Legislature(1995 - 1996)
03/18/1996 08:13 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE March 18, 1996 8:13 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative William K. "Bill" Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative Ramona Barnes Representative John Davies Representative Pete Kott Representative Don Long Representative Irene Nicholia MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL 539 "An Act changing the name of the Alaska Soil and Water Conservation Board." - PASSED HB 539 OUT OF COMMITTEE HOUSE BILL 537 "An Act renaming the division of geological and geophysical surveys in the Department of Natural Resources as the department's division of mining and geology, and revising the duties of the state geologist within that division; and providing for an effective date." - HEARD AND HELD HOUSE BILL 388 "An Act revising laws relating to oil and gas leasing to authorize a program of areawide leasing." - HEARD AND HELD HOUSE BILL 469 "An Act relating to the University of Alaska and to assets of the University of Alaska; authorizing the University of Alaska to select additional state public domain land, designating that land as `university trust land,' and describing the principles applicable to the land's management; and defining the net income from the University of Alaska's endowment trust fund as`university receipts' subject to prior legislative appropriation." - SCHEDULED BUT NOT HEARD (* First Public Hearing) PREVIOUS ACTION BILL: HB 539 SHORT TITLE: NAME CHANGE FOR SOIL AND WATER BOARD SPONSOR(S): RESOURCES JRN-DATE JRN-PG ACTION 03/08/96 3029 (H) READ THE FIRST TIME - REFERRAL(S) 03/08/96 3029 (H) RESOURCES 03/18/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 537 SHORT TITLE: DIV. OF MINING & GEOLOGY/ STATE GEOLOGIST SPONSOR(S): RESOURCES JRN-DATE JRN-PG ACTION 02/29/96 2962 (H) READ THE FIRST TIME - REFERRAL(S) 02/29/96 2963 (H) RESOURCES, FINANCE 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 03/13/96 (H) MINUTE(RES) 03/14/96 (H) RES AT 1:00 PM CAPITOL 124 03/14/96 (H) MINUTE(RES) 03/18/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 388 SHORT TITLE: OIL & GAS LEASING/ BEST INT. FINDINGS SPONSOR(S): REPRESENTATIVE(S) ROKEBERG, B.Davis, Kohring JRN-DATE JRN-PG ACTION 01/05/96 2368 (H) PREFILE RELEASED 01/08/96 2368 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2368 (H) O&G, RESOURCES, FINANCE 02/06/96 (H) O&G AT 10:00 AM CAPITOL 124 02/06/96 (H) MINUTE(O&G) 03/07/96 (H) O&G AT 10:00 AM CAPITOL 124 03/07/96 (H) MINUTE(O&G) 03/09/96 (H) O&G AT 1:00 PM CAPITOL 124 03/09/96 (H) MINUTE(O&G) 03/12/96 (H) O&G AT 5:00 PM CAPITOL 124 03/12/96 (H) MINUTE(O&G) 03/13/96 3110 (H) O&G RPT CS(O&G) NT 2DP 4NR 03/13/96 3111 (H) DP: ROKEBERG, OGAN 03/13/96 3111 (H) NR: BRICE, G.DAVIS, FINKELSTEIN 03/13/96 3111 (H) NR: WILLIAMS 03/13/96 3111 (H) FISCAL NOTE (DNR) 03/18/96 (H) RES AT 8:00 AM CAPITOL 124 WITNESS REGISTER JEFF HARTMAN, Executive Director Alaska Soil and Water Conservation Board Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801 Telephone: (907) 465-2495 POSITION STATEMENT: Testified in support of HB 539. JEFF LOGAN, Legislative Assistant to Representative Joe Green Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-3715 POSITION STATEMENT: Read sponsor statement for HB 537. JERRY BOOTH, Chairman Alaska Geological Mapping Advisory Board Division of Geological and Geophysical Surveys Department of Natural Resources 2525 "C" Street Anchorage, Alaska 99503 Telephone: (907) 274-8638 POSITION STATEMENT: Testified against HB 537. DR. DAVID HITE, Member Alaska Geologic Mapping Advisory Board Division of Geological and Geophysical Surveys Department of Natural Resources 2250 Woodworth Circle Anchorage, Alaska 99517 Telephone: (907) 258-9059 POSITION STATEMENT: Testified against HB 537. TOM CRAFFORD Alaska Miners Association; North Pacific Mining Corporation P. O. Box 93330 Anchorage, Alaska 99509 Telephone: (907) 274-8638 POSITION STATEMENT: Testified in opposition to HB 537. SUSAN KARL, Officer Alaska Geological Society P. O. Box 101288 Anchorage, Alaska 99510 Telephone: (907) 786-7428 POSITION STATEMENT: Testified in opposition to HB 537. RICH HUGHES, Chairman Fairbanks Branch Alaska Miners Association 2173 University Avenue Fairbanks, Alaska 99709 Telephone: (907) 474-2080 POSITION STATEMENT: Testified in opposition to HB 537. ROGER BURGGRAF, Miner 830 Sheep Creek Fairbanks, Alaska 99709 Telephone: (907) 479-2596 POSITION STATEMENT: Testified in opposition to HB 537. HELEN WARNER, Member Alaska Miners Association P. O. Box 80674 Fairbanks, Alaska 99708 Telephone: (907) 488-6058 POSITION STATEMENT: Testified in opposition of HB 537. EARL BEISTLINE P. O. Box 80148 Fairbanks, Alaska 99708 Telephone: (907) 479-6240 POSITION STATEMENT: Testified in opposition to HB 537. NICO BUS, Acting Director Division of Support Services Department of Natural Resources 400 Willoughby Avenue Telephone: (907) 465-2406 POSITION STATEMENT: Testified in opposition of HB 537. REPRESENTATIVE NORMAN ROKEBERG Alaska State Legislature Capitol Building, Room 110 Juneau, Alaska 99801 Telephone: (907) 465-4968 POSITION STATEMENT: Prime sponsor HB 388. PAT FOLEY, Chairman Lands Exploration and Operations Committee Alaska Oil and Gas Association P. O. Box 100360 Anchorage, Alaska 99501 Telephone: (907) 265-6213 POSITION STATEMENT: Testified in support of HB 388. SARA HANNAN, Executive Director Alaska Environmental Lobby 419 Sixth Street Juneau, Alaska 99801 Telephone: (907) 5586-3366 POSITION STATEMENT: Testified in opposition to HB 388. KENNETH BOYD, Director Division of Oil and Gas Department of Natural Resources 3601 C Street, Suite 800 Anchorage, Alaska 99503 Telephone: (907) 269-8800 POSITION STATEMENT: Testified on HB 388. ACTION NARRATIVE TAPE 96-36, SIDE A Number 000 CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting to order at 8:13 a.m. Members present at the call to order were Representatives Austerman, Green, Davies Long and Williams. Representatives Barnes, Kott, Nicholia and Ogan arrived late. HB 539 - NAME CHANGE FOR SOIL AND WATER BOARD CO-CHAIRMAN GREEN announced the first order of business would be HB 539, "An Act changing the name of the Alaska Soil and Water Conservation Board." Number 101 JEFF HARTMAN, Executive Director, Alaska Soil and Water Conservation Board, Department of Natural Resources, came forward to testify in support of HB 539. He said the board had a meeting February 1, and at that time the perception of what the board did wasn't clear with the present name of "Soil and Water Conservation." MR. HARTMAN pointed out that state statute defines the board's function as development use and conservation. The board felt the name change would more accurately reflect what the board views as their function which is not only conservation, but the development of resources, specifically in rural areas. Number 200 REPRESENTATIVE JOHN DAVIES said he doesn't have a problem with adding the word "development," but did have a problem with the further name change to "Natural Resources Soil and Water." He said in all the justification, that part of the name change is not really addressed. He pointed out that this isn't the biggest issue facing the state of Alaska, but to broaden the title to "Natural Resources Conservation and Development Board" takes in many other possible areas. When it said, "Soil and Water" we knew what the board was supposed to be doing. Natural resources covers the whole waterfront and could possibly include fish, game, oil and gas. He suggested changing "Natural Resource" to something like, "Agricultural and Forestry Conservation and Development Board." Number 289 MR. HARTMAN said they didn't specifically consider that name change, but the board is an advisory board to the Department of Natural Resources. He explained the department doesn't cover fish and game, but they represent the land owners. He said a lot of the resources they deal with are more than just soil and water. He said the soil and water conservation is the tradition that they come from. Mr. Hartman said they are into forestry and developing tourism related products using natural resources. He noted one of the potentials for development in Aniak are wild berries. It is a locally available resource. It currently isn't utilized, but it would be a matter of coming up with a distribution system. MR. HARTMAN briefed the committee about an ongoing project in Fairbanks of converting dog waste into a usable fertilizer. He also noted they are taking the ground water and making it into a usable resource for the greenhouse industry. People in Aniak were very interested in this project because they have to fly in all their fertilizer. MR. HARTMAN explained there were several reasons the wording "Natural Resources" was chosen. One is their federal partners "The Soil Conservation Service," changed their name a couple of years ago to the "Natural Resource Conservation Service." He said, "We're also one of the principle boards advising the commissioner of Natural Resource. So, again, Natural Resource Conservation Development we felt was in keeping with that." Number 450 MR. HARTMAN said he wouldn't argue that the board's principle base is agricultural, but it is broader and the board wants to reflect that kind of change of emphasis because the whole resource conservation development program in the Natural Resources Conservation Service is relatively new to Alaska - about five years old. It brings a lot of capabilities that some of the local people aren't are aware of. For these reasons, that is why "Natural Resource" was chosen as opposed to a more traditional name. Number 495 CO-CHAIRMAN GREEN noted the arrival of Representatives Scott Ogan and Irene Nicholia. Number 518 REPRESENTATIVE ALAN AUSTERMAN moved to pass HB 539 from the House Resources Committee with individual recommendations and the attached fiscal notes. Hearing no objection, HB 539 passed out of the House Resources Committee. HB 537 - DIV. OF MINING AND GEOLOGY/ STATE GEOLOGIST Number 544 CO-CHAIRMAN GREEN announced the next order of business would be HB 537, "An Act renaming the Division of Geological and Geophysical Surveys in the Department of Natural Resources as the department's Division of Mining and Geology, and revising the duties of the state geologist within that division; and providing for an effective date." He stated the bill would combine the Division of Geological and Geophysical Surveys with the Division of Mining and Water Management as a cost cutting venture. Last