Legislature(1995 - 1996)
04/26/1996 08:10 AM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE April 26, 1996 8:10 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 MEMBERS ABSENT Representative Don Long Representative Irene Nicholia COMMITTEE CALENDAR CS FOR SENATE BILL NO. 307(FIN) "An Act requiring the Department of Natural Resources to exchange with the federal government state land within, and adjoining, Dude Creek Critical Habitat Area for federal land adjacent to Fall Creek; and providing for an effective date." - PASSED CSSB 307(FIN) OUT OF COMMITTEE HOUSE BILL NO. 548 "An Act authorizing, approving, and ratifying the amendment of Northstar Unit oil and gas leases between the State of Alaska and BP Exploration (Alaska) Inc.; and providing for an effective date." - PASSED CSHB 548(RES) OUT OF COMMITTEE CS FOR SENATE BILL NO. 112(RES) "An Act establishing a discovery royalty credit for the lessees of state land drilling exploratory wells and making the first discovery of oil or gas in an oil or gas pool in the Cook Inlet sedimentary basin." - HEARD AND HELD CS FOR SENATE BILL NO. 262(RES)(ct rule fld) "An Act relating to management of game populations for maximum sustained yield for human harvest and providing for the replacement of areas closed to consumptive uses of game; relating to management of fish and game areas." - HEARD AND HELD CS FOR SENATE BILL NO. 247(RLS) am(efd fld)(ct rule fld) "An Act restricting the use of certain funds deposited in the fish and game fund; and relating to the powers and duties of the commissioner of fish and game." - SCHEDULED BUT NOT HEARD SENATE BILL NO. 257 am "An Act relating to the taking of game or fish for public safety purposes." - SCHEDULED BUT NOT HEARD PREVIOUS ACTION BILL: SB 307 SHORT TITLE: DUDE CREEK HABITAT AREA LAND EXCHANGE SPONSOR(S): FINANCE JRN-DATE JRN-PG ACTION 03/12/96 2713 (S) READ THE FIRST TIME - REFERRAL(S) 03/12/96 2713 (S) RESOURCES 03/29/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205 03/29/96 (S) MINUTE(RES) 03/29/96 2972 (S) FIN REFERRAL ADDED 04/01/96 2991 (S) RES RPT 5DP 1NR 04/01/96 2992 (S) FISCAL NOTE (DNR) 04/10/96 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/10/96 (S) MINUTE(FIN) 04/10/96 3110 (S) FIN RPT CS 6DP SAME TITLE 04/11/96 (S) RLS AT 2:35 PM FAHRENKAMP RM 203 04/11/96 (S) MINUTE(RLS) 04/11/96 3149 (S) FISCAL NOTE TO CS (DNR) 04/12/96 3193 (S) RULES TO CALENDAR 4/12/96 04/12/96 3196 (S) READ THE SECOND TIME 04/12/96 3196 (S) FIN CS ADOPTED UNAN CONSENT 04/12/96 3196 (S) ADVANCED TO THIRD READING UNAN CONSENT 04/12/96 3196 (S) READ THE THIRD TIME CSSB 307(FIN) 04/12/96 3197 (S) PASSED Y20 N- 04/12/96 3197 (S) EFFECTIVE DATES SAME AS PASSAGE 04/12/96 3220 (S) TRANSMITTED TO (H) 04/15/96 3733 (H) READ THE FIRST TIME - REFERRAL(S) 04/15/96 3734 (H) RESOURCES, FINANCE 04/26/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 548 SHORT TITLE: NORTH STAR OIL & GAS LEASE AMENDMENT SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR JRN-DATE JRN-PG ACTION 03/28/96 3434 (H) READ THE FIRST TIME - REFERRAL(S) 03/28/96 3434 (H) RESOURCES, FINANCE 03/28/96 3434 (H) FISCAL NOTE (DNR) 03/28/96 3435 (H) GOVERNOR'S TRANSMITTAL LETTER 03/28/96 3436 (H) ATTACHMENT 04/03/96 (H) RES AT 8:00 AM CAPITOL 124 04/03/96 (H) MINUTE(RES) 04/10/96 (H) RES AT 8:00 AM CAPITOL 124 04/10/96 (H) MINUTE(RES) 04/12/96 (H) RES AT 8:00 AM CAPITOL 124 04/15/96 (H) RES AT 5:00 PM CAPITOL 124 04/15/96 (H) MINUTE(RES) 04/23/96 (H) RES AT 3:00 PM CAPITOL 124 04/24/96 4019 (H) WTR REFERRAL ADDED BILL: SB 262 SHORT TITLE: MANAGEMENT OF FISH/GAME POPULATION & AREA SPONSOR(S): SENATOR(S) MILLER, Sharp, Pearce, Halford, Green, Frank, Taylor JRN-DATE JRN-PG ACTION 02/02/96 2286 (S) READ THE FIRST TIME - REFERRAL(S) 02/02/96 2286 (S) RES, JUD 02/05/96 2309 (S) COSPONSOR(S): TAYLOR 02/12/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205 02/12/96 (S) MINUTE(RES) 03/08/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205 03/08/96 (S) MINUTE(RES) 03/11/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205 03/11/96 (S) MINUTE(RES) 03/12/96 2709 (S) RES RPT CS 5DP 1NR SAME TITLE 03/12/96 2709 (S) FISCAL NOTE TO SB & CS (F&G) 03/18/96 2785 (S) FIN REFERRAL ADDED 03/26/96 2910 (S) JUD REFERRAL WAIVED Y12 N8 04/03/96 (S) FIN AT 9:00 AM SENATE FINANCE 532 04/03/96 (S) MINUTE(FIN) 04/04/96 3065 (S) FIN RPT 2DP 2NR (RES)CS 04/04/96 3065 (S) PREVIOUS FN (F&G) 04/09/96 (S) RLS AT 12:20 PM FAHRENKAMP RM 203 04/09/96 (S) MINUTE(RLS) 04/10/96 3112 (S) RULES TO CAL & 1 NR 4/10/96 04/10/96 3116 (S) READ THE SECOND TIME 04/10/96 3116 (S) RES CS ADOPTED UNAN CONSENT 04/10/96 3116 (S) ADVANCE TO THIRD READING FLD Y12 N8 04/10/96 3116 (S) THIRD READING 4/11 CALENDAR 04/11/96 3168 (S) READ THE THIRD TIME CSSB 262(RES) 04/11/96 3168 (S) PASSED Y12 N8 04/11/96 3169 (S) COURT RULE CHANGES FAILED Y13 N7 04/11/96 3176 (S) TRANSMITTED TO (H) 04/12/96 3690 (H) READ THE FIRST TIME - REFERRAL(S) 04/12/96 3690 (H) RESOURCES, JUDICIARY 04/26/96 (H) RES AT 8:00 AM CAPITOL 124 WITNESS REGISTER REPRESENTATIVE JERRY MACKIE Alaska State Legislature Capitol Building, Room 404 Juneau, AK 99801 Telephone: (907) 465-4925 POSITION STATEMENT: Testified on SB 307. KEVIN R. BANKS, Petroleum Economist Division of Oil & Gas Department of Natural Resources 3601 C Street, Suite 1380 Anchorage, AK 99503-5948 Telephone: (907) 269-8799 POSITION STATEMENT: Testified on HB 548. KENNETH BOYD, Director Division of Oil & Gas Department of Natural Resources 3601 C Street, Suite 1380 Anchorage, AK 99503-5948 Telephone: (907) 269-5948 POSITION STATEMENT: Testified on HB 548. ERIC LUTTRELL, Vice President Exploration BP Exploration (Alaska) Inc. P. O. Box 196612 Anchorage, AK 99519-6612 Telephone: (907) 564-4892 POSITION STATEMENT: Available for questions HB 548. ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman Alaska State Legislature Capitol Building, Room 115 Juneau, AK 99801 Telephone: (907) 465-2095 POSITION STATEMENT: Testified on behalf of sponsor SB 112. MARY GORE, Legislative Assistant to Senator Mike Miller Alaska State Legislature Capitol Building, Room 125 Juneau, AK 99801 Telephone: (907) 3770 POSITION STATEMENT: Testified on behalf of sponsor SB 262. JULIE PENN, Volunteer Alaska Environmental Lobby 419 6th Street Juneau, AK 99801 Telephone: (907) 463-3366 POSITION STATEMENT: Testified against SB 262. WAYNE REGELIN, Director Division of Wildlife Conservation Department of Fish and Game P. O. Box 25526 Juneau, AK 99802-5526 Telephone: (907) 465-4190 POSITION STATEMENT: Testified against SB 262. ACTION NARRATIVE TAPE 96-69, SIDE A Number 000 CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting to order at 8:10 a.m. Members present at the call to order were Representatives Green, Williams, Ogan, Austerman, Barnes, Davies and Kott. Representatives Long and Nicholia were excused. SB 307 - DUDE CREEK HABITAT AREA LAND EXCHANGE REPRESENTATIVE JERRY MACKIE introduced SB 307 saying that the Fall Creek hydropower project is located in his district about 20 miles west of Juneau in the community of Gustavus, Alaska. REPRESENTATIVE MACKIE said SB 307 will facilitate the development of the Fall Creek hydropower project by authorizing the state to engage in a land exchange with the federal government, contingent on Congress passing a land exchange authorization. SB 307 will play a vital role in the future economic health of the entire state of Alaska. REPRESENTATIVE MACKIE continued, "The Power Cost Equalization program has been cut $3,000,000 this fiscal year and we must continue to develop alternatives that will provide the state with efficient cost savings power alternatives. REPRESENTATIVE MACKIE stated, "It is vital that we work together to develop and support alternative power resources throughout the urban and rural areas of the state. Alternative energy resource development must be a priority for the state of Alaska and proposals such as SB 307 will minimize the impact of future state and federal budget restrictions. REPRESENTATIVE MACKIE proceeded, "This hydropower plant would be constructed and operated solely from private capital and supply power to the National Park Service, state of Alaska, and the community of Gustavus." REPRESENTATIVE MACKIE stated that SB 307 will potentially save up to $118,750 per year in decreased power cost equalization costs, and it would reduce the environmental impact of diesel generation and bulk fuel storage. REPRESENTATIVE MACKIE related that SB 307 includes endorsements from Gustavus Community Association, the Alaska Department of Fish and Game and the Department of Community & Regional Affairs. The Department of Natural Resources fiscal note with the analyses which accompanies SB 307 reflects a one time expenditure of $8,000. This is for one position for a two month period at a cost of $7,000 for personnel services, $800.00 for travel and $200.00 for supplies. This applies only if, and when, the federal legislation passes. Number 209 REPRESENTATIVE MACKIE continued, "This bill passed the Senate unanimously 20-0. The timely passage of SB 307 would provide a strong message to Congress in regards to HR 2561, introduced by Representative Don Young, which provides federal authority of this land exchange. This bill is strongly