Legislature(1993 - 1994)

02/28/1994 08:15 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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               HOUSE RESOURCES STANDING COMMITTEE                              
                        February 28, 1994                                      
                            8:15 a.m.                                          
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
  Representative Bill Williams, Chairman                                       
  Representative Bill Hudson, Vice Chairman                                    
  Representative Con Bunde                                                     
  Representative Pat Carney                                                    
  Representative John Davies                                                   
  Representative Joe Green                                                     
  Representative Jeannette James                                               
  Representative Eldon Mulder                                                  
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
  Representative David Finkelstein                                             
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
  HJR 55:     Relating to the importance to the economy of                     
              Southeast Alaska of continued timber harvests                    
              on the Tongass National Forest.                                  
                                                                               
              ADOPTED CS HJR 55(RES) AND MOVED OUT OF                          
              COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS                        
                                                                               
  HJR 56:     Relating to an exemption for federal lands                       
              in Alaska from the federal PACFISH management                    
              strategy.                                                        
                                                                               
              ADOPTED CS HJR 56(RES) AND MOVED OUT OF                          
              COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS                        
                                                                               
  *HB 426:   "An Act establishing the Chickaloon Flats                         
              Critical Habitat Area."                                          
                                                                               
              CSHB 426(O&G) MOVED OUT OF COMMITTEE WITH                        
              INDIVIDUAL RECOMMENDATIONS                                       
                                                                               
  HB 199:    "An Act providing for oil and gas exploration                     
              licenses, and oil and gas leases in certain                      
              areas of the state; and providing for an                         
              effective date."                                                 
                                                                               
              ADOPTED CSHB 199(O&G) AND MOVED OUT OF                           
              COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS                        
                                                                               
                                                                               
  WITNESS REGISTER                                                             
                                                                               
  THYES SHAUB, Government Affairs Director                                     
  Alaska Forest Association, Inc.                                              
  217 Second Street, Suite 206                                                 
  Juneau, Alaska   99801                                                       
  Phone:  463-3175                                                             
  POSITION STATEMENT:  Answered questions relating to HJR 55                   
                                                                               
  REPRESENTATIVE CON BUNDE                                                     
  Alaska State Legislature                                                     
  State Capitol, Room 112                                                      
  Juneau, Alaska   99801-1182                                                  
  Phone:  465-4843                                                             
  POSITION STATEMENT:  Prime Sponsor HB 426                                    
                                                                               
  JACK HENDRICKSON, President                                                  
  Alaska Waterfowl Association                                                 
  State Chairman, Waterfowl U.S.A.                                             
  3105A Lakeshore Drive, Ste. 102                                              
  Anchorage, Alaska   99517                                                    
  Phone:  266-4280                                                             
  POSITION STATEMENT:  Supported HB 426                                        
                                                                               
  ELLEN FRITTS, Deputy Director                                                
  Division of Habitat and Restoration                                          
  Alaska Department of Fish and Game                                           
  P.O. Box 25526                                                               
  Juneau, Alaska    99802-5526                                                 
  Phone:  465-4105                                                             
  POSITION STATEMENT:  Answered questions relating to HB 426                   
                                                                               
  REPRESENTATIVE JOE GREEN                                                     
  Alaska State Legislature                                                     
  State Capitol, Room 114                                                      
  Juneau, Alaska   99801-1182                                                  
  Phone:  465-4931                                                             
  POSITION STATEMENT:  Reviewed content of HB 199                              
                                                                               
  KEN BOYD, Deputy Director                                                    
  Division of Oil and Gas                                                      
  Department of Natural Resources                                              
  P.O. Box 107034                                                              
  Anchorage, Alaska   99510-0734                                               
  Phone:  762-2548                                                             
  POSITION STATEMENT:  Supported HB 199                                        
                                                                               
  GEORGE FINDLING, Manager                                                     
  Government and Public Relations                                              
  ARCO Alaska, Inc.                                                            
  P.O. Box 110360                                                              
  Anchorage, Alaska   99510                                                    
  Phone:  263-4174                                                             
  POSITION STATEMENT:  Supported HB 199                                        
                                                                               
  ARDIE GRAY, Public Service Manager                                           
  Alaska Oil and Gas Association                                               
  121 W. Fireweed, Suite 207                                                   
  Anchorage, Alaska   99503                                                    
  Phone:  272-1481                                                             
  POSITION STATEMENT:  Supported HB 199                                        
                                                                               
  BECKY GAY, Executive Director                                                
  Resource Development Council                                                 
  121 W. Fireweed, Suite 250                                                   
  Anchorage, Alaska   99503                                                    
  Phone:  276-0700                                                             
  POSITION STATEMENT:  Supported HB 199                                        
                                                                               
  WALT FURNACE, General Manager                                                
  Alaska Support Industry Alliance                                             
  4220 B Street                                                                
  Anchorage, Alaska   99503                                                    
  Phone:  563-2226                                                             
  POSITION STATEMENT:  Supported HB 199                                        
                                                                               
  GREG GARRELS                                                                 
  1176 Broadview Drive                                                         
  Fairbanks, Alaska   99712                                                    
  Phone:  457-3543                                                             
  POSITION STATEMENT:  Opposed HB 199                                          
                                                                               
  CLIFF BURGLIN                                                                
  17 Adak Street                                                               
  Fairbanks, Alaska   99707                                                    
  Phone:  452-5149                                                             
  POSITION STATEMENT:  Opposed HB 199                                          
                                                                               
  PREVIOUS ACTION                                                              
                                                                               
  BILL:  HJR 55                                                                
  SHORT TITLE: TONGASS NATIONAL FORST TIMBER HARVESTS                          
  SPONSOR(S): RULES BY REQUEST OF THE HOUSE ECONOMIC TASK                      
  FORCE                                                                        
                                                                               
  JRN-DATE     JRN-PG               ACTION                                     
  02/11/94      2344    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/11/94      2344    (H)   RESOURCES                                        
  02/23/94              (H)   RES AT 08:15 AM CAPITOL 124                      
  02/23/94              (H)   MINUTE(RES)                                      
  02/28/94              (H)   RES AT 08:15 AM CAPITOL 124                      
                                                                               
  BILL:  HJR 56                                                                
  SHORT TITLE: EXEMPT ALASKA FROM "PACFISH" REGS                               
  SPONSOR(S): RULES BY REQUEST OF THE HOUSE ECONOMIC TASK                      
  FORCE                                                                        
                                                                               
  JRN-DATE     JRN-PG               ACTION                                     
  02/11/94      2344    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/11/94      2344    (H)   RESOURCES                                        
  02/23/94              (H)   RES AT 08:15 AM CAPITOL 124                      
  02/23/94              (H)   MINUTE(RES)                                      
  02/28/94              (H)   RES AT 08:15 AM CAPITOL 124                      
                                                                               
  BILL:  HB 426                                                                
  SHORT TITLE: CHICKALOON FLATS CRITICAL HABITAT AREA                          
  SPONSOR(S): REPRESENTATIVE(S) BUNDE                                          
                                                                               
