Legislature(1997 - 1998)
03/12/1998 10:15 AM House O&G
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 12, 1998
10:15 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
OTHER HOUSE MEMBERS PRESENT
REPRESENTATIVE JOE GREEN
COMMITTEE CALENDAR
HOUSE BILL NO. 380
"An Act relating to a temporary reduction of royalty on oil and gas
produced for sale from fields within the Cook Inlet sedimentary
basin where production is commenced in fields that have been
discovered and undeveloped or that have been shut in."
- MOVED CSHB 380(O&G) OUT OF COMMITTEE
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 380
SHORT TITLE: REDUCE ROYALTY ON COOK INLET OIL & GAS
SPONSOR(S): REPRESENTATIVES(S) HODGINS, Kohring
Jrn-Date Jrn-Page Action
02/04/98 2218 (H) READ THE FIRST TIME - REFERRAL(S)
02/04/98 2218 (H) OIL & GAS, FINANCE
02/26/98 (H) O&G AT 10:00 AM CAPITOL 124
02/26/98 (H) MINUTE(O&G)
03/05/98 (H) O&G AT 10:00 AM CAPITOL 124
03/05/98 (H) MINUTE(O&G)
03/12/98 (H) O&G AT 10:00 AM CAPITOL 124
BILL: HB 393
SHORT TITLE: DEVELOP STRANDED GAS RESOURCES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
Jrn-Date Jrn-Page Action
02/11/98 2280 (H) READ THE FIRST TIME - REFERRAL(S)
02/11/98 2281 (H) OIL & GAS, FINANCE
02/11/98 2281 (H) 2 FISCAL NOTES (DNR, REV)
02/11/98 2281 (H) GOVERNOR'S TRANSMITTAL LETTER
02/19/98 (H) O&G AT 11:00 AM CAPITOL 124
02/19/98 (H) MINUTE(O&G)
02/24/98 (H) O&G AT 10:00 AM CAPITOL 124
02/24/98 (H) MINUTE(O&G)
02/26/98 (H) O&G AT 10:00 AM CAPITOL 124
02/26/98 (H) MINUTE(O&G)
03/03/98 (H) O&G AT 10:00 AM CAPITOL 124
03/05/98 (H) MINUTE(O&G)
03/09/98 2578 (H) RES REFERRAL ADDED
03/10/98 (H) O&G AT 10:00 AM CAPITOL 124
03/10/98 (H) MINUTE(O&G)
03/12/98 (H) O&G AT 10:00 AM CAPITOL 124
WITNESS REGISTER
PATRICK CARTER, Legislative Assistant
to Representative Mark Hodgins
Alaska State Legislature
Capitol Building, Room 110
Juneau, Alaska 99801
Telephone: (907) 465-2283
POSITION STATEMENT: Answered questions on CSHB 380(O&G) and
testified on CSHB 393)O&G).
JAMES EASON, Oil and Gas Operations
Management and Policy
Forcenergy Incorporated
8611 Leeper Circle
Anchorage, Alaska 99504
Telephone: (907) 333-9087
POSITION STATEMENT: Testified on CSHB 380(O&G).
KEN BOYD, Director
Division of Oil and Gas
Department of Natural Resources
3601 C Street, Suite 1380
Anchorage, Alaska 99503
Telephone: (907) 269-8800
POSITION STATEMENT: Testified on CSHB 380(O&G).
BOB SHAVELSON, Executive Director
Cook Inlet Keeper
P.O. Box 3269
Homer, Alaska 99603
Telephone: (907) 235-4068
POSITION STATEMENT: Testified against CSHB 380(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 98-23, SIDE A
Number 0001
CHAIRMAN MARK HODGINS called the House Special Committee on Oil and
Gas meeting to order at 10:15 a.m. Members present at the call to
order were Representatives Hodgins, Ogan, Rokeberg and Kemplen.
Representatives Ryan, Bunde, Brice arrived at 10:17 a.m., 10:45
a.m. and 11:00 a.m., respectively.
