Legislature(2001 - 2002)

04/04/2001 01:05 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 4, 2001                                                                                          
                           1:05 p.m.                                                                                            
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Beverly Masek, Co-Chair                                                                                          
Representative Drew Scalzi, Co-Chair                                                                                            
Representative Hugh Fate, Vice Chair                                                                                            
Representative Mike Chenault                                                                                                    
Representative Lesil McGuire                                                                                                    
Representative Gary Stevens                                                                                                     
Representative Beth Kerttula                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Joe Green                                                                                                        
Representative Mary Kapsner                                                                                                     
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 77                                                                                                              
"An Act  repealing the exception  that applies to  collection and                                                               
payment of  interest of  $150 or  less on  royalty or  net profit                                                               
share  underpayments  and  overpayments;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - MOVED SB 77 OUT OF COMMITTEE                                                                                             
                                                                                                                                
HOUSE BILL NO. 206                                                                                                              
"An Act  relating to a vessel-based  commercial fisheries limited                                                               
entry system,  to management  of offshore  fisheries, and  to the                                                               
definition of  'person' for purposes of  the commercial fisheries                                                               
entry program; and providing for an effective date."                                                                            
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
HOUSE CONCURRENT RESOLUTION NO. 8                                                                                               
Expressing   the  legislature's   opposition   to  the   proposed                                                               
"northern" or "over-the-top" route for  a natural gas pipeline to                                                               
transport North Slope natural gas  reserves to the domestic North                                                               
American  market, and  expressing  the  legislature's support  of                                                               
commercialization  of North  Slope  natural gas  for the  maximum                                                               
benefit of the people of the state.                                                                                             
                                                                                                                                
     - MOVED CSHCR 8(RES) OUT OF COMMITTEE                                                                                      
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                              
BILL: SB 77                                                                                                                   
SHORT TITLE:NET PROFIT SHARE UNDER/OVERPAYMENTS                                                                                 
SPONSOR(S): SENATOR(S) TORGERSON                                                                                                
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
02/08/01     0309       (S)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
02/08/01     0309       (S)        RES, FIN                                                                                     
02/21/01                (S)        RES AT 3:30 PM BUTROVICH 205                                                                 
02/21/01                (S)        Moved Out of Committee                                                                       
02/21/01                (S)        MINUTE(RES)                                                                                  
02/22/01     0467       (S)        RES RPT 6DP                                                                                  
02/22/01     0467       (S)        DP: TORGERSON, PEARCE,                                                                       
                                   TAYLOR, KELLY,                                                                               
02/22/01     0467       (S)        LINCOLN, ELTON                                                                               
02/22/01     0467       (S)        FN1: ZERO(DNR)                                                                               
02/28/01                (S)        FIN AT 9:00 AM SENATE FINANCE                                                                
                                   532                                                                                          
03/13/01     0633       (S)        FIN RPT 9DP                                                                                  
03/13/01     0633       (S)        DP: DONLEY, KELLY, GREEN,                                                                    
                                   AUSTERMAN,                                                                                   
03/13/01     0633       (S)        HOFFMAN, OLSON, WILKEN,                                                                      
                                   LEMAN, WARD                                                                                  
03/13/01     0633       (S)        FN1: ZERO(DNR)                                                                               
03/13/01                (S)        FIN AT 9:45 AM SENATE FINANCE                                                                
                                   532                                                                                          
03/13/01                (S)        Moved Out of Committee                                                                       
03/13/01                (S)        MINUTE(FIN)                                                                                  
03/19/01     0716       (S)        RULES TO CALENDAR 3/19/01                                                                    
03/19/01     0718       (S)        READ THE SECOND TIME                                                                         
03/19/01     0718       (S)        ADVANCED TO THIRD READING                                                                    
                                   UNAN CONSENT                                                                                 
03/19/01     0718       (S)        READ THE THIRD TIME SB 77                                                                    
03/19/01     0718       (S)        PASSED Y20 N-                                                                                
03/19/01     0718       (S)        EFFECTIVE DATE(S) SAME AS                                                                    
                                   PASSAGE                                                                                      
03/19/01     0720       (S)        TRANSMITTED TO (H)                                                                           
03/19/01     0720       (S)        VERSION: SB 77                                                                               
03/19/01                (S)        RLS AT 10:45 AM FAHRENKAMP                                                                   
                                   203                                                                                          
03/19/01                (S)        MINUTE(RLS)                                                                                  
03/20/01     0660       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/20/01     0660       (H)        RES, FIN                                                                                     
04/04/01                (H)        RES AT 1:00 PM CAPITOL 124                                                                   
                                                                                                                                
BILL: HB 206                                                                                                                  
SHORT TITLE:VESSEL LIMITED ENTRY FOR COMM. FISHERIES                                                                            
SPONSOR(S): RESOURCES                                                                                                           
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/22/01     0691       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/22/01     0691       (H)        FSH, RES                                                                                     
04/02/01                (H)        FSH AT 5:00 PM CAPITOL 124                                                                   
04/02/01                (H)        Moved Out of Committee                                                                       
                                   MINUTE(FSH)                                                                                  
04/03/01     0826       (H)        FSH RPT 2DP 4NR                                                                              
04/03/01     0827       (H)        DP: SCALZI, WILSON; NR:                                                                      
                                   DYSON,                                                                                       
04/03/01     0827       (H)        COGHILL, KERTTULA, STEVENS                                                                   
04/03/01     0827       (H)        FN1: ZERO(DFG)                                                                               
04/03/01     0827       (H)        REFERRED TO RESOURCES                                                                        
04/04/01                (H)        RES AT 1:00 PM CAPITOL 124                                                                   
                                                                                                                                