supported by the Governor and this Administration, by the environmental community and by all the people involved who work directly with the park service. To my knowledge there is no opposition whatsoever either on the federal or the state side with the exception of the National Sierra Club and one other wildlife organization whose policies include absolutely no land coming out of wilderness, period." REPRESENTATIVE MACKIE explained that a portion of Glacier Bay National Park will be transferred to the state and some critical habitat area at Dude Creek, adjacent to Glacier Bay National Park, will be transferred to the park in exchange. The state would own the property and this privately financed hydropower project can then travel through the park. Number 359 REPRESENTATIVE JOHN DAVIES moved that CSSB 307(FIN) be passed out of the House Resources Committee with individual recommendations and attached fiscal notes. Hearing no objection, CSSB 307(FIN) moved from the House Resources Committee. HB 548 - NORTHSTAR OIL & GAS LEASE PAYMENT CO-CHAIRMAN GREEN announced the committee would hear HB 548 and he asked Kevin Banks to come forward. Number 413 KEVIN R. BANKS, Petroleum Economist, Division of Oil and Gas, Department of Natural Resources stated that he would address previously requested sensitivities of DNR's Illustrative Northstar Model based on assumptions of higher production rates and high oil prices and a 25 percent savings in capital expenditures. Number 448 MR. BANKS said, "Table I is the base case. It is the numbers that we have been talking about and the relevant differences are that in the base case, we believe the proposal will produce $37 million in 1996 dollars in supplemental royalties versus in the case where the leases are not amended, development would be delayed until 2002. It is our intention, as a result, that the net profit shares would be valued at about $41,000,000." Number 492 MR. BANKS continued, "As you can see from Table II, changing some of the assumptions as you requested, all I did was increase the number of barrels without changing the peak production rate. So, it added about two years, or so, to the plateau of peak production. As you can see, there is a significant increase in net profit shares under that kind of scenario, and an increase in supplemental royalty associated with the increased volumes." Number 534 MR. BANKS referred to Tables III and IV illustrating similar kinds of results. MR. BANKS said, "To provide some kind of balance, I believe that it is only fair to look at the down side, as well. If production is not what we expect, the net profit share goes to zero. If the oil prices are not as high as we would hope, both the net profit share and the supplemental royalty fall to zero. Likewise, if capital expenditures increase by 25 percent, the net profit share basically evaporates." Number 584 MR. BANKS referred to graph provided by BP Exploration and stated that he believed that the cut off for net profit shares occurs if the capital expenditures are just 10 percent, or so, more than what they are estimating. MR. BANKS summarized, "There is a bigger impact on net profit share than on the supplemental royalty in the up side." Number 647 MR. BANKS recalled Representative Davies questions from the prior meeting and said, "I was focusing on late life capital investments but what he was really talking about was what happens at the end of field life without further investment. I believe, as an economist, that as long as there is some positive cash flow in the field, the field will go on producing. I realize that BP is probably looking at what the asset generates for the company, what contribution this asset, that they show on their balance sheet, contributes to the income of the company. They have to make a decision, I believe, that ... do we keep this asset or do we sell it? While, I believe that production would continue as long as there is a contribution to stockholder equity, in any form, they may come to the conclusion that it is an underperformer. They would off load the prospect to someone who could work with smaller margins." Number 727 MR. BANKS proceeded, "As I have indicated in my letter, we see this kind of thing happening in the Gulf of Mexico, as that basin has matured. On the other hand, and, I do add this caveat, the abandonment cost can go both ways. If a company, or a producer, recognizes that there is a fairly significant abandonment cost that is looming in their future. If they can postpone the abandonment cost, then the net present value of that cost has to be measured against what kind of income stream they can ... or the losses that they are going to have to incur, in the meantime. There could be some incentive to produce even beyond a positive cash flow after the cash flows fall to negative." Number 779 MR. BANKS further stated, "The state, however, has some say about how leases will be dismantled and assigned at the end of field life. I think, it would be in our interest to make sure that whoever acquires it, if this hypothetical occurs, has the means to dismantle and restore the leases to their original condition. That works the opposite way." Number 809 CO-CHAIRMAN GREEN thanked Mr. Brooks for his presentation and his immediate response to committee questions. Number 850 KEN BOYD, Director, Division of Oil and Gas, Department of Natural Resources, came to the table. CO-CHAIRMAN GREEN interrupted to confirm that Eric Luttrell was on the teleconference network from Anchorage. Number 863 ERIC LUTTRELL, Vice President Exploration, BP Exploration (Alaska) Inc., confirmed his presence assuring the chairman that he would not hear any groans. Number 879 CO-CHAIRMAN GREEN addressed Mr. Boyd reiterating Representative Davies question, .. "about what would happen on the abandonment and the clean up portion, and I really do appreciate Eric's indicating a likelihood of what might happen. Do you have any formal requirements that would pass to a subsequent owner?" Number 907 MR. BOYD said, "I do not believe so. I believe that what we have is the commissioner, or the director, has broad authority as to what will happen at the end of lease life and that policy has not changed to anything specific, yet. One of the things is that in trying to make decisions today, about abandonment 15 years from now, begs the question of what actually do we want to do. You think about Cook Inlet, this may be a frivolous example, take the platforms in Cook Inlet, could you make them into casinos or prisons? Do you really decide today to cut them to pieces and drag them out of here at some extreme cost? Is there some use for the facilities on the North Slope other than what they are used for now? So, the short answer to your question is, there is no specific policy but, again, there is a broad authority to do something at the end of its life." Number 957 CO-CHAIRMAN GREEN said, "For example, now we have drifted back on shore ... with all the road systems, and so on ... if there could be a beneficial use indicated, they would not necessarily require that all that gravel be put back in pits ... there may be benefits for the island at Northstar ... while the wells would be abandoned they may not need to remove the gravel?" Number 987 MR. BOYD stated, "That is correct, you have seen some of that already. I am no expert on this, but I know that there has been some gravel things that have been turned into fish habitat, for example. There are some beneficial uses, I think, even for caribou for insect relief. I, again, am not an expert on this, I just sort of know this anecdotally. Your case is the same." Number 1009 CO-CHAIRMAN GREEN recapitulated, "We have had, what I consider a very reasonable and well presented economic evaluation. Certainly, at least, as a summary, from my point of view, if there is a significant increase in the amount of oil, or the rate at which oil might be produced, or for the length of time that we might be able to produce the maximum, it would behoove the state, perhaps, to stay with the program as we have it now with the net profits rather than a supplemental royalty." CO-CHAIRMAN GREEN continued overview, "On the other hand, I think, the economic analysis has indicated that it could go the other way and the state would tend to lose under a situation like that. So, I think that then, that brings us to the point where we should have been all along, and it is not an easy decision, but I think it should be then to the purview of the commissioner of the Department of Natural Resources to ... whose staff is expert in this realm to determine how we throw the dice. Do we want to go for the big one? Do we want to take the safer, middle of the road, kind of ... hedge our bet or are we fearful that we may end up with a real poor situation and lose both ways?" Number 1085 CO-CHAIRMAN GREEN summarized, "So, it would be my recommendation from this committee then that we would accept the proposal as has been agreed to between the Department of Natural Resources and the operator. My concern now shifts to the fact that there has been statements, there have been verbal commitments that the operator would exercise, to the utmost, their desire to try and hire locally. I do