  JRN-DATE     JRN-PG               ACTION                                     
  02/02/94      2219    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/02/94      2219    (H)   O&G, RES, FIN                                    
  02/16/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  02/18/94      2456    (H)   O&G RPT  CS(O&G) 3DP  2NR                        
  02/18/94      2456    (H)   DP:  KOTT, SANDERS, SITTON                       
  02/18/94      2456    (H)   NR:  G.DAVIS, MACKIE                             
  02/18/94      2457    (H)   -ZERO FISCAL NOTE (F&G) 2/18/94                  
  02/18/94      2457    (H)   REFERRED TO RESOURCES                            
  02/28/94              (H)   RES AT 08:15 AM CAPITOL 124                      
                                                                               
  BILL:  HB 199                                                                
  SHORT TITLE: OIL & GAS EXPLORATION LICENSES/LEASES                           
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
                                                                               
  JRN-DATE     JRN-PG               ACTION                                     
  03/05/93       549    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  03/05/93       549    (H)   OIL & GAS, RESOURCES, FINANCE                    
  03/05/93       549    (H)   -ZERO FISCAL NOTE  (REV)  3/5/93                 
  03/05/93       549    (H)   GOVERNOR'S TRANSMITTAL LETTER                    
  03/15/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  03/16/93              (H)   O&G AT 08:00 AM CAPITOL 124                      
  03/22/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  03/22/93              (H)   MINUTE(O&G)                                      
  03/25/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  03/31/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  04/06/93              (H)   MINUTE(O&G)                                      
  04/07/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  04/07/93              (H)   MINUTE(O&G)                                      
  01/13/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  01/26/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  01/31/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  01/31/94              (H)   MINUTE(O&G)                                      
  02/07/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  02/09/94      2312    (H)   O&G RPT CS(O&G) NEW TITLE                        
                              3DP  2NR                                         
  02/09/94      2312    (H)   DP:  G. DAVIS, KOTT, GREEN                       
  02/09/94      2312    (H)   NR:  OLBERG, SITTON                              
  02/09/94      2312    (H)   -ZERO FISCAL NOTE (DNR) 2/9/94                   
  02/09/94      2312    (H)   REFERRED TO RESOURCES                            
  02/23/94              (H)   RES AT 08:15 AM CAPITOL 124                      
  02/28/94              (H)   RES AT 08:15 AM CAPITOL 124                      
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 94-21, SIDE A                                                           
  Number #000                                                                  
                                                                               
  The House Resources Committee was called to order by Vice                    
  Chairman Bill Hudson at 8:30 a.m.  Members present at the                    
  call to order were Representatives Hudson, Bunde, Davies,                    
  James and Mulder.  Members absent were Representatives                       
  Williams, Carney, Finkelstein and Green.                                     
                                                                               
  VICE CHAIRMAN BILL HUDSON announced there is a quorum                        
  present.                                                                     
  HJR 55 - Tongass National Forest Timber Harvests                             
                                                                               
  VICE CHAIRMAN HUDSON said there is a committee substitute                    
  before the committee.  The changes from the original                         
  resolution include page one, line four, through page two,                    
  line nine, eight new WHEREAS clauses have been added.  These                 
  clauses strengthen the resolution and recognize other                        
  multiple uses of the Tongass and laws in place to protect                    
  those uses.  He added that the Alaska Forest Association                     
  does approve the changes.  He stated another change is on                    
  page three, line 28, the words "under current laws" have                     
  been added.                                                                  
                                                                               
  VICE CHAIRMAN HUDSON noted for the record that                               
  REPRESENTATIVE CARNEY joined the committee at 8:32 a.m.                      
                                                                               
  Number 035                                                                   
                                                                               
  REPRESENTATIVE JOHN DAVIES felt the changes made are good,                   
  but is concerned about the numbers contained in the                          
  resolution.  He said he would feel better if someone could                   
  testify as to where the numbers came from.  He also is                       
  concerned about page two, lines 30-32 where the resolution                   
  says "a decline in the availability of timber to harvest..."                 
  and on page two, lines eight and nine, where HJR 55 says                     
  "the economy of Southeast Alaska was built around an                         
  expected annual harvest level of 450,000,000 board feet;".                   
  He felt economies are not built.                                             
                                                                               
  REPRESENTATIVE DAVIES read portions of a recent report which                 
  reviews the economic impact of the wilderness designation of                 
  the Tongass National Forest.  The report is required by the                  
  Alaska National Interest Land Conservation Act (ANILCA)                      
  every two years.  "A concern of Congress in passing ANILCA                   
  was the impact of the wilderness designation on three major                  
  industries in Southeast Alaska:  Forest products, fisheries,                 
  and tourism.  The changes in employment levels in these                      
  three major industries in Southeast Alaska are linked to                     
  changes in demand, supply and institution variables as well                  
  as changes in wilderness designations.  Thus far, an                         
  economic effect on employment and personal earnings of                       
  designating this land as wilderness cannot be distinguished                  
  from the effects of other economic forces which have                         
  continued to change between 1981 and 1991."  He pointed out                  
  that later in the report it shows that major changes in the                  
  industry were driven by the change in the price of the                       
  dollar on the world market in the early 1980s.                               
                                                                               
  REPRESENTATIVE DAVIES stressed there are considerations                      
  other than the availability of timber which cause                            
  significant changes and to date, the effects have not been                   
  determined between the availability and the actual                           
  production.  He felt the report contradicted what is stated                  
  in HJR 55, page two, lines 30-32.                                            
                                                                               
  Number 087                                                                   
                                                                               
  REPRESENTATIVE ELDON MULDER said, reality is a mill has been                 
  shut down and another mill is temporarily closed because of                  
  a lack of availability of timber.  He felt the WHEREAS                       
  clause is quite appropriate for 1994 as opposed to 1991.  He                 
  agreed with Representative Davies in regard to page two,                     
  lines eight and nine regarding "built around".  He thought                   
  perhaps "relies upon" might be better language.                              
                                                                               
  VICE CHAIRMAN HUDSON noted for the record that                               
  REPRESENTATIVE GREEN joined the committee at 8:35 a.m.                       
                                                                               
  Number 105                                                                   
                                                                               
  REPRESENTATIVE JEANNETTE JAMES said she did not oppose the                   
  words "built around", especially since there are huge                        
  amounts of capital infused to build an industry.  She also                   
  accepts using the words "relies upon."  Regarding the report                 
  which Representative Davies referred to, she commented many                  
  events have happened since 1991 which have caused the price                  
  of lumber to skyrocket.  She said the pulp mills situation                   
  is due to a balance between the lack of timber and worldwide                 
  pulp prices.  She stated she is comfortable with the numbers                 
  contained in the resolution.                                                 
                                                                               
  VICE CHAIRMAN HUDSON reminded committee members that when                    
  the last hearing on HJR 55 concluded, the original draft was                 
  before the committee and there was a motion on the table.                    
  He stated the committee must vote on the amendment.  He read                 
  the proposed amendment:  Remove the language on page one,                    
  line 15, "and the near completion of the first harvest" and                  
  the second WHEREAS on page two.                                              
                                                                               
  VICE CHAIRMAN HUDSON asked for a roll call vote.  Voting in                  
  favor of the amendment was Representative Davies.  Voting                    
  against the amendment were Representatives Carney, Bunde,                    
  Green, James, Mulder and Hudson.  The motion was DEFEATED.                   
                                                                               
  REPRESENTATIVE PAT CARNEY made a motion to ADOPT CS HJR
  55(RES).                                                                     
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections.                     
  Hearing none, the MOTION PASSED.                                             
                                                                               
