Legislature(1995 - 1996)

03/20/1996 08:20 AM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE RESOURCES STANDING COMMITTEE                              
                         March 20, 1996                                        
                           8:20 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 388                                                                
 "An Act revising laws relating to oil and gas leasing to authorize            
 a program of areawide leasing."                                               
      - PASSED CSHB 388(RES) OUT OF COMMITTEE                                  
 HOUSE BILL 401                                                                
 "An Act authorizing the issuance and sale of revenue bonds to fund            
 public wastewater systems, nonpoint source water pollution control            
 projects, including solid waste management systems, and estuary               
 conservation and management projects; authorizing the use of the              
 Alaska clean water fund to pay and secure the bonds and to pay                
 costs related to issuance and administration of the bonds;                    
 authorizing certain measures to secure payment of the bonds; and              
 amending Alaska Rule of Civil Procedure 3."                                   
      - PASSED CSHB 401(RES) OUT OF COMMITTEE                                  
 CS FOR SENATE JOINT RESOLUTION NO. 39(RES)                                    
 Relating to the U.S. Environmental Protection Agency draft National           
 Pollutant Discharge Elimination System general permit for placer              
 mining in Alaska.                                                             
      - SCHEDULED BUT NOT HEARD                                                
 (* First Public Hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HB 388                                                               
 SHORT TITLE: AREAWIDE OIL & GAS LEASING                                       
 SPONSOR(S): REPRESENTATIVE(S) ROKEBERG,B.Davis                                
 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                           
 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)                                 
 03/13/96      3111    (H)   REFERRED TO RESOURCES                             
 03/18/96              (H)   RES AT  8:00 AM  CAPITOL 124                      
 03/18/96              (H)   MINUTE(RES)                                       
 03/20/96              (H)   RES AT  8:00 AM  CAPITOL 124                      
 BILL:  HB 401                                                               
 SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR                                  
 JRN-DATE     JRN-PG                 ACTION                                    
 01/08/96      2378    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 01/08/96      2378    (H)   CRA, STATE AFFAIRS, RESOURCES, FINANCE            
 01/08/96      2379    (H)   2 ZERO FISCAL NOTES (REV, DEC)                    
 01/08/96      2379    (H)   GOVERNOR'S TRANSMITTAL LETTER                     
 02/20/96              (H)   CRA AT  1:00 PM CAPITOL 124                       
 02/20/96              (H)   MINUTE(CRA)                                       
 02/21/96      2829    (H)   CRA RPT  4NR                                      
 02/21/96      2829    (H)   NR:  ELTON, AUSTERMAN, KOTT, IVAN                 
 02/21/96      2829    (H)   2 ZERO FISCAL NOTES (DEC, REV) 1/8/96             
 03/09/96              (H)   STA AT 10:00 AM CAPITOL 102                       
 03/12/96      3088    (H)   STA RPT  CS(STA) NT 5DP                           
 03/12/96      3089    (H)   DP: JAMES, GREEN, IVAN, PORTER,                   
 03/12/96      3089    (H)   2 ZERO FISCAL NOTES (REV, DEC) 1/8/96             
 03/12/96      3089    (H)   REFERRED TO RESOURCES                             
 03/20/96              (H)   RES AT  8:00 AM CAPITOL 124                       
 WITNESS REGISTER                                                              
 REPRESENTATIVE NORMAN ROKEBERG                                                
 Alaska State Legislature                                                      
 Capitol Building, Room 110                                                    
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 465-4968                                                    
 POSITION STATEMENT:  Sponsor of HB 388.                                       
 KENNETH A BOYD, Director                                                      
 Division of Oil and Gas                                                       
 Department of Natural Resources                                               
 3601 C Street, Suite 1380                                                     
 Anchorage, Alaska  99503-5948                                                 
 Telephone:  (907) 269-8800                                                    
 POSITION STATEMENT:  Testified on CSHB 388(RES).                              
 PAT FOLEY, Chairman                                                           
 Land Exploration and Operations Committee                                     
 Alaska Oil and Gas Association                                                
 P. O. Box 100360                                                              
 Anchorage, Alaska  99510                                                      
 Telephone:  (907) 265-6243                                                    
 POSITION STATEMENT:  Testified in support of CSHB 388(RES).                   
 BRADLEY PENN                                                                  
 Marathon Oil Company                                                          
 P. O. Box 196168                                                              
 Anchorage, Alaska  99519                                                      
 Telephone:  (907) 564-6428                                                    
 POSITION STATEMENT:  Testified in support of CSHB 388(RES).                   
 KEITH KELTON, Director                                                        
 Division of Facility Construction and Operation                               
 Department of Environmental Conservation                                      
 410 Willoughby Avenue, Suite 105                                              
 Juneau, Alaska  99801-1715                                                    
 Telephone:  (907) 465-5180                                                    
 POSITION STATEMENT:  Department presentation on CSHB 401.                     