HB 380 - REDUCE ROYALTY ON COOK INLET OIL & GAS
Number 0064
CHAIRMAN HODGINS announced the committee would hear CSHB 380( ),"An
Act relating to a temporary reduction of royalty on oil and gas
produced for sale from fields within the Cook Inlet sedimentary
basin where production is commenced in fields that have been
discovered and undeveloped or that have been shut in."
Number 0101
REPRESENTATIVE NORMAN ROKEBERG made a motion to adopt the proposed
CSHB 380( ), 0-LS1503\B, 3\11\98, for discussion purposes.
Number 0130
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
the proposed CSHB 380( ) was before the committee.
Number 0157
PATRICK CARTER, Legislative Assistant to Representative Mark
Hodgins, stated that last week the committee adopted a proposed
committee subsitute which named the field eligible for a royalty
reduction and placed a royalty cap on 40 million barrels of oil and
a 35 billion cubic feet of gas. He stated that the only change in
this committee substitute is the royalty cap on oil is reduced to
35 million barrels of oil. He stated that there were some
discussions on putting a price cap on the royalties at $24 a barrel
but after discussing that with legal it was decided that it would
not be proposed as an amendment because of significant hardships it
would cause to the industry.
Number 0357
REPRESENTATIVE JOE RYAN stated that he thought that the time-frame
was originally set for the year 2000, not 2004.
MR. CARTER replied that it has always been at 2004.
REPRESENTATIVE RYAN asked what is wrong with using a Platt's [ph]
price, that reflects the type of oil on the market for which it is
being sold.
Number 0433
MR. CARTER replied stated that he is not qualified to speak to
pricing indexes utilized throughout industry on oil, but there is
the complication of how often it would be changed. Would the
royalty rate be changed daily and if so that would become very
complicated. For those reasons, it was not considered as an
amendment.
Number 0491
REPRESENTATIVE ROKEBERG referred to the issue of specificity of the
six discreet fields and asked if he checked with legal as to the
constitutionality on specifying fields.
Number 0578
MR. CARTER replied that he had and the restriction is shut-in
fields or undeveloped fields that were discovered before January 1,
1988 and have remained that way through December 31, 1997. He
stated that in regards to oil and gas legislation, the different
stratifications, that occur throughout the state, are region
specific and that is why they allow quite a bit of leniency with
regard to special legislation on oil and gas issues.
Number 0601
REPRESENTATIVE ROKEBERG asked if it was possible to list the six
fields but add the wording "not limited to" so that it would not
have any challenges based on special legislation.
MR. CARTER replied that language was not discussed, although the
intention was that the six fields listed are the fields that
qualify to date.
Number 0670
REPRESENTATIVE SCOTT OGAN asked if any of the fields had recently
changed hands.
MR. CARTER replied that he would not be qualified to speak to the
history of the fields.
Number 0741
JAMES EASON, Oil and Gas Operations, Management and Policy,
Forcenergy Incorporated, replied that in the case of Redoubt Shoal
Field, the leases where all owned by a combination of different
entities all of which were under the control of Daniel Dunkel [ph]
until about two years ago when the leases were signed to
Forcenergy, which unified the leases. A 3-D seismic survey was
conducted this fall and currently is in the process of discussing
with the companies in the Far East, the construction cost for a
platform that might be used to explore those leases. In regards to
the Starichkof field, it was discovered 30 years ago and the lease
has been held by the same company. In addition Forcenergy, ARCO
and (Indisc.) have bought leases from the federal government or the
state that are near that field. The ownership of Nicolai Creek has
been owned by Unocal and Marathon. He stated that North Fork field
had originally been drilled by Chevron and there were a number
parties involved over the years. The current ownership is by a Gas
Pro Alaska, ARCO and Marathon. He stated that Forcenergy owns
leases adjacent to the discovery of the West Foreland field.
Falls Creek is owned by ARCO, Cliff Bergland [ph], and private
individuals.
Number 0959
KEN BOYD, Director, Division of Oil and Gas, Department of Natural
Resources, testified via teleconference from Anchorage that he
wanted to point out that a lot of the discussion is that these
fields have not been developed for many years, but in fact there is
a lot new leasing that has gone on some of the oil fields. He
stated that the new leasing surrounding the fields shows that there
is a lot of interest in Cook Inlet. He stated that a lot of new
fields are coming on line.
