Legislature(1993 - 1994)

03/04/1994 08:15 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE RESOURCES STANDING COMMITTEE                              
                          March 4, 1994                                        
                            8:15 a.m.                                          
  MEMBERS PRESENT                                                              
  Representative Bill Williams, Chairman                                       
  Representative Pat Carney                                                    
  Representative John Davies                                                   
  Representative David Finkelstein                                             
  Representative Joe Green                                                     
  Representative Jeannette James                                               
  MEMBERS ABSENT                                                               
  Representative Bill Hudson, Vice Chairman                                    
  Representative Con Bunde                                                     
  Representative Eldon Mulder                                                  
  COMMITTEE CALENDAR                                                           
  HCR 12    Relating to the use of natural gas as a motor                      
            vehicle fuel in Alaska.                                            
            CS HCR 12(O&G) MOVED OUT OF COMMITTEE WITH                         
            INDIVIDUAL RECOMMENDATIONS                                         
  SB 238   "An Act establishing a procedure for review of                      
            proposed projects under the Alaska coastal                         
            management program, and relating to petitions                      
            for compliance with and enforcement of district                    
            coastal management programs under that program                     
            and to the disposition of those petitions."                        
            CSSB 238(FIN) MOVED OUT OF COMMITTEE WITH                          
            INDIVIDUAL RECOMMENDATIONS                                         
  SB 151   "An Act providing for oil and gas exploration                       
            incentive credits for certain activities on                        
            certain land in the state; and providing for                       
            an effective date."                                                
            HCS SB 151(RES) MOVED OUT OF COMMITTEE WITH                        
            INDIVIDUAL RECOMMENDATIONS                                         
  WITNESS REGISTER                                                             
  REPRESENTATIVE DAVID FINKELSTEIN                                             
  Alaska State Legislature                                                     
  State Capitol, Room 424                                                      
  Juneau, Alaska   99801-1182                                                  
  Phone:  465-2435                                                             
  POSITION STATEMENT:  Prime Sponsor HCR 12                                    
  CHUCK LANDERS, Member                                                        
  Anchorage Assembly                                                           
  P.O. Box 196650                                                              
  Anchorage, Alaska   99503                                                    
  Phone:  562-6050                                                             
  POSITION STATEMENT:  Supported HCR 12                                        
  RON COLLINS, Principal Administrative Officer                                
  Fleet Service Division                                                       
  Municipality of Anchorage                                                    
  4333 Bering Street                                                           
  Anchorage, Alaska   99503                                                    
  Phone:  562-0632                                                             
  POSITION STATEMENT:  Supported HCR 12                                        
  JEFF OTTESEN, Chief                                                          
  Right-of-Way & Environment                                                   
  Division of Engineering and Operations                                       
  Department of Transportation and Public Facilities                           
  3132 Channel Drive                                                           
  Juneau, Alaska   99801                                                       
  Phone:  465-2985                                                             
  POSITION STATEMENT:  Answered questions relating to HCR 12                   
  KEN ERICKSON, Aide                                                           
  Senator Drue Pearce                                                          
  State Capitol, Room 508                                                      
  Juneau, Alaska   99801-1182                                                  
  Phone:  465-4993                                                             
  POSITION STATEMENT:  Provided sponsor statement on SB 238                    
  STEVEN PORTER                                                                
  ARCO Alaska                                                                  
  P.O. Box 100360                                                              
  Anchorage, Alaska   99510                                                    
  Phone:  265-6269                                                             
  POSITION STATEMENT:  Supported SB 238                                        
  PAUL RUSANOWSKI, Director                                                    
  Division of Governmental Coordination                                        
  Office of the Governor                                                       
  P.O. Box 110030                                                              
  Juneau, Alaska   99811-0030                                                  
  Phone:  465-3562                                                             
  POSITION STATEMENT:  Supported SB 238                                        
  BETH KERTTULA, Assistant Attorney General                                    
  General Civil Section                                                        
  Department of Law                                                            
  P.O. Box 110300                                                              
  Juneau, Alaska   99811-0300                                                  
  Phone:  465-3600                                                             
  POSITION STATEMENT:  Answered questions                                      
  TOM LOHMAN, Representative                                                   
  North Slope Borough                                                          
  P.O. Box 642                                                                 
  Barrow, Alaska   99723                                                       
  Phone:  852-0350                                                             
  POSITION STATEMENT:  Supported SB 238                                        
  ROGER ALLINGTON, Director                                                    
  Statewide Planning                                                           
  Department Transportation and Public Facilities                              
  3132 Channel Drive                                                           
  Juneau, Alaska   99801-7898                                                  
  Phone:  465-4070                                                             
  POSITION STATEMENT:  Offered an amendment for SB 238                         
  DREW SCALZI, Member                                                          
  Alaska Coastal Policy Council                                                
  41685 Redoubt Circle                                                         
  Homer, Alaska   99603                                                        
  Phone:  235-6359                                                             
  POSITION STATEMENT:  Passed on giving testimony                              
  JIM HAYNES                                                                   
  Division of Oil and Gas                                                      
  Department of Natural Resources                                              
  P.O. Box 107034                                                              
  Anchorage, Alaska   99510                                                    
  Phone:  762-2592                                                             
  POSITION STATEMENT:  Gave overview on SB 151 and answered                    
  KEN FREEMAN, Project Coordinator                                             