year, the state geologist position was not funded and, currently, the division is serving without a state geologist. Number 604 JEFF LOGAN, Legislative Assistant to Representative Joe Green, read the following statement into the record: "House Bill 537 establishes in the Department of Natural Resources, the Division of Mining and Geology. Earlier this year an attempt was made to transfer DGGS (Division of Geological and Geophysical Surveys) into the Division of Oil and Gas, and while we concur that the cost of state government can be effectively accomplished -- or lower cost of state government can be effectively accomplished by combinations of certain agencies. Combining DGGS with DOG would have been an inappropriate combination." "The use of DGGS personnel to perform DOG oil and gas presale analysis, as indicated by recent testimony by the DOG, would have been an improper use, we believe, of DGGS personnel. We believe that such activities, through that proposed combination, would not only violate state statute, but lead to ultimate dissolution of DGGS functions through the absorption in the DOG. "Budget reductions have reduced funding to the DGGS and combining it with another division is appropriate, but only if it is functions are preserved and its personnel are appropriately confined to the functions delineated in AS 41.08. Combining DGGS with the Division of Mining and Water not only ensures statutory compliance of its activities, but also its survival." Number 730 JERRY BOOTH, Alaska Geologic Mapping and Advisory Board, Division of Geological and Geophysical Surveys, Department of Natural Resources, testified via teleconference from Anchorage. He explained that the board was established in 1994, by former Commissioner Noah, as an advisory group to the Division of Geological and Geophysical Surveys. With the new Administration, the advisory board offered to Commissioner Shively a recommendation that the board look at the future of the Division of Geological and Geophysical Surveys' mission, goal and function into the future on how to improve its effectiveness and then provide a report outlining these findings. This effort was lead by Dr. David Hite, a member of the advisory board. He established a select committee of geologists and engineers representing all users of the DGGS. Number 791 MR. BOOTH explained that throughout 1995, the select committee held numerous meetings and public hearings to gain as much information as possible. He indicated a report was prepared in which the committee should have a copy of. The report contained numerous recommendations the committee made to the advisory board. Late in 1995, the advisory board approved their recommendations and provided these to Commissioner Shively. MR. BOOTH related that some of the recommendations included keeping the Division of Geological and Geophysical Surveys intact and expand its role to include a presence in Anchorage by the state geologist; to conduct a nationwide search for a new state geologist; provide a five year term for the position to make it a nonpolitical position to maintain its scientific integrity; recombine the hydrologist function back to DGGS; and to reinstate basin analysis and oil and gas functions back to the survey. He said all of these recommendations and ones not discussed, were to maintain the DGGS as an independent group within the current Alaska Statute AS 41.08. Number 870 MR. BOOTH stated that the intent and the recommendations of the advisory board regarding the DGGS is, respectfully, much different that those proposed in HB 537. He said they feel that the combining of DGGS with the Division of Mining and the removing of the requirement to have the state geologist run the DGGS is not in the best interest of the users of the state. The recommendations of the advisory board are well stated in the report and they look to this legislature to retain the current mission, role and function of the Division of Geological and Geophysical Surveys. MR. BOOTH pointed out that for a quarter of a century, Alaska has had a geological survey and it has functioned very well under AS 41.08. The advisory board of the DGGS respectfully requests that the House Resources Committee reconsider HB 537 and retain the DGGS as an independent division. He thanked the committee for the opportunity to testify. Number 940 DR. DAVID HITE, Member, Alaska Geologic Mapping Advisory Board Division of Geological and Geophysical Surveys, Department of Natural Resources, testified via teleconference from Anchorage. He stated that he echoed the comments made by Mr. Booth and was strongly concerned about the requirements put fourth in HB 537 to eliminate the qualifications for the state geologist. He offered his assistance in answering questions relating to the report. Number 1006 TOM CRAFFORD, representing the Alaska Miners Association and the North Pacific Mining Corporation, a subsidiary of Cook Inlet Region, Incorporated, testified via teleconference from Anchorage. He said that he is a mineral exploration geologist and has been active in the state since 1974. He stated he is well acquainted with the Division of Geological and Geophysical Surveys and the role it plays in Alaska. He stated he is respectful and appreciative of the service that DGGS has provided over the years, and he feels that its function needs to be preserved. Mr. Crafford stated he is similarly in support of the Division of Mining and Water Management. He indicated he has had good working relationship with them over the years. He noted he doesn't want his comments to be construed as any statement against the Division of Mining and Water Management. It is, therefore, with reluctance that he must express my opposition to HB 537. MR. CRAFFORD said he potentially fears that HB 537 could politicize the DGGS and it remove some of the statutorily mandated elements that established the division and preserves the academic and technical role that it was created to play. Mr. Crafford said HB 537 would create a geological (indisc.) which he fears could potentially become geological and geophysical survey in name only. It would relegate the position of state geologist to a subdirector level position and remove any educational or experience of qualifications for that position. He said those and other provisions of HB 537 could weaken the protection for the objective by (indisc.) regulatory role that was originally established for DGGS. He said he feels that in a resource rich state like Alaska that it is especially important to preserve the current functions of the DGGS, particularly in light of recent federal budget reductions that eliminated the Bureau of Mines and severely impacted the U. S. Geological Survey. He stated he endorses the recommendations of the Alaska Geologic Mapping Advisory Board which advocates the retention of a strong and independent division. Number 1170 SUSAN KARL, Officer, Alaska Geological Society (AGS), testified via teleconference. She explained the AGS membership includes professionals from oil and gas companies, mining companies, environmental contractors, Native corporations, universities, governmental agencies - statewide and outside of Alaska. She said she would focus on two main concerns. One, is that Alaska is a resource state and it is important to keep regulatory functions separate from research functions. The state's economic health depends on natural resources and the state also has significant geological hazards such as earthquakes, volcanoes, environmental hazards associated with human activities and the development of transportation and resources. If any state needs a strong, dynamic and independent geological survey, it is Alaska. MS. KARL referred to the second concern and said it also essential and critical that the state's leaders have solid scientific knowledge as a basis for their constantly evolving policy decisions. The state's health and welfare depend on these decisions. HB 537 makes Alaska's state geologist a political appointee with no required scientific credentials. It is unthinkable that Alaska's leaders would be making resource and environmental policy decisions without information from a scientifically qualified state geologist. MS. KARL said in conclusion, Alaska needs an independent, dynamic and adequately funded geological survey and a knowledgeable, credible and respected state geologist to contribute to informed decisions by state policy makers. She thanked the committee for listening to her testimony. Number 1295 RICH HUGHES, Chairman, Fairbanks Branch, Alaska Miners Association, testified via teleconference from Fairbanks. He asked to go on record opposing HB 537. He stated that the combination won't work. The minerals industry is reviving in the state very strongly and this bill is sending the wrong message. Number 1324 ROGER BURGGRAF, Miner, testified via teleconference from Fairbanks. He asked to go on record opposing HB 537. He said he realizes times are tough and cuts in government need to be made. The Division of Geological and Geophysical Surveys is a technical, scientific agency with a statutorily mandated mission. To have it absorbed into a regulatory agency would weaken effect of their mission. The work that DGGS has done over the years has been very beneficial, not only to the state of Alaska, but to industry. With the downsizing of the federal government, it is even more important that Alaska, as a resource state, maintain DGGS in its present format. It is important that DGGS maintain its scientific integrity. The reports that DGGS has done has encouraged investments of millions of dollars into the state of Alaska. Mr. Burggraf requested that the committee reconsider its position with respect to HB 537. HELEN WARNER, Member, Alaska Miners Association, testified via teleconference from Anchorage. She noted she is a graduate of the University of Alaska with a degree in mathematics. Ms. Warner said she doesn't think it is in the best interest of either the industry or the state for the DGGS to be subordinated or included into the Division of Mining. It is no diminution of the role of the Division of Mining. She said she supports the testimony of Jerry Booth, David Hite and Tom Crafford. She said she believes the DGGS has a mission and it is to all the people in the state and several other (indisc.) precise mineral industry. Ms. Warner urged the committee members not to pass HB 537. Number 1480 EARL BEISTLINE was next to testify from Fairbanks. He stated he is a life-long Alaskan with the sole