Number 1042
CHAIRMAN HODGINS asked which of the fields on the list that he knew
of, would not have any activity.
Number 1050
MR. BOYD replied that he expected there to be activity at Redoubt
Shoal but he did not know which ones would not be developed. He
stated that if they become economic they will be developed. He
stated that he believed that industry was buying leases with some
intention of doing something with them.
Number 1183
CHAIRMAN HODGINS asked if he would rather this bill did not exist.
MR. BOYD stated that he was willing to work on the bill and asked
why the committee has now lowered the number to 35 million barrels
of oil. He stated that he was looking for a reason to do this.
Number 1212
CHAIRMAN HODGINS asked if he thought without the bill there would
be a lot of opportunities on the six fields.
MR. BOYD responded that he saw a lot of opportunities on the oil
fields and stated that he could not speak to the gas fields as
there is no shortage of gas. He said " If you want to displace
12.5 percent gas with 5 percent gas that's the benefit you get in
the short term. If there is a gas shortage and price rises I think
simple economics tell you these fields become more economic."
Number 1240
CHAIRMAN HODGINS stated that Enstar has stated that there is a gas
shortage.
MR. BOYD stated he would not speak for Enstar or anybody else. He
stated that there are other companies that would testify there is
not a gas shortage. He stated that he is not sure if it is a gas
shortage or a deliverability problem.
Number 1278
CHAIRMAN HODGINS asked him why he thought the fields have not be
utilized.
Number 1300
MR. BOYD stated the he believed the companies are out there working
as Forcenergy, ARCO and Frontier Petroleum are drilling on the west
side. He stated that certain fields because of their advantages
are going to be developed first. He stated that if a shortage
develops and exploration does not pan out the fields would become
more economical. He stated that he could not say the terms of the
bill is the right answer.
CHAIRMAN HODGINS asked what is the right answer.
Number 1350
MR. BOYD replied that HB 207.
CHAIRMAN HODGINS stated that he is interested in HB 207 for the
fact that it has never been used.
MR. BOYD replied that there has been an application from Unocal and
that is the only time that it has been applied.
Number 1387
CHAIRMAN HODGINS stated that the reason could be that HB 207 is too
cumbersome to be used and this bill would allow industry to get
into various fields.
MR. BOYD responded that the other possibility is that the fields
are economic and do not need relief.
CHAIRMAN HODGINS responded than he would think there would be
drilling rigs all over Cook Inlet.
Number 1412
REPRESENTATIVE RYAN referred to page 3 of Mr. Eason's letter in
answer to Representative Ogan's question. He stated that a spread
sheet could adjust the royalty rate to the price of oil on a daily
basis.
Number 1460
REPRESENTATIVE ROKEBERG asked if the way the bill is drafted, it
does not distinguish between a field, pool or horizon.
Number 1491
MR. BOYD stated that the bill as he understands it, it applies to
the entire field.
Number 1503
CHAIRMAN HODGINS asked that in regards to the fiscal note, what
would it cost the state if the bill went through.
MR. BOYD stated that there was a range of numbers on oil regarding
two scenarios. He stated that it was between $14 million and $27
million.
Number 1543
CHAIRMAN HODGINS asked what it would cost to administer this bill.
MR. BOYD responded that it would cost very little.
Number 1553
REPRESENTATIVE OGAN referred to the discovery oil bill and asked if
there was an increase in exploration work as a result.
Number 1570
MR. BOYD responded that the bill was passed a year ago and the
regulations have just been adopted. He stated that he expected to
see applications in the future. One of the problems was that there
were a few lawsuits in Cook Inlet which have been won.
Number 1636
REPRESENTATIVE OGAN asked if there was a potential for the shut-in
wells that they could find some new pools and fields then the
royalty could be applied to them.
Number 1653
MR. BOYD responded that is the purpose of the bill so the answer is
yes.
Number 1671
CHAIRMAN HODGINS asked if he could give a synopsis of his letter as
his office has just now received it.
Number 1677
MR. BOYD stated that it was a letter to Senator Halford in response
to a letter that Forcenergy wrote in March.