  REPRESENTATIVE DAVIES MOVED to AMEND CS HJR 55(RES) on page                  
  two, line eight, deleting the words "was built around" and                   
  insert the words "would benefit from."                                       
                                                                               
  VICE CHAIRMAN HUDSON stated the most significant point                       
  regarding the work draft is the appeal for a timber harvest                  
  level which allows industries in Southeast Alaska to remain                  
  open.                                                                        
                                                                               
  REPRESENTATIVE MULDER stated the only problem he has with                    
  the motion is that it almost insinuates "if we had it", as                   
  opposed to the fact that we have had 450 million board feet.                 
  He thought perhaps the statement was intended to say, this                   
  is what we are intending to have and this is what we are                     
  gearing toward.  He asked if the harvest level is in fact                    
  450 million board feet.                                                      
                                                                               
  THYES SHAUB, GOVERNMENT AFFAIRS DIRECTOR, ALASKA FOREST                      
  ASSOCIATION, INC., responded the harvest level has not been                  
  that high in the past couple of years.  She stated she did                   
  not object to the proposed amendment.  She commented that in                 
  1978, when the compromise took place, because of the                         
  wilderness designation and the changes in the Tongass Land                   
  Management Plan at that time, written into the law was an                    
  intention there would be an average of 450 million board                     
  feet provided.  Going back to the 1950s, the economy was                     
  built around that figure.                                                    
                                                                               
  Number 221                                                                   
                                                                               
  REPRESENTATIVE CON BUNDE felt it is more a level of                          
  intensity.                                                                   
                                                                               
  REPRESENTATIVE JAMES said she liked the words "built                         
  around", especially because the word built indicates that                    
  money has been invested.                                                     
                                                                               
  REPRESENTATIVE DAVIES pointed out that the report he                         
  referred to earlier, lists the harvests from 1981 to 1991                    
  and aggregates both the saw log and the utility in terms of                  
  million board feet harvested.  The figures contained in that                 
  report are 387 million, 372 million, 250 million, 280                        
  million, 232 million, 290 million, 336 million, 396 million,                 
  444 million, 471 million, 364 million and 345 million board                  
  feet.  He said in that decade, there appears to be only two                  
  years that approach the level called for in the resolution.                  
  Therefore, it is difficult for him to see when the economy                   
  has relied healthily on the timber industry for a decade                     
  since the harvest levels have been far below the 450 million                 
  board feet.                                                                  
                                                                               
  REPRESENTATIVE CARNEY suggested amending CS HJR 55(RES),                     
  page two, lines eight and nine to read:  "WHEREAS the timber                 
  industry of Southeast Alaska was developed based on an                       
  expected annual harvest level of 450,000,000 board feet;"                    
                                                                               
  REPRESENTATIVE JAMES felt it is important to understand why                  
  the resolution is at hand.  If there is a desire to say that                 
  the timber industry is not needed, then it is easy to single                 
  out the timber industry and say that is what is being talked                 
  about.  She felt there is a need to emphasize that the                       
  economy of Southeast is based on the timber industry.  If                    
  the committee focuses on the timber industry only and the                    
  450 million board feet, the committee is saying it is not a                  
  problem, the industry can be lost and picked up in tourism                   
  and fishing.  She did not feel that is true.  She stressed                   
  the economy in Southeast is definitely dependent upon the                    
  timber industry, and if the timber industry was eliminated,                  
  Southeast would feel a deficit.                                              
                                                                               
  REPRESENTATIVE JAMES supported the words "developed around,"                 
  but stated she wants it understood there has been a lot of                   
  economic input over the years in developing an economy which                 
  is very important to Southeast.                                              
                                                                               
  REPRESENTATIVE MULDER speaking to the amendment suggested by                 
  Representative Carney, stated the amendment is quite                         
  appropriate when the following four WHEREAS clauses are                      
  considered because they do talk about how many jobs are                      
  created, what type of employment is created, how much the                    
  annual income is, what the payroll does for the overall                      
  region.  He supported the proposed amendment.                                
                                                                               
  Number 296                                                                   
                                                                               
  REPRESENTATIVE CARNEY felt it is important to stress that                    
  action was taken by the timber industry based on                             
  expectations.  He thought the term "economy" is a stretch of                 
  the imagination to think the economy of Southeast Alaska is                  
  totally dependent upon the timber industry.  He said by                      
  stressing the industry was developed based on expectations                   
  will indicate to people reading the resolution that the                      
  Alaska timber industry extended itself based on federal                      
  promises and that could be important to how the resolution                   
  is viewed.                                                                   
                                                                               
  REPRESENTATIVE JAMES pointed out the two previous WHEREAS                    
  clauses are related to the economy and felt if the committee                 
  changes the term economy to the timber industry, the intent                  
  of the resolution is destroyed.                                              
                                                                               
  REPRESENTATIVE DAVIES noted the two previous WHEREAS clauses                 
  refer to the broader economy.  He said he would accept                       
  Representative Carney's amendment as a substitute for his.                   
                                                                               
  REPRESENTATIVE DAVIES WITHDREW his motion to amend CS HJR
  55(RES).                                                                     
                                                                               
  REPRESENTATIVE CARNEY MOVED to AMEND CS HJR 55(RES) on page                  
  two, lines eight and nine to read, "WHEREAS the timber                       
  industry of Southeast Alaska was developed based upon an                     
  expected annual harvest level of 450,000,000 board feet;"                    
                                                                               
  VICE CHAIRMAN HUDSON asked for a roll call vote.  Voting in                  
  favor of the amendment were Representatives Green, Carney,                   
  Hudson, Bunde, Davies, and Mulder.  Voting against the                       
  amendment was Representative James.  The AMENDMENT was                       
  ADOPTED on a vote of six to one.                                             
                                                                               
  Number 384                                                                   
                                                                               
  REPRESENTATIVE DAVIES commented in regard to page two, lines                 
  27-29, part of the problem with the resolution is the push                   
  for 450 million board feet.  He said one of the basic issues                 
  is what the Tongass can really yield on a sustained yield                    
  basis.  The assessment of what is truly available in that                    
  forest has changed in the past decade.  He noted there had                   
  been testimony indicating that the original inventory was                    
  significantly overstated.  He said while it may be true the                  
  industry was developed based on that expectation, he felt                    
  that expectation may have been an error due to the inventory                 
  being incorrect.                                                             
                                                                               
  REPRESENTATIVE DAVIES felt uncomfortable voting to support                   
  the resolution because there is no reliable testimony as to                  
  what the current inventory is in the Tongass, and thought it                 
  is quite possible that production on private land was far in                 
  excess of the sustained yield.  He stated for the committee,                 
  to make up a cut rate which was beyond sustained yield                       
  principles on private land and increasing resources from                     
  public lands is not good.                                                    
                                                                               
  REPRESENTATIVE JAMES stated resolutions are made up of                       
  WHEREAS and RESOLVE clauses and felt the RESOLVE clauses are                 
  the most important.  She said in this resolution, it                         
  indicates in a RESOLVE clause to manage the Tongass National                 
  Forest in order to provide maximum opportunity for timber                    
  harvest under current law.  She felt that particular RESOLVE                 
  protects the committee from anything the committee is asking                 
  for and the problems referred to by Representative Davies                    
  will be admitted in that statement.  She said disagreeing                    
  with the WHEREAS clauses is not as critical as disagreeing                   
  with the RESOLVE clauses.                                                    
                                                                               