BILL: HCR 8                                                                                                                   
SHORT TITLE:NORTH SLOPE NATURAL GAS PIPELINE ROUTING                                                                            
SPONSOR(S): REPRESENTATIVE(S)WHITAKER                                                                                           
                                                                                                                                
Jrn-Date   Jrn-Page                     Action                                                                                  
03/16/01     0625       (H)        READ THE FIRST TIME -                                                                        
                                   REFERRALS                                                                                    
03/16/01     0625       (H)        O&G, RES                                                                                     
03/28/01                (H)        O&G AT 3:00 PM CAPITOL 124                                                                   
03/28/01                (H)        Moved CSHCR 8(O&G) Out of                                                                    
                                   Committee                                                                                    
                                   MINUTE(O&G)                                                                                  
03/30/01     0785       (H)        O&G RPT CS(O&G) 4DP 1DNP 1NR                                                                 
03/30/01     0786       (H)        DP: FATE, GUESS, DYSON, OGAN;                                                                
03/30/01     0786       (H)        DNP: KOHRING; NR: CHENAULT                                                                   
03/30/01     0786       (H)        FN1: ZERO(H.O&G)                                                                             
04/04/01                (H)        RES AT 1:00 PM CAPITOL 124                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                              
DARWIN PETERSON, Staff                                                                                                          
to Senator John Torgerson                                                                                                       
Alaska State Legislature                                                                                                        
Capitol Building, Room 427                                                                                                      
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Presented SB 77 on behalf of the sponsor.                                                                  
                                                                                                                                
BILL VAN DYKE, Lease Administration/Royalty                                                                                     
Division of Oil & Gas                                                                                                           
Department of Natural Resources                                                                                                 
550 West 7th Avenue, Suite 800                                                                                                  
Anchorage, Alaska  99501-3560                                                                                                   
POSITION STATEMENT:  Answered question relating to SB 77.                                                                       
                                                                                                                                
MARY McDOWELL, Commissioner                                                                                                     
Commercial Fisheries Entry Commission                                                                                           
Alaska Department of Fish & Game                                                                                                
8800 Glacier Highway, Suite 109                                                                                                 
Juneau, Alaska  99801-8079                                                                                                      
POSITION STATEMENT:  Answered questions regarding HB 206.                                                                       
                                                                                                                                
KURT O. SCHELLE, Research & Planning Project Leader                                                                             
Commercial Fisheries Entry Commission                                                                                           
Department of Fish & Game                                                                                                       
8800 Glacier Highway, Suite 109                                                                                                 
Juneau, Alaska  99801-8079                                                                                                      
POSITION STATEMENT:  Clarified language of HB 206.                                                                              
                                                                                                                                
JOE MACINKO                                                                                                                     
2625 Spruce Cape Road                                                                                                           
Kodiak, Alaska  99615                                                                                                           
POSITION STATEMENT:  Testified on HB 206.                                                                                       
                                                                                                                                
CHRIS BERNS                                                                                                                     
PO Box 26                                                                                                                       
Kodiak, Alaska  99615-0026                                                                                                      
POSITION STATEMENT:  Testified on HB 206.                                                                                       
                                                                                                                                
PAUL SEATON                                                                                                                     
58395 Bruce Street                                                                                                              
Homer, Alaska  99603                                                                                                            
POSITION STATEMENT:  Spoke in opposition to HB 206.                                                                             
                                                                                                                                
JOHN WINTHER (ph)                                                                                                               
(No address provided)                                                                                                           
Homer, Alaska                                                                                                                   
POSITION STATEMENT:  Spoke in support of HB 206.                                                                                
                                                                                                                                
JOE KYLE                                                                                                                        
234 Gold Street                                                                                                                 
Juneau, Alaska  99801                                                                                                           
POSITION STATEMENT:   Spoke  in support  of HB  206 on  behalf of                                                               
Korean hair crab fishery vessel owners.                                                                                         
                                                                                                                                
EDWARD C. FURMAN                                                                                                                
(No address provided)                                                                                                           
POSITION  STATEMENT:    Spoke  on  behalf  of  the  fishermen  of                                                               
Cordova, in opposition to HB 206.                                                                                               
                                                                                                                                
REPRESENTATIVE JIM WHITAKER                                                                                                     
Alaska State Legislature                                                                                                        
Capitol Building, Room                                                                                                          
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Testified as the sponsor of HCR 8.                                                                         
                                                                                                                                
MICHAEL J. HURLEY                                                                                                               
Government Relations                                                                                                            
North American Natural Gas Pipeline Group                                                                                       
601 West 5th Avenue, Suite 500                                                                                                  
Anchorage, Alaska 99501                                                                                                         
POSITION STATEMENT:  Testified on HCR 8.                                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-29, SIDE A                                                                                                              
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIR  BEVERLY  MASEK  called  the  House  Resources  Standing                                                               
Committee meeting  to order at  1:05 p.m.   Representatives Fate,                                                               
McGuire,  Chenault, Stevens,  Masek, and  Scalzi were  present at                                                               
the  call  to order.    Representative  Kerttula arrived  as  the                                                               
meeting was in progress.                                                                                                        
                                                                                                                                
SB 77-NET PROFIT SHARE UNDER/OVERPAYMENTS                                                                                     
                                                                                                                                
CO-CHAIR MASEK announced  that the first order  of business would                                                               
be  SENATE BILL  NO. 77,  "An  Act repealing  the exception  that                                                               
applies to collection and payment of  interest of $150 or less on                                                               
royalty or  net profit share underpayments  and overpayments; and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
Number 0135                                                                                                                     
                                                                                                                                