Number 1690
CHAIRMAN HODGINS called for a brief at ease at 10:45 a.m.
Number 1690
CHAIRMAN HODGINS called that meeting back to order at 10:48 p.m.
Number 1716
REPRESENTATIVE RYAN asked what would be the initial capital cost
for these people to go out and set up the various platforms and
infrastructures they would need to do the drilling. He stated that
he is comfortable with the incentive that is offered as if it is
not offered there is no reason for the people to take the time and
invest the capital.
Number 1794
REPRESENTATIVE CON BUNDE made a motion to move the proposed CSHB
380( ) out of committee.
Number 1805
REPRESENTATIVE OGAN objected for discussion purposes.
Number 1808
REPRESENTATIVE ROKEBERG referred to Mr. Eason's letter dated March
11, 1998 and stated that it answers a lot of the committee's
questions. He stated that there is a section that refers to the
potential of double dipping and stated that the statutory cite
should read AS 83.05.180 subsection (F) not (D) both on page 1 and
3 of the letter. He stated that the wanted to note that the letter
refers to proprietary information on field sites. He stated that
because of this disclosure of proven reserves, he has a greater
comfort level. He stated that he would rather not complicate the
bill with sliding scales but it is a policy scale to let the bill
go forward with the policy reduction as to the entire lease. He
stated that he would be voting to support the bill.
Number 1955
BOB SHAVELSON, Executive Director, Cook Inlet Keeper, testified via
teleconference from Homer, that Cook Inlet Keeper is a non-profit
organization that is dedicated to protecting Cook Inlet. He stated
that there is no need for this legislation as the oil and gas
activity has increased under the existing royalty structure and new
technology is resulting making wells more efficient. He stated
that the more appropriate thing to do, is to take back non-
performing leases and wells and put them out for competitive bid
and see if other companies are interested in trying to make a
profit. He stated that there still are the questions of which
fields this bill could be applied to and the fiscal impact to the
state. He stated that these nonrenewable resources are public
resources, held in trust by the state, which is to ensure that all
these dispensations be in the best interest of the public. He
stated that testimony has shown that there is no reason to decrease
revenues that are available to the state.
Number 2057
REPRESENTATIVE OGAN asked Mr. Boyd with the royalty reduction given
on the estimated amount of producible reserves, how much money
would the state not be getting.
MR. BOYD estimated the range to be between $14 and $27 million
assuming certain things about production rate over 10 years.
Number 2111
REPRESENTATIVE OGAN removed his objection.
CHAIRMAN HODGINS asked if there were any further objections.
Hearing none, CSHB 380(O&G),0-LS1503\B, with individual
recommendations and the attached fiscal notes moved out of the
House Special Oil and Gas Committee.
HB 393 - DEVELOP STRANDED GAS RESOURCES
Number 2150
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 there is a marked of version of HB 393, which is the
committee substitute that the committee is proposing.
Number 2164
PAT CARTER asked that the committee look at the version with the
words "O&G mark-up 3/12/98" written on the front which is the
original bill with the changes written in and CSHB 393(O&G)0-
GH2006\B, 3/11/98. He said "These should be substantially similar
since its what legal worked off of. The drafting manual states
that the new text underlined and the deleted text bracketed only
applied to changes in existing statute and therefor it is very
difficult to disseminate between the original bill and the mark-
up." He asked the committee to turn to page 2 on the marked-up
version finding (4) was deleted and renumbered accordingly. He
stated that in (7) "although developing technology may offer other
alternatives, such as gas-to-liquids (GTL), was deleted and Insert
A, was added which reads:
Page 2, line 28: (7) following "marine tankers;" INSERT:
although experimental research is being conducted on other
alternative technologies such as gas-to-liquids (GTL), this
technology is not yet commercially viable. If this research
results in commercially viable technology, and after economic
analysis by the state of Alaska of the application of this
technology it is shown that local or state tax or regulatory
changes are necessary to commercialize an Alaska project
utilizing this technology, then this technology may be
considered in regards to this legislation.