 MARIE SANSONE, Assistant Attorney General                                     
 Civil Division                                                                
 Department of Law                                                             
 P. O. Box 110300                                                              
 Juneau, Alaska  99811-0300                                                    
 Telephone:  (907) 465-3600                                                    
 POSITION STATEMENT:  Available for questions on CS HB 401.                    
 LEE SHARP, Bond Counsel                                                       
 Department of Environmental Conservation                                      
 429 L Street, Suite 400                                                       
 Anchorage, Alaska  99501                                                      
 Telephone:  (907) 276-1969                                                    
 POSITION STATEMENT:  Explained proposed amendments to CS HB 401.              
 BERDA WILLSON, Assistant Manager                                              
 Nome Joint Utilities                                                          
 P. O. Box 70                                                                  
 Nome, Alaska  99762                                                           
 Telephone:  (907) 443-5288                                                    
 POSITION STATEMENT:  Testified in support of CS HB 401.                       
 DIANA BENNETT, Finance Manager                                                
 Anchorage Water and Wastewater Utilities                                      
 Municipality of Anchorage                                                     
 3000 Arctic Boulevard                                                         
 Anchorage, Alaska  99503                                                      
 Telephone:  (907) 786-5623                                                    
 POSITION STATEMENT:  Testified in support of CS HB 401.                       
 MIKE BURNS, Section Chief                                                     
 Municipal Grants Section                                                      
 Division of Construction & Facilities                                         
 Department of Environmental Conservation                                      
 410 Willoughby Avenue, Suite 105                                              
 Juneau, Alaska  99801-1795                                                    
 Telephone:  (907) 465-5136                                                    
 POSITION STATEMENT:  Answered questions on CS HB 401.                         
 ACTION NARRATIVE                                                              
 TAPE 96-38, SIDE A                                                            
 Number 000                                                                    
 CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting            
 to order at 8:20 a.m.  Members present at the call to order were              
 Representatives Green, Williams, Austerman, Davies, and Nicholia.             
 Representatives Barnes, Kott, Long and Ogan arrived late.                     
 HB 388 - OIL & GAS LEASING; BEST INT. FINDINGS                              
 The first order of business was CSHB 388(O&G), "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."                 
 Number 042                                                                    
 REPRESENTATIVE NORMAN ROKEBERG, sponsor of the measure, related               
 that he had reviewed the proposed amendments and is in full                   
 accordance with the changes and duly noted a drafting change on               
 page 6.  He urged committee's approval of the legislation                     
 disclosing that it is caucus priority.                                        
 CO-CHAIRMAN GREEN recessed the committee due to lack of quorum.               
 REPRESENTATIVE ALAN AUSTERMAN asked for explanation of the drafting           
 change on page 6.                                                             
 Number 141                                                                    
 CO-CHAIRMAN GREEN explained the change was a drafting preference by           
 the drafter which rearranged committee recommendations.                       
 Number 212                                                                    
 REPRESENTATIVE ROKEBERG approved of the drafting change because he            
 felt that it made the language clearer.                                       
 CO-CHAIRMAN GREEN announced that the committee had a quorum and               
 entertained motion to adopt the committee substitute.                         
 CO-CHAIRMAN BILL WILLIAMS moved for the adoption of the proposed              
 committee substitute for HB 388(RES), Version "M."                            
 CO-CHAIRMAN GREEN asked if there was an objection.  Hearing none,             
 CSHB 388(RES), Version "M" was adopted.                                       
 Number 281                                                                    
 REPRESENTATIVE JOHN DAVIES offered the following amendment to page            
 6, line 27:                                                                   
      Following:  "may"                                                        
      Insert:  ", for state land north of the Umiat baseline."                 
 REPRESENTATIVE DAVIES explained that the amendment would make the             
 bill applicable to the North Slope.  The reason being he believes             
 the situation on the North Slope where the homogeneous                        
 distributions of land there are suitable to the areawide proposals            
 in HB 388, and the heterogeneous nature of the Cook Inlet Basin               
 which are not so suitable to the bill, thus the reason for offering           
 the amendment.                                                                
 Number 350                                                                    
 REPRESENTATIVE ROKEBERG indicated objection to the adoption of the            
 amendment, saying that the amendment does a very specific thing.              
 The bill before the committee, Version M, is non-specific to area,            
 it is also discretionary in a large degree.  The Oil and Gas and              
 Resources Committees spent a substantial time, during the interim,            
 having major discussions and hearings.  This is a topic that was              
 discussed in the Governor's Oil and Gas Policy Council and there              
 was concern expressed by the Administration about the Cook Inlet              
 area.  That is why major accommodations were made and revisions in            
 the original bill to remove specific geographic areas from the                
 statutory changes to give the commissioner the ability to                     
 incrementally implement this process as he sees fit.  As the we               
 have heard from the director of the Division of Oil and Gas, he is            
 in support of this.                                                           
 CO-CHAIRMAN GREEN addressed Ken Boyd for his position on the                  
 Number 490                                                                    
 KENNETH A. BOYD, Director, Division of Oil and Gas, Department of             
 Natural Resources, testified via teleconference from Anchorage.  He           
 stated he understands the amendment.  He said, "Once you build a              
 foundation finding, I think that's the key.  As long as you have a            
 complete finding, the annual offer of sales, no matter where they             
 are, is somewhat perfunctory.  The sale isn't the issue, it is the            
 finding and once you can do the finding, you can have the sale.               