DARWIN PETERSON,  Staff to Senator  John Torgerson,  Alaska State                                                               
Legislature, came forth on behalf  of Senator Torgerson, sponsor,                                                               
to give  a brief overview  of SB 77.   He explained that  in 1998                                                               
the  legislature exempted  the  Department  of Natural  Resources                                                               
(DNR)  from   calculating  interest  on  small   overpayments  or                                                               
underpayments  of royalty,  if  the interest  was  $150 or  less.                                                               
Prior  to 1998,  these small  overpayments or  underpayments were                                                               
calculated  manually,  using  Excel  spreadsheets;  the  cost  of                                                               
manually  calculating the  payments  was more  than the  interest                                                               
received or the credit applied.                                                                                                 
                                                                                                                                
MR. PETERSON informed  members that with the state's  new oil and                                                               
gas  royalty  accounting  system,  interested owed  on  even  the                                                               
smallest  amount   is  calculated  electronically,   and  royalty                                                               
payments   are  sent   electronically.     Furthermore,  if   the                                                               
legislature does not  repeal the statute in  question, both [DNR]                                                               
and  the  payers  of  royalties would  have  to  reprogram  their                                                               
computer  systems to  not compute  underpayments or  overpayments                                                               
payments of  interest in the amount  of $150 or less;  that would                                                               
be  an unnecessary  expense for  all the  parties involved,  when                                                               
there is a much easier option available, such as [SB 77].                                                                       
                                                                                                                                
Number 0258                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK asked  Mr. Peterson  whether the  sponsor expects                                                               
there to  be a positive  fiscal note.   She asked how  much money                                                               
will be gained by passage of SB 77.                                                                                             
                                                                                                                                
MR.  PETERSON replied  that the  amount in  question is  minimal.                                                               
For the 12 months prior to  October 31, 2000, the state processed                                                               
1,716 royalty  filings with interest  amounts between  a negative                                                               
$150 and a  positive $150; the net gain was  $4,096 to the state.                                                               
He deferred  to the  DNR to  explain why  there isn't  a positive                                                               
$4,096 in the fiscal note.                                                                                                      
                                                                                                                                
BILL VAN  DYKE, Lease Administration/Royalty,  Division of  Oil &                                                               
Gas,  Department  of  Natural  Resources  (DNR),  testifying  via                                                               
teleconference,  noted that  Mark Meyers,  Director, Division  of                                                               
Oil & Gas, had asked him to fill  in for him and that Jim Stoffer                                                               
(ph), head  of royalty  accounting, was  with him.   He  said, as                                                               
aforementioned, the amounts of some  of the returns are negative,                                                               
while  some  are  positive.    Although  the  sample  size  taken                                                               
resulted in a  slightly positive number, the  same analysis taken                                                               
over more years  would produce results closer  to zero; sometimes                                                               
royalty  payers overpay,  and sometimes  they  underpay, but  the                                                               
number should average zero over a long enough time period.                                                                      
                                                                                                                                
Number 0475                                                                                                                     
                                                                                                                                
REPRESENTATIVE FATE moved  to report SB 77 out  of committee with                                                               
individual  recommendations  and  the accompanying  fiscal  note.                                                               
There  being no  objection,  SB 77  was moved  out  of the  House                                                               
Resources Standing Committee.                                                                                                   
                                                                                                                                
[Co-Chair Masek turned the gavel over to Co-Chair Scalzi.]                                                                      
                                                                                                                                
HB 206-VESSEL LIMITED ENTRY FOR COMM. FISHERIES                                                                               
                                                                                                                                
CO-CHAIR SCALZI announced  that the next order  of business would                                                               
be  HOUSE  BILL NO.  206,  "An  Act  relating to  a  vessel-based                                                               
commercial  fisheries  limited  entry system,  to  management  of                                                               
offshore  fisheries,  and  to  the  definition  of  'person'  for                                                               
purposes  of   the  commercial   fisheries  entry   program;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
CO-CHAIR  SCALZI mentioned  that HB  206 had  been heard  in [the                                                               
House Special  Committee on Fisheries,  on April 2,  2001], where                                                               
Paul Seaton, Alan Parks, and  Mako Haggerty testified against the                                                               
bill via  teleconference, at which  time Co-Chair  Scalzi invited                                                               
them  to submit  their  testimony in  writing.   Co-Chair  Scalzi                                                               
indicated Mr. Seaton's testimony was in the committee packet.                                                                   
                                                                                                                                
[There was a motion to adopt  HB 206 for discussion purposes, but                                                               
it was already before the committee.]                                                                                           
                                                                                                                                
CO-CHAIR  SCALZI,  speaking  on  behalf of  the  House  Resources                                                               
Standing Committee,  sponsor of  HB 206,  told listeners  that he                                                               
had  been asked  to submit  HB 206  on behalf  of the  Commercial                                                               
Fisheries  Entry  Commission  (CFEC),   at  the  request  of  the                                                               
legislature.  He  explained that a few years  ago the legislature                                                               
had  experienced  a  problem  with the  [Korean]  hair  crab  and                                                               
scallop  fisheries in  the  Bering  Sea.   He  mentioned a  limit                                                               
placed  on the  number of  fishing  vessels, as  well as  federal                                                               
moratoriums and state moratoriums that are about to expire.                                                                     
                                                                                                                                
CO-CHAIR SCALZI stated that in  order to enact a limitation plan,                                                               
Alaska's  current license  limitation  program  must be  altered.                                                               
Currently,  the CFEC's  license limitation  program designates  a                                                               
license to an  individual, rather than to a vessel.   Thus HB 206                                                               
will allow  the [CFEC]  to develop  a program  to "fix  a limited                                                               
license to a vessel."  Co-Chair Scalzi explained:                                                                               
                                                                                                                                