professional career in Alaska's mineral education and mining industry fields. He said he supports the previous testimony of Jerry Booth, David Hite and Tom Crafford. He referred to the recommendations made by the Alaska Geological Mapping Advisory Board and said they are very important and need to be considered in detail and in their entirety. MR. BEISTLINE said he would suggest the present organization of the Division of Geological and Geophysical Surveys remain an independent agency as it is at the present time for the benefit of Alaska and its people. It is an agency that offers a fundamental service to the economy of the state and identification of geological hazards for appropriate resolution and safety of its people overall. MR. BEISTLINE said it is his opinion that any streamlining of DGGS or a combination of other agencies for reducing costs of operation of state agencies should be carefully studied in depth in concert with appropriate personnel of Natural Resource agencies, legislators, state administrators and private industry. He said a strong Division of Geological and Geophysical Surveys agency is an important foundation stone for the further enhancement of the state's minerals resource. He said that concludes his statement. Number 1615 NICO BUS, Acting Director, Division of Support Services, Department of Natural Resources, came forward to give his testimony. He said he wanted to comment that the Department of Natural Resources (DNR) cannot support HB 537. He said basically, when DNR deliberated the introduction of Executive Order 92, the department tried to implement as many of the Alaska Geologic Mapping Advisory Board's recommendations as possible. Although it was not a perfect fit, they felt that Executive Order 92 met this purpose. House Bill 537, as proposed, strips many of the requirements the DGGS needs and the department cannot support it. Number 1663 MR. BUS distributed departmental sectional analysis outlining DNR's points section by section. Also, administratively and budgetarily, currently the department feels the Division of Mining is still struggling with the combination with the Division of Water that came about two years ago. He indicated the department doesn't feel it is appropriate at this time to combine the DGGS and the Division of Mining and Water. Number 1692 CO-CHAIRMAN GREEN referred to Executive Order 92 and said the attitude was that because there wasn't a state geologist position, as it had been defunded last year, the DNR wanted to combine the Division of Geological and Geophysical Surveys with the Division of Oil and Gas. CO-CHAIRMAN GREEN stated, "At the hearing of in front of the Oil and Gas Special Committee that one of the functions that would be done by DGGS would be to do presale analysis DOG and it was my feeling, and I so testified at that meeting, that that was step one of doing exactly what we've heard today as the objections to combining it with the Division of Mines -- that it would erode the statutory requirements of the DGGS. And so I submit to you that by combining them, if they cannot exist without a state geologist, which that function has been defunded, then they are far better off with Division of Mines and Water because they then by the very implement that would create that required to maintain and do those functions outlined in statute and not get involved in another division's activities. And so what I'm hearing as the objection going in to the Division of Mines is the very purpose that it's going there to prevent anything - any erosion of their functions, delusions that might come about by a more powerful or better funded division. And so that's the very reason that it was there. Plus the fact that if you look at the description of the duties of the Division of Geological and Geophysical Surveys, their functions fit exactly with what the Division of Mining needs -- hard rock minerals, tectonics, because along faults that is where mineralization occurs. I mean it's nothing to do -- it's not even mentioned other than was mentioned once before that fuel is used in one word description of the things that they look at. But no where is oil and gas mentioned, and yet, it was the department's decision that they should be merged with Oil and Gas Division. And I'm submitting that they far better matched with the Mining Division, and their functions would be much better protected. I champion that. I think it would be a travesty if we lost the functions as outlined in statute, and that's exactly what this bill does. It maintains those functions." Number 1830 REPRESENTATIVE DAVIES respectfully submitted that House Bill 537 is equivalent to discussions during the Vietnam War era in having to destroy the village in order to save it. He said he thinks this combination is a far worse match than the proposed one with oil and gas. He said if we're not going to do the oil and gas one, then we ought to just leave it alone. While the state geologist position has been defunded, there still is an individual in the state survey who is currently the acting state geologist, who is by training and experience very qualified to be the state geologist. I think the division would be far better, under a reduced budget, to simply stay as it is to designate that individual as the state geologist with no increase in funds for the division. Number 1880 REPRESENTATIVE DAVIES said, "We went down this path - what was it about ten years ago and made this combination, at one time, and it was discovered to be unworkable. We've also had the testimony of a representative sample of the `who's who' in the mining world and the geology world; both from the companies, from the private sector, from the university, people who have had experience in the university world and people who had experience in the regulatory world of mining and people who have had experience in the areas that the state survey is statutorily charged to function. And out of that testimony, one of the particular things that this bill seems to ignore is that DGGS has a mission far broader than just mining. I mean that's certainly is, I think, its `flag ship mission,' but that it's much more than that. It's involved in the analysis where gravel is, it has been involved in land selections and making land selections. The state survey was one of the key institutions that selected some of the most productive petroleum rich land in the state of Alaska, in terms of land selection process. So, to suggest that there is no match with oil and gas or no necessity for them to maintain expertise in the basis analysis, I think, is short sighted. It ignores the past and it is short sighted with respect to the future." Number 1955 REPRESENTATIVE DAVIES said that we've been down this path before. We know that it's a mistake from history and the testimony. There is unanimous opposition from a representative sample of "Who's Who" in the mining and mineral industry in the state of Alaska. He suggested that the bill be put into a subcommittee and rethink how this proposal might fit into the Hite report. C0-CHAIRMAN GREEN asked Representative Davies if he is familiar with the description of the duties of the division as in statute. REPRESENTATIVE DAVIES indicated he was familiar with the duties. CO-CHAIRMAN GREEN asked if water and groundwater is one of the issues that the division is charged with reviewing and tabulating. He also asked it that isn't, in fact, the name of the division that would be going in. So, it is not just mining, it is mining and water and both of those are prime functions specified in the description of the Division of Geological and Geophysical Surveys. Co-Chairman Green said he maintains, again, it is a fear, it is a speculation that they - going into a different regulatory body, that their functions would be lost. While, in open testimony, it was stated that part of their functions would be lost if they were combined with the Division of Oil and Gas. Number 2026 REPRESENTATIVE DAVIES contended, "Mr, Chairman, I think that is a red herring. I opposed the combination with oil and gas. I don't think that's a good idea either. I voted, as you recall, to over turn 92. I think that, yes, I agree with you that reading the statute, I think the hydrological functions ought to be put back into the state survey, but the issue of regulatory agency and a research oriented agency like DGGS statutory supposed to be, is the paramount issue here in my mind. That's why the merger failed in `86 and that's why many many people opposed it then and continue to oppose it now. It's simply an inappropriate mix." Number 2048 CO-CHAIRMAN GREEN said he was referring to the fact that Representative Davis had stated in his prior testimony that he thought that it would be better in DOG. Co-Chairman Green said he would maintain that Representative Davies indicated it would be better in the Division of Oil and Gas and he would maintain that there is a better fit with the Division of Mines and Water. Number 2070 REPRESENTATIVE SCOTT OGAN asked for more details about the reference to the past merger of the two agencies. CO-CHAIRMAN GREEN commented, "That is correct, briefly. Different breed of cast, different attitude and it wasn't Division of Mines and Water then, it was the Division of Mines. There was an attempt made because -- while the testimony today has been unanimously against this, there are several out there involved with these who thought it was a good idea then, still think it is a good idea." Number 2112 CO-CHAIRMAN GREEN asked Mr. Bus to inform the committee what the cost would be to reinstall the state geologist to make the division whole again. Number 2127 MR. BUS said the director's salary is about $90,000. In the budget, to accommodate Executive Order No. 92, they felt there was some efficiency by merging the two divisions and sharing administrative staff. To recreate the director of the Division of Geology, you would need a director plus some support staff, so you are talking about $150,000, including benefits. Number 2155 CO-CHAIRMAN GREEN said, "To your chagrin, as well as mine, that budgeting was felt everywhere - budget cuts, and one of those, obviously, was the state geologist last year. A prior commissioner of the Department of Natural Resources used to use the phrase that's kind of like `eating your seed corn,' to which I do subscribe. Nonetheless, the division was cut and the state geologist position was lost and the concern, expressed by both the Department of Natural Resources and myself, is