 So, I don't think you absolutely need sale area specificity, but I            
 do know that the first sale that will take place under this new               
 system, if you like - it isn't really new - it's new and (indisc.),           
 will take place on the North Slope and it will take place between             
 the Colville and the (indisc.) as it is currently under schedule,             
 as the letter I wrote to the committee on the sixteenth of                    
 Number 568                                                                    
 MR. BOYD felt that it would be harder in Cook Inlet because the               
 title is less clear, there are more people living there and the               
 land ownership is somewhat uncertain.                                         
 MR. BOYD said he believes that the process, as described in the new           
 legislation, is universally applicable.  He said, "Only time will             
 tell, as to whether we can create a finding that will satisfy all             
 the people that will be subjected to that finding, but once you do            
 that - once you have that foundation finding and give people the              
 opportunity to comment on a yearly basis, and create a supplement             
 to the finding based on that new information, I do not believe that           
 you would need area specificity."                                             
 Number 621                                                                    
 CO-CHAIRMAN GREEN said that he would object to Representative                 
 Davies amendment.  He then asked for a roll call vote.                        
 Representatives Davies and Nicholia voted in favor of the                     
 amendment.  Representatives Austerman, Ogan, Williams and Green               
 voted against the amendment.  So, the amendment failed.                       
 Number 671                                                                    
 PAT FOLEY, Chairman, Lands Exploration and Operations Committee,              
 Alaska Oil and Gas Association, testified via teleconference from             
 Anchorage.  He stated that he had nothing to add to the testimony             
 except his support for committee substitute, Version M.                       
 Number 699                                                                    
 BRADLEY PENN, Marathon Oil Company, was next to testify via                   
 teleconference from Anchorage.  He testified that the committee               
 substitute, Version M, streamlines the existing process and helps             
 the Division of Oil and Gas prepare best interest findings on an              
 areawide basis.  Marathon Oil Company supports CSHB 388(RES),                 
 Version (M).                                                                  
 CO-CHAIRMAN GREEN asked if there was anyone else wishing to                   
 testify.  There being none, he closed the public hearing on HB 388.           
 Number 783                                                                    
 REPRESENTATIVE AUSTERMAN made a motion to pass CSHB 388(RES),                 
 Version M, out of committee with individual recommendations and a             
 zero fiscal note.                                                             
 CO-CHAIRMAN GREEN called for a brief at ease.                                 
 Number 829                                                                    
 CO-CHAIRMAN GREEN acknowledged the motion to move CSHB 388(RES),              
 Version M.                                                                    
 Number 840                                                                    
 REPRESENTATIVE AUSTERMAN then withdrew his motion.                            
 CO-CHAIRMAN GREEN announced the committee will probably be recessed           
 until later in the day at which time a vote will be taken.                    
 HB 401 - REVENUE BONDS: WATER & WASTE PROJECTS                              
 Number 866                                                                    
 C0-CHAIRMAN GREEN announced that the committee would hear HB 401,             
 the Administration's bill on revenue bonds for water and waste                
 water projects.                                                               
 Number 900                                                                    
 KEITH KELTON, Director, Division of Facility Construction and                 
 Operation, Department of Environmental Conservation (DEC), said he            
 would explain HB 401 and the Senate companion bill SB 207.  First,            
 he explained what the department is trying to do and where they               
 came from with this program.  Prior to 1987, the DEC administered             
 a construction grants program assisting communities in financially            
 constructing waste water treatment facilities.  He emphasized,                
 "grants."  In 1987, the Federal Clean Water Act was amended and               
 reauthorized to eliminate the grants provision.  In its place, they           
 put in a loan program.                                                        
 MR. KELTON stated, "We have been administering this loan program              
 which was capitalized with state and federal dollars for the last             
 seven years.  We've had, up to this time, enough money to meet the            
 demand for this program.  In the last two years, demand has started           
 to exceed the available resources for these loans.  So, we started            
 looking around to see what the other states are doing.  We found              
 that there is 20 other states, nationwide, which have put in a                
 program to leverage the amount of money that is available for loans           
 by selling revenue bonds and using the corpus of the account as               
 collateral.  So working with the Departments of Law and Revenue and           
 financial advisors, through bond counsel, we've developed a bill              
 that we think has the ability to provide an alternative funding               
 source for local governments.  As general funds diminish and grants           
 become less available, we will have another tool in the box which             
 would enable communities, as long as they are incorporated and have           
 a dedicated revenue base to repay the loans, they could come in to            
 us to get financial assistance for funding wastewater treatment               
 facilities, non-point source, pollution control problems.                     