not want to get into the wrong nomenclature, so that this could somehow be construed as going against the federal court. But, whether you call it Alaska hire, or people who live in this state would be hired as much as possible - that the construction of modules would be done in state. I think, that while the royalty aspect, the income stream, certainly is of critical nature to the state, I think the potential for being a staging area for the developing nations, Russia and the Pacific Rim, I think really bodes well. We will end up with a trained work force, technically capable and skillfully trained. I think that is equally important to this legislature." Number 1174 CO-CHAIRMAN GREEN said, "Having said all that, there is before you an amended version of this bill, version G. In essence, what this version does, it stays with the program that has been agreed to between the applicant and the department. However, it has expanded that contract or that bill that was originally introduced. HB 548 was fairly plain ... that was introduced on the 28th of March. This bill follows that format but adds in ... and I will review the portions that have been changed for your edification." Number 1224 CO-CHAIRMAN GREEN, "On page 2, line 14 through page 3, line 18. That has been instituted at the suggestion of some of the leadership of the House. Then, again, on page 3, lines 30 and 31 through page 4, line 23. In essence, what that does, it actually requires the applicant to make a good faith effort and it says that they will hire at least 85 percent (page 4, line 6) and they will construct all the necessary paraphernalia that would go with the development of Northstar within the state of Alaska. That, in essence, is what is required with no change to agreement itself." Number 1297 CO-CHAIRMAN WILLIAM K. "BILL" WILLIAMS moved to adopt CS HB 548, version `G,' as the working document. There were no objections. Number 1320 CO-CHAIRMAN WILLIAMS noted that the first part of Co-Chairman Green's amendments were in the findings area and said he had no question about that. He did have a question on page 4, "How will these areas be legally enforceable?" Number 1344 CO-CHAIRMAN GREEN commented that that was a very good question. "We have talked with the legal drafter and there is a `severability' that if there is challenge to this, as there may be, if there is challenge and it fails, only that portion of the challenge would change and the rest of the document would stay intact. So, that if, for example, 85 percent is held by federal court to be unconstitutional, for some reason, then the 85 percent would drop but there would still be the desire to hire as many locals as possible. If that wording were held unconstitutional, then it is just going to back off as much as would be held unconstitutional. There is, perhaps, even a chance that to require the applicant to construct their modules within the state. Maybe a restraint of trade that would not pass muster. But, I think, that too, would only be a severable portion of it and the rest of the contract would hold." Number 1408 CO-CHAIRMAN GREEN continued, "In essence, what this says is, `Go do your best,' and if there are individual challenges and lose, ...and that is not to say they would, just because of challenge, lose - at least, they would be severable and not the whole contract then (indisc.) would not fall." Number 1425 REPRESENTATIVE PETE KOTT concurred with the Chairman's comments. "In my opinion, I do not think that the section dealing with the 85 percent will hold in the court and make Section 3 a moot issue because there will be no reporting provision. If, in fact, I were wrong, and the 85 percent is held up which would then trigger the reporting provision. What would the commissioner of the Department of Labor do if, in fact, the report showed a 75 percent higher rate, instate? What is the ramifications of not meeting the threshold of 85 percent?" Number 1461 CO-CHAIRMAN GREEN said, "Well, that would be a condition that, assuming that that 85 percent passed muster, then they would be required to increase the number of local hire until it met 85 percent of their work force, for that project." Number 1478 REPRESENTATIVE KOTT said, "My question is, what would happen if they, ultimately, did not?" Number 1484 CO-CHAIRMAN GREEN replied, "I would think that would be a breach and they would be held accountable to either modify their work force or increase it to accomplish that. That is one of the reasons for the reporting requirement. So, that they can't get themselves into a position like that. As they develop their work force which would be a ramp up, that they would stay with Alaskans except for those few cases where there is no trained or trainable work force timely enough to accomplish what needs to be done." Number 1505 REPRESENTATIVE KOTT stated that he has no reason to believe that the 85 percent threshold will not be met. "I think we have enough qualified people in the state. I was just curious as to what the potential ramification would be if, in fact, for whatever reason, the 85 percent was not reached. The project, I would not ... they would just be stopped right in the middle. I am sure there would be some good faith effort to increase it, if possible. I am sure there would be some consideration, by the department, on the percentage." Number 1530 CO-CHAIRMAN GREEN responded, "I think you bring up a good point because there could be a `saw tooth effect' that during the period of adjustment to get it to an operational ... or even during construction, that might go above 85 percent, and drop below it. I think that is where we bring the Department of Labor involved to go along with that, `Whoops, applicant you are down to around 65 percent, you had better do something,' because it does provide for training, if necessary." Number 1551 REPRESENTATIVE DAVIES applauded the chairman's efforts to make the collateral benefit more tangible, but, "I am concerned that because of the kind of discussions that we have had, I guess I concur with the Representative from Eagle River that the constitutionality of this particular provision is problematic. My understanding is that these sorts of things can, sometimes, pass muster more easily if they are couched in the terms of incentives. I wondered if you have considered structuring something so that, depending upon the level of participation in Alaska hire, the supplemental royalty might change to provide an incentive?" Number 1603 CO-CHAIRMAN GREEN stated that he had not considered that. "I think that would have been a very good thing to discuss if this were February, or last year, and we would not be in a time constraint activity which if we don't do something then we have a whole interim period of time that may not be good. So, I think that brings up a very interesting point. If this were to pass this way then I would think that there would be a sudden movement between the various parties to the situation to address just what you are talking about. Maybe there is a better way. Or, they could be saying, `Hey, we know that will be unconstitutional.' I don't know that nor did the drafter of this. The legal expertise said, `Yes, 100 percent, we know won't work.' Eighty-five percent or any percent, we tried to find out ... does the possibility of it passing improve with the decreased minimum number of local hires. That is purely speculative, and I want to make sure that everybody knows what I found out that, `Hey, having any number in there may not pass muster. So, what you are suggesting is maybe, in order to keep that as high as possible, that if you do not do this, the royalty goes up. That too, may find because the court would ... I am talking way out of school here because I am not legally trained, but, I would think the court would look through that and say that, too, ties to local hire and that is what we are holding as an unconstitutional restraint (indisc.). It may have already been discussed, Representative Davies, I do not know. We were not privy to, almost, a year of negotiation that has been going on between the Department of Natural Resources and the applicant. I have no idea what all those things ... and this could certainly have been one. Were you involved in those negotiations, Ken, or was it the commissioner? I am sure they covered a wide swath of negotiations and that is duly noted on the record that may be an alternative to this. Unless, are you suggesting to offer that as an amendment to the amendment?" Number 1722 REPRESENTATIVE DAVIES, "In all due respect, Mr. Chairman, I got this at 8:00 o'clock last night, so I have not had a lot of time to think about it. I, certainly, do not have an amendment prepared. It would take some consideration to look at that. What I am thinking right now, this is different than the version that came to us from the other side in that there will be a requirement to ... Number 1751 CO-CHAIRMAN GREEN interjected, "Are you saying the Senate version? We do not have that yet. We have, kind of, been following it." Number 1761 REPRESENTATIVE DAVIES agreed that was correct, "I was just wondering if there might be some opportunity for a conference committee to have some further thought?" Number 