that without a state geologist, it is a vulnerable position and it has been cut. And part of the funding there to try and get outside funding as well and I think they have to some degree." Number 2195 CO-CHAIRMAN GREEN emphasized that Representative Davies has indicated that HB 537 should go into a subcommittee. He said if he thought it would go to a subcommittee for constructive purposes, he might be so inclined. He said he is afraid that it will be a subcommittee to death. Number 2212 CO-CHAIRMAN WILLIAM K. "BILL" WILLIAMS reminded Representative Davies that this issue has been before the committee for quite some time. He pointed out that Representative Davies did vote against the executive order. He asked him if he could you give the committee some ideas as to how he thinks this should be done. Number 2224 REPRESENTATIVE DAVIES responded, "I think that I, pretty well, outlined it. I don't think that either one of the mergers is appropriate I think, you know, the comment from the previous commissioner about `eating your seed corn' couldn't be more aptly demonstrated by the -- I think it can only be described as a `gold rush' that's going on in the Fairbanks area, right now and north of the Alaska range, all the way to McGrath, all around. As a result, I think as a direct result of the aero magnetic program that the state survey heads up and is carried out under capital funding from the state legislature. I think that's only one excellent example of the kind of strong work that's important to our economic future that results from having leadership from a strong state geologist." Number 2266 REPRESENTATIVE DAVIES continued, "A second one in the news today, there are scientists on the ground at Akutan Volcano, right now, have flown there over the past week to advise whether the village should be evacuated or not. The geological hazards function, both from the ecological and earthquake hazards, is an important part of that statutory mission. That's not something that comes under - you know - the heading of `mining' in the state. And whenever I say that kind of thing, I certainly do not mean to denigrate that. I think that the mining function is extremely important." Number 2316 REPRESENTATIVE DAVIES explained, "There is a philosophical problem and it translates down into a very practical problem in reality when you merge agencies that are supposed to have an objective scientific view about land selections, an objective scientific view about what the real hazards are and a proposal, for example, that might impact some kind of development - to have some objective view about what lands we ought to select for its oil and gas potential, its mineral potential and gravel potential, those kinds of things. There needs to be both the perception and the reality that the advice the state government is getting from that agency is independent of any advocacy group and independent from any regulatory concern. And that's the problem with putting the geologic mission and the geophysical mission under a regulatory mantle that the Division of Mining has." Number 2335 C0-CHAIRMAN WILLIAMS said he agrees about not wanting the legislation stuck in subcommittee, but in view of the opposition this bill is getting from industry, he can't debate the issue. He said there should be a plan benefitting both industry and the Administration. He asked Representative Davies if he had a plan or direction. Number 2381 REPRESENTATIVE DAVIES said he had not responded to a plan, with respect to this particular bill, because he does not believe that this bill is the right way to do it. He said he would be happy to come back with a plan and noted he doesn't currently have one. He said his overall view is that among the choices of combining it with oil and gas, combining it with the Division of Mining, or leaving it as it is, he strongly support the status quo. He said leave it alone as it is. Representative Davies said he see the legislature designate the person who is acting as the state geologist to be the state geologist. He said his preferred position is to put the $150,000 back in the budget to make it whole again. Absent that, he would just leave it the way it is. Number 2431 CO-CHAIRMAN GREEN clarified, "In the evaluation discussions, the searching for what could be done, because I do champion the activities that the Division of Geological and Geophysical Surveys has been doing. One of the reasons in the decade preceding this that it was combined when there wasn't the budget crunch that we are suffering now - was told to me that while it is important that a group, a think tank type of division such as DGGS is and should be, the fear of them being involved with a regulatory function where it's pretty much this type of one foot ahead of the other, those don't necessarily go and you can inhibit creative thought if it's over viewed - too much detail and I certainly subscribed to that. On the other hand, there is the fear always with a strictly theoretical group that they spend more time in theory than they do in action and that there may have been from time to time, I'm not [END OF TAPE] TAPE 96-36, SIDE B Number 000 CO-CHAIRMAN GREEN continued, " ....been removed, but another benefit that would be derived from such a combination as outlined in 537, might be an oversight to just review, on an ongoing basis, what is actually accomplished and what is done in there rather than the reports which to some degree, in the past, has been -- and I think credit was given, done by USGS or done by some federal agencies, or by university work that then gets published as DGGS report. And So my point is that if they were combined briefly before, the function that they were combined for, at least for what I am talking about now, apparently was not done - that an oversight could be done and maybe the best thing in all worlds would be that this oversight comes back saying, `Yes, these people are extremely efficient, they use their time to the utmost, they not only should have their state geologist reinstated but they should be funded greater.' And I think while we, in the majority, are in a cost cutting mode, I do not think it is fair or appropriate to say that we would want to see the demise of a very beneficial, streamlined, well run, efficient organization. And if that comes back, if fact, then I think you can extricate them from the Division of Mines and reestablish them with their own state geologist far easier from the Division of Mines than it would be if they got embroiled in, as has been said, in presale analysis to the extent that was stated on the record. And so from that standpoint, I can see the desire to have them ultimately be an independent division. Right now, there is some cloud, there is certainly, through the division, the Department of Natural Resources, some indication that there should be merger and I am just submitting to you that for all of those reasons, I think that this merger will accomplish both the efficiency, the overview and the potential extrication back as an independent agency. If that is the best thing for the state - far easier than it would be in any other kind of combination. So, for that reason, I would still strongly support passage of HB 537." Number 110 REPRESENTATIVE DAVIES explained, "The oversight and the analysis that you are suggesting might somehow magically occur from a director of the Division of Mining -- in fact, presently exists from an advisory board that is largely comprised of members of the industry. DGGS is not an `ivory tower' operation, it is not a `think tank' operation. It is about the farthest thing from it that you could imagine. It is a very `rubber meets the road' practical state agency whose mission is to -- one of its largest functions is to identify sand and gravel resources and that is not `think tank' type of operations. It's mission is the day-to-day -- part of it's involved in the day-to-day advise of whether a village should be evacuated or not. That's not `think tank,' that's about as urgent a day-to-day kind of mission as you can imagine. It does require, however, to make those kinds of analyses, to look into the future and to make some assertions about that, it does require some independent analytic ability. So, that is why it is important to maintain the separation from the regulatory commission." Number 183 REPRESENTATIVE DAVIES continued, "Mr. Chairman, my only -- the reason why I left academia, why I left Columbia University, in New York State, and came back to this state to be a member of the DGGS was precisely because I did not want to be in an `ivory tower' anymore. Precisely because I wanted to do something that affected the people of the state of Alaska directly, and I felt at that time, and I continue to believe now, that the state survey is one of those agencies that does that. It's a `rubber meets the road' operation. It's a very practical application of geological analysis." Number 215 REPRESENTATIVE AUSTERMAN explained he isn't an oil, gas or minerals person. He said he sits in this legislature trying to learn everything I am supposed to learn and be able to make decisions that are good for the state of Alaska. He said, "In all due respect to your knowledge and how you push this through, Mr. Chairman, in other legislation that has come before this committee I have respected your opinions and I have tried to follow a lot of your leads because you do have the knowledge. Although, the testimony that we've had today is also from people that I have a lot of respect for in the industry and so I'm rather torn on this thing right now and I think if we were to go to a vote right now I would have to vote no to move it out of this committee until I have more time to either to talk to these other people or really to understand the issue a little bit more. But it seems to me that we need a little more time on this." Number 235 CO-CHAIRMAN GREEN asked the participants on the teleconference network to rank their preference of the scenarios surrounding the DGGS. Number 283 MR. BOOTH reiterated that the advisory board recommends that the DGGS stay as it is. He said it has been operating very functionally with the acting state geologist. If it because of budgetary concerns, it has to remain that way, he is sure that the advisory board would concur to that as its number one priority. He said he thinks that what they are attempting to try to do in the DGGS is to `mount the tires, hit the road and screech a lot of rubber' as has been stated. The advisory board has