     Now, the  reason that they  want to do that  is because                                                                    
     if  they [use]  the traditional  method that  they have                                                                    
     now, a license would have  to go to every applicant who                                                                    
     was eligible, which  could mean if you had  four ... or                                                                    
     five skippers on  a vessel, each one  would be eligible                                                                    
     for a  ... limited entry  license.  And ...  that would                                                                    
     ...  change  the number  of  available  boats that  you                                                                    
     could have.   In  other words,  each skipper  could get                                                                    
     his own  boat, and  instead of having  10 boats  in the                                                                    
     fishery, you could have 40 boats in the fishery.                                                                           
                                                                                                                                
     So ... having  the ability to use this  tool and create                                                                    
     a license  limitation program that  is attached  to the                                                                    
     vessel  ... will  clearly limit  the  fishery to  those                                                                    
     vessels that  are permitted, currently, and  [that are]                                                                    
     under the moratorium.                                                                                                      
                                                                                                                                
CO-CHAIR SCALZI clarified that HB 206  by itself is not a license                                                               
limitation plan, but if passed,  would give [CFEC] the ability to                                                               
create one.                                                                                                                     
                                                                                                                                
Number 0935                                                                                                                     
                                                                                                                                
MARY   McDOWELL,   Commissioner,   Commercial   Fisheries   Entry                                                               
Commission,  Alaska  Department of  Fish  &  Game, explained  the                                                               
genesis of HB 206:                                                                                                              
                                                                                                                                
     The origins of  this bill ... came at the  time in 1996                                                                    
     when  the  legislature  placed [a]  moratorium  on  the                                                                    
     entry  of  new  vessels   into  the  Korean  hair  crab                                                                    
     fishery,  and then  they did  the same  thing with  the                                                                    
     weathervane scallop  fishery in 1997.   In implementing                                                                    
     the  moratorium   [on]  the  hair  crab   fishery,  the                                                                    
     legislature   directed   that   the  [CFEC]   and   the                                                                    
     Department  of Law  work together  to draft,  and bring                                                                    
     back  to   the  legislature,  legislation   creating  a                                                                    
     vessel-based limited  entry program that could  be used                                                                    
     in  fisheries   in  which  limitation   under  Alaska's                                                                    
     current  limited entry  program could  not achieve  the                                                                    
     purposes of the limited entry Act.                                                                                         
                                                                                                                                
MS.  McDOWELL  defined  those purposes  as  conservation  of  the                                                               
resource  and  protection  of  the   economic  viability  of  the                                                               
fishery.   She  emphasized  that HB  206 in  no  way changes  the                                                               
state's limited  entry program; it  just provides  an alternative                                                               
approach that would be available  to limit the few fisheries that                                                               
aren't  suited for  the method  of limitation  under the  current                                                               
program.  Ms.  McDowell pointed out that the  current program has                                                               
been in  effect for over  17 years, with  few changes made.   She                                                               
indicated that 63  fisheries have been limited  under the current                                                               
program.                                                                                                                        
                                                                                                                                
MS.  McDOWELL  described the  fisheries  suited  for the  current                                                               
limitation program  as having  small boats,  usually individually                                                               
owned  and  operated.   Under  that  program, the  limited  entry                                                               
permits  are  issued only  to  individual  human beings,  not  to                                                               
vessels,  partnerships,   or  companies.     She   said  [CFEC's]                                                               
challenge has been to create  a modified version of limited entry                                                               
to effectively  limit the  few fisheries that  have evolved  in a                                                               
much  different  way over  recent  years  - fisheries  that  have                                                               
ownership  and participation  patterns different  from the  model                                                               
upon  which the  current limited  entry  program is  based.   Ms.                                                               
McDowell  characterized those  fisheries as  having bigger,  more                                                               
expensive  vessels that  are owned  by partnerships  or companies                                                               
and that  fish further offshore.   Many  use hired skippers  - or                                                               
multiple,  successive skippers  to fish  throughout the  season -                                                               
who often have no ownership in the operation.                                                                                   
                                                                                                                                
MS. McDOWELL explained that limiting  fisheries under the current                                                               
program might  actually increase the number  of participants over                                                               
time, rather than  "cap it," thereby defeating  the whole purpose                                                               
of limitation and posing a risk  to the resource and the fishery.                                                               
At that point,  she said, the only remaining options  might be as                                                               
follows:   to close  the fishery entirely,  which would  mean the                                                               
loss  of harvesting  and  processing  jobs and  the  loss of  tax                                                               
revenues to the  state and local municipalities, or,  in the case                                                               
of  some  of these  larger-boat  fisheries,  to let  the  federal                                                               
government preempt  [CFEC's] management  and take  it over.   Ms.                                                               
McDowell continued:                                                                                                             
                                                                                                                                
     Even if  you could find  a feasible way to  provide for                                                                    
     the conservation  and the economic viability  under our                                                                    
     current  program,  in  those   fisheries  many  of  the                                                                    
     permits would be issued to  the hired skippers, who are                                                                    
     essentially  employees,  and  not  to  those  who  have                                                                    
     invested in the development of the fishery.                                                                                
                                                                                                                                
     So,  as  I  said,   the  legislature  recognized  these                                                                    
     problems and  the traits in  the hair crab  and scallop                                                                    
     fisheries  in  developing   the  moratorium  for  those                                                                    
     fisheries,  and, in  those  cases,  they developed  the                                                                    
     moratorium, based  on a vessel model.   The interim-use                                                                    
     permits, under  which those vessels operate  during [a]                                                                    
     moratorium,  are  issued  to  the  ...  owners  of  the                                                                    
     vessel,   rather  than   to  the   skippers  in   those                                                                    
     fisheries.                                                                                                                 
                                                                                                                                
MS. McDOWELL recalled that last  year the moratorium on hair crab                                                               
was about to expire and [CFEC]  didn't have a "tool in place," so                                                               
the  legislature opted  to  extend the  moratorium  on hair  crab                                                               
until 2003, and  on scallops until 2004, to allow  enough time to                                                               
look at developing  a tool for the long-term  for such fisheries.                                                               
She added  that [CFEC]  didn't want  to risk  the return  to open                                                               
access, which  could create an  influx of new  participants, many                                                               
from outside of Alaska, or risk the closure of those fisheries.                                                                 
                                                                                                                                