  Resource Development Council                                                 
  121 W. Fireweed, #250                                                        
  Anchorage, Alaska   99502                                                    
  Phone:  276-0700                                                             
  POSITION STATEMENT:  Supported SB 151                                        
  WALT FURNACE, General Manager                                                
  Alaska Support Industry Alliance                                             
  4220 B Street                                                                
  Anchorage, Alaska   99503                                                    
  Phone:  563-2226                                                             
  POSITION STATEMENT:  Supported SB 151                                        
  PREVIOUS ACTION                                                              
  BILL:  HCR 12                                                                
  SPONSOR(S): REPRESENTATIVE(S) FINKELSTEIN                                    
  JRN-DATE     JRN-PG               ACTION                                     
  03/01/93       485    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  03/01/93       485    (H)   O&G, RESOURCES, TRA, FINANCE                     
  04/06/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  04/07/93              (H)   O&G AT 05:00 PM CAPITOL 124                      
  04/07/93              (H)   MINUTE(O&G)                                      
  02/14/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  02/18/94      2455    (H)   O&G RPT  CS(O&G) 2DP 1DNP 1NR                    
  02/18/94      2456    (H)   DP:  KOTT, GREEN                                 
  02/18/94      2456    (H)   DNP: OLBERG                                      
  02/18/94      2456    (H)   NR:  G.DAVIS                                     
  02/18/94      2456    (H)   -ZERO FISCAL NOTE (DEC) 2/18/94                  
  03/04/94              (H)   RES AT 08:15 AM CAPITOL 124                      
  BILL:  SB 238                                                                
  SPONSOR(S): SENATOR(S) PEARCE                                                
  JRN-DATE     JRN-PG               ACTION                                     
  01/07/94      2456    (S)   PREFILE RELEASED 1/7/94                          
  01/10/94      2456    (S)   READ THE FIRST TIME/REFERRAL(S)                  
  01/10/94      2457    (S)   RES,  FIN                                        
  01/24/94              (S)   RES AT 3:30 PM BUTRVICH RM 205                   
  01/24/94              (S)   MINUTE(RES)                                      
  01/28/94              (S)   MINUTE(RES)                                      
  02/02/94      2657    (S)   RES RPT  4DP                                     
  02/02/94      2657    (S)   FISCAL NOTE PUBLISHED (GOV)                      
  02/11/94      2783    (S)   FIN RPT CS 4DP 2NR SAME TITLE                    
  02/11/94      2784    (S)   FISCAL NOTE TO CS PUBLISHED                      
  02/11/94              (S)   FIN AT 09:00 AM SENATE FIN 518                   
  02/14/94              (S)   RLS AT 03:00 PM FAHRENKAMP ROOM                  
  02/14/94              (S)   MINUTE(RLS)                                      
  02/15/94      2860    (S)   RLS RPT  4 CAL 1NR   2/15/94                     
  02/15/94      2861    (S)   READ THE SECOND TIME                             
  02/15/94      2861    (S)   FIN  CS ADOPTED UNAN CONSENT                     
  02/15/94      2861    (S)   ADVANCED TO THIRD READING                        
                              UNAN CONSENT                                     
  02/15/94      2861    (S)   READ THE THIRD TIME                              
                              CSSB 238(FIN)                                    
  02/15/94      2862    (S)   PASSED Y19 N- A1                                 
  02/15/94      2862    (S)   Ellis NOTICE OF RECONSIDERATION                  
  02/22/94      2920    (S)   RECONSIDERATION NOT TAKEN UP                     
  02/22/94      2920    (S)   TRANSMITTED TO (H)                               
  02/23/94      2490    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  02/23/94      2490    (H)   RESOURCES                                        
  03/04/94              (H)   RES AT 08:15 AM CAPITOL 124                      
  BILL:  SB 151                                                                
  SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                 
  JRN-DATE     JRN-PG               ACTION                                     
  03/05/93       618    (S)   READ THE FIRST TIME/REFERRAL(S)                  
  03/05/93       618    (S)   OIL & GAS, JUDICIARY, FINANCE                    
  03/05/93       618    (S)   ZERO FISCAL NOTES (DNR, REV)                     
  03/05/93       619    (S)   GOVERNOR'S TRANSMITTAL LETTER                    
  03/16/93              (S)   O&G AT 08:00 AM                                  
  03/16/93              (H)   MINUTE(O&G)                                      
  03/16/93              (S)   MINUTE(O&G)                                      
  03/23/93              (S)   O&G AT 5:00 PM BUTRVICH RM 205                   
  03/23/93              (S)   MINUTE(O&G)                                      
  03/30/93              (S)   MINUTE(O&G)                                      
  03/31/93      1002    (S)   O&G RPT  3DP 1DNP/AM                             
  03/31/93      1002    (S)   PREVIOUS ZERO FNS (DNR, REV)                     
  04/15/93      1418    (S)   JUD REFERRAL WAIVED   Y11 N9                     
  04/18/93      1468    (S)   FIN RPT  6DP 1DNP                                
  04/18/93      1468    (S)   PREVIOUS ZERO FNS (DNR, REV)                     
  04/18/93              (S)   FIN AT 01:00 PM SENATE FIN 518                   
  04/18/93              (S)   MINUTE(FIN)                                      
  04/18/93              (S)   MINUTE(RLS)                                      
  04/21/93      1613    (S)   RULES   3CAL 1NR   4/21/93                       
  04/21/93      1620    (S)   MOVED TO BOTTOM OF CALENDAR                      
  04/21/93      1633    (S)   READ THE SECOND TIME                             
  04/21/93      1633    (S)   AM NO  1     FAILED  Y9 N11                      
  04/21/93      1634    (S)   AM NO  2     FAILED  Y7 N13                      
  04/21/93      1634    (S)   ADVANCE TO THIRD READING FAILED                  
                              Y11 N9                                           
  04/21/93      1634    (S)   THIRD READING 4/22 CALENDAR                      
  04/22/93      1675    (S)   READ THE THIRD TIME  SB 151                      
  04/22/93      1675    (S)   PASSED Y14 N6                                    
  04/22/93      1675    (S)   EFFECTIVE DATES SAME AS PASSAGE                  
  04/22/93      1675    (S)   JACKO NOTICE OF RECONSIDERATION                  
  04/23/93      1714    (S)   RECON TAKEN UP-IN THIRD READING                  
  04/23/93      1715    (S)   PASSED ON RECONSIDERATION                        
                              Y14 N6                                           
  04/23/93      1715    (S)   EFFECTIVE DATES SAME AS PASSAGE                  
  04/23/93      1717    (S)   TRANSMITTED TO (H)                               
  04/24/93      1508    (H)   READ THE FIRST TIME/REFERRAL(S)                  
  04/24/93      1508    (H)   OIL & GAS, RESOURCES, FINANCE                    
  01/31/94              (H)   O&G AT 05:00 PM CAPITOL 124                      
  01/31/94              (H)   MINUTE(O&G)                                      
  02/02/94      2215    (H)   ADOPT AMENDMENT                                  
  02/02/94      2215    (H)   O&G RPT  3DP 2NR                                 
  02/02/94      2215    (H)   DP:  KOTT, G. DAVIS, GREEN                       
  02/02/94      2215    (H)   NR:  SITTON, OLBERG                              
  02/02/94      2215    (H)   -ZERO FISCAL NOTE (DNR) 2/2/94                   
  02/02/94      2216    (H)   JUD REFERRAL ADDED                               
  02/23/94              (H)   MINUTE(ECO)                                      
  03/04/94              (H)   RES AT 08:15 AM CAPITOL 124                      
  ACTION NARRATIVE                                                             
  TAPE 94-25, SIDE A                                                           
  Number 000                                                                   
  The House Resources Committee was called to order by                         
  Chairman Bill Williams at 8:25 a.m.  Members present at the                  
  call to order were Representatives Williams, Carney, Davies,                 
  Finkelstein, Green, and James.  Members absent were                          
  Representatives Hudson, Bunde and Mulder.                                    