 Number 1039                                                                   
 MR. KELTON left the table to explain departmental chart. "Looking             
 at this chart, the top half is what is currently in place.  The               
 Clean Water Fund was created by statute in 1989 I believe.  It                
 capitalizes federal grants.  For each dollar that comes in from the           
 federal government, the state puts in 20 percent, so it comes out             
 about 83 to 17 percent ratio.  It goes into this fund, the money is           
 loaned out to eligible municipal projects and repayment principal             
 and interest comes back.  These are 20 year loans and right now the           
 interest rate is slightly under 4 percent.  It fluctuates based on            
 the municipal bond index, so whatever the national economy does, it           
 changes slightly.  It has never been above 5 and it has been as low           
 as 3.5.  So, it's a very attractive interest rate.  It's better               
 than anything else, I am aware of, on the market.  The top half of            
 this is in place, has been in place, we have been administering               
 this program for six or seven years."                                         
 Number 1099                                                                   
 MR. KELTON said, "The money that is coming into this program, so              
 far, has been a total of $80 million.  Of that $80 million, $50               
 million has gone out to current projects.  Of that, a good share of           
 it has started to come back as repayments now, but there is still             
 is a $30 million unobligated balance, and that's what we propose to           
 use as a corpus for the revenue bonds - the collateral to issue               
 these bonds.  So this legislation sets up a bond redemption fund,             
 taking money from the clean water fund to pay for the issuance                
 costs of revenue bonds.  These bonds, through the State Bond                  
 Committee, which are the Commissioners of Revenue, Administration             
 and Commerce, and their financial trustees, when they issue the               
 bonds to investors, the bond proceeds come back up through the                
 clean water fund and the process is completed with going out for              
 projects, coming back as repayments.  The repayment stream then               
 comes back and pays off the investors."                                       
 Number 1192                                                                   
 MR. KELTON set up a new chart to explain how the money actually               
 balances over a period of time.  "This chart, I won't say                     
 hypothetical, but it represents a period of time, based on                    
 assumptions, that may not be quite verifiable as you go along.  To            
 try level it out, we took a nine year average.  Representing the              
 clean water fund in the denter, ideally, what you want to do is               
 have the cash coming in equal the cash going out on bond sales                
 versus loans."                                                                
 MR. KELTON said, "In the Senate, originally, and in the House State           
 Affairs, this bill was amended to limit the amount of revenue                 
 bonds, that we sold in any one year, to $15 million.  So, that                
 forms the basis for a couple of the assumptions on here.  So                  
 assuming that we have a point in time representing a nine-year                
 average, the loans that are out there, the repayment of principal             
 and interest represents $6.5 million coming back into the clean               
 water fund.  The $15 million annual revenue bond sales amount to              
 $14.7 by the time you take out the cost of the bond sales.  There             
 is an unknown amount that we are showing as zero right now.  The              
 Clean Water Act is up for reauthorization again currently and we do           
 expect that there will be a reauthorization which will, along with            
 the state match, continue to put some funding into here, but we're            
 showing that as zero for the moment."                                         
 Number 1273                                                                   
 MR. KELTON continued, "Also, there is some interest earned on that            
 $30 million corpus that's out there, that represents about $3                 
 million a year.  So, going out, we have the debt service to pay off           
 the bonds $3.8 million.  We have a loan disbursement which can be             
 $15.8 million a year of new loans.  And, as we sell the $15 million           
 each year, the figures work out that we have to set aside a corpus            
 allocation of $3.85 million.  So, that's withdrawn from the money             
 available, but it goes back in and earns interest.  And, we have              
 capitalized interests on the bonds of $750,000.  In a balancing               
 equation, using this set of assumptions, we are showing about $24             
 million a year going in and out, which would represent $16 million,           
 roughly, of available loans, per year, for eligible projects.  And            
 as I said, these are available to any incorporated community that             
 has a revenue base, revenue stream, generally for revenue bonds it            
 would be the user fees that would be derived from the utility                 
 operations to pay back the loan."                                             
 Number 1331                                                                   
 MR. KELTON said, "In your packet there is a summary of the loans              
 that are currently in place.  You will notice that it has                     
 benefitted communities from the size of Craig all the way to                  
 Anchorage.  In fact some of the smaller places are Homer, Kachemak,           
 Seward, Cordova, Craig, Nome is on the rural fringe of the                    
 applicants, but to be quite honest the majority of these funds have           
 been taken by Anchorage.  Of the $50 million, $30 million has gone            
 to Anchorage, to date.  It generally will be a more popular program           
 with the communities that have more of a revenue stream to repay,             
 but it certainly does provide an alternative funding source for all           
 communities.  By taking some of the pressure off the general fund,            
 through loans, it should be in a position to benefit all                      
 Number 1392                                                                   
 MR. KELTON responded to question from Representative Austerman that           
 the $30,000,000 just acts as collateral.  If you get a house loan,            
 or a personal loan, you use some of your property as collateral.              
 That is all this is doing, it is ensuring that we can get a higher            
 bond rating.                                                                  
 Number 1453                                                                   
 REPRESENTATIVE AUSTERMAN referred to the $50 million that is                  
 already out there and then said this authorizes up to another $15             
 million, each year, of new bonds which is a part of the revolving             
 loan program.  He asked how much money would be accumulated over a            
 ten year period and how much money would be accumulated into the              
 revolving loan program.                                                       
 MR. KELTON said, "There would be $150 million of new funds going              
 into it if you upped the maximum each year.  There is no                      
 requirement that we sell the maximum and there might not be the               
 demand each year. Also, I can't quite answer that question because            
 I don't know at what rate some communities may wish to pay it back.           