MS. McDOWELL  said HB 206  would provide  the tools to  deal with                                                               
those few  fisheries in  which an  alternative method  is needed;                                                               
the bill creates  a generic program, as  the legislature directed                                                               
the department  to do.   She stated  that currently the  only two                                                               
fisheries the department  can foresee using it in  would be those                                                               
for hair  crab and  scallops, but  it is  possible that  over the                                                               
years other fisheries will come  along for which the vessel-based                                                               
program wouldn't be a useful tool.                                                                                              
                                                                                                                                
MS. McDOWELL explained that the  bill establishes a framework for                                                               
this  vessel-based  program, similar  to  the  framework for  the                                                               
individual-based program that is in  our current statute.  It was                                                               
carefully  drafted to  preserve the  use of  the current  person-                                                               
based  program in  any fishery  in which  it could  work, and  to                                                               
adhere  to as  many  of the  goals and  purposes  of the  current                                                               
program as  would be  feasible "for  a program  like this."   She                                                               
told members:                                                                                                                   
                                                                                                                                
     I'll point out  a few of the important  features of the                                                                    
     bill  that are  aimed  at  accomplishing those  things:                                                                    
     First,  on page  2, lines  16-31, is  the criteria  for                                                                    
     when the  commission may use this  alternative program.                                                                    
     It's  tightly  constructed  to always  default  to  our                                                                    
     traditional person-based  limited entry, unless  we can                                                                    
     determine that  limitation under  a current  program is                                                                    
     not workable  - that you couldn't  achieve the purposes                                                                    
     of the limited entry Act by using that program.                                                                            
                                                                                                                                
     As  I  said, that  program  is  well designed  to  keep                                                                    
     fishing  privileges   in  the   hands  of   the  actual                                                                    
     participants, and  to avoid  absentee ownership  of our                                                                    
     fisheries,  and consolidation  of  ownership.   And  it                                                                    
     does  work well  to protect  the place  of Alaskans  in                                                                    
     their fisheries,  both at the time  of initial issuance                                                                    
     and  over  time,  while  still  passing  constitutional                                                                    
     muster.                                                                                                                    
                                                                                                                                
MS. McDOWELL reiterated that the  first section of the bill would                                                               
ensure  that  this alternative  program  would  only be  used  in                                                               
state-managed fisheries if the  current program "wouldn't achieve                                                               
purposes of  the Act."  She  added that CFEC could  also use this                                                               
program  in a  fishery that  is in  the waters  of the  exclusive                                                               
economic  zone (EEZ),  if  it  would help  gain  or retain  state                                                               
management of a fishery.  Ms. McDowell continued:                                                                               
                                                                                                                                
     Another important  feature in the  bill is what  can be                                                                    
     referred   to  as   "second  generation"   language  or                                                                    
     provisions that  start on page  6, line 8.   Under this                                                                    
     program,  the  permits  are  initially  issued  to  the                                                                    
     owners  of the  vessels  that qualify  at  the time  of                                                                    
     limitation, whether  the owners are  individual persons                                                                    
     or partnerships or companies or  any other entity.  But                                                                    
     under these  transfer provisions, when the  permits are                                                                    
     transferred, either  sold or given away,  they can only                                                                    
     be transferred  to an individual human  being, which is                                                                    
     the case in our current program.                                                                                           
                                                                                                                                
     The  bill provides  that the  transferee  - the  person                                                                    
     receiving the permit - must  hold an ownership interest                                                                    
     in the vessel and must  be onboard whenever that vessel                                                                    
     is fishing, as is the case in our current program.                                                                         
                                                                                                                                
     There's  one exception  to that  that's spelled  out in                                                                    
     subsection  (c),  which  would   be  where  an  initial                                                                    
     "issuee" -  even if  that is an  entity -  could obtain                                                                    
     another  permit to  use on  the  same vessel.   So  you                                                                    
     wouldn't  [have] to  buy up  additional vessels  in the                                                                    
     fishery.   But in  the case  of endorsements  where the                                                                    
     permits in  [a] given  fishery may qualify  for certain                                                                    
     species or areas, if someone  with one vessel wanted to                                                                    
     stack two permits for use on  one vessel in order to be                                                                    
     able to fish more species  in more areas, that would be                                                                    
     the one exception to the "must be a person" rule.                                                                          
                                                                                                                                
MS.    McDOWELL   mentioned    concern   expressed    about   the                                                               
enforceability  of the  provisions  regarding ownership  changes.                                                               
She noted that  a penalty section, starting on page  11, line 27,                                                               
states  that any  person or  entity who  provides, or  assists in                                                               
providing,   false  information   or  fails   to  correct   false                                                               
information to  the commission would be  liable for a fine  up to                                                               
$5,000 and  suspension or revocation  of all of  fishing permits.                                                               
She suggested  it would be a  disincentive for any kind  of lying                                                               
about a change of ownership, and  said the CFEC believes it would                                                               
be a "large deterrent to any kind of fraudulent information."                                                                   
                                                                                                                                
Number 1610                                                                                                                     
                                                                                                                                
MS. McDOWELL continued:                                                                                                         
                                                                                                                                
     In summary, I  would ... say that we think  the bill is                                                                    
     responsive  to  the  directive that  we  got  from  the                                                                    
     legislature  to   design  a  program  to   be  used  in                                                                    
     fisheries  where  the  current program  is  unworkable.                                                                    
     And it's pragmatic,  in that it recognizes  the need to                                                                    
     develop a  new tool for  meeting the evolving  needs in                                                                    
     our fisheries, but does so  in a very cautious way that                                                                    
     departs  from   our  current   program  as   little  as                                                                    
     possible.                                                                                                                  
                                                                                                                                