  CHAIRMAN WILLIAMS announced there is a quorum present.  He                   
  noted the meeting is on teleconference with Anchorage,                       
  Barrow, Cordova, Fairbanks, Homer, and Kenai/Soldotna.                       
  HCR 12 - USE OF NATURAL GAS IN MOTOR VEHICLES                                
  move to get natural gas vehicles in Alaska has been slow                     
  going, but added there are many positive elements ongoing.                   
  The federal government has renewed interest, the state is                    
  making initial efforts converting its fleet, and the                         
  municipality of Anchorage recently put a couple of vehicles                  
  on line and has requested $500,000 in their capital request                  
  for a pilot project to expand the use of natural gas                         
  vehicles.  He felt it was appropriate to have a resolution                   
  such as HCR 12 showing the legislature's support for                         
  expanding natural gas vehicle use in Alaska.                                 
  CHUCK LANDERS, MEMBER, ANCHORAGE ASSEMBLY, testified via                     
  teleconference, and said the Anchorage assembly recently                     
  passed a legislative program which addresses this type of                    
  issue.  In the program, the assembly has a grant request to                  
  buy a large compressor for approximately $500,000.  He                       
  stressed the assembly believes there is a need to get into                   
  the Compressed Natural Gas (CNG) program.  He said the                       
  assembly has one CNG car on line and added they are in the                   
  process of acquiring two CNG vans.                                           
  MR. LANDERS stated Anchorage has many mandates due to the                    
  Clean Air Act and carbon monoxide (CO) nonattainment status.                 
  The assembly believes the CNG program is one of the answers                  
  and is willing to take the necessary steps to convert their                  
  fleet to CNG.  The problem is the city has no fueling                        
  stations.  He noted the one fueling station is a privately                   
  owned fuel station and is of the old technology, delivering                  
  CNG at 2,400 pounds per square inch (PSI).  The latest                       
  equipment delivers CNG at 3,600 PSI.                                         
  MR. LANDERS stated HCR 12 addresses many of the issues                       
  facing Anchorage currently.  He added Anchorage is blessed                   
  in that it has natural gas and the CNG program is an                         
  excellent way for the city to use one of the state's                         
  DIVISION, MUNICIPALITY OF ANCHORAGE, testified via                           
  teleconference, and stated CNG is the fuel of the future.                    
  He said the abundance of CNG in Alaska is well known.  The                   
  problems mentioned earlier are being dealt with on a daily                   
  basis.  He remarked it is inconvenient for a large fleet to                  
  deal with refueling problems currently existing in                           
  Anchorage.  He stressed a new refueling station would help                   
  achieve the CO attainment goals.   In addition to the two                    
  CNG vehicles the municipality is attempting to purchase                      
  currently, he said the municipality also has ten vehicles                    
  which were converted after their arrival in Anchorage and                    
  stressed those vehicles will work in the application.                        
  (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVE                  
  HUDSON joined the committee at 8:30 a.m.)                                    
  Number 118                                                                   
  PUBLIC FACILITIES, stated he is available for questions.                     
  REPRESENTATIVE JOHN DAVIES requested Mr. Ottesen to review                   
  the state's activity using CNG vehicles and asked if                         
  nonattainment areas such as Anchorage and Fairbanks will be                  
  helped through the use of CNG vehicles.                                      
  MR. OTTESEN replied the state is currently using six                         
  vehicles with CNG capability and he verified the refueling                   
  problems expressed earlier.  He said the technology is                       
  straightforward, with the capability of switching from CNG                   
  with the vehicle running to gasoline.  However, he stressed                  
  there is a need for refueling stations.  In regard to                        
  solving the CO problem, he stated CNG vehicles are much                      
  cleaner so they are a potential solution, particularly in                    
  the Anchorage and the greater Anchorage area where there is                  
  natural gas available.  He noted the only way to get natural                 
  gas to Fairbanks is by pipeline or by transporting liquid                    
  natural gas by tanker to Fairbanks where it can then be used                 
  in a compressed form.                                                        
  REPRESENTATIVE PAT CARNEY asked what a compressor costs.                     
  MR. OTTESEN responded compressors range from the small home                  
  appliance which costs a few thousand dollars to a large-                     
  scale, three or four stage compressor providing rapid                        
  filling which costs $300,000 to $500,000.                                    