Number 2237
MR. CARTER stated that (9) was deleted. In (10) of the original
bill, "for an enormous volume of gas," "that volume of gas
represents approximately one-quarter of the entire East Asian LNG
market today and probably cannot be placed into that market all at
once", and "which means that the project must secure most, if not
all, of the projected growth in demand for LNG in the East Asian
market over the ramp up period;" was deleted. Inset B was added
which reads:
Page 3, Line 16: INSERT a new finding: (11) the state has
contracted an extensive financial analysis of the
commercialization of North Slope gas; this analysis, performed
by a recognized expert in petroleum economics, Dr. Pedro Van
Meurs, indicates that changes in the local, state, and federal
tax structure may be necessary to make commercialization of
North Slope gas resources economically viable;
Number 2304
MR. CARTER stated Insert C was added, which reads:
Page 5, line 12: INSERT: (b) The legislature intends that,
in order to provide the stable fiscal terms that will
encourage development of stranded gas projects, any contract
negotiated pursuant to this Act will express whether the state
intends to be bound to the full extent allowed by the
Constitution of the State of Alaska; however, the legislature
further intends that the terms of a contract negotiated under
this chapter will not be binding on or enforceable against the
state or the other parties to the contract unless the
commissioner is authorized to execute the contract by the
legislature as provided in this chapter.
Mr. CARTER stated that on page 6 , line 21 the word "economic" was
added before "proximity" and as well as throughout the bill.
Insert CC was added which reads:
Page 7, line 31: INSERT new : (6) a plan to mitigate the
increased demand for public services and other negative
effects caused by the project; (7) a plan for the safe
management and operation of the project once it is
constructed;
Number 2349
MR. CARTER stated that on page 9, line 31, the date is changed from
2004 to 2001. Insert D was added was reads:
Page 14, line 9: INSERT: (c) Subject to the voluntary
agreement of the qualified sponsors, the commissioner may
include a term in the contract providing for incentives to
encourage training and hiring of Alaska residents.
Number 2377
Mr. CARTER stated that on page 15, line 4 the words "any two" were
deleted and the word "both" was added. He stated that (iii) and
(iv) were deleted. He stated that on page 14, line 7 following As
43.82.240 "or to a municipal advisory" was added. On page 14,
line 12 after the word "Law" "and municipal advisory group
established held under AS 43.82.510" was added. He asked
Commissioner Condon to speak to this.
Number 2423
WILSON CONDON, Commissioner, Department of Revenue, stated that it
would be a group that is established and authorized to share
confidential information with the municipal advisory group.
Number 2452
MR. CARTER stated that on page 19, line 31, "enter into the
proposed contract" was deleted and "submit the contract to the
legislature, together with a request from the Governor, for
authority to enter into the proposed contract pursuant to AS
43.82.435" was added. Similar language was also added on page 20,
line 13, with Insert E.
TAPE 98-23, SIDE B
Number 0003
CHAIRMAN HODGINS asked if that would be the ratification language.
MR. CARTER replied that is correct.
Number 0038
Mr. CARTER stated that on page 21, line 2 after the word "public"
"and members of the legislature" is added and (3) is renumbered to
(4) and vise versa. He stated that on page 21, line 24 after
"appropriate", "and with the pertinent municipal advisory group" is
added. He stated that on page 21, line 31, "the commissioner may
execute the contract is deleted. Insert F is added which reads:
Page 22. Line 2: Following "state" INSERT: the commissioner
shall under 43.82.435 submit the contract to the legislature,
together with a request from the Governor for authorization to
execute the contract.
Number 0096
MR. CARTER stated that on Insert G is added which reads:
Page 22, between lines 5 and 6, INSERT: Sec. 43.82.435.
Legislative Authorization. The commissioner may not execute a
contract developed pursuant to this chapter and a contract
developed pursuant to this contract is not binding upon or
enforceable against the state or other parties to the contract
unless the commissioner is authorized to execute the contract
by means of general law. The state and the other parties to
the contract shall execute the contract within 60 days of the
effective date of the authorizing legislation.
Sec. 43.82.440. Judicial Review. A person may only bring an
action challenging the constitutionality of an enactment under
AS 43.82.435 or the enforceability of a contract executed
pursuant to an enactment under AS 43.82.435 if the action is
commenced within 120 days after the date that the contract was
executed by the state and the other parties to the contract.