  Number 441                                                                   
                                                                               
  REPRESENTATIVE CARNEY wondered whether the language on page                  
  one, lines 13-16, "WHEREAS regeneration on harvested land in                 
  the Tongass National Forest has demonstrated that second                     
  growth yields can reach the 23,000 board feet per acre                       
  necessary to sustain a harvest of 450,000,000 board feet per                 
  year as designated in the Tongass Land Management Plan;" is                  
  accurate.                                                                    
                                                                               
  VICE CHAIRMAN HUDSON responded the committee had as much                     
  testimony for it as they did against it.                                     
                                                                               
  REPRESENTATIVE CARNEY felt there is a need to be accurate                    
  and he assumes the statement is correct.                                     
                                                                               
  REPRESENTATIVE JAMES pointed out that HJR 55 came as a                       
  recommendation from the House Economic Task Force.  She                      
  stated a lot of testimony was heard and the resolution                       
  currently before the committee is the direct result of a                     
  request which came from the timber industry and all of the                   
  other information received.  She believed there is back up                   
  in House Economic Task Force testimony to support every                      
  statement in the resolution.                                                 
                                                                               
  Number 465                                                                   
                                                                               
  REPRESENTATIVE DAVIES said his motivation is to speak to                     
  important issues raised in the resolution including what is                  
  meant by multiple use forests, what is meant by sustained                    
  yield and whether or not the resolution is calling for a                     
  reasonable thing.  He pointed out that in the second RESOLVE                 
  clause, there is a request for an increase in the amount of                  
  timber available.  He stressed there is not sufficient                       
  information to know whether or not the Tongass can sustain                   
  an increase over what is currently offered and furthermore,                  
  he stated he is not convinced that the current decline in                    
  the economy in Southeast Alaska is directly related to the                   
  availability of timber.  He felt it is more related to                       
  market forces and independent decisions on private                           
  investments.                                                                 
                                                                               
  VICE CHAIRMAN HUDSON said while in Ketchikan, he had a long                  
  discussion with Martin Pihl, the Chief Executive Officer of                  
  the Ketchikan Pulp Company, discussing the availability of                   
  trees and the impact it has on the company's ability to                      
  operate.  Vice Chairman Hudson stated the company is very                    
  concerned about the cutback and proposed cutbacks and                        
  believed when the original act was passed, the harvest of                    
  450 million board feet was, in fact, a part of the                           
  arrangement.  Now they are being asked to take less.                         
                                                                               
  Number 518                                                                   
                                                                               
  REPRESENTATIVE MULDER made a motion to MOVE CS HJR 55(RES)                   
  with a zero fiscal note out of committee with INDIVIDUAL                     
  RECOMMENDATIONS.                                                             
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections to                   
  the motion.  Hearing none, the MOTION PASSED.                                
  HJR 56 - Exempt Alaska From "PACFISH" Regulations                            
                                                                               
  VICE CHAIRMAN HUDSON explained the new material to be added                  
  to the resolution.  On page one, line four through page two,                 
  line two, six new WHEREAS clauses have been added.  On page                  
  two, at the end of line 25 and at the beginning of line 26,                  
  the words "and mining" have been added.  On page three,                      
  lines four-seven, a new WHEREAS clause was added.  On page                   
  three, lines eight and nine, the words "Chugach National                     
  Forest, and on Bureau of Land Management land" was added.                    
  On page three, line 25, after "exclude" the word "all" was                   
  added.                                                                       
                                                                               
  REPRESENTATIVE CARNEY MOVED to ADOPT CS HJR 56(RES).                         
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections to                   
  the motion.  Hearing none, the MOTION PASSED.                                
                                                                               
  REPRESENTATIVE JAMES made a motion to MOVE CS HJR 56(RES)                    
  with a zero fiscal note out of committee with INDIVIDUAL                     
  RECOMMENDATIONS.                                                             
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections to                   
  the motion.  Hearing none, the MOTION PASSED.                                
                                                                               
  Number 600                                                                   
  HB 426 - Chickaloon Flats Critical Habitat Area                              
                                                                               
  REPRESENTATIVE CON BUNDE, PRIME SPONSOR, said there is a                     
  committee substitute for HB 426 before the committee.  He                    
  added that the committee folders contain a map showing the                   
  location of the area, as there has been confusion on where                   
  the Chickaloon Flats are actually located.  He said the                      
  Chickaloon Flats are the mud flats directly across and south                 
  of the Anchorage Potter Creek area.  HB 426 adds the                         
  Chickaloon Flats area to two areas which have already been                   
  declared critical habitat areas.                                             
                                                                               
  REPRESENTATIVE BUNDE stated the Chickaloon Flats area is a                   
  waterfowl nesting, feeding and resting area, which is a                      
  particularly important area in the fall when great numbers                   
  of duck, geese and swan migrate through and Portage Pass is                  
  closed.  It becomes vital that waterfowl have this resting                   
  area until the Pass is open.  He stressed the legislation is                 
  not intended to withdraw more lands from public use and lock                 
  them up in any way.  He explained HB 426 provides one more                   
  step of protection.  Currently, public lands are opened to                   
  development without a permit.  HB 426 will require a permit                  
  from the Alaska Department of Fish and Game (ADF&G) before                   
  development can take place.  If exploration for resources is                 
  compatible with the purpose of the critical habitat, it will                 
  be allowed.                                                                  
                                                                               
  Number 683                                                                   
                                                                               
  JACK HENDRICKSON, PRESIDENT, ALASKA WATERFOWL ASSOCIATION                    
  AND STATE CHAIRMAN, WATERFOWL U.S.A., testified via                          
  teleconference, and stated his group has been involved in                    
  getting protection for waterfowl in the Susitna Flats State                  
  Game Refuge, which is 301,000 acres; Trading Bay State Game                  
  Refuge, 186,000 acres; Redoubt Bay Critical Habitat Area,                    
  201,000 acres; Goose Bay State Game Refuge, 14,000 acres;                    
  Palmer Hay Flats State Game Refuge, 38,000 acres; and                        
  Anchorage Coastal Refuge, 14,000 acres.                                      
                                                                               
  Number 700                                                                   
                                                                               
  MR. HENDRICKSON said the Chickaloon Flats is one of the                      
  remaining spots in Cook Inlet needing oversight; not to the                  
  extent that it needs to be declared a refuge, but to the                     
  extent that ADF&G has some oversight.  He felt critical                      
  habitat area is a good designation and it will not cost any                  
  more money than is already appropriated for ADF&G to have                    
  oversight.  He explained the Chickaloon Flats is very                        
  important to waterfowl both in the spring and fall.  If                      
  Portage Pass is closed and waterfowl cannot go any further                   
  south, they have to have places to rest and feed.  The                       
  Chickaloon Flats has been very popular with duck and geese                   
  who get into that situation.  He added that although the                     
  Anchorage Coastal Refuge is also of assistance, waterfowl                    
  seem to prefer the Chickaloon Flats.                                         
                                                                               