  REPRESENTATIVE CARNEY inquired if the large compressor is                    
  needed to reach the 3,600 PSI.                                               
  MR. OTTESEN said the large compressor refuels a large number                 
  of vehicles on a fast fuel basis, meaning a vehicle will be                  
  filled in three to four minutes.  He stated the slow fill                    
  appliance takes six to eight hours to fill.                                  
  REPRESENTATIVE CARNEY said he is trying to determine the                     
  differences in pressure.                                                     
  MR. OTTESEN stated the storage systems in the vehicles                       
  themselves have moved up from 2,400 PSI, to 3,000 PSI, and                   
  currently the storage technologies are moving toward 3,600                   
  PSI.  He added there is also new technology being explored                   
  which relies upon carbon absorption, which goes back down to                 
  1,000 PSI, but relies upon an absorption principle as                        
  opposed to straight compression.  He stressed storage is                     
  clearly the problem and added that when the fuel is                          
  compressed, it is no where as dense as gasoline.                             
  REPRESENTATIVE BILL HUDSON asked how CNG is sold and asked                   
  if it is taxed.                                                              
  MR. OTTESEN replied CNG is not taxed as an automotive or                     
  motor fuel.  He said natural gas is sold on the basis of                     
  therms or BTU's, but added that most natural gas retail                      
  outlets are converting to what is considered a gallon                        
  equivalent.  He explained a price is received based on                       
  therms, but the price looked at is considered to be a gallon                 
  of fuel or its equivalent energy content.                                    
  Number 196                                                                   
  REPRESENTATIVE HUDSON asked if the tanks in a typical                        
  fueling station are large.                                                   
  MR. OTTESEN said the service stations he has seen in the                     
  lower 48 include a pressure station located somewhere on the                 
  property of a conventional gas station and the tanks are the                 
  size of the committee table but ten feet tall.  He stated                    
  the cascade principle is usually used meaning there are                      
  tanks at different pressures.                                                
  REPRESENTATIVE JOE GREEN stated he has a bill requiring the                  
  use of natural gas as a fuel.  He said an organization                       
  recently formed in Anchorage is looking at the wide scope of                 
  uses of natural gas including use in locomotives.  He felt                   
  one of the problems for widespread use of CNG is that it is                  
  compressed, except for home use.  If distance is to be                       
  achieved, liquified natural gas (LNG) will need to be used                   
  since it has more BTU's per gallon than gasoline.  For a                     
  given amount of energy derived from the thermal aspect of                    
  ombustion, further distances can be attained on LNG.                         
  Number 240                                                                   
  MR. OTTESEN noted that the state of New Mexico has just                      
  mandated the state's fleet be 100 percent converted to                       
  natural gas and at the same time, the public utility which                   
  sells natural gas is adding a small surcharge to all natural                 
  gas customers.  He stated the surcharge money is going to be                 
  used to install a network of over twenty refueling stations                  
  throughout the state and at the same time, will provide                      
  rebates to people who convert their vehicles to natural gas.                 
  Number 259                                                                   
  (CHAIRMAN WILLIAMS noted for the record that REPRESENTATIVES                 
  MULDER AND BUNDE joined the committee at 8:40 a.m. and 8:43                  
  a.m. respectively.)                                                          
  REPRESENTATIVE ELDON MULDER stated the Chairman of the                       
  Anchorage Assembly had impressed upon him the need for an                    
  appropriation for their project.  They are hoping to put a                   
  pump in Anchorage which will be a cooperative effort between                 
  the municipality, MAPCO and another entity.  He felt HCR 12                  
  is worthwhile as there are few industries in Alaska with                     
  value added products and this is one of them.                                
  REPRESENTATIVE CARNEY asked if LNG is the way of the future,                 
  will CNG compressors eventually become obsolete.                             
  MR. OTTESEN replied the industry is still focusing on CNG                    
  except for certain major industrial users.  Recently, the                    
  Seattle Metropolitan bus fleet opted to go to LNG as opposed                 
  to CNG.  He added that the two fuels are identical and said                  
  the only difference between the two is storage.  He said CNG                 
  is the general method being sold currently.  LNG is best for                 
  locomotives, large diesel trucks which are going to be                       
  converted, or bus systems and is a specialized niche at this                 
  REPRESENTATIVE CARNEY asked if the Japanese are using LNG in                 
  ordinary vehicles.                                                           
  MR. OTTESEN replied that worldwide, the U.S. is behind in                    
  the use of all types of alternative fuels and in particular,                 
  natural gas which is used widely.  The Japanese are using                    
  LNG for heavy industrial uses, but CNG seems to be the                       
  preferred method.  He added that LNG is stored in a vacuum                   
  insulated tank which keeps it cold. If a vehicle is being                    
  used daily, LNG is fine but if the vehicle is not used                       
  daily, a certain amount of boil off has to take place in the                 
  tank and that fuel is wasted to the atmosphere.                              
  Number 320                                                                   
  REPRESENTATIVE JEANNETTE JAMES made a MOTION to ADOPT the                    
  Oil and Gas committee substitute for HCR 12.                                 
  CHAIRMAN WILLIAMS asked if there were any objections.                        
  Hearing none, the MOTION PASSED.                                             
  REPRESENTATIVE JAMES made a MOTION to MOVE CSHCR 12(O&G) out                 
  of committee with INDIVIDUAL RECOMMENDATIONS.                                
  REPRESENTATIVE HUDSON asked if the additional WHEREAS clause                 
  recommended by the Department of Transportation (DOT) is                     
  embodied in the committee substitute.                                        
  REPRESENTATIVE FINKELSTEIN stated the position paper had                     
  been submitted last year and the first recommended WHEREAS                   
  clause was not included based on discussions held in the Oil                 
  and Gas Committee.                                                           
  REPRESENTATIVE HUDSON asked if it was the resolution                         
  sponsor's view that the first WHEREAS clause would enhance                   
  the resolution.                                                              
  REPRESENTATIVE FINKELSTEIN said there had been a lot of                      
  discussion on the uses of LNG versus CNG and it was felt the                 
  first WHEREAS clause was not needed.                                         
  CHAIRMAN WILLIAMS asked if there were any objections to the                  
  motion.  Hearing none, the MOTION PASSED.                                    
