Legislature(1993 - 1994)
03/04/1994 08:15 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= 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 questions 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 SHORT TITLE: USE OF NATURAL GAS IN MOTOR VEHICLES 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 SHORT TITLE: COASTAL ZONE MANAGEMENT PROCEDURES 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 (GOV) 02/11/94 (S) FIN AT 09:00 AM SENATE FIN 518 02/14/94 (S) RLS AT 03:00 PM FAHRENKAMP ROOM 203 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 SHORT TITLE: OIL & GAS EXPLORATION INCENTIVE CREDITS 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 REPRESENTATIVE DAVID FINKELSTEIN, PRIME SPONSOR, stated the 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 resources. RON COLLINS, PRINCIPLE ADMINISTRATIVE OFFICER, FLEET SERVICE 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 JEFF OTTESEN, CHIEF, RIGHT-OF-WAY & ENVIRONMENT, DIVISION OF ENGINEERING AND OPERATIONS, DEPARTMENT OF TRANSPORTATION AND 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 time. 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 review. 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 passed. 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. PAUL RUSANOWSKI, DIRECTOR, DIVISION OF GOVERNMENTAL 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 districts. 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. BETH KERTTULA, ASSISTANT ATTORNEY GENERAL, DEPARTMENT OF LAW, stated she is available to answer questions. Number 637 TOM LOHMAN, REPRESENTATIVE, NORTH SLOPE BOROUGH, testified 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. ROGER ALLINGTON, DIRECTOR, STATEWIDE PLANNING, DEPARTMENT OF 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 subject. 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 consideration. 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 committee. REPRESENTATIVE HUDSON asked if the amendment fits within the title. 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 considered. REPRESENTATIVE JAMES agreed. Number 056 DREW SCALZI, MEMBER, ALASKA COASTAL POLICY COUNCIL, testified via teleconference, and passed on giving testimony. REPRESENTATIVE GREEN made a MOTION to pass CSSB 238(FIN) with the fiscal note out of committee with INDIVIDUAL RECOMMENDATIONS. 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 JIM HAYNES, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL 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 regulations. 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 state. 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 sense. 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 KEN FREEMAN, PROJECT COORDINATOR, RESOURCE DEVELOPMENT 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 exploration. 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 future. Number 397 WALT FURNACE, GENERAL MANAGER, ALASKA SUPPORT INDUSTRY 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. REPRESENTATIVE HUDSON made a MOTION to ADOPT HCS SB 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. ANNOUNCEMENTS 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. ADJOURNMENT There being no further business to come before the House Resources Committee, Chairman Williams adjourned the meeting at 9:45 a.m.