been looking very closely at the functions of what DGGS is doing and making very strong suggestions in what they follow through to provide to users of Alaska with geology. Mr. Booth said that not only includes the mapping, but the seismic and traditional geology that is very important to try to get the hydro geologic function back in DGGS and, certainly, to expand the (indisc.) and volcanic deserts. He said he thinks that the advisory group certainly would support having an independent agency. CO-CHAIRMAN GREEN asked Mr. Booth if he shares the concern that if it were combined that there would some sort of inhibition or some sort of restriction imposed on the normal functions of the DGGS, if the outlines of HB 537 were followed. Number 386 MR. BOOTH answered, "Mr. Chairman, yes I think that is what the advisory broad has felt as we've walked through this process the latter part of last year. There was a lot of discussion very similar to what we are hearing today on that particular issue and I think there were some very very strong concerns, and we thought the advisory board kind of filled the gap to make sure that we're functioning as we're supposed to. Your concerns and what would happen with DGGS if it went over to the DOG I think are much the same concerns as we have heard from the advisory board. Although, we were rest assured from DNR that the particular concern that you had was not going to happen, but as we all know when these get put into different groups, different things happen." Number 427 CO-CHAIRMAN WILLIAMS referred to the situation with the budget and trying to save money and said he thinks this was part of the Administration's goal and part of the legislature's goal. He said he would like some input from the industry as to whether they currently have any ideas. Number 439 REPRESENTATIVE AUSTERMAN responded to Representative Williams that he believes the committee just heard their view. He said, "If we are going to do anything with the budget constraints that we have right now, then just leave it as status quo." Number 470 CO-CHAIRMAN GREEN said that because there is a significant difference of opinion on HB 537, the legislation will be held over for further discussion. HB 388 - OIL AND GAS LEASING; BEST INT. FINDINGS Number 510 CO-CHAIRMAN GREEN announced that committee would hear CSHB 388(O&G), Version K, "An Act revising laws relating to oil and gas leasing as related to land previously the subject of a written best interest finding; amending provisions setting out exceptions to sales, leases, or other disposals for which a revised written best interest finding is not required; authorizing annual offer of land for oil and gas leases if the land, or adjacent land, was the subject of a best interest finding and if preparation of a supplement to the best interest finding for that land is not justified; and modifying the statement of purpose in the Alaska Land Act as it applies to oil and gas leasing." He asked Representative Rokeberg to explain the version before them. Number 522 REPRESENTATIVE NORMAN ROKEBERG, Sponsor of HB 388, stated the bill is known as the areawide leasing bill. This is, for the information of everybody here, a House Majority priority bill for the year. REPRESENTATIVE ROKEBERG stated, "This bill has been combined with HB 389 which is known as `areawide best interest findings.' So, we have a hybrid bill that is the work of a substantial effort on the part of the AOGA, the Alaska Oil and Gas Association, working in conjunction with the director of Oil and Gas in DNR (Department of Natural Resources) to come up a compromise bill that will accomplish the purposes that we set out to do so. Early on, even last year in the interim, we have had a number of work sessions and hearings on this bill in the Oil and Gas Committee. And I am really pleased to be able to bring this bill forward in front of the Resources Committee and I'd like just briefly describe what it does." Number 590 REPRESENTATIVE ROKEBERG said, "Number one, the bill - and this is the Version K, provides specific legislative intent language which stipulates annual areawide lease sales. Now the director of Oil and Gas indicates, and I agree, that presently he has the authority to conduct these types of sales under the exempt and reoffered provisions of the Title 38 statute. But what we've done here is gone on step further and stipulated to that fact in statute. Because what we've done - we've stipulated that the director may conduct such sales annually. And the `may' or the permissiveness in the statutory language is done intentionally to give the director some flexibility. For example, the market conditions for price were to be in a very low side, it may not be in the state's best interests to pursue a lease sale on the annual basis. There are provisions in this bill that allow for the flexibility to meet the conditions that are in the discretion of the commissioner and the director. I think that's a positive note." Number 633 REPRESENTATIVE ROKEBERG pointed out that the provisions of this bill in no way alter the five year leasing schedule, lease plans, that the state presently conducts their oil and gas leases under. REPRESENTATIVE ROKEBERG felt that one of the key components of this bill is that we look at the best interest findings. The life span of a best interest finding, which is a major document that has to be prepared by the department before acreage is offered for sale, under the exempt and reoffered provisions of Title 38 there is a limitation on the life of these documents to five years. This bill makes them ten years. I think this is a major step forward because what this does should have a positive impact on the fiscal responsibilities of the department and the need to reinvent the wheel every five years when you want to offer this acreage out and that is a very important factor. Number 685 REPRESENTATIVE ROKEBERG said, the bill also sets up a new supplemental process which is somewhat different than the word "revision." It means a revision, but there is a supplemental process if there is only new substantial information that would require a supplement to the existing best interest finding (BIF). So, in other words, if new major information comes forward, the process that is stipulated in the bill to provide for a modification of the existing BIF so that it can be brought up to speed in terms of any technical or other necessary information that is brought forward. Representative Rokeberg said the director uses the "red headed owl" example that moves in and creates new habitat within that area. There are clearly provisions for that and they are somewhat more expedited. This is a very positive thing for the state. The fact that this is just substantial new information to create somewhat of a higher standard for the reopening of supplementing the existing best interest findings. REPRESENTATIVE ROKEBERG pointed out that only acreage that has a best interest finding can be offered on this annualized basis. Representative Rokeberg left the table to refer to maps showing some of the acreage in the North Slope and Cook Inlet. Representative Rokeberg explained that the bill is really an areawide bill, it is a nonspecific area bill. Number 790 REPRESENTATIVE ROKEBERG emphasized, "That the intention of this bill, to overcome any statutory or any other provisions that may be on the books now, to enable em to have more flexibility, offer more land to a way to the industry so they can plan on and conduct their capital budgets for further exploration and development of our very important resource in the state." REPRESENTATIVE ROKEBERG further stated, "One thing I would also point out that this bill is really an areawide bill, it is nonspecific area bill. In the past forms of this legislation, some of it was endeavoring to stipulate as to areas. For example, the Umiat baseline Kenny River Colville or what's called the `box' in the Cook Inlet which was a legal description of an area in the Cook Inlet - was under the, I think exploration licensing bill two years ago defined a box in the Cook Inlet area. There was testimony that there was controversy about this and so forth. There was some reluctance on the part of people involved in the process to be specific like that, but I think we have done artfully in this compromise generated by AOGA and the director, nothing specific about that. So we're taking existing power that the director has, and giving him additional tools, setting up authority to do things annually that he may not have wanted before but there is an expression of legislative intent here that do these things annually because these areas have been offered before." REPRESENTATIVE ROKEBERG continued, "For example, a newcomer, a new independent would come into an area and they could have consultations with the director. Say they have an interest like the nomination factor is now and they could provide for the exempt, the reoffered sales that is done now, but this could be done on a more regular basis. So, it is a real positive thing in that regard." Number 889 REPRESENTATIVE ROKEBERG proceeded, "As I mentioned, this is a compromise bill. There was a memorandum issued to the chairmen of this committee after the Oil and Gas Committee passed out our Version K with some recommendations for some modifications." REPRESENTATIVE ROKEBERG said in the committee member's packets, there should be the amendments that the Oil and Gas Committee is offering to overcome some of items listed in the Alaska Oil and Gas Association memorandum dated March 15, 1996. He said most of the objections in the AOGA memorandum are really technical statutory drafting problems and there are only two substantive areas that he would like to comment on. Number 936 REPRESENTATIVE AUSTERMAN asked if the amendments are being offered to the committee substitute, Version K. REPRESENTATIVE ROKEBERG said that was correct and referred to the specific AOGA amendment: Page 5, lines 6 - 9: Delete: ", together with any tract for which a written best interest finding has not been prepared if the tract is located within and is entirely surrounded by acreage described in this subparagraph for which a best interest finding was issued" REPRESENTATIVE ROKEBERG repeated the proposed language deletion, and walked away from the microphone to refer to map. He referred to the wording in the amendment and said, "Which means, for example, if there is like an inholding or land here that there was, a lot of these may have been leased