 There will be a return stream coming back for the loans maybe for             
 up to any time - up to 20 years.  We have had some instances where            
 they have been paid back within a three year period, already.  So             
 there is no guarantee what the revenue stream will be, but when we            
 sell the revenue bonds, that is what the bond counsel and the state           
 bond committee will look at, is what the stream is on an individual           
 basis each year to determine what the maximum that the market will            
 bear, up to $15 million.  It may be less than $15 million in some             
 years.  I don't anticipate that."                                             
 Number 1508                                                                   
 REPRESENTATIVE AUSTERMAN wanted further clarification as to how               
 much money is needed in this revolving loan fund.  He said he keeps           
 going back to the word "revolving" because this money comes back in           
 to be loaned out again.  He asked how far out and how much money do           
 they need to borrow so that there is enough money in this revolving           
 loan program to put it out there.                                             
 Number 1538                                                                   
 MR. KELTON referred to a chart and said, "This is a point in time             
 after nine years, the year 2005.  At that point in time, we would             
 be able to have, in essence, $24 million coming back into it which            
 is only going to allow us to loan out $15 or $16 million.  That is            
 the end of your ten year period in essence of $150 million, so                
 that's really going to be your cap right there.  We can't go over             
 $150 million total of revenue bonds at any one time.  This should             
 be close to representing the maximum amount of money that will be             
 available in this program unless there is a change in the                     
 Number 1609                                                                   
 MR. KELTON responding to further questions from Representative                
 Austerman confirmed that the interest rate being paid on the bonds            
 will probably be slightly higher than the interest rate that the              
 communities are paying to keep their loans viable.  The reason they           
 are able to do that is because we do have the $30 million in there            
 as well as the original $50 million that is already loaned out as             
 additional money that is drawing interest.                                    
 Number 1634                                                                   
 MR. KELTON said, "The faster this process can be put in place, the            
 more money we'll have available to use as collateral to leverage              
 additional funds.  At the current rate, we're making loans at $12             
 million a year.  So, the $30 million collateral, next year, will be           
 down to $17 or $18 range, and we would not have nearly as effective           
 a program if we had to wait for a year or two to get this                     
 legislation through."                                                         
 CO-CHAIRMAN GREEN, Representative Austerman and Mr. Kelton                    
 continued the discussion to clarify the arithmetic.                           
 Number 1727                                                                   
 MR. KELTON said, "The mathematics do work out, we have spent a lot            
 of time with financial advisors in New York to come up with this              
 and pattern it after the history of the other 20 states that are              
 doing this.  I don't think we're off too far.  I apologize because            
 I can't explain it any better than I am but..."                               
 Number 1780                                                                   
 MR. KELTON responded to questions from Co-Chairman Green that as              
 long as the program was sound, which the bond market would dictate,           
 we would still be able to sell the $15 million each year up to the            
 cap imposed by the statute without any difficulty.                            
 Number 1822                                                                   
 MR. KELTON responded to a question from Representative Davies that            
 they are interest free bonds and the department expects a AA bond             
 rating.  He said the state bears no liability.                                
 REPRESENTATIVE DAVIES wondered if the state is paying a percent or            
 two more than what the revolving loan fund is doing, then are we              
 making that up with the interest on the corpus.                               
 An unidentified departmental representative in the audience agreed            
 that was correct.                                                             
 Number 1892                                                                   
 CO-CHAIRMAN GREEN asked Mr. Kelton to address the proposed                    
 MR. KELTON deferred to the Department of Law.                                 
 Number 1911                                                                   
 MARIE SANSONE, Assistant Attorney General, Civil Division                     
 Department of Law, stated that the proposed amendments are                    
 primarily to clarify the language in the bill and to correct a few            
 errors that came up in the course of drafting the committee                   
 substitute.  She said the first amendment is the clarification in             
 the bond cap language.  She suggested that bond counsel might                 
 better explain the amendment.                                                 
 The following is Amendment 1 relating to clarification in the bond            
 cap language:                                                                 
 Page 2, lines 14-15:                                                         
 Following:  "revenue bonds"                                                  
 Insert:  "under AS 37.15.560 - 37.15.605"                                    
 Page 2, line 15:                                                             
      Following:  "total"                                                      
      Insert:  "unpaid principal"                                              
      Page 2, line 16:                                                         
      Following:  "bonds"                                                      
      Delete:  "outstanding at any one time"                                   
      Insert:  ", including refunding bonds, but excluding refunded            
      bonds, issues under the provisions of AS 37.15.560 -                     
      Page 2, lines 16-17:                                                     
      Following:  "$150,000"                                                   
      Delete:  "including principal and interest owed on the bonds"            
 Number 1953                                                                   
 LEE SHARP, Bond Counsel, Department of Environmental Conservation,            
 testified via teleconference from Anchorage.  He stated that they             
 are suggesting the amendments in order to clarify some of the                 
 language so that when it comes time to compute exactly what the               
 limit is, there won't ben any doubt about how you treat various               
 items.  The original language included interest in the computation            
 of the total - $150 million cap.  It wasn't clear whether that's              
 the interest that is due this year or the interest that is due over           
 the life of a bond.  It also raised a question on how you would               
 compute interest if you have a floating rate bond.  You wouldn't              
 know exactly what the interest is going to be.                                