1770 CO-CHAIRMAN GREEN said, "Well, there would certainly be, there, and this goes on to Finance and there would be a chance to do something like you are saying in Finance, or on the Floor, and this also has a referral to the World Trade Committee." REPRESENTATIVE DAVIS commented that the World Trade Committee has sort of global views ... Number 1788 REPRESENTATIVE ALAN AUSTERMAN recognized what Representative Davies was saying and his concern, "I, also, do not know how you would answer that question, and it has been a question throughout the state for many, many years. I am in favor of this draft and continuing on in trying to push it forward. I think every step that we take toward trying to solve, or answer, this question of local hire, and every time it is going to end up in the courts, whether we like it or not, that as long as we keep pursuing it and pounding it, at some point in time, we may come up with the answer that we are looking for. But, just to draw back and say that we feel it is unconstitutional and may not pass muster, does not get us there either. It is going to go to the courts and they are the ones who are going to end up making the determination if somebody takes it to court. I am in favor of pursuing this, at this stage of the game, and seeing if we can get an answer to it and come to some resolve as to whether it is building a new school, in one of the villages, or whether it is to drill for oil on the North Slope. It is an issue that we need to continue to pursue and try to get an answer to. It is how we put our people to work." Number 1852 REPRESENTATIVE KOTT appreciated what his colleague from Kodiak is saying but clarified that what Representative Davies was trying to get at was, "If there are potential constitutionality problems with this and this ends up in the court, it may delay the project from going forward. I, kind of, like the idea of some kind of incentive mechanism to reach the same goal of hiring 85 percent and whatever the numbers are that are maxed out in the proposal. I think that would, certainly, circumvent any potential court or litigation, in the future. I do not know how long litigation would occur if it ended up in court. I would certainly not want to prohibit this project from commencing, at the earliest possible time, to benefit all the state residents." Number 1886 CO-CHAIRMAN GREEN said, "Now, we are on a legal question. I would think that there is no way to know what the court might do. But, short of an injunction, it seems to me that the worst that could happen is that the project could continue, but that the court may strike down this saying, `While this is in litigation, because of prior cases, you are not going to be held to this.' If you want to continue operating, we are going to remove that restriction and you go ahead and build it the way you see. But, do not use that as any kind of, even an, legal opinion, let alone the court's decision. I think that as Representative Austerman says, `It is up in the air now,' and whether that would impact the development of this ... my feeling would be, that it would not. I think the state, in its best interest, would find that it is better to move along with the project and worry about this without it being held. If it turns on whether `85' is reasonable or if it turns on the fact that you can not put a number there, I still think that the operator can be allowed to go ahead and develop. But, that certainly is not a legal opinion." Number 1937 REPRESENTATIVE DAVIES said, "My concern is that it also gets to the question of `sanctions.' I do not know, even if it were to be held legal, constitutional, I concur with the Representative from Eagle River's concerns, again, about what you would do to enforce that. Whereas, if you had an incentive mechanism, the enforcement would be automatic. You would determine, through the Department of Labor, what the numbers were, and that would determine what the supplement royalty would be." CO-CHAIRMAN GREEN stated that Representative Davies certainly made an interesting case. REPRESENTATIVE DAVIES stated that there was one other point that he wanted to raise, "There is another constitutionality issue surrounding this whole bill and that has to do with whether we are meeting the test in the constitution of getting the maximum value, for the citizens of the state of Alaska, from the resource, maximum reasonable value. It is a bit of a judgement call. Clearly, there is no certainty in the world, if we do not know exactly what the benefits of one course versus the other course are, and that takes some judgement. That is what we are being asked to do. I think that is a reasonable request." REPRESENTATIVE DAVIES continued, "However, in the mean case ... the best case scenarios, we are explicitly leaving $2,000,000 on the table and the $41 million compared to the $37-39 million. What we are saying is that there is some other value to the state. I think if we were to let ... the other value is things like Alaska hire which without some such things, what you are trying to do here is pretty nebulous. I think if we were not to put something like that in, this thing could be challengeable on that ground. So, there is no requirement in here to get that other benefit. Therefore, we have not met our constitutional responsibility to get the best value for the citizens of the state of Alaska. Whereas, if there were some such mechanism, as I have suggested, I think it would go a long ways to meeting that challenge, as well." Number 2038 CO-CHAIRMAN GREEN acknowledged that Representative Davies made a very good case, "Again, I would say in the interest of time, and the fact that there are two more committees of referral, and the other side, there are ample opportunities to put that in. Also, there would be time then for the applicant to react to that, too. I would encourage you to pursue that because I think that you make a very good point." Number 2069 CO-CHAIRMAN WILLIAMS commented, "You have, also, in here, entered into contracts with Alaskan vendors? How many Alaska licensed firms are available to take ..." Number 2099 C0-CHAIRMAN GREEN replied, "We actually sent out invitations to one of our earlier meetings for vendors and contractors to come. I believe there were 30 or 40 ... there is a list, and we can make that available ... oil contractors vendors list. We had several, we had 15 or 20 that actually came, of which, probably 10 or more testified at one of our hearings. We have several contractors, we have several constructors and many employment labor forces. I think ... we have been told, at least, by one of the major participants in this that they will have the ability ... they even went beyond what this would require which, I find, really bizarre. They could construct, in the state of Alaska, things as large as a seawater treating plant which `blows me away.' Certainly, they can construct modules large enough for this project." Number 2132 CO-CHAIRMAN GREEN asked the wish of the committee. Number 2137 CO-CHAIRMAN WILLIAMS made a motion to move CSHB 548(RES) from the House Resources Committee with individual recommendations. Hearing no objection, CSHB 548(RES) passed out of committee. CO-CHAIRMAN GREEN asked Mr. Luttrell if he had anything to add. MR. LUTTRELL was not available. CO-CHAIRMAN GREEN asked for an at ease. CO-CHAIRMAN GREEN reconvened the House Resources Committee at 9:01 a.m. announcing that the committee would hear from the subcommittee, Representative Ogan, Chair, Davies and Green, on SB 112. SB 112 - DISCOVERY ROYALTY CREDIT Number 2230 REPRESENTATIVE SCOTT OGAN reported that the subcommittee had met twice with lively discussions centering around, "On the discovery royalty, making sure that we had very clearly defined who got there first, what would be considered, the type of structure or pool of oil that was discovered first. Probably, the most important thing was establishing when the clock starts ticking. The main amendment that was being discussed, which was actually divided into three questions, which was one you offered. We just recently came up with what, we believe, is a good amendment to the bill that would define, essentially, when the clock starts ticking. The intent, I believe, of the subcommittee, and, I believe that we should put on the record in this committee, is that that person who first starts producing the oil would be the one who gets the discovery royalty break. The intent of that would be to encourage ... keep someone from, maybe, discovered a pool but they will sit on it for five or ten years and discourage development. The idea of giving the break is to encourage oil to be developed and not be speculated upon." Number 2295 REPRESENTATIVE OGAN continued, "Therefore, I think we should offer up this amendment, we should call Amendment No. 1: Page 3, Lines 27-32 with parallel language on Page 2, Lines 3-11 "the lessee under a lease issued in the Cook Inlet sedimentary basin who is [CERTIFIED BY THE COMMISSIONER TO BE] the first to file a nonconfidential sworn statement with the commissioner claiming to be and who is certified by the commissioner to be the first to have drilled a well discovering oil or gas in a previously undiscovered oil