MS. McDOWELL said  this legislation would be the  first step; the                                                               
department  would be  still be  faced with  proposing limitations                                                               
for the specific  fisheries after passage of the bill.   She said                                                               
there would be a learning curve,  because this would be the first                                                               
time  a  program   like  this  has  been   used;  therefore,  the                                                               
department would  have a lot  of work  to do in  implementing the                                                               
program,  and working  with the  participants in  the fishery  to                                                               
make sure that the program was  well crafted to meet the needs of                                                               
the fisheries.   She told the committee members  that having this                                                               
enabling  legislation in  place  soon would  be  very helpful  in                                                               
creating a good,  workable program before the  moratoriums on the                                                               
hair crab and  scallop fisheries expire.   Ms. McDowell mentioned                                                               
that Kurt Schelle was available to answer questions.                                                                            
                                                                                                                                
Number 1689                                                                                                                     
                                                                                                                                
REPRESENTATIVE KERTTULA  asked Ms. McDowell to  clarify the issue                                                               
of second-generation licensing and how "a vessel can stack."                                                                    
                                                                                                                                
MS. McDOWELL answered:                                                                                                          
                                                                                                                                
     At the initial issuance,  entities besides human beings                                                                    
     could be issued  the permits if they were  the owner at                                                                    
     the time of limitation.   From then on, every time that                                                                    
     permit changes hands,  only a living human  being - who                                                                    
     must be  a participant in  the fishery and  onboard the                                                                    
     vessel  - can  obtain a  permit.   It ...  prevents the                                                                    
     idea  of  the  fishery  going  more  and  more  towards                                                                    
     absentee corporate  ownership, and [goes]  more towards                                                                    
     participant ownership.                                                                                                     
                                                                                                                                
MS.  McDOWELL reiterated  that the  exception would  be when  the                                                               
initial  issuee -  "whether a  permit or  an entity"  - wants  to                                                               
obtain another  permit to use,  on the  same vessel, in  order to                                                               
expand species, areas, and/or endorsements.                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA  requested  that  Ms.  McDowell  explain                                                               
CFEC's intent  behind the  language, found  on page  8, regarding                                                               
the   commission's  regulatory   stance   on  "concentration   of                                                               
ownership."  She  added that it is the only  language that "gives                                                               
authority back to the CFEC."                                                                                                    
                                                                                                                                
MS.  McDOWELL described  a "protection"  in the  original program                                                               
that limits permit  ownership to only one human  being, and which                                                               
limits  a human  being  from owning  more than  one  permit in  a                                                               
fishery.  The  bill allows the department to study  a fishery and                                                               
cap  the  ownership within  that  fishery.    She added  that  at                                                               
initial issuance, one  company might own a couple  of vessels and                                                               
might "grandfather  in," but the  department would have a  cap so                                                               
those particular  companies could  not continue "buying  up" more                                                               
and more of the fishery.                                                                                                        
                                                                                                                                
REPRESENTATIVE  KERTTULA stated  her  [understanding] that  those                                                               
hypothetical companies  would not, therefore, be  able to "stack"                                                               
all of the permits onto the vessels and control the fishery.                                                                    
                                                                                                                                
MS. McDOWELL concurred.                                                                                                         
                                                                                                                                
Number 1892                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI said he would ask  some of the questions posed by                                                               
Mr. Seaton  in the last  hearing.   Mr. Seaton had  addressed the                                                               
licensed limitation permit (LLP), which  is issued by the federal                                                               
government, and  had suggested adopting a  federal endorsement on                                                               
an LLP, rather than using the state permit process.                                                                             
                                                                                                                                
MS.  McDOWELL replied  that there  were several  issues involved.                                                               
She said the  [Korean] hair crab fishery is not  currently in any                                                               
federal management plan (FMP), but  is exclusively managed by the                                                               
state.   Ms. McDowell pointed out  that if the state  were to ask                                                               
the federal government  to manage the licensing  of that fishery,                                                               
it  would  be  giving  up   control  over  the  fishery  and  its                                                               
limitation program.   In the  scallop fishery,  her understanding                                                               
is that the federal government has  a FMP in federal waters only,                                                               
she added.  By  asking for an LLP, the state  would be asking the                                                               
federal  government  to  "preempt"   state  management  in  state                                                               
waters.  Ms.  McDowell expressed confusion over  why [Mr. Seaton]                                                               
would propose that,  because [fishermen] argue that  it is better                                                               
to have  fisheries in which  the participants are the  holders of                                                               
permits, and under the federal  program permits would go entirely                                                               
to entities.                                                                                                                    
                                                                                                                                
Number 2021                                                                                                                     
                                                                                                                                
KURT O.  SCHELLE, Research & Planning  Project Leader, Commercial                                                               
Fisheries Entry  Commission, Department  of Fish &  Game (ADF&G),                                                               
concurred with Ms. McDowell's statements.                                                                                       
                                                                                                                                
CO-CHAIR  SCALZI  explained  that  an LLP  is  a  federal  permit                                                               
whereby the  federal government puts  an endorsement on  a vessel                                                               
that fishes for  crab or groundfish in the Bering  Sea or Gulf of                                                               
Alaska  and is  qualified under  a moratorium.   Co-Chair  Scalzi                                                               
said,  "And this  is how  they manage  new entrants.   And  it is                                                               
dissimilar  from  what  the  state   does;  the  state  does  the                                                               
management of the crab fisheries in federal waters."                                                                            
                                                                                                                                