  Number 730                                                                   
                                                                               
  MR. HENDRICKSON stated that in addition to small populations                 
  of nesting duck, the flats are also valuable to migrating                    
  shore birds who also use the area.  Designating the                          
  Chickaloon Flats as a critical habitat area is not costly,                   
  is thoughtful and puts together almost an entire Cook Inlet                  
  package of waterfowl refuges which is the largest, best and                  
  least costly in the world.                                                   
                                                                               
  Number 752                                                                   
                                                                               
  REPRESENTATIVE JAMES stated she is not familiar with the                     
  other state refuges and critical habitat areas which have                    
  been mentioned and what is permitted in those areas.  She                    
  wondered if the Chickaloon Flats Critical Habitat Area will                  
  be different than the other refuges and habitat areas in                     
  terms of development.                                                        
                                                                               
  TAPE 94-21, SIDE B                                                           
  Number 000                                                                   
                                                                               
  MR. HENDRICKSON responded it is not the intent of ADF&G to                   
  stop development when an area has been designated.  HB 426                   
  provides for desirable oversight and is the kind of caution                  
  an intelligent conservationist would use in setting up land                  
  designations.  If there is no development in the Chickaloon                  
  Flats area in the next 20-30 years, it will not make any                     
  difference whether the area was designated or not.  However,                 
  if large structures are going to be built there and the                      
  development is not compatible with the fish or waterfowl                     
  there, ADF&G could stop the development with the oversight                   
  they have.  He added that oil and gas development is one of                  
  the least intrusive kinds of development on land because                     
  most of it is done underground.                                              
                                                                               
  Number 023                                                                   
                                                                               
  REPRESENTATIVE JAMES asked if it is correct that state game                  
  refuges and critical habitat areas do not have permission to                 
  do other things.  She expressed concern that if oil                          
  development and other development is allowed by permit in                    
  the other areas and not in the Chickaloon Flats, it will be                  
  contradictory.  On the other hand, if development by permit                  
  is not allowed in the other areas but will be allowed in the                 
  Chickaloon Flats, she does not see the need to set up two                    
  different kinds of protection for migratory waterfowl.                       
                                                                               
  MR. HENDRICKSON responded refuges suggest a higher degree of                 
  concern.  He said ADF&G has more care and examination at                     
  refuges than critical habitat areas.  He did not believe                     
  ADF&G has a single person assigned to work on the refuges,                   
  but ADF&G does watch refuges more because there is a higher                  
  level of protection needed due to the larger number of                       
  wildlife.                                                                    
                                                                               
  REPRESENTATIVE BUNDE told committee members they have a copy                 
  of Alaska Statute 16.20.605 which lists critical habitat                     
  areas and discusses what is allowed.  HB 426 requires a                      
  permit before development is allowed to ensure oversight.                    
                                                                               
  Number 060                                                                   
                                                                               
  REPRESENTATIVE DAVIES pointed out the statute says Redoubt                   
  Bay is a critical habitat area and it also has a similar oil                 
  and gas permit clause.                                                       
                                                                               
  ELLEN FRITTS, DEPUTY DIRECTOR, DIVISION OF HABITAT AND                       
  RESTORATION, ADF&G, stated there are 32 critical habitat                     
  areas located throughout the state.  What can and cannot                     
  happen within the areas is determined when the legislature                   
  designates the area.  In the proposed work draft on HB 426,                  
  it lists specifically not only what kinds of things the                      
  public will want to have happen there and what the                           
  legislature thinks should happen there, but also states what                 
  the area will specifically be set aside for.  She pointed                    
  out the Chickaloon Flats Critical Habitat Area will be set                   
  aside for waterfowl.  She stressed the purpose of the                        
  elevated scrutiny is to look carefully at what the resources                 
  are in the area, look at the activity which is proposed and                  
  perhaps condition the activity so it can go forward while                    
  still meeting the purpose of the area.                                       
                                                                               
  Number 095                                                                   
                                                                               
  REPRESENTATIVE JAMES pointed out the Chickaloon Flats area                   
  is another 22,000 acres and there is a zero fiscal note.                     
  She asked if ADF&G is stating there will not be a                            
  significant fiscal impact when adding that many more acres                   
  to the responsibility of ADF&G in maintaining the habitat.                   
                                                                               
  MS. FRITTS said that is correct.  ADF&G has permitters in                    
  the Anchorage area who will review any applications for the                  
  area and accomplish it as a part of their regular duties.                    
                                                                               
  REPRESENTATIVE BUNDE added there are no known or proposed                    
  requests for permits currently.  There might be a fiscal                     
  impact if a large number of requests were received.                          
                                                                               
  REPRESENTATIVE BUNDE said HB 426 is a feel good type of                      
  legislation which does not cost anything, either in lost                     
  resources or actual dollars.  He commended the Alaska                        
  Waterfowl Association as they were the driving force behind                  
  the other habitat areas which were mentioned.                                
                                                                               
  Number 117                                                                   
                                                                               
  REPRESENTATIVE JAMES asked if there will be a blank permit                   
  for uses of the area, based on a decision made by ADF&G                      
  rather than issuing individual permits for activities                        
  whereby a fee could be charged.                                              
                                                                               
  MS. FRITTS replied no fees are charged for any of ADF&G's                    
  permits.  She added that many of the activities included are                 
  the types of activities which ADF&G does not review on any                   
  of the refuges or critical habitat areas.  She stated for                    
  many of the special habitat areas, ADF&G does prepare a                      
  management plan, asking members of the public to be a part                   
  of a planning committee.  Those management plans are more                    
  specific on activities if there is a concern expressed by                    
  the committee with that particular special area.                             
                                                                               
  Number 148                                                                   
                                                                               
  REPRESENTATIVE MULDER made a motion to MOVE CSHB 426(O&G)                    
  with a zero fiscal note out of committee with INDIVIDUAL                     
  RECOMMENDATIONS.                                                             
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections.                     
  Hearing none, the MOTION PASSED.                                             
  HB 199 - Oil and Gas Exploration Licenses/Leases                             
                                                                               
  REPRESENTATIVE BUNDE made a motion to ADOPT CSHB 199(O&G).                   
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections.                     
  Hearing none, the MOTION PASSED.                                             
                                                                               
  Number 175                                                                   
                                                                               
  REPRESENTATIVE GREEN said since the Department of Natural                    
  Resources (DNR) representative had not dialed in yet, he                     
  would review HB 199.  He told committee members that in                      
  their folder was a chart showing the revenues to the state                   
  from the petroleum industry.  It shows, contrary to a belief                 
  which many people have, the lease bonus does not supply a                    
  very large portion of oil revenue.  He pointed out that the                  
  state's wealth from the oil industry comes primarily from                    
  royalties received and the severance tax applied to all                      
  barrels.                                                                     
                                                                               
  REPRESENTATIVE GREEN stated, referring to two maps contained                 
  in members' folders, that HB 199 does not apply to any land                  
  north of the Umiat Base Line or the developed portion of                     
  Cook Inlet.  HB 199 does not impact conventional,                            
  competitive leasing which is conducted every year by DNR.                    
  He stressed HB 199 encourages companies remaining in the                     
  state and perhaps encourages other worldwide companies to                    
  return to the state or come to the state for the first time.                 
  He said these worldwide companies are familiar with                          
  concession type leasing which occurs in foreign countries                    
  and noted this country has nothing like that, but rather                     
  develops the oil industry in the U.S. based on private                       
  ownership.  He stated in the U.S., an oil company goes to a                  
  private landowner and requests that a certain royalty be                     
  arranged if the landowner allows drilling.                                   
                                                                               