MR. CARTER stated that page 23, Article 6 was deleted and Insert H
was added. He asked Commissioner Condon to explain it.
Number 0108
COMMISSIONER CONDON stated that in the original bill the contract
provided for either a formula or an equity participation in the
project. Rather than having a specific formula in the legislation
the new municipal provision provides that the proposed contract
would provide for payment made directly to municipalities and those
payments would be negotiated in line with the principles of AS
43.82.520 (b). He stated that the legislation would require the
creation of an municipal advisory group and one member appointed
from each municipality whose taxing power would be affected by the
proposed project. He stated that the commissioner, in developing
the contract would be obligated to keep the municipal advisory
group informed and to seek their advice and counsel in arriving at
the municipal sharing formula.
Number 0191
MR. CARTER stated that on page 24, line 23 was added, which reads:
(1) "affected municipality" means a municipality for which it
is reliably expected by the commissioner of revenue that after
the commencement of activities under AS 43.82.200 that a
contract entered into pursuant to AS 43.82. 020 will affect
taxes that otherwise would be imposed by that municipality
pursuant to AS 43.82.210.
MR. CARTER stated that Insert J was added which is the definition
of economic proximity and is renumbered accordingly. He stated
that on page 25, line 15, Insert K was added, which is the
definition of uneconomic or uncompetitive.
Number 0278
REPRESENTATIVE TOM BRICE asked when legislative approval of the
contracts is mentioned is it the approval in the form of resolution
or statute.
Number 0292
COMMISSIONER CONDON replied that the committee substitute would
provide a template for bringing modifications to the state's fiscal
system before the legislature. It calls for the development of a
proposal which the commissioner would not have the authority to
sign. A bill would come before the legislature that, if passed,
would give the authority to the commissioner to enter into a
contract.
Number 0325
REPRESENTATIVE BRICE stated that a bill is either a resolution or
a statute and he asked if he was taking statutory to mean a House
bill.
Number 0330
COMMISSIONER CONDON replied absolutely. He stated that it might
not show up as a section in the codified statutes but it is a bill
as opposed to a resolution.
Number 0339
REPRESENTATIVE BRICE stated that his concern is that it would leave
some leeway for legislative manipulation of that contract. He
stated that by resolution that language would be less easily
manipulated.
Number 0361
COMMISSIONER CONDON replied that it would provide an opportunity
for legislative review before the contract was submitted to the
legislature along with the request for authority to enter into the
contract. He stated that there is both the opportunity to change
the contract in response to legislative views and then an up or
down vote once authorization to enter into the contract is
requested.
Number 0414
REPRESENTATIVE BRICE referred to Insert E and stated that the
legislature can approve the contract by action of both bodies
through resolution. A resolution would stand for the legislatures
endorsement of a contract which is much different than having a
piece of legislation that will be able to be amended in the
committee process.
Number 0469
COMMISSIONER CONDON replied that it is the legislature's decision
as to how this gets structured. He stated that this bill does not
give the commissioner the authority to enter into the contract what
it does is, requires the commissioner, under a detailed set of
criteria, to come back to the legislature with a specific proposal
in contract form and a requirement for it to become legally
effective, a specific legislative authorization to enter into the
contract. The legislature would not have the authority to amend
the contract; they would have the authority either to give
authority to the commissioner to enter into it or to deny it.
Number 0526
REPRESENTATIVE BRICE stated that he has a strong concern that the
authority needs to be defined to be approved by the legislature
through passage of a resolution, so there is a certain amount of
specificity as to how the legislature will react to the contract.
Number 0548
REPRESENTATIVE ROKEBERG stated that if a general law was passed, it
would be possible to amend or change the terms of the contract so
the issue is, if it should be a law or resolution. He stated that
the question is, does the legislature want to be able to change the
terms of the contract.
Number 0574
COMMISSIONER CONDON stated that as the bill is structured, without
the passage of a subsequent bill it can not be done by a resolution
it has to be done by a bill.