or gas pool and who is certified by the commissioner within one year of completion of the discovery well to have drilled a well in that pool which is capable of producing in paying quantities shall pay a royalty of five percent on all production of oil or gas from that pool attributable to that lease for a period of ten years following the date of completion of the discovery well in that pool, and thereafter the royalty payable on all production of oil or gas from the pool attributable to that lease shall be determined and payable as specified in the leases; the reduced royalty authorized by this paragraph is subject to the following: [(A) A LESSEE IS ELIGIBLE TO PAY THE REDUCED ROYALTY AUTHORIZED BY THIS PARAGRAPH ONLY IF THE LESSEE IS THE FIRST TO DRILL A WELL DISCOVERING OIL OR GAS IN A PREVIOUSLY UNDISCOVERED OIL OR GAS POOL;] [(B)] (A) " Number 2306 REPRESENTATIVE AUSTERMAN asked, "Do we have a working draft in front of us now? Did we move to have a working draft in front of us, and then it went to subcommittee, or did it just go to subcommittee?" Number 2313 CO-CHAIRMAN GREEN informed, "We did not request that they bring back a working draft. I wish I had." REPRESENTATIVE AUSTERMAN clarified what he was saying, "The draft I have before me is version `K,' and is that on the table now?" CO-CHAIRMAN GREEN replied, "That is on the table." REPRESENTATIVE OGAN commented, "We did not draft a new committee substitute just because of the short time frame and the fact that working out the details of the amendment were worked into last night and, actually, this morning. So, we felt the best way to handle it would be to strictly offer an amendment to version K." REPRESENTATIVE AUSTERMAN responded that he just wanted to be sure that the committee had moved version K, and that was the version the committee was working from. REPRESENTATIVE OGAN stated that was correct. Number 2353 REPRESENTATIVE OGAN further stated that concluded his report. CO-CHAIRMAN GREEN recalled some discussion about certifying people with commercial production on pages 3 and 4. Number 2363 REPRESENTATIVE OGAN agreed, "Mr. Chairman, you are correct. On the amendment offered by you in the subcommittee, we divided the question on the amendment, actually, into three different subunits. What we called numbers two and three which was page 3, line 29, and on page 4, line 5, there was quite a bit of discussion about deleting the word `commercial,' and adding the words, `paying quantities.' Paying quantities is defined in statute ... no, I believe it is defined in regulation and we were ... there was some discussion when we left as to which regulation. There were three different cites in regulation where paying quantities are (indisc.) and this amendment... Number 2409 REPRESENTATIVE AUSTERMAN interrupted, "We are at a disadvantage because we do not have the amendment that he is referring to, that you made in subcommittee." CO-CHAIRMAN GREEN thought that amendment had been offered, "There was one offered that had two ... there was one offered with my name on it at committee before it went to subcommittee. I think that is what Representative Ogan is referring to." Number 2433 REPRESENTATIVE DAVIES inquired, "Can we go back, what are we talking about?" CO-CHAIRMAN GREEN answered, "He is just giving us a report as to what has happened in subcommittee. Then, we have not offered any amendments, yet. Then, Representative Ogan, was there going to be a choice made ...."(End Tape) TAPE 96-69, SIDE B Number 000 REPRESENTATIVE OGAN is saying...."privy to all the discussions of what happened after the meeting as far as what the amendment was going to come up with. I believe that is what this amendment addressed." CO-CHAIRMAN GREEN said, "I do not see the definition of `paying quantities' here." REPRESENTATIVE OGAN said, "I don't either." Number 024 REPRESENTATIVE DAVIES suggested that the chairman move an amendment so the committee would have something to talk about. Number 030 CO-CHAIRMAN GREEN said, "What we are still trying to get through, is the committee report. When the committee report is through, Representative Davies, I will say now, then we can go. Just bear with us." CO-CHAIRMAN GREEN stated to Representative Ogan that members of the Department of Natural Resources were present. Number 046 REPRESENTATIVE OGAN explained, "What happened was that after the committee ... the committee decided we were going to insert `paying quantities' and we were going to cite regulation in statute. We were going to pick which ..." CO-CHAIRMAN GREEN said, "That is not a good idea." REPRESENTATIVE OGAN further explained, "That was one of the things that we discussed. However, after the committee adjourned there was quite a bit of discussion that went on afterwards about the best way to do that. This is what we came up. So, I think, maybe, there needs to be some clarification." REPRESENTATIVE OGAN requested an at ease. CO-CHAIRMAN GREEN requested that the committee stand at ease and reconvene at 9:20 a.m. CO-CHAIRMAN GREEN reconvened the meeting at 9:22 a.m. Number 077 REPRESENTATIVE OGAN apologized for the confusion. "A lot happened after the meeting. Conceptually, what we agree to do was to adopt these amendments, number two and three. What the result of that was what we are introducing as Amendment No. 1, today. We would, also, like to add language for the purposes of this paragraph or this statute. We would like to adopt the language from 11 AAC 83.395 and put that in statute and that would define the paying quantities. A copy of that is forthcoming, 11 AAC 83.395." REPRESENTATIVE DAVIES signified that he just wanted to make sure that he understood what the committee is doing. Number 122 CO-CHAIRMAN GREEN clarified that Representative Ogan had offered Amendment No. 1 , "and went further to say, in addition, to what you see there, he is ... for the purpose of determining what `paying quantities" is, what that term means." REPRESENTATIVE DAVIES wondered if that should be Amendment No. 2. REPRESENTATIVE OGAN stated that it is amendment to the amendment. CO-CHAIRMAN GREEN said, "It is conceptually going to be as part of ... we can do it either way. Did you have a question Representative Barnes?" REPRESENTATIVE RAMONA BARNES indicated that she was just listening. REPRESENTATIVE DAVIES commented that she should listen carefully. CO-CHAIRMAN GREEN continued, "The amendment language is being reproduced and what he is suggesting is that because there may be some indication that paying quantities is a vague term. For the purpose of this paragraph in statute, there will be a definition. That definition being the same definition that is included in the regulations, at the current time. Those words are coming down to us. We have representatives from the Department of Natural Resources here if you want to ... for this period of time that we are talking about, he can tell us what those words are." Number 164 REPRESENTATIVE DAVIES stated that he was still trying to figure out ... "I want to make sure that I understood exactly what Amendment No. 1 is that is before us. While we are waiting maybe we can have another at ease until we get the other language. It says `with parallel language on page 2,' does that mean that it is to insert all this stuff, also, on page 2, lines 3-11? Number 187 REPRESENTATIVE AUSTERMAN interjected, "Before we go any further, Mr. Chairman, I want to make sure ... have we got Amendment No. 1 on the table now? In version K, on page 3, line 27, it starts, `with the effective date of this Act.' So, we are going to do what here? I do not understand the `with parallel language.' Are we going to just insert this language here starting on line 27 and move everything down? Are we removing anything out of this language on page 3? I do not follow this." Number 212 ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman, Chairman, Senate Resources Committee, joined the panel. "Part of this is due to time constraints in drafting the amendment, and I apologize if it is not clear. The amendment goes to page 3, lines 27-32 beginning on line 27 where it says `the lessee.' So, we are inserting this following the comma after Act,. If you would like to correct the amendment to read, `insert following the comma after Act on that line. That is the intention, of course, the lessee under a lease issued in the Cook Inlet sedimentary basin. Then, also, if you will note on the amendment, it also goes over to page 4, and deletes (A), beginning on line 3 through line 5, because it is not necessary after the amendment is made." Number 251 REPRESENTATIVE BARNES asked clarification, "Where does it end?" MS. KREITZER answered, "It is inserted into the language that begins on line 27, and goes through line 32, and up to the top of page 4. Then we delete (A), on page 4." Number 255 REPRESENTATIVE AUSTERMAN confirmed everything after the comma on line 27. Number 260 MS. KREITZER assented, "Is replaced with this amendment, and then through the deletion of (A) on page 4, line 5. Then on line 6, (B) becomes (A). CO-CHAIRMAN GREEN asked members if everyone was aware of what was being deleted? REPRESENTATIVE BARNES wanted to go back to the top of the page to make sure she understood everything