  REPRESENTATIVE GREEN stated HB 199 allows competitive lease                  
  bidding which is currently ongoing and is similar to the                     
  conventional oil company operations within the U.S.  He                      
  explained that HB 199 supplements competitive lease bidding                  
  with what is known as worldwide tract leasing or large                       
  concession leasing with a licensing from the state on large                  
  tracts of land.  He noted the minimum amount of acreage to                   
  exercise HB 199 is 20,000 acres and the maximum is 500,000                   
  acres.                                                                       
                                                                               
  REPRESENTATIVE GREEN reminded committee members there are                    
  large amounts of acreage in the state which have not been                    
  developed, tapped, or even drilled upon.  HB 199 will make                   
  that acreage available by allowing a company or a                            
  combination of companies to suggest to the commissioner of                   
  DNR that they would like to exercise their license agreement                 
  with the state for a particular area.  He explained if the                   
  commissioner finds it would be in the best interest of the                   
  state to have activity looking for hydrocarbons to replace                   
  the state's dwindling reserves, he would then publicly                       
  announce that a competitive bid will take place for the                      
  license privilege within the area which has been designated.                 
  Representative Green said hopefully at that time, several                    
  individual companies or combinations of companies will                       
  submit sealed bids similar to the competitive lease sales                    
  which occur in Cook Inlet and the North Slope.                               
                                                                               
  REPRESENTATIVE GREEN added that when the commissioner agrees                 
  the activity should happen, he will assign some blanket                      
  conditions.  Once those conditions are determined, they will                 
  be listed in the licensing bidding.  Therefore, when                         
  companies bid, they are completely aware there are certain                   
  restrictions.  He explained the licensing agreements then go                 
  on the block.  The successful bidder will be chosen by a                     
  sealed bid arrangement, similar to the competitive lease                     
  selling.  If the commissioner finds at that time the bids                    
  are not satisfactory, the sale is cancelled.  If it is                       
  determined that there has been a satisfactory license bid,                   
  that bid is accepted.                                                        
                                                                               
  REPRESENTATIVE GREEN gave an example:  Company A comes to                    
  the commissioner and expresses an interest in a tract; the                   
  lease sale is held and companies bid; company A bids $100                    
  million and the bid is accepted.  Company A is then                          
  committed to the state to spend $100 million over a ten year                 
  period to try and find hydrocarbons, with the restrictions                   
  imposed in the area which company A has received a                           
  designation on.  Company A then has an exclusive ability to                  
  look for oil anywhere in this concession.  He pointed out                    
  there are some restrictions.  If company A has not committed                 
  and spent at least 25 percent of their bid by the fourth                     
  year, the commissioner relinquishes that license agreement.                  
                                                                               
  Number 298                                                                   
                                                                               
  VICE CHAIRMAN HUDSON asked if their bond would be forfeited.                 
                                                                               
  REPRESENTATIVE GREEN responded, yes the company would and                    
  added that is a yearly commitment.  He stated HB 199 says                    
  company A has an up front requirement from a regulation                      
  saying they have to commit or lose their bond.  Current                      
  leasing does not have that restriction.  He continued that                   
  if a company gets a ten year lease on a competitive basis,                   
  it can wait nearly until the tenth year before it does                       
  anything.  He said HB 199 forces a company to do something                   
  earlier which is to the state's benefit.  He added that if a                 
  company completes 50 percent and has actually spent $50                      
  million in ground truth before the fourth year, there will                   
  be no restriction of the land back to the state and the                      
  company is allowed to continue to develop.  If a company                     
  commits more than 25, but less than 50 percent; for example,                 
  a company commits 40 percent on a very expensive well within                 
  the fourth year but then sits on their laurels and thinks                    
  about it, the company begins to lose part of its acreage by                  
  that time.  The company loses 25 percent and ten percent                     
  every year thereafter, up to 75 percent total.  He stressed                  
  the company has committed what is needed to hold but has                     
  lost 75 percent of the land designated since it has not                      
  committed to doing the work agreed to.                                       
                                                                               
  REPRESENTATIVE GREEN explained further that even though                      
  there is a bond requirement or an environmental safeguard                    
  for any petroleum activity within the state, a company                       
  either has to show that it is capable or buy an actual                       
  performance bond saying that if its drilling messes up the                   
  countryside, that company can be taken to task or their bond                 
  will be taken.  That is a completely separate bond than the                  
  bond which is issued in relation to HB 199.  The bond for HB
  199 is a commitment to the state that a company will do some                 
  work and if it does not, it will sacrifice dollars to the                    
  state.                                                                       
                                                                               
  REPRESENTATIVE GREEN gave an example:  Company A has                         
  committed $100 million.  HB 199 says that you take that                      
  amount of commitment and subtract the amount of work which                   
  the commissioner has approved as adequate, and then divide                   
  by the number of years remaining on the license agreement.                   
  He pointed out the first year it would be $100 million minus                 
  zero, divided by ten.  A company would need to post a $10                    
  million bond that if the company does not do anything in                     
  that year, the state gets $10 million.  The second year, the                 
  company does 55 percent or $55 million - $100 million minus                  
  $55 million, leaving $45 million yet to be divided by nine,                  
  meaning the company needs to commit to a $5 million bond.                    
  It works that way progressively down until the company has                   
  spent $100 million.  He stated at that point there is no                     
  more bonding to the state, but there would still be                          
  environmental bonding needed through the Department of                       
  Environmental Conservation (DEC).                                            
                                                                               
  REPRESENTATIVE GREEN continued with the example.  Company A                  
  finds an oil field in its 500,000 acres.  The company then                   
  goes to the commissioner and states that the remaining land                  
  seems to be a goat pasture and desires to convert the area                   
  around the indicated oil field to a lease.  He stressed                      
  there is a provision in HB 199 to accomplish that.  At that                  
  time, the company goes on the same leasing program which it                  
  would have done if it had gone through competitive leasing.                  
  The lease area which the company commits to, will draw $3 an                 
  acre rental until it can actually develop an economic stream                 
  of oil from there.  He added that it is up to the company to                 
  develop a way to get that oil to market.                                     
                                                                               
  REPRESENTATIVE GREEN stated HB 199 is designed to get                        
  activity in other parts of the state, probably remote parts                  
  of the state, meaning there is no existing method of getting                 
  there.  The company will possibly incur pipelines, barges,                   
  etc.  The company needs to consider in their bid that once                   
  oil is found, the company has to get the oil to market.  HB
  199 does not circumvent any biological, environmental or                     
  economic problems which will incur after a company finds                     
  oil.                                                                         
                                                                               
  Number 378                                                                   
                                                                               
  KEN BOYD, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS, DNR,                     
  testified via teleconference, and explained that HB 199                      
  dates back to the second session of the seventeenth                          
  legislature.  The commissioner of DNR at that time was                       
  challenged by the legislature to determine a way to allow                    
  Alaska to remain competitive with the international oil                      
  market.  The commissioner came up with two ideas;  one is                    
  before the committee today, and the second is exploration                    
  incentive credits which the committee will hear later in the                 
  week.  He stated the exploration licensing bill was                          
  generated late in that session and (indiscernible) the                       
  concession provisions of about 100 countries, putting                        
  together a package suitable for Alaska.                                      
                                                                               