 MR. SHARP said the suggested language looks solely at the principal           
 amount that is unpaid.  This is a very clear computation.  He said            
 they are also suggesting that the language be added to ensure that            
 there is no confusion about the limitation on the Bond Committee              
 because the Bond Committee does issue other bonds, other revenue              
 bonds.  Mr. Sharp said they are suggesting that language be added             
 to make sure that when we look at this cap we are looking only at             
 bonds that have been issued under this program.                               
 Number 2057                                                                   
 REPRESENTATIVE DAVIES moved Amendment 1.                                      
 CO-CHAIRMAN GREEN asked if there was an objection.  Hearing none,             
 it was so ordered.                                                            
 Number 2070                                                                   
 REPRESENTATIVE DAVIES moved Amendment 2.                                      
 The following is Amendment 2 relating to grammatical clarification            
 (limit scope of term `money and revenue'):                                    
      Page 4, lines 8-9:                                                       
      Following:  "pledge of"                                                  
      Insert:  "such"                                                          
 CO-CHAIRMAN GREEN asked if there was an objection to adopting                 
 Amendment 2.  Hearing none, Amendment 2 was adopted.                          
 Number 2083                                                                   
 REPRESENTATIVE DAVIES moved Amendment 3.                                      
 The following is Amendment 3 relating to a grammatical                        
 clarification (singular to plural):                                           
      Page 5, line 12:                                                         
      Following:  "default to"                                                 
      Insert:  "any"                                                           
 CO-CHAIRMAN GREEN asked if there was an objection.  Hearing none,             
 Amendment 3 was adopted.                                                      
 Number 2095                                                                   
 REPRESENTATIVE DAVIES moved Amendment 4.                                      
 The following is Amendment 4 which corrects a typographical                   
      Page 6, line 28                                                          
      Following:  "refunding"                                                  
      Insert:  "bonds"                                                         
 CO-CHAIRMAN GREEN asked if there was an objection to adopting                 
 Amendment 4.  Hearing none, Amendment 4 was adopted.                          
 Number 2104                                                                   
 REPRESENTATIVE DAVIES moved Amendment 5.                                      
 The following is Amendment 5 which allows municipalities and state            
 agencies to access the Alaska Clean Water Fund for bond insurance             
 and other collateral security for local obligations.  "Other                  
 qualified entities" should also have access to the Fund for this              
      Page 9, line 26:                                                         
      Following:  "municipal"                                                  
      Delete:  "or"                                                            
      Insert:  ","                                                             
      Following:  "state agency"                                               
      Insert:  ", or other qualified entity"                                   
 CO- CHAIRMAN GREEN asked if there was an objection to the adoption            
 of Amendment 5.  Hearing no objection, Amendment 5 was adopted.               
 CO-CHAIRMAN GREEN announced he would take teleconference testimony            
 on CSHB 401(RES).                                                             
 Number 2140                                                                   
 BERDA WILLSON, Assistant Manager, Nome Joint Utilities, testified             
 via teleconference from Nome in support of HB 401 and related her             
 30 year residency in Nome and the many years with rudimentary                 
 sanitation and water facilities.  She said, "I want to make sure              
 that clean water loans continue.  Communities need access to low              
 interest loans and (indisc.) grants are becoming more scarce and              
 communities must have an alternative source of funds provided the             
 (indisc.) public (indisc.) for solid waste facilities.  Nome Joint            
 Utilities has taken advantage of two clean water loans, one for a             
 new sewage treatment and a lagoon and another for extending the               
 sewage and water rights to a new subdivision.  (Indisc.) gave about           
 60 plus (indisc.) access to pipe water and sewer.  The City of Nome           
 (indisc,) has also participated in a clean water loan.  I would               
 like to speak in favor and ask that the clean water fund - loan               
 program continue.                                                             
 CO-CHAIRMAN GREEN asked if there were favorable results on the                
 reduction of hepatitis with these kinds of loans and clean up of              
 sewage facilities.                                                            
 MS. WILLSON responded, "Absolutely!"  She noted there is a                    
 reduction in other diseases that are caused by poor sanitation.               
 Number 2260                                                                   
 DIANA BENNETT, Finance Manager, Anchorage Water and Wastewater                
 Utilities, Municipality of Anchorage, testified via teleconference            
 in support HB 401 and SB 207.  She said these bills authorize the             
 state of Alaska to issue revenue bonds for the purposes of                    
 wastewater and other water quality assistance projects.  Ms.                  