REPRESENTATIVE RYAN stated that there is a separation of power and
the job of the administration is to bring the deal back to the
legislature. He stated that at that point the legislature could
approve or disapprove it, it is not in the legislature's power to
cut the deal, only to approve it. He stated that legislative
approval is necessary, but we should not be negotiating the deal.
Number 0657
REPRESENTATIVE ROKEBERG stated that he did not agree, he would
think that the legislature would have the right to make changes in
general law as well as granting authority.
Number 0685
COMMISSIONER CONDON stated that it could happen in a lot of
different ways. For example, if there was a proposed contract that
project participants and the commissioners have agreed to it. If
the legislature grants the authority to enter into the deal then
there would be a contract and the legal effects that go along with
it. At that point, the legislature could say that they do not like
the deal but like the ideas. Therefore, the legislature could take
the provisions out of the contract and put them into the general
law and pass it as a bill which would then be the fiscal system.
He stated that would be the choice the legislature has.
Number 0764
REPRESENTATIVE ROKEBERG stated that is the point that
Representative Brice was making. He stated that it is in the realm
of politics, authority and responsibility; by crafting legislation
we can shift the authority and the ultimate decision making from
one branch of government to another.
Number 0797
COMMISSIONER CONDON stated that this proposed legislation does not
limit the legislature's authority at all. It does require a
process by which the administration can bring something back to the
legislature. He stated that there are some policy advantages by
having the proposal come back in the form of a contract. He stated
that fiscal certainty is important in trying to reduce perceived
risk to attract investors. He stated that putting the fiscal
system in place in the form of a contract has the advantage of
increasing the fiscal certainty that would be investors would have
but the legislature has full discretion to say whether they like
the idea.
Number 0918
MR. CARTER referred to a memo by Tam Cook from legal services that
this may violate the separation of powers doctrine. He said "As I
understand it the administration is not required to seek
legislative approval and they have continued to take that position
under oil contracts. The latest one is the governor's transmittal
letter on SB 164 dated April 22, 1995." He read from the memo
"That while the executive branch has consistently and in my view
correctly asserted that legislative approval provisions are
unconstitutional it is often conformed to them to accommodate the
legislative desire for oversight."
Number 0982
COMMISSIONER CONDON referred to the separation of power doctrine
and stated that the legislature has taken the position that they
will prevent the executive branch from acting unless there is
specific legislative authorization. Any time the administration
wants to build something with revenue bonds there needs to be
specific legislative authority to do so. However, there is general
authority to build roads etc. He stated that this bill would not
give the administration the authority to do so, it gives the
command to the administration to develop a proposal for legislative
authorization. He stated that without legislative authorization
there can not be a separation of power problem.
Number 1090
REPRESENTATIVE BRICE stated that the believed the legislature has
been clear in its support of the gas line. He stated that HB 393
gives the administration the authority to break down the terms and
negotiate the contract. He stated that he is hearing that
Commissioner Condon wants more authority to negotiate fiscal terms
and then come back to the legislature and ask for specific statute
changes to meet those fiscal terms. He had hoped in the event that
there was a contract, the legislature would either sign off
through resolution or not. He stated that his confusion is that
instead, the administration is going to come back with further
changes to the state's fiscal system.
Number 1216
COMMISSIONER CONDON stated that what the bill would do is ask the
legislature for the authority to enter into the contract. In order
to do so a bill would have to be passed.
Number 1253
REPRESENTATIVE BRICE replied "The difference between HB 393 and HJR
12 in general terms, are two specific different animals." He
stated that the administration asks for legislative approval
submitted in House bill form, but to say that the legislature can
not go into that contract and make changes is absolutely foreign.
He stated that to say that the legislature will approve by
resolution, the difference is in the discretion.
Number 1324
COMMISSIONER CONDON stated that if there is a contract they will
have no discretion unless it is agreed to.
REPRESENTATIVE BRICE asked if he wanted a resolution.
COMMISSIONER CONDON replied that it in fact has to be done in the
form of a bill.
Number 1357
REPRESENTATIVE ALAN KEMPLEN stated that there would be further
discussions of this. The notion of fiscal certainty has been
reinforced enough to move forward with the project. He stated that
the process is building a case for a long term commitment to the
terms of the contract. He stated that he believed this to be a
good approach.