     Mr.  Seaton also  points  out  that there's  co-managed                                                                    
     fisheries in  the state,  such as  the ...  cod fishery                                                                    
     within   state  waters,   and   there's  also   federal                                                                    
     management [in]  federal waters.   They co-exist.   And                                                                    
     ...  there is  a  sablefish fishery  in Prince  William                                                                    
     Sound,  as  there is  a  federal  fishery, and  a  chad                                                                    
     fishery  also,  ...  with licensed  "permitation."    I                                                                    
     would just  point out that  those are  just co-managed.                                                                    
     It's  not that  you  are managing  one fishery;  you're                                                                    
     actually  managing  two.    So  that's  where  the  co-                                                                    
     management is.   In this case, we're  talking about the                                                                    
     state  managing  fisheries  in  federal  waters.    And                                                                    
     that's currently  the way  we do this,  and ...  it's a                                                                    
     little different  than what Mr. Seaton  pointed out; we                                                                    
     have two separate areas.                                                                                                   
                                                                                                                                
CO-CHAIR  SCALZI   made  reference   to  Mr.   Seaton's  comments                                                               
regarding AS  16.43.460, page  5, lines 3-6,  of the  bill, which                                                               
read:                                                                                                                           
                                                                                                                                
               (2)  the substitution of another vessel by                                                                       
     the  applicant for  a vessel  interim-use  permit or  a                                                                    
     vessel  entry permit  if the  vessel used  to establish                                                                    
     eligibility for  a vessel entry  permit is  lost before                                                                    
     the initial issuance  of a vessel entry  permit for the                                                                    
     vessel.                                                                                                                    
                                                                                                                                
CO-CHAIR SCALZI then  drew attention to Mr.  Seaton's comments on                                                               
page 2 of 3 in his letter, under "Article 6A."                                                                                  
                                                                                                                                
MS. McDOWELL  stated her  belief that the  section to  which [Mr.                                                               
Seaton's comments]  refer is "substitution  language" on  page 7.                                                               
She added that she thought  there was a misunderstanding, because                                                               
the vessel  permits will have restrictions  limiting capacity and                                                               
types  of  gear; therefore,  if  one  vessel is  substituted  for                                                               
another, the replacement  would have to be  consistent within the                                                               
range of what that permit  would allow.  Ms. McDowell paraphrased                                                               
from HB 206, page 7, lines 21-23, subsection (b), which read:                                                                   
                                                                                                                                
     A  substituted   vessel  and   the  operation   of  the                                                                    
     substituted  vessel  are  subject   to  all  terms  and                                                                    
     conditions attached  to the vessel entry  permit at the                                                                    
     time  that the  vessel permit  is transferred  from the                                                                    
     original vessel to the substituted vessel.                                                                                 
                                                                                                                                
Number 2210                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK inquired  whether  a person  whose vessel  breaks                                                               
down and  who owns  a permit  may use  another boat  and continue                                                               
fishing.                                                                                                                        
                                                                                                                                
MS. McDOWELL  replied that Co-Chair  Masek would find  the answer                                                               
in the  "substitution" language on page  7 of the bill,  where it                                                               
states  that  a person  in  that  situation  could apply  to  the                                                               
commission  for permission  to substitute  another vessel  in its                                                               
place.   In response to  a follow-up question by  Co-Chair Masek,                                                               
Ms. McDowell  called attention to  page 3 of the  bill, beginning                                                               
on line  16, which specifies that  if a fishery is  limited under                                                               
this program, there would be  capacity restrictions on the vessel                                                               
permit.   She asked Co-Chair  Masek if  she was referring  to how                                                               
the determination  would be made  as to whether [a  vessel] would                                                               
"fall under this program."                                                                                                      
                                                                                                                                
CO-CHAIR  MASEK asked  if it  would be  possible to  add a  size-                                                               
specification  into  the language  of  the  bill to  clarify  the                                                               
intent to  help the small-boat  owners in the  commercial fishing                                                               
industry.                                                                                                                       
                                                                                                                                
MS. McDOWELL reiterated that the  department would always default                                                               
to  its current  program in  the small-boat  fishery, whereby  it                                                               
issues the permit  to the vessel owner-operator.   The department                                                               
may  use the  vessel-based program,  however, in  a fishery  that                                                               
meets three criteria [subsection (a),  page 2, lines 16-24]:  the                                                               
fishery needs limitations; the purposes  of the limited entry Act                                                               
could  be met  by  using the  program; and  the  purposes of  the                                                               
limited entry Act could not be  met by using the existing program                                                               
[AS 16.43.140 - 16.43.330].                                                                                                     
                                                                                                                                
CO-CHAIR MASEK asked why, on page  9, Section 3, the language had                                                               
been changed to "a fishery" from "a scallop fishery".                                                                           
                                                                                                                                
Number 2415                                                                                                                     
                                                                                                                                
MR. SCHELLE  responded that the  only reason that language  is in                                                               
the  bill is  in  case there  are other  fisheries  to which  the                                                               
program would  be applicable in  the future.  He  speculated that                                                               
this  language  may  have  come  from  the  "scallop  moratorium"                                                               
language.                                                                                                                       
                                                                                                                                
MS.  McDOWELL asked  the House  Resources  Standing Committee  to                                                               
recall the debate  over the "Mr. Big" fishery that  wiped out the                                                               
scallop  fishery   resource  for   lack  of  a   federal  fishery                                                               
management  plan.   She said  she  believed that,  at that  time,                                                               
there was language  added - specific to the scallop  fishery - to                                                               
clarify that the state may assume  management of a fishery in the                                                               
absence of  a federal  management plan.   She explained  that the                                                               
proposed bill before the committee  broadens the language to say,                                                               
if a  similar situation arises again,  the state may step  in and                                                               
assume management.                                                                                                              
                                                                                                                                
CO-CHAIR  MASEK   asked  for  a  definition   of  "United  States                                                               
exclusive economic zone", found on page 2, line 27.                                                                             
                                                                                                                                