 Bennett said their six year capital improvement budget forecasts a            
 program of capital construction ranging from $5 million to $10                
 million annually.  The current rate payers cannot and should not              
 support the entire long-term capital program.  Ms. Bennett said               
 their plan is to finance $4 million to $6 million each year with              
 loans from the Alaska Clean Water Loan Program.  She said she hopes           
 the money will be available to do so.  Without this bill and the              
 opportunity to leverage capitalization grants, they are concerned             
 that their utility and other incorporated municipalities                      
 throughout the state, will be forced to turn to higher cost                   
 financing sources with a subsequent negative impact toward rate               
 payers.   These revenue bonds provide a practical, prudent and                
 sound financial option.  Ms. Bennett continued to give testimony in           
 support of the legislation and urged it be passed out of committee            
 and on to the floor.                                                          
 CO-CHAIRMAN GREEN said there was a question earlier about the                 
 adequacy of the amount if there was a run on the number of the                
 requests made that there might be a period of time when there                 
 wouldn't be a sufficient number of dollars available.  He asked Mr.           
 Sharp if he had anything to add to that discussion.                           
 Number 2444                                                                   
 MR. SHARP responded to Co-Chairman Green's question about there               
 possibly being a period of time when there was not a sufficient               
 number of dollars available.  That was one caveat, you cannot go              
 out and issue $15 million.  You have to be assured you are going to           
 be able to make those kinds of loans.  In other words, you cannot             
 just go out and borrow the money and put it in the bank.  [END OF             
 TAPE 96-38, SIDE B                                                            
 Number 000                                                                    
 CO-CHAIRMAN GREEN asked, "Would there still be availability for               
 borrowing money?"                                                             
 Number 010                                                                    
 MR. SHARP replied, "As long as you have money coming in from the              
 municipalities repaying their loans, you would have that that you             
 could loan back out again.  If you do not have the sufficient                 
 amount of that money coming back in to meet the loan demand, taking           
 into account the $15 million of new funds (indisc.--paper                     
 shuffling) then you would simply tell the municipalities you're               
 gonna come back next year or they're on the list.  One solution to            
 that would be, of course, to remove the cap or to raise it to give            
 the state more flexibility."                                                  
 Number 032                                                                    
 CO-CHAIRMAN GREEN clarified that Mr. Sharp meant that it is not               
 likely but it would be mathematically possible.  The probability is           
 that there will be funding available since it won't always be a $15           
 million hit and it will not be a full 20 year payback.  He said the           
 probability is there will be funding available.                               
 MR. SHARP deferred to Mr. Kelton.                                             
 Number 057                                                                    
 CO-CHAIRMAN GREEN wondered how the department prioritizes multiple            
 requests from communities that exceeded the $15 million amount.               
 Number 067                                                                    
 MR. KELTON stated, "There is a process for that.  Since this is a             
 federal program, it comes with its own rules and regulations that             
 we have to adhere to.  One of those is the requirement that we                
 develop an annual intended use plan.  That intended use plan does             
 rank and prioritize projects base of environmental concerns, health           
 concerns and a variety of other factors which generates a list, and           
 it would be out intention to try to handle as many projects as                
 possible in a year.  We would never want to give all $15 million to           
 one or two projects.  We'd try to use our list to benefit as many             
 different places as possible."                                                
 Number 093                                                                    
 REPRESENTATIVE AUSTERMAN asked if the department anticipates                  
 receiving additional federal dollars into the program.                        
 MR. KELTON anticipated it, but could not guarantee it.  The Clean             
 Water Act is up for reauthorization this year.  It has passed the             
 House, but he doesn't think it is going to pass the Senate.  It may           
 be a year or two before they know that for sure.  There is                    
 appropriation language even though there is no authorization out at           
 this point in time which would continue authorization at about $1.2           
 billion, nationwide.  He said our share of that would be somewhere            
 around $6 million, if it happens.  There is also amendments in the            
 House side of Congress which would say, "unless there is                      
 authorization, there will be no appropriation until that                      
 authorization is achieved."  He said he thinks it going to happen,            
 but it probably is not going to happen for federal fiscal year 97.            
 He noted that is not factored into the equation on the chart.                 
 Number 139                                                                    
 MR. KELTON informed the committee, "The federal law does allow the            
 state match to be paid for by the proceeds of the revenue bond                
 sales.  Currently, we are providing the state match from GF                   
 (general funds) at 20 cents on the federal dollar.  That is a                 
 expense the state will be able to pass off onto the sale of the               
 revenue bonds as well."                                                       
 Number 156                                                                    
 REPRESENTATIVE AUSTERMAN expressed his support of the concept of              
 the bill and clarified that he is just trying to understand it.               
 Number 165                                                                    
 REPRESENTATIVE DAVIES wanted definition of the $3 million interest            
 earned, and asked if that is anticipated on the $30 million or is             
 it earning interest on other funds that are flowing in and out.               