clearly. "You are deleting all of (A) through line 5 to (B)?." CO-CHAIRMAN GREEN agreed, "Yes, but we are actually deleting more than that. If we start over on page 3, line 27, after the word Act, that whole part of the rest of the page, clear over through line 5 on page 4, is all out. Then this language goes in there." MS. KREITZER explained, "Then the second part of this where it says with parallel language on page 2, lines 3 through 11, this section ... speaks to the exploration licensing because the sedimentary basin (indisc. interference with the microphone) expected to be a bit larger than the box created by the exploration licensing program. It says `with parallel language' on page 2, lines 3-11, because this is written slightly differently, and I did not have the time to create the parallel language that would be necessary to make it match. If you can accept that, conceptually, the idea is that you take the same language (indisc. more interference with the microphone) on page 2 to make it fit. They are written just a little bit differently, so we could not make the exact amendment to that section because of the way that this is phrased. I apologize to the committee for not having the time to make it complete there, but if you can accept that conceptually...." Number 356 REPRESENTATIVE AUSTERMAN said, "Let's go to page 2, line 3. Where in that line are we going to insert the language? Number 361 MS. KREITZER, "Well, it is going to have to be inserted where it begins on line 3 ... and, if you could adopt that conceptually because the drafter will have to make this language fit within that paragraph. It is written just slightly differently, the words would be the same within that section, lines 3-11, it is just that it is written slightly different than page 3." Number 399 CO-CHAIRMAN WILLIAMS wanted to know, "To make it clear then, we are putting this language over here, also?" MS. KREITZER responded, "Yes, Representative Williams, the only thing that would not go, of course, is the deletion of (A) which is at the bottom of this amendment." Number 414 REPRESENTATIVE OGAN wanted to clarify for the record that what is happening here is that when the subcommittee left, we agreed on page ... to change, according to page 3, line 29 and page 4, line 5, on these amendments that you offered here. In the meantime, what has happened is that the drafter of the original bill on the other body has gotten together with the Department of Natural Resources and has come up with language that, conceptually, does the same thing. That is what they are offering here, today. I just wanted to make that clear." Number 441 CO-CHAIRMAN GREEN said, "Yes, I think that explains on pages 3 and 4, I think the concern now registered by Representative Austerman is back on page 2. The problem is that the conforming language, the way it is drafted doesn't just `shoe horn in' to page 2 like it does in pages 3 and 4. Then it fits and you can just go from there, but over here it is parallel. It is the same concept, but there is going to have to be some massaging of the intro language. Obviously, as stated, there is no elimination of (A) because there is no (A) to eliminate. So, this major paragraph will be massaged in its entrance to where it can fit then on page 2. So that they are the same." Number 479 REPRESENTATIVE OGAN understood that stating that he simply wanted to make the point of what happened at the meeting and why the committee is dealing with a little bit different amendment, today. "Essentially, trying to get there ... and that is the issue that we need to discuss at the meeting here, is if what we agreed on in the subcommittee meeting, if this amendment, offered today, accomplishes, conceptually, what we are trying to achieve." CO-CHAIRMAN GREEN suggested that Representative Ogan might want to speak to the amendment as to how that does accomplish that, or are there any questions of the amendments?" Number 504 REPRESENTATIVE OGAN said, "I believe that it is a good faith effort to accomplish what we are trying to accomplish with our amendments in subcommittee. As they say, the `devil is in the details,' as far as the wording goes, but, conceptually, I believe that it is very similar." Number 527 REPRESENTATIVE BARNES requested that a working draft be prepared and brought back so the committee could look at it in its context. CO-CHAIRMAN GREEN replied, "We certainly can." CO-CHAIRMAN WILLIAMS asked to hear from the bill's sponsor. Number 543 MS. KREITZER apologized if she was confusing people, "It really is not that difficult of an amendment. I appreciate Representative Barnes concern about wanting to make sure that she knows exactly what she is moving out of committee. I very much appreciate that, but I will just attempt one more time to say, if you look at the language on page 2, line 2, where it starts, `except that the lessee who, proceeding under AS 38.05.131 - 38.05.134, that sets off, of course, this exploration licensing program. My point, only, was that we could not word-for-word insert Amendment No. 1 in here because of the beginning of that phrase that says `except that the lessee who proceeding under 131 to 134. What I would love to be able to do is to say after the comma, after 4, the lessee under lease issued in Cook Inlet sedimentary basin. Then, of course, it would just fit perfectly into page 2. I have to recognize that that phrase, `except the lessee who, proceeding under 131-134' sits there. So, I do not know how the drafter will fit this in here. I do not know if he would agree with the way that I would phrase it or if he will change it slightly. The intent, of course, is the same that, `except the lessee who, proceeding under exploration licensing under a lease issued in the Cook Inlet sedimentary basin who is the first to file a nonconfidential sworn statement with the commissioner, claiming to be and who is certified by the commissioner - take the amendment from there. That is the intent, Representative Barnes." Number 601 REPRESENTATIVE BARNES understood the intent, "But, I, also, want to see what it is, in its context. So, we can all have a clear reading of what it is that we are doing." CO-CHAIRMAN GREEN replied, "Okay." CO-CHAIRMAN WILLIAMS expressed concern, "In the interest of time, I would agree with that, I know what our time schedule is." CO-CHAIRMAN GREEN said, "Well, we are constrained. I can understand that Representative Barnes is a little reluctant to leave it to a drafter... it is not an uncommon process." REPRESENTATIVE BARNES agreed that it was not uncommon, but stated that the chairman could make it a little more clear than what the committee was doing, today. Number 630 CO-CHAIRMAN GREEN understood that Representative Davies concurred with the fact that there is confusion. "So, we will have a redrafted version ... and have it before us on Monday and it will, essentially, be, as has been discussed. Are there any other questions, so that when we do reconvene and look that over, we will have that in your offices for review. So, I would expect there will be very little time taken on Monday (April 29)." Number 654 REPRESENTATIVE DAVIES requested that the draft be delivered with time enough to review them before 8:00 o'clock Monday morning, preferably, Saturday or by Sunday afternoon. Number 674 REPRESENTATIVE AUSTERMAN asked if committee action had eliminated paragraph (C) on page 4. CO-CHAIRMAN GREEN said that (C) has not been removed, "it was discussed earlier in amendments, but those were never accepted." REPRESENTATIVE AUSTERMAN advised that the chairman, technically, needed to make that change on the amendment. REPRESENTATIVE BARNES discussed with the chairman the reordering of paragraphs. Number 716 CO-CHAIRMAN WILLIAMS asked if there any other amendments. CO-CHAIRMAN GREEN asked committee if there were other amendments to consider. Number 727 REPRESENTATIVE DAVIES observed, "This is probably a little bit premature, but we did not actually get the amendment to the amendment, or Amendment No. 2 before us. I presume that is going to come as part of the work draft that we are going to get back. I would like to say, right now, that I object to putting that language in statute. My view is that we ought to leave `paying quantities' and just let that be defined in the regulations. For the record, I wanted to let you know where I am on that." CO-CHAIRMAN GREEN commented that it sure is easier to strike than to put in. "Any other comments about what you will be receiving over the weekend and what we will be doing on Monday with this bill?" Number 759 REPRESENTATIVE OGAN suggested that the committee follow up on Representative Davies objection and discuss that out so we can move it out expeditiously on Monday. "I guess he objected to putting the language ... defining `paying quantities' in statute. Maybe we should discuss it in committee to find out ..." Number 788 CO-CHAIRMAN GREEN clarified that the committee did not have it before them. "So, what I am suggesting is that if we put it in, it is easy to strike. For the purposes of this paragraph, paying quantities means `Wheeeet' (whistle) and we strike it if we do not like it." Number 805 CO-CHAIRMAN GREEN announced that SB 112 