before. This particular map doesn't necessarily speak to this particular issue, but this is just an example. There might be an inholding within this whole area - want to have an areawide lease sale on it. The language that the Oil and Gas Committee inserted here would provide for that." REPRESENTATIVE ROKEBERG said there was a concern that there may be some reasons that a particular tract of land may not want to be (indisc.), so it has been requested by the Alaska Oil and Gas Association that this language be removed. Representative Rokeberg said that as the bill sponsor, he has agreed to do so. He stated that is one of the major objections that AOGA, in their March 15, 1996, memorandum to the chairmen of this committee. He noted there are a number of other technical questions that we've acceded to. Number 1031 REPRESENTATIVE ROKEBERG directed committee attention to another proposed amendment: Page 6, lines 27-30 Delete: "(1) may annually offer to issue oil and gas leases of the acreage described in AS 38.05.035(e)(6)(G) unless the commissioner determines that substantial new information has become available that justifies preparation of a supplement to the best interest finding for the area proposed to be leased;" Insert: "(2) may annually offer to issue oil and gas leases of the acreage described in AS 38.05.035(e)(6)(G) that is subject to a written best interest finding issued within the previous 10 years unless, under that subparagraph, the commissioner determines that preparation of a supplement to the best interest finding for the acreage proposed to be leased is justified;" REPRESENTATIVE ROKEBERG repeated the amendment beginning on line 27, he explained that AS 38.05.035(e)(6)(G) references the new provision of this bill which is "the guts of this bill." He said there were concerns raised about the language after that, "Unless the commissioner determines that substantial new information has become available that justifies preparation of a supplement to the best interest finding for the area proposed to be leased." Representative Rokeberg said, "The intention of myself and the legal drafter was that this new language merely indicates that if in fact new substantial information comes to light that there is a need for a supplemental revision modification to the BIF that could delay the annual basis. In other words, if there was a scheduled annual sale under this provision then the commissioner, because there was new information, could delay that." Number 1103 REPRESENTATIVE ROKEBERG explained, "However, AOGA and some people in industry feel that they don't understand the language, so we have offered a new amendment here which basically says that - that's the first page of the amendment that's presented to you for different language which basically says the same thing that if there is a new information that requires a supplement coming forward, then there could be a delay in the annual sale." Number 1129 REPRESENTATIVE ROKEBERG interpreted the word "may" on page 6, line 27. The word "may" is a permissive thing and is really really important to understand. He said that all this bill is doing is providing encouragement and authorization to the commissioner to do this on an annual basis. Representative Rokeberg said we want the commissioner to have that flexibility so that he/she will more land out into the hands of industry. We want to see more "bits" turning to the right and more down hole information. Number 1162 REPRESENTATIVE ROKEBERG referred to remaining amendments proposed by the AOGA and stated that those recommendations are strictly statutory drafting problems where there is either a lack of understanding or comfort just the way the language is drafted. There is nothing substantive there. Number 1192 REPRESENTATIVE ROKEBERG directed attention to the title of the bill where the AOGA recommended addition of language "areawide leasing." He pointed out the problem from a statutory drafting point is notwithstanding the fact that the short title of the bill is "areawide leasing," but because the commissioner presently has the authority to conduct areawide leasing, there is nothing in the bill that says we're doing areawide leasing. So it can't be included in the title. He asked for the committee's consideration of the proposed amendments and expeditious review of this legislative priority. Number 1247 REPRESENTATIVE OGAN noted that the updated fiscal note has been decreased from $290,000 in fiscal year 97 to $8,000. He said he wants to make sure that the $8,000 fiscal note replaces the $290,000 fiscal note. Number 1280 REPRESENTATIVE ROKEBERG explained that the original bill that was brought forward in the House Special Committee on Oil and Gas, in essence, established a new annual leasing program with the statute. With the input of the director and the industry, in the AOGA compromise, we're able to change the entire scope of the bill and reduce its impact, financially, on the division. REPRESENTATIVE ROKEBERG asked committee to keep in mind that the acreage that is being offered, under this bill, is what is called exempt and reoffered acreage which has always been able to be done before, but now it will be done on a more consolidated basis. This is not new frontier wildcat exploration acreage we are talking about that should have a new best interest finding and all the environmental concerns and things of that nature are taken care of. Number 1424 CO-CHAIRMAN GREEN recalled earlier testimony from Representative Rokeberg about the significant drop in the fiscal note and asked what the department would not be able to do now. Number 1468 REPRESENTATIVE ROKEBERG replied that the previous version of the bill set up almost a statutory program which would have required additional manpower, etc. Number 1495 REPRESENTATIVE OGAN said he has worked on a bill that had a similar situation where he was designing a program that was completely outside of the scope of what their job is - whole new program. He said he thinks that what has been done with this bill is that it mirrors existing statute as much as possible, yet it makes the substantive changes within the existing program statute and that is why the fiscal note was reduced. They aren't reinventing the wheel. Number 1560 REPRESENTATIVE ROKEBERG responded to questions from Representative Austerman relating that there are numerous lands that have been leased before. He explained that their terms were typically ten years. Those lease terms have now expired and they are being reoffered. As we step out and offer more lands, we write best interest findings for those parcels and then they are let out, but then there is no bid on them. Under the five year leasing schedule they get out of the loop. You could have a lease, for example, that occurred five years ago and nobody bid on then, three years later there may be some interest in that land, but it won't get back on the schedule until the sale is rescheduled. The intent of the bill is to short circuit that. If there is some interest, the bill would allow the commissioner to put that parcel on a sale that is different than a scheduled five year sale. Number 1643 CO-CHAIRMAN GREEN said, "I might add to that that as Representative Davies talked about the fact that the geological staffs of companies, as well as the state, are looking at areas that maybe are not in the current leasing schedule or not even contemplated, but geologists are out of work and all of a sudden a reinterpretation of the use of 3-D seismic various activities that they do, suddenly they get a different picture, but because this particular land if it were just not asked for in the current leasing procedures, it would take six years because it would have to get on the five year schedule that's already been published. So in order to expedite that, this would cover it. As Representative Rokeberg said, lands that have already been looked at before from a best interest findings standpoint. Number 1695 REPRESENTATIVE ROKEBERG informed that the $8,000 fiscal note is for advertising as required in the statute, if they were to offer leases. All their asking is to spend some more advertising money so they can advertise the land which they are required to do. He said it is a good fiscal note. He noted he could arguable say that it should be a negative fiscal note, it is just common sense. Number 1733 REPRESENTATIVE RAMONA BARNES referred to Representative Rokeberg saying that believes that it should be a zero fiscal note and asked Representative Rokeberg why he won't advocate for it. Number 1770 REPRESENTATIVE ROKEBERG countered that because the fiscal note has been significantly changed from the last fiscal note. He said this is still statutorily required. Number 1790 CO-CHAIRMAN GREEN commented that the $8,000 is merely an estimate. Number 1850 PAT FOLEY, Chairman, Lands Exploration and Operations Committee Alaska Oil and Gas Association, testified via teleconference, in support of HB 388. He said, "The areawide leasing concept is really rather simple. The Division of Oil and Gas must complete a large best interest finding for the Central North Slope and the core area of the Cook Inlet. Once a favorable best interest finding is issued, the division must then offer all unused land in these areas at the annual lease sales. The need to continually review the current issue, the best interest findings in areas of the state, which have repeatedly offered for lease since the 1960s, is eliminated. We believe that regular, certain and predictable schedule of annual lease sales, which offer the acreage of critical exploration interests to the industry, will receive the continued support of the current operators within the state. It may serve to attract new explorers (indisc.) oil and gas operating environment." MR. FOLEY continued, "We applaud the efforts of Representative Rokeberg and the House Oil and Gas Committee to forward this bill for your review. With the few changes, which I am now prepared to discuss, AOGA unanimously supports this bill." Number 1970 MR. FOLEY referred to the distinctive AOGA marked up copy of the bill highlighted in multiple colors and said the highlighted colors are a visual aid to help him walk through the bill. He pointed out that there are four different types of changes, conceptually. The yellow and the blue are each changes that AOGA is recommending in addition to the bill. The orange and the pink are AOGA's recommendations to delete two concepts which appear in Version K for the first time. Number 2027 