 MR. KELTON responded that the interest earned is primarily on the             
 $30 million corpus.  There are a few other small interest bearing             
 accounts.  The bond sale process generates some interest, but it is           
 primarily on the corpus.                                                      
 REPRESENTATIVE DAVIES questioned whether that is a 10 percent rate            
 of return.                                                                    
 Number 194                                                                    
 MIKE BURNS, Section Chief, Municipal Grants Section, Division of              
 Facility Construction and Operation, Department of Environmental              
 Conservation, elucidated that this is a nine year average.  He said           
 the $3 million is averaged over 9 years.  It would be much smaller            
 than that in the first years and in the year 2005, it would be much           
 larger.  The $30 million will grow slightly over the years.                   
 REPRESENTATIVE DAVIES conjectured that another way to look at this            
 is, "a snap shot in time, about five years out."  He said assuming            
 that the $30 million is going to grow, what is the source of the              
 MR. BURNS replied that this will be invested by the Department of             
 Revenue much like the permanent fund earnings are.  These numbers             
 were generated, actually, at about 6.7 percent rate of return which           
 was the recommendation of the financial advisors.                             
 Number 258                                                                    
 REPRESENTATIVE DAVIES asked, "Where does the money come from to               
 increase the size of the $30 million collateral?"                             
 MR. BURNS answered, "The corpus allocation.  As repayments come in,           
 the state bond committee recommends a certain size of the corpus              
 that must be attained to secure the fund to keep market ratings up.           
 So, that much is set aside to make sure that we have a conservative           
 secure program which is exactly what we want to achieve."                     
 MR. BURNS wanted to address earlier concern of Representative                 
 Austerman and said, "We were mixing up a little bit of apples and             
 oranges here, you said loan disbursement is approximately $15.8               
 million, that does not really compute with the $200 million in                
 portfolio, out there.  We would only have the $200 million, in                
 portfolio, out there, in repayment status after the year 2005.  It            
 would be probably closer to the year 2009 when you had all the                
 money lent out and in repayment status.  So, at that point, of                
 course we'd have -- we would be able to do much more than $15.8               
 million, but this $15.8 is just an average of the year 96 through             
 ought 5, so we don't want to mix the things up there.  Certainly in           
 the year 97 and 98, we'd have much less ability than $15.8."                  
 CO-CHAIRMAN GREEN interpolated, "That cap, it floats."                        
 MR. BURNS agreed, "We expect the fund to grow.  He is right, it is            
 a revolving loan program.  We expect to achieve an equilibrium and,           
 hopefully, that equilibrium would be somewhat close to demand.                
 Right now, it is not anywhere close to communities demand as you              
 can tell."                                                                    
 Number 334                                                                    
 REPRESENTATIVE DAVIES rephrased for clarity, "It seems to me, in              
 really simplistic and basic terms, what we've got - right now we've           
 got about $30 million in the bank, and if we loan that out at $15             
 million a year, we'd be done in two years.  So, we would have a               
 total of $30 million revolving out there."                                    
 MR. BURNS agreed.                                                             
 REPRESENTATIVE DAVIES continued, "But, what we are proposing to do            
 instead is to loan out -- to issue $15 million worth of bonds, per            
 year, for about ten years and to use the interest income on the $30           
 million that we are keeping in the bank, both as collateral, but as           
 a generator of income, to pay the debt service on these bonds.  So,           
 by doing this we can go out somewhere around ten years, I don't               
 know where we actually achieve equilibrium, but on the order of ten           
 years.  And so instead of having $30 million out there revolving,             
 by leveraging it this way, we have $150 million out there                     
 revolving.  It's supported by the interest coming off the $30                 
 million and the (indisc.).  Is that right?"                                   
 Number 383                                                                    
 MR. BURNS said that is correct.  He said the primary payback or               
 income from the program will be loan repayments from the                      
 communities and the people who use the projects.  He said the                 
 differential that has to be made up - this is a low interest                  
 program and that is why it is attractive - the differential between           
 that and market value of the bonds would be made up by the interest           
 that they would have invested.  It is actually quite simple when              
 you think of it that way.                                                     
 Number 440                                                                    
 REPRESENTATIVE AUSTERMAN made a motion to move CSHB 401(RES),                 
 Version C, as amended, out of the committee with individual                   
 recommendations and the attached zero fiscal notes.  Hearing no               
 objection, it was so ordered.                                                 
 HB 388 - OIL & GAS LEASING/ BEST INT. FINDINGS                              
 Number 454                                                                    
 REPRESENTATIVE RAMONA BARNES moved and asked unanimous consent to             
 move CSHB 388(RES) from committee with individual recommendations.            
 Number 474                                                                    
 REPRESENTATIVE DAVIES objected.                                               
 CO-CHAIRMAN GREEN asked for a roll call vote.  Representatives                
 Austerman, Barnes, Kott, Long, Nicholia, Williams and Green voted             
 in favor of moving the bill.  Representative Davies voted against             
 moving the bill.  So, CSHB 388(RES) moved out of the House                    
 Resources Committee.                                                          
 There being no further business to come before the House Resources            
 Committee, Co-Chairman Green adjourned the meeting at 9:20 a.m.               

Document Name Date/Time Subjects