendments.                   
                                                                               
REPRESENTATIVE RYAN stated that he could instead introduce his                 
committee substitute and then explain it.                                      
                                                                               
REPRESENTATIVE ROKEBERG stated that he did not want to be                      
argumentative but it is not in the proper form of an amendment and             
he can not debate the issues.                                                  
                                                                               
Number 1638                                                                    
                                                                               
CHAIRMAN HODGINS stated that time is running out and he asked if               
maybe, Representative Ryan could give a concept of the amendments.             
                                                                               
REPRESENTATIVE RYAN stated that he would have legal put it in the              
form of amendment and then they would proceed from there.                      
                                                                               
CHAIRMAN HODGINS asked Representative Rokeberg if he wanted to                 
present his amendments.                                                        
                                                                               
Number 1674                                                                    
                                                                               
REPRESENTATIVE ROKEBERG asked the committee to consider the                    
memorandum from Legal Services regarding "periodic payments in lieu            
of taxes".  He stated that his amendment is 0-GH2006\B.1.  He                  
stated that on page 24, line 17 of CSHB 393(O&G) he would insert a             
new section entitled "Sec. 43.82.505. Payments to economically                 
affected municipalities."  He stated that the concept is to create             
by definition two forms of municipalities; those that tax bases are            
affected and those that have other economic impacts as a result of             
the construction of the pipeline.                                              
                                                                               
Number 1809                                                                    
                                                                               
CHAIRMAN HODGINS stated that it might be suggested that this would             
affect all communities.                                                        
                                                                               
REPRESENTATIVE ROKEBERG referred to his proposed amendment on page             
27, following line 2, of the committee substitute which would                  
insert a new paragraph to read: "(6) "economically affected                    
municipality" means a municipality the commissioner of revenue                 
determines will be reasonably required to provide additional public            
services under the terms proposed in an application approved under             
AS 43.82. 140(a); the commissioner may consider historical data                
from construction of the trans-Alaska Pipeline System, and                     
information submitted by a municipality in making the                          
determination;"                                                                
                                                                               
Number 1862                                                                    
                                                                               
REPRESENTATIVE ROKEBERG stated that he would call his changes                  
Amendment 2 and made a motion to adopt Amendment 2.                            
                                                                               
Number 1871                                                                    
                                                                               
REPRESENTATIVE TOM BRICE objected.                                             
                                                                               
Number 1882                                                                    
                                                                               
CHAIRMAN HODGINS stated that he would leave that pending and hold              
CSHB 393(O&G) as the committee has run out of time.                            
                                                                               
ADJOURNMENT                                                                    
                                                                               
Number 1884                                                                    
                                                                               
CHAIRMAN HODGINS adjourned the House Special Committee on Oil and              
Gas meeting at 10:45 a.m.                                                      

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