MR. FOLEY directed attention to the yellow highlighted changes and said, "The first which appears on page 1 and the second is on page 6. (Indisc.) this is an an areawide leasing bill and we proposed that the words `areawide leasing' be (indisc.) throughout the bill to emphasize this point. The words `areawide leasing' do appear in the bill, as it is currently drafted, and they appear on page 6 on line 22 of Section 2. (Indisc.) modified to let you (indisc.) areawide lease sales are in the best interest of the state. So we would simply add language to the title on page 1, at line 8, hoping to make reference to a areawide leasing." Number 2082 REPRESENTATIVE ROKEBERG interjected that he likes this amendment. MR. FOLEY continued, "And then also on page 6, we would insert the language in Section 3. I'm gunna have more comments on Section 3, in fact, I recommend it be deleted entirely, but if your committee feels compelled to leave it in - that language - the yellow block which you see on line 27." Number 2100 MR. FOLEY continued explanation of orange highlighted amendments relating that it appeared that Representative Rokeberg's amendments had incorporated all of the orange changes: Page 1, line 5, Title Delete: "or adjacent land," Page 5, line 6, Delete: "together with any tract for which a written best interest finding has not been prepared if the tract is located within and is entirely surrounded by acreage described in the subparagraph for which a best interest finding was issued" Page 6, line 23 Delete: "or that is adjacent to and surrounded by state land that has been the subject of a best interest finding" Number 2169 MR. FOLEY referred to the pink changes and said it is a more subtle issue. He noted Representative Rokeberg touched on it and said he wanted to add some points of clarification. He explained AOGA is concerned that with this language the BIF is required. Mr. Foley directed the committee to Section 3. AS 38.05.180 (d) on page 6: Page 1, lines 6 and 7 Delete: "and if preparation of a supplement to the best interest finding for that land is not justified. Page 6, lines 28 Delete: "unless the commission determines that substantial new information has become available that justifies preparation of a supplement to the best interest finding for the area proposed to be leased." Number 2272 MR. FOLEY discussed the distinctions between AS 38.05.180(b) and (c) and (d). He referred members to page 6, line 25, Section 3, AS 38.05.180(d) which exempts certain lands from the need to appear on a five year lease sale scheduled and said by adding that language it essentially negates the exclusion that created .180(d). Mr. Foley said if you look at .180(b), this establishes the requirements to include the land on a five year sale program. AS 38.05.180(c) says that you cannot offer land which (indisc.) appear on that five year program. AS 28.05.180(d) sets forth the exemption. If you include this language highlighted in pink on page 6, it negated the exclusion created .180(d). Number 2331 CO-CHAIRMAN GREEN asked Mr. Foley if he had received a copy of Representative Rokeberg's proposed amendments. MR. FOLEY acknowledged that he had a copy, but had the same problem with the language that appears in his amendment. Number 2374 REPRESENTATIVE DAVIES did not follow Mr. Foley's explanation that having this language in here negates the whole exception. He said it seem to him that this finding of substantial of new information would be the exceptional case. In most cases, the underlying exception would be in place. In the vast majority of instances, the commissioner could annually offer areawide lease sales as long as they had been subject to best interest finding within the last ten years. MR. FOLEY said, "If you look at the changes that we're making in (G) and (H), which is now just (G), (indisc.) for a supplemental best interest finding, if substantial new information is discovered it throws you into that loop there that requires... [END OF TAPE] TAPE 96-37, SIDE A Number 000 REPRESENTATIVE ROKEBERG said he understands their concerns. He explained it is not the intention of the sponsor, nor the drafter, to create the result that has been brought to his intention. Representative Rokeberg pointed out there is a fix at this stage, particularly given the light to move this legislation along. Representative Rokeberg indicated he is willing to accept the "klink" change without deleting the balance of the statement in Section 3, particularly with the addition of the words, "an areawide lease sale," highlighted in yellow. He said he is more than willing to accept that as a friendly amendment. Representative Rokeberg stated he won't agree to the removal of the first part of that sentence which has also been requested. That is the only thing that authorizes anything about annual and it is the only thing that says anything about areawide lease sales not that it has been modified. CO-CHAIRMAN GREEN asked Mr. Foley if it is still his feeling that he would still have the conflict if just the first sentence and a half was used. MR. FOLEY indicated he wouldn't. He said the suggestion by Representative Rokeberg satisfies his concern. He noted he still believes that all of Section 3 and the amendment to .180(d) is unnecessary. He stated he doesn't have an objection to the change Representative Rokeberg has put forward. Number 158 CO-CHAIRMAN GREEN said as he understands, Section 3 would have the yellow in and the pink out. MR. FOLEY indicated that was correct. CO-CHAIRMAN GREEN noted there was an affirmative nod from the sponsor. Number 183 MR. FOLEY referred the committee to the title of the bill on page 1 and said there is a pink deletion. He said (indisc.) is identical to what was just said. CO-CHAIRMAN GREEN said, "So what I hear so far, I think the committee is with us, that yellow, orange and pink, as proposed by AOGA, is acceptable to the sponsor." REPRESENTATIVE ROKEBERG indicated that is correct. Number 237 MR. FOLEY referred the committee members to the changes that are blue and said, "(Indisc.) are necessary to clarify some procedure requirements. They're essentially legislative housekeeping, if you will. On page 3, line 23, we've added language `except for sale under (G)(6) of this subsection.' I would like it in this change to (indisc.) put forward in Section 5 of this bill, which (indisc.) AS 38.05.945(A), (indisc.) to clarify on the hearing or lease sales are exempt from certain public notice requirements." Number 300 REPRESENTATIVE ROKEBERG explained he spent substantial time reviewing this and it is statutory drafting. He said, "Everything that Mr. Foley says I agree with. We do not conceptually agree with. It is just the matter if one looks up to the first page, on line 11, there is a little `(e)' there and if you follow the whole section - that subsection down, it's all inside the subsection. And if you go beyond his change - requested blue change now on page 3, and keep going on page 4 and keep going on page 5, you end up with `(G)' and `(H).' We're all in the same subsection, so the statutory draft is you don't have to make the reference back because it's right in the subsection." Number 365 REPRESENTATIVE BARNS explained that sometimes it doesn't have anything to do with the drafters, it has to do with people who read it after you get through drafting it to understand what the intent is. Perhaps that is the reason they want it put in so that it is clearly followed in statute in the future. REPRESENTATIVE BARNES said, "What I would do would entertain a motion. I would move that all this colored language, I don't think it's yellow - I think it's green where they calling it yellow - orange, pink and blue be adopted into the committee substitute we have before us." CO-CHAIRMAN GREEN said he would presume the motion would cover page 1, line 4. REPRESENTATIVE BARNES indicated that is correct. Number 444 CO-CHAIRMAN asked if there was an objection. REPRESENTATIVE DAVIES objected. He said he still doesn't understand why the committee wants to make the change in Section 3 on page 6. Representative Davies indicated he doesn't understand why it is necessary. He asked Representative Rokeberg if that change were to be made, would there still be the requirement that whenever such acreage is being offered and if there is substantial new information, there would be a new best interest finding. REPRESENTATIVE ROKEBERG said the reference to (e)(6)(G), which is the actual operative clause, reviews the whole aspect creation of the supplemental to the BIF. He noted it starts on page 4, line 29, (G) and go to page 5, line 11. He said the point Mr. Foley made is correct. He referred to the language highlighted in pink in Section 3 and said the only reason it was there was it is modifier to indicate that there could be circumstances that would necessitate a delay on the annual sale. Representative Rokeberg said he thinks that by the statement on the record in going forward with the deletion that they've requested should be adequate to cover that because it is included in the new section (G). Number 607 CO-CHAIRMAN GREEN asked Mr. Foley if he agrees with what Representative Rokeberg had just stated. MR. FOLEY indicated he does. REPRESENTATIVE ROKEBERG stated that by putting it on the record, the permissiveness under the new Section 3 is still there in case things happen like the price changes. The director and commissioner can take it into account. He noted it was added by the drafter of the bill as qualification for additional flexibility. CO-CHAIRMAN GREEN asked Representative Rokeberg if he has a problem with the wording on page 1, line 4. REPRESENTATIVE ROKEBERG said that is a matter of statutory drafting. He indicated he doesn't disagree with it and doesn't have an objection. CO-CHAIRMAN GREEN asked Representative Davies if he still maintains his objection. REPRESENTATIVE DAVIES said the bill is fairly complicated. He asked for a brief at ease. CO-CHAIR GREEN called the meeting back to order. REPRESENTATIVE ROKEBERG said he would remove his amendments from the table and would exceed to the ones requested. Number 805 CO-CHAIRMAN asked Representative Davies if he still has an objection. REPRESENTATIVE DAVIES removed his objection. CO-CHAIRMAN GREEN said, "Is there any objection to the motion to move - it was this bill... REPRESENTATIVE BARNES said, "...From the committee as amended." CO-CHAIRMAN GREEN said, "As amended and with the new fiscal note. Is there objection?" An unidentified committee member said