  Number 370                                                                   
  SB 238 - COASTAL ZONE MANAGEMENT PROCEDURES                                  
  KEN ERICKSON, AIDE, SENATOR DRUE PEARCE, stated the Coastal                  
  Policy Council coordinates state agencies and local coastal                  
  districts in reviewing and issuing state permits for                         
  proposed development projects affecting natural resources in                 
  Alaska's coastal zones.  SB 238 clarifies when and how                       
  certain parties can petition the Coastal Policy Council                      
  during an Alaska Coastal Management Program consistency                      
  MR. ERICKSON said this bill corrects a problem which occurs                  
  when a petition is brought before the council after a final                  
  commissioner level decision on a consistency review has been                 
  made.  Under current Alaska Coastal Management Program                       
  statutes and regulations the state's resource commissioners                  
  cannot delegate their responsibility to participate in an                    
  elevation of a consistency determination to the commissioner                 
  level, nor may they delegate their authority to decide a                     
  petition in the final consistency determination.  However,                   
  as noted in the included informal Attorney General's                         
  opinion, the commissioners cannot sit in both capacities.                    
  Number 395                                                                   
  MR. ERICKSON stated the clarifications embodied in SB 238                    
  will ensure that complaints are heard and addressed in a                     
  timely manner.  This bill will ensure that citizens, state                   
  agencies, and affected projects have a voice in the                          
  development policies of the state's coastal areas.  He                       
  stressed SB 238, as proposed, is the result of intensive                     
  collaboration between Senator Pearce, an Alaska Coastal                      
  Policy Subcommittee, the Alaska Department of Law, and other                 
  interested parties.  He told committee members that in their                 
  folders they will find a negative fiscal note, a sectional                   
  analysis, an analysis from Paul Rusanowski, a summary of the                 
  Attorney General's opinion, and a summary of the Alaska                      
  Coastal Management Policy's review process.                                  
  Number 407                                                                   
  REPRESENTATIVE GREEN said the committee has heard                            
  essentially the same bill as a house version and it was                      
  CHAIRMAN WILLIAMS stated SB 238 had not been heard in the                    
  House Resources Committee, but had been heard in the Oil and                 
  Gas Committee.                                                               
  STEVEN PORTER, ARCO ALASKA, testified via teleconference,                    
  and expressed support of SB 238, a good consensus bill.                      
  COORDINATION, OFFICE OF THE GOVERNOR, stated SB 238 is                       
  identical to HB 401 and emphasized SB 238 is a consensus                     
  bill which was developed over a period of almost two years,                  
  involving many members of coastal districts, interested                      
  industries, and state representatives and added that the                     
  bill has been endorsed in concept by the Coastal Policy                      
  Council for moving forward in the legislative process.  He                   
  said the Coastal Policy Council contains nine                                
  representatives from different districts around the state                    
  and seven representatives from state departments.                            
  Therefore, SB 238 has broad support within the                               
  Administration, within the coastal program and within the                    
  constituents of the coastal program represented by the                       
  MR. RUSANOWSKI stressed SB 238 does resolve a problem of due                 
  process in which currently the commissioners are charged                     
  with hearing elevations on disputed projects and are also                    
  charged with sitting on the Coastal Policy Council to hear                   
  petitions.  He noted that committee members have in their                    
  folders a diagram illustrating the due process problem.  He                  
  stated SB 238 is one solution which solves the problem.                      
  Number 475                                                                   
  CHAIRMAN WILLIAMS noted the Bering Straits Coastal Resource                  
  Service Area Board has concerns and asked Mr. Rusanowski to                  
  address those concerns.                                                      
  MR. RUSANOWSKI said the concern which the Bering Straits                     
  Coastal Resource Service Area Board has is that the public                   
  which will participate in the process and will have the                      
  ability to petition the Coastal Policy Council to ensure                     
  their comments are fairly considered has to participate in                   
  the review itself; that is they have to actively comment                     
  during the consistency review.  If a person has not                          
  commented during that review, that person does not have the                  
  right to petition to ensure their comments were fairly                       
  considered.  He stated the Bering Straits Coastal Resource                   
  Service Area Board feels SB 238 will diminish the ability of                 
  the public or other groups to participate in the process and                 
  that any individual should have the ability to petition that                 
  their comments are fairly considered.                                        
  Number 500                                                                   
  MR. RUSANOWSKI said the issue is best stated as if you have                  
  not participated in the process and are unaware of the                       
  project, you only have a five day window in which to respond                 
  to request a petition to the Coastal Policy Council.  It                     
  would be difficult to conceive of a circumstance where                       
  someone would become aware of a project who had not                          
  commented and would have a grievance that could be resolved.                 
  He noted that the coastal district has the ability to                        
  petition.  He stressed the coastal district is the                           
  representative group, at the local level, for all of the                     
  citizens of that district and already perform that function.                 
  MR. RUSANOWSKI stated what is being added to that function                   
  is the ability of a citizen who chooses individually to                      
  participate to ensure that not only the agencies have                        
  performed properly but that the district has performed                       
  properly.  If in that individual's opinion, this has not                     
  happened with respect to his/her comments, that individual                   
  can go to the Coastal Policy Council and make sure the                       
  Council does take action with respect to their concern.  He                  
  stated the department does not view the Bering Straits                       
  Board's concern as appropriate to SB 238.                                    