would be held until Monday, April 29, 1996, 8:00 a.m. SB 262 - MANAGEMENT OF FISH/GAME POPULATION & AREA Number 875 MARY GORE, Legislative Assistant to Senator Mike Miller, testified on behalf of the sponsor, "The quick and dirty explanation of this bill, as Senator Miller likes to say, is to put more moose on the table of Alaskans. This bill guarantees that game populations in the state will be managed for maximum sustained yield to allow for hunting for consumptive use. The bill requires that any land closed to hunting for consumptive use for subsistence or sport use with the exception of a biological emergency, a new area three times the size of the originally closed area will be opened to allow for consumptive use harvest." MS. GORE continued, "The bill also acknowledges that there is a public trust created between the state and the sportsmen of Alaska. The revenue generated from taxes, licenses and other fees paid by sportsmen would be breached if public access was restricted on state game refuges except when restriction on access is to protect habitat from damage due to the method of access. This trust would also be breached if, by restricting hunting, fishing and trapping opportunities in a manner inconsistent with maximum sustained yield. MS. GORE read, "Further, revenue generated by sportsmen through taxes and fees cannot be used in an area where consumptive use of fish and game is not prohibited or for management of nongame species. If the state breaches this trust, three times the acreage will be opened and a civil suit can be brought against the state or public official to compel compliance. MS. GORE said, "Included in your packet was a sponsor statement, as well as a sectional analysis of the bill. I would like to draw attention to the sectional. It was created for the original version of the bill and was then modified by the Senate Resources Committee. There are no substantial changes to the sectional with the exception of the state being required to open three times the amount of land instead of five times the amount of land in the original bill. Also, the word `sport' before fishing was deleted from the original bill to the Senate Resources bill. Number 1026 MS. GORE stated, "In the bill offered in the Senate Resources Committee, Senator Hoffman offered an amendment that would exempt Board of Game members from being held liable and being sued. That was not cleaned up in the second section of the bill. So, we have an amendment today that we would like to offer that would exempt the Board of Game members in the second section of the bill, to clean it up and make it consistent all the way through. Number 1038 MS. GORE addressed the amendment: Page 3, line 23, after "official" insert: "other than a member of the Board of Game" Page 3, line 25, after "official" insert: "other than a member of the Board of Game" REPRESENTATIVE DAVIES commented that he had the wrong version. CO-CHAIRMAN GREEN remarked that the committee had the wrong draft, it does not match. REPRESENTATIVE DAVIES verified version CS SB 262(RES) (ct rule fld). MS. GORE said that would be it. CO-CHAIRMAN GREEN replied that something does not mesh with the amendment. MS. GORE said, "If you look on page 2 of the bill, subsection (c), line 10, it says other than a member of the Board of Game." REPRESENTATIVE KOTT corrected the witness, "page 2, line 9." MS. GORE stated, "It would be on line 9 then. That needs to be inserted on page 3, line 19, after the word `official' then on line 21, also. MS. GORE said, "The (Senate) Resources Committee decided that if a member of the Board of Game was liable for suit, they would never get anyone to be a member of the Board of Game. So, it was probably a good thing to change." Number 1174 CO-CHAIRMAN GREEN asked if there were questions about the verbal addition on page 3, lines 19 and 21. Number 1183 CO-CHAIRMAN WILLIAMS moved that the House Resources Committee substitute for CS SB 262 (RES) (ct rule fld), version K, be adopted as the working document. Number 1199 CO-CHAIRMAN GREEN restated the motion to adopt CS SB 262 (RES) (ct rule fld) as the working document. Hearing no objection, it was so ordered. CO-CHAIRMAN GREEN asked if there was a motion to move the amendment. Number 1222 CO-CHAIRMAN WILLIAMS so moved. CO-CHAIRMAN GREEN said, "There has been a motion to move the amendment as presented and, also, amended the amendment to add the same language on ... well, this one actually does not work. It is the verbal amendment now on lines 19 and 21 that the words other than a member of the Board of Game, after the word `official' on both lines. Is there objection to that amendment?" Hearing no objection, it was so ordered. Number 1254 CO-CHAIRMAN GREEN stated to Ms. Gore that she has used the word "trust." "That conjures up the potential for litigation with, perhaps, some bad vibes as what the consequences might be. Is there a reason that we established this trust and then the punitive damage to the state would be three times the amount of area that is blocked off? Is that assuming that there might be some development that the state might want to do, or make a park, or do something?" Number 1288 MS. GORE replied, "The bottom line is that they want to make sure that the money the sportsmen are paying into the Department of Fish and Game is used strictly for consumptive use, to manage for consumptive use. If the department does not manage for consumptive use, they will be required to open an area three times the size, and that the public trust of the people paying into the Department of Fish and Game's budget would be breached if the money was not use to manage for consumptive use." Number 1326 CO-CHAIRMAN GREEN said, "There was some indication that if an area were no longer available, there would also be that... Number 1339 MS. GORE noted that there were exceptions, "On pages 2 and 3, numbers (1) and (2). Senator Halford wanted to make sure and added an amendment, actually, that was line 28 and 29, on page 2, that would sure that if access was inconsistent, it would still allow ... that area could be closed if the land would be damaged or if they needed to use the land for something else." Number 1386 CO-CHAIRMAN GREEN asked, "Okay, and that other land would be available." MS. GORE answered, "No, that would be an exemption to this." CO-CHAIRMAN GREEN stated, "It says the public trust would be breached by restrictions." MS. GORE, "Except, when the restriction on access is necessary solely for the purpose of protecting habitat from damage due to method of access, or if it is inconsistent with maximum sustained yield. These are the exceptions." Number 1415 CO-CHAIRMAN GREEN stated that his concern with the trust is, "If there was a restriction other than habitat that we have breached this trust, what are the consequences of that?" Number 1428 MS. GORE replied, "They will bring suit." CO-CHAIRMAN GREEN queried, "What will they sue for? What would be the consequences that they would say, `Okay,' we can't have access to this 40 acres; what am I suing for?" MS. GORE answered, "I am suing for 120 acres in a different area of the state." CO-CHAIRMAN GREEN theorized, "And, if I do that, and this is right next to this area that was a really good area ...so, there is three times as much area of goat pasture, would this open the state to litigation and damages, perhaps, because of the trust nature of this?" MS. GORE responded, "That, I can't answer." CO-CHAIRMAN GREEN said, "I am not trying to manufacture a problem but trust always incurs the fear of something nasty. That is the concern that I have. Like for like, and you know that there is never two people who can agree to that." MS. GORE agreed. Number 1497 REPRESENTATIVE DAVIES expressed concern about allowing people to bring suit against public officials, "even if we exclude people on the fish and game boards. I mean, isn't it the same argument about finding people to serve on the fish and game board would apply to people who want to work as public officials when they are in a capacity where they could be sued for making professional management decisions, personally. Among a long list of other things that I have concerns with, that is one of them." REPRESENTATIVE DAVIES said, "By setting up this trust and inviting people to sue us, as state agencies, and as public officials, that we are creating a situation where there will be a lot of law suits. Sort of like a lawyers employment bill." CO-CHAIRMAN WILLIAMS commented, "By public officials, meaning us, right?" CO-CHAIRMAN GREEN wondered who the bill drafter is and whether it would be possible to get that person here to review some of these. Number 1627 JULIE PENN representing the Alaska Environmental Lobby testified, "SB 262 indicates that `game populations shall be managed solely on a biological basis' and that `consumptive use of game is the highest and best use of game.' But, `managing on a biological basis' and `managing for maximum sustained yield for human consumption are mutually inconsistent terms. In fact, all of the terms used in this bill that sound biological, such as maximum sustained yield and harvestable surplus, are not biological terms at all. You will not find them defined in any biology