  MR. BOYD said the exploration licensing bill was introduced                  
  late in the session, had very few hearings, and languished                   
  during the interim.  He noted much work was done to the bill                 
  between sessions resulting in a bill that was heard last                     
  session in both the House and the Senate.  He stated on the                  
  Senate side, the bill was heard several times and was                        
  heavily amended.  It ended in the Senate as a result of                      
  different groups having various ideas as to what the bill                    
  should look like.  He explained on the House side, the bill                  
  was heard several times in the Oil and Gas Committee, was                    
  not amended and sat until this session.                                      
                                                                               
  MR. BOYD pointed out that DNR and the industry knew there                    
  was not a consensus on the bill.  The one thing that gave                    
  them hope, however, was that everyone wanted the concept of                  
  exploration licensing.  It was important and needed as an                    
  incentive for companies to get out into the remote areas of                  
  Alaska to explore.  He pointed out that too many companies                   
  were leaving the state.  He said over the interim, DNR met                   
  with approximately 20 companies of all sizes and took the                    
  bill apart, reviewed each piece and reached a consensus.                     
  Mr. Boyd stressed it is important that the committee                         
  consider that HB 199 as it is written, is the bill that had                  
  a consensus.                                                                 
                                                                               
  Number 447                                                                   
                                                                               
  REPRESENTATIVE BUNDE asked Representative Green if the four                  
  years he used in his example is a firm four years or does                    
  that vary with the length of the lease.                                      
                                                                               
  REPRESENTATIVE GREEN responded four years is included in the                 
  bill.                                                                        
                                                                               
  REPRESENTATIVE JAMES said she is very supportive of any                      
  activity to be done in the state which enhances economic                     
  activity and encourages industry to take a part in the                       
  development of the state's resources.  She asked when                        
  550,000 acres has been licensed to an oil company to drill                   
  for oil and the company does the projected activity they                     
  committed to do, what is the possibility of them using that                  
  550,000 acres for any other resource development, such as                    
  timber, mining, coal, etc.  She also questioned if the                       
  exploration license is given and the oil company                             
  subsequently enters into a lease, how does that compete with                 
  development of other natural resources.                                      
                                                                               
  Number 479                                                                   
                                                                               
  MR. BOYD replied all of the current provisions in regulation                 
  and statute apply to licensing.  He said just as it is with                  
  the leasing program currently, the same is true for licensed                 
  lands; every other activity is allowed, and added that this                  
  includes the public access provision.                                        
                                                                               
  REPRESENTATIVE DAVIES stated there seems to be three                         
  distinct land use decisions which get made if HB 199 was to                  
  pass.  The first decision would be the commissioner making a                 
  preliminary written determination on state land, which is                    
  subject to the provisions of HB 199.  There would be a                       
  blanket designation of a lot of land which may be entered                    
  into licenses.  He said the second land use decision which                   
  might get made would be where a company applies for a                        
  license on a subset of the land which was designated.  The                   
  third action would be to convert a portion of that licensed                  
  land to a lease.  He asked if the provisions for licensing                   
  are exactly those which are in present law.                                  
                                                                               
  REPRESENTATIVE GREEN replied the law says there will be                      
  restrictions put on a lease once it is converted, and added                  
  that those restrictions could be in a blanket form or could                  
  be site specific.                                                            
                                                                               
  MR. BOYD added that the lease is actually tied to the                        
  licensing.  The lease received is already in place.  He                      
  stressed all the provisions in place currently apply and                     
  gave an example.  He said companies will have no surprises                   
  when they convert to a lease.  They will know there are                      
  certain constrained areas within the licensed area which                     
  will need to be addressed.                                                   
                                                                               
  Number 558                                                                   
                                                                               
  REPRESENTATIVE DAVIES said taking a best interest finding as                 
  an example, does that process occur at the time the                          
  commissioner considers the issuance of the license or at the                 
  time he considers the issuance of the lease.                                 
                                                                               
  MR. BOYD responded at the time of the license and stressed                   
  everything has to be completed prior to issuing the license.                 
                                                                               
  VICE CHAIRMAN HUDSON noted for the record that                               
  REPRESENTATIVE WILLIAMS joined the committee at 9:40 a.m.                    
                                                                               
  GEORGE FINDLING, MANAGER, GOVERNMENT AND PUBLIC RELATIONS,                   
  ARCO ALASKA, testified via teleconference, and expressed                     
  support of HB 199.  He pointed out the strengths of HB 199,                  
  including the provision of a level playing field for                         
  potential competitors for licenses.  First, the bonding                      
  formulation strikes an appropriate balance among the variety                 
  of interests, provides equal financial footing for bidders                   
  and solid protection for the state's interest.  Second,                      
  leases are achieved only after the entire work commitment is                 
  completed which minimizes the chances for speculation.                       
  Third, the bonding and relinquishment provisions provide                     
  incentives to conduct work early and vigorously.  Fourth,                    
  the bonding provision allows the licensee maximum                            
  flexibility to pursue a work program which makes sense.                      
  Fifth, the licensing supplements and also dovetails into the                 
  proven state licensing system, providing licensees with                      
  maximum certainty of the long-term rule.  And finally, the                   
  winning bid in any competition is selected based upon                        
  objective standards of total dollar amounts by using sealed                  
  bids.  He stressed that ARCO strongly supports HB 199.                       
                                                                               
  Number 646                                                                   
                                                                               
  ARDIE GRAY, PUBLIC SERVICE MANAGER, ALASKA OIL AND GAS                       
  ASSOCIATION (AOGA), testified via teleconference, and said                   
  AOGA believes that large oil and gas exploration licensing                   
  is an attractive addition to the state's leasing program, to                 
  accelerate exploration and financial development of Alaska's                 
  frontier areas.  She stated AOGA supports a large block                      
  licensing program which does not apply to lands north of the                 
  Umiat Base Line; lands south of the Umiat Base Line which                    
  are within proposed competitive oil and gas lease sales 80,                  
  87, and 88 prior to the initial sale; and in the vicinity of                 
  Cook Inlet that are within the area bounded by the north                     
  boundary of township 17 north Seward meridian, the Seward                    
  Meridian, the south boundary of township 7 south Seward                      
  meridian, and the west boundary range 19 west Seward                         
  meridian.                                                                    
                                                                               
  MS. GRAY stated that AOGA supports a program in which a                      
  license is conditioned upon posting of an annual bond or                     
  other security in favor of the state and in which the annual                 
  bond or other security is calculated as the entire work                      
  commitment expressed in dollars less the cumulative                          
  expenditures as of the last day of the most recent project                   
  year, divided by the remaining years of the exploration                      
  license.  She said AOGA supports a competitive program in                    
  which all licenses are awarded on the basis of written,                      
  sealed bids for total dollar work commitment.  The                           
  commissioner should adopt regulations to evaluate competing                  
  proposals.                                                                   
                                                                               