  Number 536                                                                   
  REPRESENTATIVE DAVIES posed a hypothetical situation where a                 
  process was going forward and an individual had made                         
  comments that a third party agreed with, but for expediency                  
  purposes decided not to duplicate the comments but rather                    
  just monitor the process.  Then the decision is made and it                  
  is the third party's opinion that those comments which                       
  represented their own were not fairly dealt with and for                     
  some reason, the second party decided not to appeal. He                      
  stated what SB 238 forces is that in order for people to                     
  keep their opportunity to elevate the issue, many people                     
  will be commenting just to keep their oar in the water.  He                  
  said he can envision a number of circumstances where people                  
  might want to just watch and see what happens and then                       
  choose to be concerned at the last minute.                                   
  Number 555                                                                   
  MR. RUSANOWSKI explained the present process addresses that                  
  situation.  A citizen of a district is represented by the                    
  district's participation and has no rights currently to any                  
  petition or elevation status in the present review process.                  
  He said if a person has a grievance with how the process is                  
  being handled, they must go to the district representative,                  
  make their case known, and the district supports their                       
  position in the process.  The district is the entry point                    
  for the public.                                                              
  Number 580                                                                   
  MR. RUSANOWSKI stressed SB 238 expands that participation by                 
  the public so if they chose to participate themselves, they                  
  have a right to make sure they are heard.  If they have not                  
  participated themselves, they still have the same right to                   
  go to their district and say the process is not working                      
  correctly and the district needs to represent them and move                  
  forward.  He felt the present status has not been                            
  diminished, but rather the ability has been added for a                      
  member of the public who chooses to participate, to have the                 
  same rights as the district.                                                 
  Number 597                                                                   
  REPRESENTATIVE JAMES stated in her experience with the                       
  public and planning process, in order to be available to                     
  participate in the objection process, a person has to have                   
  been available in the beginning.  She felt that was a good                   
  way to guarantee that people do not come in out of the                       
  woodwork and get involved.                                                   
  LAW, stated she is available to answer questions.                            
  Number 637                                                                   
  via teleconference, and expressed support of SB 238.  He                     
  said all of the good things in SB 238 stand in contrast to                   
  the Administration's introduction of HB 474 which also                       
  addresses coastal management issues.                                         
  TRANSPORTATION AND PUBLIC FACILITIES (PF), stated the                        
  department does not have a problem with SB 238, but does                     
  have a problem with the coastal management procedures.  He                   
  said on January 31, the department communicated with Senator                 
  Pearce's office suggesting language be added to SB 238 to                    
  correct the problem.  The problem is that currently all DOT                  
  and PF projects are required by federal law to have a                        
  minimum of three public involvement processes.  A statewide                  
  transportation plan is required which goes through a public                  
  process; a three year state transportation improvement                       
  program is developed which goes through a public process;                    
  and then each project has to go through an environmental                     
  process.   At that time, the department has to go through                    
  the Division of Governmental Coordination consistency                        
  determination which adds about 30-50 days to the project                     
  time period which gives the opportunity for an opponent of                   
  the project to get a second bite of the apple.                               
  MR. ALLINGTON stated DOT suggests the Coastal Management Act                 
  be amended to provide that in AS 44.19.145, which involves                   
  the functions of the office of the Governor, in subsection                   
  11 which addresses determining federal consistencies, an                     
  additional clause be added which would state, "provided                      
  however that if a project has been developed in such a                       
  manner that the requirements of AS 46.40.096 are met, the                    
  state agency proposing the project shall make the conclusive                 
  state consistency determination."                                            
  MR. ALLINGTON said this amendment will allow DOT or any                      
  other agency which goes through the process outlined for the                 
  Coastal Management determination program will be able to                     
  make a consistency determination.  He stated DOT feels this                  
  change will serve the public process required.  He added                     
  that DOT does get local government concurrence on projects.                  
  TAPE 94-25, SIDE B                                                           
  Number 000                                                                   
  REPRESENTATIVE FINKELSTEIN felt the procedure used to                        
  proposed the amendment is strange and felt the proposed                      
  amendment does not relate directly to SB 238.  He wondered                   
  why the Administration did not introduce a bill on the                       
  MR. ALLINGTON responded they could but since SB 238 was at                   
  hand, the procedure could be included in the bill.                           
  REPRESENTATIVE FINKELSTEIN said this is not how the                          
  Administration usually operates.                                             
  REPRESENTATIVE DAVIES commented this amendment will affect                   
  all agencies in their review process and will need a lot of                  
  Number 020                                                                   
  CHAIRMAN WILLIAMS asked the view of the sponsor in regard to                 
  the suggested amendment.                                                     
  MR. ERICKSON said Senator Pearce defers to the will of the                   
  REPRESENTATIVE HUDSON asked if the amendment fits within the                 
  MS. KERTTULA stated she had not seen the amendment                           
  previously.  She was not sure about the single subject rule                  
  in the title and said conceivably it would not be under the                  
  same subject, especially given the general thrust of the                     
  bill.  She said it is not an easy suggestion to simply say                   
  that if the state agency has been meeting with the process,                  
  then it will not have to go through a consistency review.                    
  It would create many legal issues and there is a need for                    
  the Department of Law to take another look at the bill and                   
  the proposed amendment.  In her opinion, given the lateness                  
  in the session, the proposed amendment needs to be taken up                  
  as a separate topic.                                                         
  REPRESENTATIVE CON BUNDE felt the amendment should not be                    
  REPRESENTATIVE JAMES agreed.                                                 
  Number 056                                                                   
  testified via teleconference, and passed on giving                           
  REPRESENTATIVE GREEN made a MOTION to pass CSSB 238(FIN)                     
  with the fiscal note out of committee with INDIVIDUAL                        
  CHAIRMAN WILLIAMS asked if there were any objections to the                  
  motion.  Hearing none, the MOTION PASSED.                                    
  SB 151 - OIL & GAS EXPLORATION INCENTIVE CREDITS                             
  REPRESENTATIVE BUNDE made a MOTION to ADOPT HCS SB 151(RES).                 
  CHAIRMAN WILLIAMS asked if there were any objections to the                  
  motion.  Hearing none, the MOTION PASSED.                                    