textbook the way they are defined in this bill. This bill is social engineering with no foundation in biological science and no relationship to the sound management of resources expected of the Department of Fish and Game. MS. PENN continued, "If we are managing Alaska's game populations entirely on a biological basis, then why does SB 262 attempt to manage our game by acreage rather than by the health of the ecosystem? Mandating that the Board of Game open three acres for every acre closed is management by map and ruler rather than by biological principles. It does not exemplify biologically sound management. MS. PENN proceeded, "Alaska Department of Fish and Game studies show that nonconsumptive users of Alaska's wildlife spend 30 percent more on its wildlife than consumptive users. Placing into law the assumption that human consumption is the highest and best use of wildlife could cause the state to lose money as well as its worldwide reputation as a haven for wild nature at its best. MS. PENN concluded, "Alaska and Alaska's wild resources deserve better management than SB 262 provides. MS. PENN further stated that the bill had not been amended to protect the members of the Board of Fisheries as well as other public officials. "It is, also, not clear in the bill whether commercial fishing is included or excluded among fish. So, closures of commercial areas could require areas three times larger opened to commercial fishing which is a whole new way of managing commercial fishing." Number 1805 WAYNE REGELIN, Director, Division of Wildlife Conservation, Department of Fish and Game testified that this legislation will change quite a few existing statutes. "It would mandate that game populations, in most areas of the state, would be managed solely for maximum sustained yield. Then it goes on and defines what that means ... It comes back to one third of all the animals born in a year. The department does its best, most places, to manage for high harvest levels. We also take other things into consideration besides just maximum sustained yield. The board has areas where they manage areas slightly different because that is what the hunting public primarily has desired. You have to also remember that wildlife is a public resource owned by all residents of the state ... and to say that only one use is the highest and best, I am not sure that is very appropriate. I think that hunting is one of the most legitimate uses ... very legitimate uses of wildlife resources and we do our very best to provide that opportunity. But, there are other uses that are also legitimate." Number 1898 MR. REGELIN continued, "The section that mandates that the Board of Game, if it closes an area or restricts an area ... hunting in an area, that you open one three times larger or remove the restrictions of an area three times as large causes us some concerns. I think that the Board of Game would have real difficulty closing any season under the provisions of the bill. Most of the time you are not going to find an area that the state has any jurisdiction over to open that is three times larger. There are very few areas in the state that are closed to hunting that have been done by the Board of Game. Most of the closed areas are federal areas that are national parks. In the 14 years that I have worked for the department, the board has only closed hunting in one area. That was for one species and that was in the McNeil River area which was highly controversial decision but it was ... and that maybe what this is referring to. But, I certainly do not think that is a very big problem and what I think you would end of having is a lot of ... the board not being able to close areas or reduce seasons or make restrictions when it is necessary because they would not have an area to open up." Number 2000 MR. REGELIN proceeded, "I think that there is another section of the bill then that would forbid the restrictions of public access on any refuge or sanctuary or critical habitat area. That is the part that says that they can sue me if that happens. I do not like that much. It also gets then into the restrictions on how we can spend our money which is the same language that was in SB 77, and the identical language that is in SB 247." MR. REGELIN said, "To reduce our ability to restrict public access could really threaten some of our refuges, in my mind, and some of our sanctuaries. But, it could also really take away a tool that the Board of Game uses to manage its wildlife in control use areas. They have a lot of these areas where they control the method of access to provide certain advantages to some people, like our trophy sheep areas in Tok, and in Delta, where access is restricted and we have really some trophy areas. We would not be allowed to do that anymore, we would not be allowed to have controlled use areas like the Koyukuk Control Use Area, out by Galena, which is one of the premier moose hunting areas in the state, and it is managed for access by boat. And, that gives ... for lots of reasons the board has done that for years and I think it has worked out extremely well. Those things, I think, would be prohibited under this law. I think that the department has worked hard for a very long time, since the ANILCA was passed in 1980, to identify 17B easements so we can have access across federal lands and (indisc.) for navigable waters, and other ways. I think we are trying to preserve our access rights to these areas. But, I think there is a real difference between trying to work preserving our rights for access and guaranteeing rights to access in legislation." Number 2130 MR. REGELIN continued, "When you guarantee rights of access for hunting to all of our refuges, critical habitat areas, and things like that, which is the areas that it guarantees them for, it really raises some serious questions in my mind how we would do that. Would we be allowed to restrict the one area that was closed that would be reopened under this would be McNeil River. When that was opened, we limited it to six permits every other year. Under this legislation, that would be reopened and we would not be able to limit it by permits. The way I read this legislation, our whole permit system on these types of areas would be illegal because we would be limiting access to hunts that is guaranteed in this legislation. I think that there is just some really poor wildlife policy in this bill. I think it has some real problems technically and some specifically. But, also, the whole idea of it, I think, is flawed policy that you are going to try to remove all of the balance that the Division of Wildlife has, and our responsibility to try to manage wildlife for all residents of the state. So, we are opposed." Number 2277 REPRESENTATIVE DAVIES asked Mr. Regelin to address the way the shifting of funds would go to cover costs in the current programs that have been funded in fish and game federal aid funds and shift to the general fund. MR. REGELIN replied that the only source of funds that the Division of Wildlife gets is federal aid and license fees. "It would prohibit us to expend those funds on any programs that are not directly related to consumptive use. Right now, we spend about a little less than five percent of our budget, each year, on programs for wildlife viewing and wildlife education. In the broad sense, I think they do benefit hunters and hunting in a large sense, very significantly but, in a narrower sense, people say that everyone is benefitting so the hunter should not have to pay. That is what this is trying to say. We are working very hard to find alternative sources of funding to pay for these programs of viewing and wildlife education and we have some things going on in Congress and, also, working on some ideas on how to match that federal money when it comes. But, that is a couple of years down the line. Our feeling was that we have always had general funds until last year to pay for these programs. We lost all of our general funds last year after ... the big reason was we have a $5.5 million surplus in our dedicated fish and game fund. So, it was hard to get general funds and what I have done is to ask people to have some patience while we find alternative sources. I think that most hunters readily agree that wildlife education and teaching about hunting in the schools is very important and most of them enjoy watching wildlife .....(END TAPE) TAPE 96-70, SIDE A Number 000 MR. REGELIN is saying ..."dollars from the federal government and that is a tax on arms and ammunition and archery equipment, and a whole lot of people buy guns and ammunition besides just hunters. I do not want to argue against the dedicated fund, but, I think they are taking a very narrow view of this issue." Number 037 CO-CHAIRMAN GREEN asked Mr. Regelin if he could appear before the committee on Monday, April 29, for further discussion on SB 262. MR. REGELIN indicated he would be in attendance. CO-CHAIRMAN GREEN suggested that the sponsor of SB 262 also request the presence of the bill drafter to address legal consequences. ADJOURNMENT Number 076 There being no further business to come before the House Resources Committee Co-Chairman Green adjourned the meeting at 10:00 a.m.