  MS. GRAY stressed that AOGA supports a program in which                      
  conversion from license to lease is under existing state                     
  leasing statutes AS 38.05.180 (j)-(m), (o)-(u), and (x)-(z),                 
  and upon conversion, such a lease is subject to the acreage                  
  chargeability of AS 38.05.140(c).  She stated AOGA supports                  
  a program in which any relinquishment of the license area                    
  does not occur before the fourth anniversary of the license                  
  and each year thereafter is a percentage relinquishment of                   
  the remaining license area, not to exceed 50 percent of the                  
  original license area.  As an incentive for early evaluation                 
  of a license area, AOGA believes no relinquishment should be                 
  required if the licensee has expended 50 percent of the                      
  approved work commitment by the fourth anniversary of the                    
  license.                                                                     
                                                                               
  MS. GRAY stated the House Oil and Gas Committee Substitute                   
  for HB 199 is consistent with the AOGA position on                           
  exploration licensing legislation.  AOGA supports HB 199.                    
                                                                               
  TAPE 94-22, SIDE A                                                           
  Number 000                                                                   
                                                                               
  BECKY GAY, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT COUNCIL                  
  (RDC), testified via teleconference, and said RDC strongly                   
  supports HB 199 and believes it will augment the present oil                 
  and gas leasing program.  She stressed that many hours of                    
  work have gone into building the exploration licensing from                  
  a concept into a workable program, which should help                         
  encourage exploration of Alaska's vast resource potential.                   
  Most people think of resources already in production or                      
  under development, but she felt exploration is the key to                    
  the future of resource development.  Just as the state                       
  cannot afford to wait for megatons like Prudhoe Bay, to fill                 
  its coffers, neither can exploration companies afford to                     
  rest on their laurels of past successes in looking for new                   
  oil and gas lease areas.                                                     
                                                                               
  MS. GAY stressed exploration is the lifeblood of the                         
  industry and anything which will help encourage more                         
  exploratory work in Alaska, particularly on state lands,                     
  should be supported.  This legislation will not supplant the                 
  ongoing lease program, but it should enhance it.  Many                       
  compromises allowing small companies to pursue exploration                   
  licensing have been made, but noted in any event,                            
  exploration in Alaska is costly, very risky in regard to                     
  success, and even more difficult because of the huge areas                   
  off-limits, and the lack of infrastructure to support                        
  exploration activities.  RDC urged the committee to move HB
  199 on to the next committee.                                                
                                                                               
  Number 036                                                                   
                                                                               
  WALT FURNACE, GENERAL MANAGER, ALASKA SUPPORT INDUSTRY                       
  ALLIANCE, testified via teleconference, and said the board                   
  of directors of the Alliance reviewed HB 199 and supports                    
  the intent of the legislation.  The Alliance's position is                   
  that as Alaska's known oil and gas fields are depleted,                      
  there is a need to take aggressive steps to encourage                        
  companies to explore areas of the state which may not be of                  
  prime capacity.  In reviewing the legislation, the Alliance                  
  noted that it does provide (indiscernible) vehicle.  The                     
  Alliance also endorses the bonding mechanism contained in                    
  the bill and supports the concept that when companies                        
  explore, the financial responsibility must be in place.                      
                                                                               
  MR. FURNACE stressed the Alliance supports HB 199 because                    
  the oil and gas industry is the lifeblood of Alaska and                      
  urges the rapid passage of HB 199.  Without its passage,                     
  Alaska will no longer be able to provide this source of                      
  revenue which is so crucial to the development of its                        
  resources.  He reminded committee members that under the                     
  state's Constitution, legislators are charged with                           
  developing Alaska's resources to the maximum benefit of the                  
  state's citizens.                                                            
                                                                               
  Number 063                                                                   
                                                                               
  GREG GARRELS, FAIRBANKS, testified via teleconference, and                   
  stated he had not heard anyone mention the fact that what                    
  this bill amounts to is an option on a lease.  He felt HB
  199 gives the large, powerful corporations the ability to                    
  lock up an area equivalent to 50 percent of all private                      
  lands in Alaska with very little oversight.  He wondered if                  
  anyone had considered the possibility that with large                        
  discoveries being made all over the world, and with oil                      
  companies, in general, moving many of their operations                       
  overseas, what the oil companies may be looking for is a                     
  cheap and efficient way to lock the door behind them on                      
  their way out.                                                               
                                                                               
  MR. GARRELS noted that he had heard the words level playing                  
  field mentioned and he felt there is only a level playing                    
  field if you are a multi-billion dollar corporation, not a                   
  small company located in Alaska.  He stated the whole thing                  
  is going to be overseen by one ex-oil company employee.  He                  
  asked if the provisions are going to be enforced through the                 
  same diligence which has resulted in $6 billion in back                      
  taxes.  He felt HB 199 was written by a major oil company                    
  and that it is in the interest of the major oil companies,                   
  not in the interest of the state.                                            
                                                                               
  Number 098                                                                   
                                                                               
  CLIFF BURGLIN, FAIRBANKS, testified via teleconference, and                  
  said British Petroleum (BP) is Alaska's major producing                      
  corporation.  He stated in the last year, BP has had                         
  discoveries in Columbia and in the last two weeks, BP has                    
  announced findings of 500 million to one billion barrels of                  
  oil in the North Sea.  He mentioned that BP produces about                   
  600,000 barrels of Alaska oil a day and it appears they are                  
  headed elsewhere.  He stated companies are already sitting                   
  on finds which will produce two billion barrels a day, close                 
  to  infrastructures and he named the fields.  He stressed                    
  the fields have been discovered, but not yet developed in                    
  addition to about two million acres that companies are also                  
  sitting on in leases, which have not been developed or are                   
  only partially developed.  Mr. Burglin asked what makes the                  
  legislators think these companies are going to do anymore                    
  than they have already done if they get exploration                          
  licensing.  He expressed opposition to passage of HB 199.                    
                                                                               
  REPRESENTATIVE GREEN said when the House Oil and Gas                         
  Committee reviewed HB 199, Mr. Burglin stated he had several                 
  questions to ask the committee and was requested to send the                 
  written questions to the committee.  Representative Green                    
  noted he had not received them to date.                                      
                                                                               
  MR. BURGLIN responded he had sent the questions and he would                 
  like to have his concerns addressed in writing.  He added                    
  there is trouble brewing in the Mid-East and when it comes                   
  to fruition, Arabs do not care about oil fields and 15                       
  billion barrels a day could come off the market just like it                 
  did in 1973 and 1974.  Alaska will be the only place where                   
  the U.S. can pick up additional production easily like they                  
  did during the Gulf War.  If the land in Alaska is allowed                   
  to be locked up by big oil companies, he hoped that people                   
  are prepared to freeze and wait in long gas lines.                           
                                                                               
  Number 183                                                                   
                                                                               
  REPRESENTATIVE MULDER made a motion to MOVE CSHB 199(O&G)                    
  with a zero fiscal note out of committee with INDIVIDUAL                     
  RECOMMENDATIONS.                                                             
                                                                               
  VICE CHAIRMAN HUDSON asked if there were any objections to                   
  the motion.  Hearing none, the MOTION PASSED.                                
                                                                               
  ANNOUNCEMENTS                                                                
                                                                               
  VICE CHAIRMAN HUDSON announced the committee will meet on                    
  Wednesday, March 2 at 8:15 a.m. to hear HB 238.                              
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  There being no further business to come before the House                     
  Resources Committee, Vice Chairman Hudson adjourned the                      
  meeting at 10:17 a.m.                                                        

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