he thought the committee was voting on an amendment. CO-CHAIRMAN GREEN said, "Oh, well we can't. We have a motion on the floor to accept these..." REPRESENTATIVE BARNES said, "And you asked if there was any objection and there was none. So the next motion is to move out of committee, as amended, with individual recommendation. CO-CHAIRMAN GREEN asked Representative Barnes if that is her motion. REPRESENTATIVE BARNES indicated it was. CO-CHAIRMAN GREEN asked if there was an objection. REPRESENTATIVE DAVIES objected. He said there is a new version and several amendments that the committee hasn't had a chance to digest. He said he would respectfully request the committee be given a day to review the amendments. CO-CHAIRMAN GREEN said, "If there are no other questions of the sponsor, in fairness, we have Sara Hannan to speak on this bill. I would ask you to be as brief as possible, Ms. Hannan." SARA HANNAN, Executive Director, Alaska Environmental Lobby, testified in opposition to HB 388. She said she has sat through several hearings in the Senate and would like to discuss some of the concerns and differentiations that she thinks the policy implies that the committee members need to think about. Areawide leasing, conceptually, is a good idea. Ms. Hannan referred to the best interest finding mechanism and said it is the mechanism in which local communities have input into the oil and gas lease schedule. If a community feels that a lease sale dramatically affects their fishing constituencies or their tourism development, the best interest finding is the place where their testimony can come into play and certain parcels can be exempted from leases and non leases. When talking about areawide sales and the two areas where we do lease sales, they vastly differ. The North Slope's oil and gas leasing area, above the Umiat baseline between the Cannon River and the Colville River, provide an area that is fairly homogeneous in environment and fairly non populated. Conversely, the Cook Inlet Basin is a very diverse area with a lot of different economic interests. There are several communities and a variety of constituencies with different economic concerns ranging from tourism expansion in the area to a fishing constituency. Additionally, most of the oil and gas in Cook Inlet is offshore. All of the North Slope oil and gas leases are onshore leases. Some are offshore with lateral drilling, but the lease sales are held on shore. Ms. Hannan said for that reason, those two areas are vastly different and she would argue that it should be differentiated within the legislation. She said she would urge the committee to evaluate those two areas differently because they are vastly different. The North Slope and the Southcentral Cook Inlet Basin don't look anything alike. Ms. Hannan said if you're taking something that is data five years current, when you're talking about developing fishing and tourism industries, things change substantially in five years. MS. HANNAN explained that when communities work for or against lease sales in their area, if a parcel is not leased and not sold, there should be some assurance to that community that they don't need to spend a substantial amount of their community energy evaluating the pending lease sale every year. What has been provided through a five year sale mechanism is that if lease sale "X," in front of their view shed affecting their fishing development, doesn't sell they know that in five years it could come back and they, again, will have an additional comment period. Ms. Hannan informed the committee that exempting these sales from additional comments creates an ongoing policy problem for local communities. She thanked the committee members for listening to her comments. Number 1122 REPRESENTATIVE DAVIES referred to Ms. Hannan mentioning "five years" several times in her comments and said he would like to make sure Ms. Hannan was aware that the "five" had been changed to "ten" in the bill. MS. HANNAN said she was aware. Currently, it is a five year window and most communities in the Cook Inlet Basin are dealing with a five year mechanism. When that goes to a ten year mechanism, we will be looking at even more changes. REPRESENTATIVE DAVIES indicated Ms. Hannan said her concern was that there could be substantial changes an a unit from one window to the next when a lease sale may be offered. He said under the terms of the bill, if there are substantial changes there would then be a reiteration of the best interest finding process. Representative Davies asked Ms. Hannan if she is not comfortable with that provision. MS. HANNAN indicated she isn't comfortable with the provision. She noted she meant to substitute the word "substantial," as it is her understanding that "substantial" has a legal definition of a certain standard. Ms. Hannan referred to Homer and said if your tourism expansion and growth has been 30 percent, does that meet the legal definition of a substantial change? She pointed out there are mixed opinions, amongst attorneys, as to what substantial new information implies. They say it's a very high standard that most local governments would have a hard time saying that this is substantial new information, yet it is an expansion and the tourism constituency has some concern, but can you prove it is substantial new information or it is just an increase in economic value annually. REPRESENTATIVE DAVIES asked Ms. Hannan if she has another word to substitute for "substantial." MS. HANNAN indicated she didn't. Number 1259 KENNETH BOYD, Director, Division of Oil and Gas, Department of Natural Resources, was next to testify via teleconference from Anchorage. He said he thinks the legislation has gone a long way in the right direction. Mr. Boyd said Representative Rokeberg has done a really nice job of working with the Division of Oil and Gas and AOGA. He explained that he believes that the changes made are valuable. He referred to page 1, line 4, relating to the title of the bill and said there was talk about making changes to the colored language - the yellow, blue, green and pink. The word "authorizing" would be changed to "encouraging. He asked if there was another word change. Number 1310 REPRESENTATIVE BARNES said, "My motion, because we all have this document, incorporated all the coloring and the - the...." CO-CHAIRMAN GREEN said, "...that little blue area. If yours isn't colored, mine is. Just a moment. There was to be the word `encouraging' on line 4 was to be colored blue and the word `encouraging' substituted there." REPRESENTATIVE BARNES agreed. REPRESENTATIVE DAVIES said it was his understanding that Representative Barnes indicated the change on line 4, specifically. He said it was understanding that when the amendment was moved, that was what was being done. CO-CHAIRMAN GREEN said the amendment has passed. Number 1349 MR. BOYD said he is certainly in favor of the change. He said, "We are authorized, as we've discussed many times, to do what we're doing here, but encouraging those annual (indisc.) I think is a very positive (indisc.) of the legislature to get on with it." CO-CHAIRMAN GREEN said there was previous discussion that there was significant changes to the bill and that there would be some time to review the changes. He said those changes have been adopted and he sees no problem with getting another draft of the bill for review at the meeting on Wednesday. He said he would suggest that Representative Rokeberg might want to consider a zero fiscal note. Number 1398 REPRESENTATIVE BARNES made a motion to adopt a zero fiscal note. REPRESENTATIVE DAVIES objected for the purpose of discussion. He asked Mr. Boyd to comment. MR. BOYD said, "If you want to zero it out, go ahead, but that doesn't give (indisc.) that you want more lease sales and those lease sales don't cost a lot of money, but a flight to (indisc.) to do public testimony has a real cost to the division. I'm only recognizing here that those costs are real. But I think Representative Rokeberg was also correct in his earlier testimony that at some point in time I think the cost begins to go down because at some point I think is less necessity to reinvent that wheel, but (indisc.) at some point in time (indisc.) and we have to do public testimony, we have to advertise (indisc.), and it's in addition to what we're doing now. I think it's a small cost to pay for a program that gets an awful lot of land out, you know, potentially in the hands of the (indisc.) user. This truly is an administrative cost, but again, a flight to (indisc.) costs a couple of thousand dollars to get people into that village to deal with the local people. I think it's an important cost. The same thing goes for flying to Kenai or flying to Homer. It's part of the public process that's required and it does have a cost." Number 1479 CO-CHAIRMAN GREEN asked if this is something that he didn't foresee in the division's budget. MR. BOYD said they always try to find things in their budget, but would keep adding things. Mr. Boyd explained he couldn't say whether or not he couldn't find the money. He stated he thinks this is a fair and reasonable additional cost if there is an extra sale, on a yearly basis. Number 1500 REPRESENTATIVE DON LONG said, "I was just going to mention whether or not it goes into the budget because notwithstanding the fact that areawide leasing or a best of finding or whatever -- I mean if there a lease or not a lease that's (indisc.). If there is, then it shouldn't be an additional cost." REPRESENTATIVE DAVIES said he thinks what the bill is intending to do is authorize/encourage more sales. If there is going to be more sales that are going to be offered more frequently, then there will be an additional cost. He said he would also note that the budget proposal is actually to reduce the division's budget by $150,000. He said we can do all the encouraging we want, but nothing will happen if the division doesn't have the fiscal tools to do the job. He indicated he still maintains his objection. Number 1552 CO-CHAIRMAN GREEN asked for a roll call vote on whether or not the committee will submit a fiscal note from the House Resources Committee. Representatives Austerman, Barnes, Kott, Long, Ogan, Williams and Green in favor of the motion. Representatives Davies and Nicholai voted against the motion. So the committee adopted a zero fiscal note. CO-CHAIRMAN GREEN announced the bill would be held over for review of the amendments. ADJOURNMENT CO-CHAIRMAN GREEN adjourned the meeting at 10:12 a.m.