  Number 098                                                                   
  RESOURCES (DNR), testified via teleconference, and gave an                   
  overview of SB 151.  He said the objective of the bill is to                 
  provide an incentive for oil and gas exploration by                          
  extending credits for certain activities.  Subsection 100                    
  clarifies that the incentive program is separate and                         
  distinct from the existing exploration incentive credits.                    
  He stated that particular statute applies to lessees on                      
  state-owned land and SB 151 applies to all land within the                   
  state for the purposes of geophysical work, stratigraphic                    
  test wells and exploration wells.                                            
  MR. HAYNES said the primary thrust of SB 151 is to extend                    
  existing incentive credits to lands other than state leased                  
  lands; credits will go to private and federal lands as well.                 
  In subsection (b), the credits can currently be applied                      
  against oil and gas bonus payments, royalty and rental                       
  payments and a change with the existing statute                              
  (indiscernible) applied against income taxes as well as                      
  severance taxes.  He explained there are conditions on the                   
  (indiscernible) credit in subsection (c), where a credit                     
  must be preapproved by the commissioner.  It is not                          
  automatic but has to be of some benefit to the state.  All                   
  of the work must be completed within a ten year period and                   
  within 30 days of the completion of the work, all raw data                   
  must be submitted to the commissioner for broad review.                      
  Number 125                                                                   
  MR. HAYNES said subsection (d) addresses the confidentiality                 
  provisions.  Data from any wells is kept confidential for 24                 
  months which conforms to current statute.  A change in the                   
  geophysical data is that the data may be shown, but not                      
  distributed to interested third parties if the commissioner                  
  determines it to be in the best interest of the state.  He                   
  explained there are limiting factors which are covered under                 
  (e), (f), (g), and (h) which states allowable credits can be                 
  based on eligible costs, which may not exceed 50 percent of                  
  those costs on state land or 25 percent of the costs on land                 
  not owned by the state.  The incentive credit may not exceed                 
  $5 million per any one project and there is an additional                    
  cap in that the entire program may not exceed a cost of                      
  $50 million.                                                                 
  MR. HAYNES continued that any credits received must be used                  
  within five years and credits may be assigned to a third                     
  party.  The amounts due the permanent fund must be                           
  calculated before the application of any credit.  He stated                  
  subsection 170 is the normal language authorizing the                        
  commissioner to adopt regulations enabling the                               
  implementation of the act.  Subsection 180 clarifies the                     
  intent of the act be distinct and separate from the                          
  exploration incentive credits in AS 38.05.180(i).                            
  Subsection 190 provides definitions to conform this                          
  particular act with other existing (indiscernible) in other                  
  MR. HAYNES said Section 2 contains technical language which                  
  authorizes the commissioner to adopt regulations that will                   
  take effect under the Administrative Procedure Act.  Section                 
  3 contains language which allows Section 2 to take effect                    
  immediately so the commissioner can proceed.                                 
  Number 168                                                                   
  REPRESENTATIVE BUNDE asked someone to speak on the fiscal                    
  note.   He said if there is a decreased flow of money into                   
  the general fund, there should be a negative impact to the                   
  state.  He felt there should be an acknowledgement that the                  
  general fund is going to receive less money.                                 
  REPRESENTATIVE DAVIES clarified that the intent of SB 151 is                 
  to induce additional exploration and the rational is the                     
  benefit accrued to the state if that exploration goes on.                    
  He asked for comments on the distinction between state land,                 
  federal land and private land regarding benefits to the                      
  MR. HAYNES replied on state owned land, the state receives                   
  100 percent of the royalties and 100 percent of the                          
  severance taxes.  A good portion of federal lands is in                      
  conservation units of which the state receives royalties of                  
  90 percent and 100 percent of the severance taxes.  On other                 
  private lands in the state, the majority of which are Native                 
  owned, the state receives 100 percent of the severance taxes                 
  and a royalty on all lands under navigable waters.  He                       
  stressed in all three situations, the state receives the                     
  benefit of employment as well as the value added                             
  infrastructure.  He continued with examples.                                 
  Number 214                                                                   
  REPRESENTATIVE DAVIES asked what the advantage is under                      
  section (g) which allows the assignment of the credit to a                   
  third person.                                                                
  MR. HAYNES responded that a (indiscernible) conforms to the                  
  existing language in the (inaudible) current credit, but if                  
  it were to move to private lands, the intent was to allow a                  
  geophysical company to come into the state, do work on                       
  speculation and not have a severance tax or an income tax                    
  (inaudible).  They then could assign or sell that credit to                  
  someone who has a direct use for it.                                         
  REPRESENTATIVE FINKELSTEIN asked what the current                            
  exploration incentive credit system is under AS 38.05.180(i)                 
  and how it differs from SB 151.                                              
  MR. HAYNES stated under 180(i), the credit is limited to                     
  state land under lease and credits may be given up to 50                     
  percent of the cost of the project itself.  There is a                       
  difference in that the existing law has (inaudible) either                   
  in a cap on dollars or on years of work.  The credits can be                 
  applied against royalty and (indiscernible) payments as                      
  contained in SB 151, but taxes are limited to AS 43.55,                      
  which limits severance taxes and excludes income taxes.                      
  REPRESENTATIVE FINKELSTEIN asked why that program is not                     
  being eliminated and replaced by SB 151.                                     
  MR. HAYNES responded he did not know.                                        
  REPRESENTATIVE FINKELSTEIN felt it is confusing to have                      
  programs covering the same area.                                             
  MR. HAYNES said another change under 180(i) is that                          
  geophysical work must be done a minimum of two seasons                       
  preceding any lease sale and the data must be made public                    
  following a lease sale.  That differs from SB 151.  He                       
  explained the reason for the change is that DNR has never                    
  had a geophysical application for exploration incentive                      
  credits under 180(i).                                                        
  REPRESENTATIVE GREEN stated another benefit not mentioned is                 
  when a well is drilled and a $5 million tax incentive is                     
  given, if the information is there and no discovery is made,                 
  that information is still beneficial to the state because it                 
  is a data point which is certain, as opposed to geophysics                   
  which is more speculative.                                                   
  Number 295                                                                   
  REPRESENTATIVE DAVIES disagreed in that in SB 151, the data                  
  does not become available.                                                   
  MR. HAYNES stated the well data is the same; it becomes                      
  public information after two years unless there are                          
  extenuating circumstances which need to be scrutinized by                    
  the commissioner.                                                            
  REPRESENTATIVE DAVIES asked about the geophysical data.                      