Number 1509
REPRESENTATIVE OGAN referred to Ms. Cook's memo and asked if we are
binding further legislatures from changing the terms of the
contract.
Number 1559
COMMISSIONER CONDON replied that the answer to that question is
unknown. At some point in time the legislature will have the
option of saying that they want to bind a future legislature, once
contested the answer will be known. There are differing views on
how far the legislature can go in binding future legislatures.
Number 1650
REPRESENTATIVE OGAN asked that in order to avoid legislation, it
would be prudent to make sure the law is not ambiguous.
Number 1669
COMMISSIONER CONDON replied that he agreed with that but in respect
to this issue, litigation would be wanted to find out the extent of
the legislature's authority.
Number 1689
REPRESENTATIVE OGAN referred to Article 9, Section 1, and asked if
he could explain what is provided in the article.
Number 1735
COMMISSIONER CONDON replied that the question of binding future
legislatures would not arise now but when dealing with a proposed
contract.
CHAIRMAN HODGINS asked Representative Ryan to present his committee
substitute.
Number 1783
REPRESENTATIVE RYAN stated that there were a number of changes that
he requested that are not reflected in the draft. He stated that
he would not ask the committee to introduce his committee
substitute until it is includes what he intended it to. He stated
that he was going to talk with the legislative legal department.
Number 2366
REPRESENTATIVE ROKEBERG made a motion to adopt CSHB 393(O&G). 0-
GH2006, version B, 3/11/98.
TAPE 98-24, SIDE A
Number 0006
CHAIRMAN HODGINS asked if there was an objection. Hearing none,
CSHB 393(O&G) 0-GH2006, version B, 3/11/98 was adopted.
Number 0076
REPRESENTATIVE ROKEBERG stated that he had two conceptual
amendments. He stated that he would like to change that an
affected community is not only those that have their revenue base
affected but those that have a socio-economic impact for the
services of those communities, specifically the Mat-su valley and
the Anchorage area. Therefore, in the definition of the affected
municipalities on page 26, line 17 add the word "revenue" before
the term "affected municipality". He stated that he would like to
create a new definition of economically affected communities which
would state that "the municipalities incorporated under state law
which have a history of or can demonstrate that they may have their
services impacted by this type of project would be the economically
affected communities."
Number 0291
REPRESENTATIVE OGAN stated that definitions are usually put in
statute for terms that are in the bill.
REPRESENTATIVE ROKEBERG stated that he did have another amendment
that would do so.
Number 0348
REPRESENTATIVE ROKEBERG made a motion to adopt the conceptual
amendments.
CHAIRMAN HODGINS asked if there was an objection.
Number 0355
REPRESENTATIVE OGAN objected for discussion purposes. He stated
that he is moving amendments to definitions and the committee does
not know where he is going with the definitions. He stated that it
would be helpful to have the amendments written.
Number 0408
CHAIRMAN HODGINS stated that the committee could adjourn with the
motion pending.
Number 0438
REPRESENTATIVE ROKEBERG stated that he would explain the other
portion to his amendment. On page 24, line 18, the economically
affected communities would be added. He stated that he would bring
the formal amendments to the committee. He withdrew his conceptual
amendments.
Number 0542
REPRESENTATIVE OGAN stated that he concurred with Representative
Rokeberg's direction with the amendments.
Number 0565
REPRESENTATIVE KEMPLEN referred to page 7, line 31 and stated that
would address Representative Rokeberg's concerns. He referred
Representative Rokeberg's above-mentioned proposed change on page
24, and stated that it was his understanding that the municipal
participation was for those communities that were giving up
property taxes.
Number 0638
REPRESENTATIVE KEMPLEN stated that he would like to present a
conceptual amendment on page 14, line 25 add "with a credit cap of
$100 million."
CHAIRMAN HODGINS asked that he present that amendment in written
form at the next meeting. He announced that the bill would be held
over.
ADJOURNMENT
Number 0725
CHAIRMAN HODGINS adjourned the House Special Committee on Oil and
Gas meeting at 12:00 p.m.
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