  MR. HAYNES stated the desire is to have the geophysical                      
  company do work, which they often do on speculation, and                     
  then become a salesman.                                                      
  REPRESENTATIVE DAVIES asked if there is a difference between                 
  the 180(i) program and the SB 151 program with respect to                    
  geophysical data.                                                            
  MR. HAYNES said under 180(i) the information must be made                    
  public following a lease sale.  Under SB 151, geophysical                    
  work may be selectively shown to interested third parties                    
  who the commissioner feels could use the data.                               
  REPRESENTATIVE HUDSON said current law provides a lot of                     
  discretion on the part of the commissioner in a normal                       
  MR. HAYNES said that is correct.                                             
  REPRESENTATIVE HUDSON clarified that SB 151 will identify on                 
  state and other lands, a percentage not to exceed $50                        
  million and has to be used in five years.  He asked if the                   
  applications of the five years and the $50 million are after                 
  the discovery comes into production.                                         
  MR. HAYNES stated not after a discovery but after the work                   
  commitment is completed.                                                     
  REPRESENTATIVE HUDSON asked if the credit is against the                     
  royalty or the severance tax or both.                                        
  MR. HAYNES replied either/or and income taxes, as well.                      
  Number 352                                                                   
  COUNCIL, (RDC) testified via teleconference, and expressed                   
  support of SB 151.  He said SB 151 will encourage                            
  exploration, broaden the scope of the present leasing                        
  program, encourage initial prospecting and give a true                       
  incentive to explore Alaska, including nonstate lands.  Most                 
  people think of oil and gas from a production or development                 
  standpoint, but exploration is the lifeblood of the oil and                  
  gas industry.  He stressed exploration is the basis for                      
  development, with huge up front costs, many unknowns and a                   
  high risk of failure.  Alaska, although considered a premier                 
  oil and gas region,  is still largely unexplored.  He stated                 
  acreage is increasingly off limits and not offered for                       
  MR. FREEMAN said RDC believes SB 151 encourages new players                  
  in exploring for Alaska's oil and gas resources, encourages                  
  prospecting for small, local targets such as natural gas,                    
  enhances the value of nearby or adjacent state lands,                        
  maximizes the odds of discovery, encourages exploration on                   
  the best geological targets regardless of land ownership,                    
  and provides a long-term economic strategy for more stable                   
  resource development climate, making the state less                          
  dependent on mega projects which is (indiscernible) policy.                  
  He mentioned it should be noted the state will receive                       
  severance taxes on developed (indiscernible), so the state                   
  will benefit regardless of the location of any find.                         
  MR. FREEMAN stated SB 151 sends a clear signal that oil and                  
  gas is still viewed by many, including the legislature and                   
  the Administration, as a key component to Alaska's long-term                 
  Number 397                                                                   
  ALLIANCE, testified via teleconference, and stated although                  
  the Alliance has not had the opportunity to review SB 151,                   
  he did a cursory review and found it to be in consort with                   
  the overall support factors of the Alliance.  In reviewing                   
  SB 151, he found the bill to be another tool to the                          
  legislative process to encourage additional oil and gas                      
  development within the state.  He said the Alliance applauds                 
  the legislature's efforts on SB 151 and recognizes it as a                   
  valuable incentive.  Hopefully, those companies requiring                    
  leases on state land are those companies who may have                        
  ownership in lands outside state ownership, and will take                    
  advantage of SB 151 resulting in additional oil and gas                      
  development.  He said SB 151, coupled with the exploration                   
  licensing bill, and the retooling of the 470 fund is a good                  
  package coming out of the 18th Legislative Session.                          
  REPRESENTATIVE FINKELSTEIN commented that Mr. Haynes had                     
  stated under AS 38.05 there had never been an application                    
  for an exploration incentive credit.  He said if that is                     
  true, thought should be given to eliminating the old                         
  provision.  If it has been used or has the potential to be                   
  used, the two provisions should be combined.                                 
  MR. HAYNES stated the department has had approximately $41                   
  million in exploration incentive credits applied for under                   
  the old law.  He said the credits were all for stratigraphic                 
  test wells or exploration wells, never for the geophysical                   
  program.  He pointed out that even though the department can                 
  go up to 50 percent, the commissioner has never allowed more                 
  than 30 percent and in most cases, 20 percent is an average.                 
  REPRESENTATIVE FINKELSTEIN felt there could be value in                      
  looking at combining the two provisions and it would make                    
  sense to have one provision in law which applies to                          
  exploration incentive credits to stratigraphic wells.                        
  151(RES), the previous zero fiscal note from DNR and the new                 
  zero fiscal note from the Department of Revenue and MOVE HCS                 
  SB 151(RES) with fiscal notes out of committee with                          
  INDIVIDUAL RECOMMENDATIONS.                                                  
  CHAIRMAN WILLIAMS asked if there were any objections.                        
  Hearing none, the MOTION PASSED.                                             
  CHAIRMAN WILLIAMS announced the committee will meet Monday,                  
  March 7, at 8:15 a.m. to hear SB 77, HB 448, HJR 17, and HB
  404.  On Wednesday, March 9, the committee will hear HB 238.                 
  There being no further business to come before the House                     
  Resources Committee, Chairman Williams adjourned the meeting                 
  at 9:45 a.m.                                                                 

Document Name Date/Time Subjects