MS.  McDOWELL replied  that she  believes  the federal  exclusive                                                               
economic zone (EEZ) is 3 miles to 200 miles [off the coast].                                                                    
                                                                                                                                
Number 2505                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI specified  that all United States  waters fall in                                                               
that range.  He then opened public testimony.                                                                                   
                                                                                                                                
Number 2538                                                                                                                     
                                                                                                                                
JOE MACINKO, testifying via  teleconference, mentioned the "over-                                                               
investment" and  "over-capitalization" of all our  fisheries.  He                                                               
said if  people are rewarded  for doing what caused  the problem,                                                               
the problem won't go  away.  He asked why it  makes sense to give                                                               
permits to those who invest  their "tax-deferred" dollars, rather                                                               
than their  lives.  He said  he took exception to  Ms. McDowell's                                                               
comment  that  there is  no  way  to  track  entities.   He  said                                                               
individual human beings pass away,  but the "initial" corporation                                                               
never goes away.                                                                                                                
                                                                                                                                
[A  portion  of  Mr.  Macinko's  testimony was  cut  off  due  to                                                               
technical difficulties.]                                                                                                        
                                                                                                                                
MR. MACINKO asked the committee  to imagine the consequences, had                                                               
this bill been active at statehood.   He said the canneries owned                                                               
all the boats back then; therefore,  they would have owned all of                                                               
the permits.   He said he  didn't see any compelling  need to "go                                                               
down this  road" now.   Mr. Macinko  referred an  earlier comment                                                               
that if permits were given to  operators, there would be too many                                                               
boats  participating.   He indicated  that would  happen only  if                                                               
CFEC didn't make an "appropriate  qualification for permits."  He                                                               
added, "Some people qualify and some  people don't.  They come up                                                               
with an  optimum number, and if  [Ms. McDowell has] done  her job                                                               
well, there will be the  same number of participants, whether you                                                               
give them to individuals or entities."                                                                                          
                                                                                                                                
Number 2675                                                                                                                     
                                                                                                                                
CHRIS  BERNS, testifying  via teleconference,  declared that  [HB                                                               
206] "belongs  in the garbage can."   He stated that  the bill is                                                               
"the  will  of about  three  guys  [who]  are  pushing it."    He                                                               
explained  his view  that this  is a  special-interest bill  by a                                                               
handful of  participants.  In  the scallop fishery,  for example,                                                               
the  majority  of permits  will  go  to  one  company.   He  told                                                               
members:                                                                                                                        
                                                                                                                                
     You need  to investigate this as  a resource committee,                                                                    
     and understand  that this is  a severe policy  shift by                                                                    
     the  State  of  Alaska.    It's  not  coming  from  the                                                                    
     majority of  the people  of Alaska  or the  majority of                                                                    
     the fishermen  out of  Alaska.   It's only  coming from                                                                    
     about three  or four people  who have some  highly paid                                                                    
     lobbyists [who]  have been beating doors  in Juneau and                                                                    
     elsewhere -  about six years,  as far as I  can recall.                                                                    
     ...                                                                                                                        
                                                                                                                                
     If the owners of the  boat [had been given the permits]                                                                    
     when  the original  limited entry  for salmon  was, ...                                                                    
     the canneries would  own the majority of  the rights to                                                                    
     harvest  salmon  right now.    And  that was  the  main                                                                    
     reason  you  have  points  for  residency,  points  for                                                                    
     participation.    And  through the  point  system,  the                                                                    
     actual people  that were operating the  boat and making                                                                    
     a living and  taking the risk and  taking the financial                                                                    
     risk  got   the  permits,  and  the   majority  of  the                                                                    
     (indisc.)  permits  in Alaska  now  are  held by  state                                                                    
     residents.  The  majority of these, if you  look at the                                                                    
     ownership of  the vessels in  these fisheries,  I think                                                                    
     you'll find  that most  of these  guys are  residing in                                                                    
     Palm  Springs,  or  Washington,  or  they're  basically                                                                    
     nonresidents.                                                                                                              
                                                                                                                                
     So, I think that  this resource committee should really                                                                    
     investigate  what this  is going  to do  to change  how                                                                    
     fisheries  are  limited.   And  it's  not going  to  do                                                                    
     anything for  the conservation of  the fisheries.   And                                                                    
     ...  the biological  conservation  could be  done in  a                                                                    
     number  of ways  that don't  have anything  to do  with                                                                    
     giving one company half the scallop fishery industry.                                                                      
                                                                                                                                
MR. BERNS concluded by urging members  to look at a letter to the                                                               
editor by Barney  Olson (ph) and at  "Rationalization, Who Wins?"                                                               
on page 8 of the "2001 yearbook" of Pacific Fishing magazine.                                                                 
                                                                                                                                
Number 2889                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI asked Mr. Berns if  he was in favor of the status                                                               
quo and open access "in that fishery."                                                                                          
                                                                                                                                
MR. BERNS said no, but began to qualify his answer.                                                                             
                                                                                                                                
CO-CHAIR SCALZI,  in the interest  of time, invited Mr.  Berns to                                                               
submit any further testimony in writing.                                                                                        
                                                                                                                                
Number 2935                                                                                                                     
                                                                                                                                
PAUL SEATON testified by teleconference  in opposition to HB 206,                                                               
indicating  he  would  clarify  points  on  previously  submitted                                                               
written testimony [included in the  bill packet].  First, he said                                                               
the oldest  crab fishery  in the  Bering Sea  is under  a federal                                                               
license limitation  program, and although that  LLP could require                                                               
endorsements for specific species,  it is not required presently.                                                               
He specified  that right now  the crab fishery allows  fishing of                                                               
any  crab; however,  there is  a moratorium  on "this  one."   He                                                               
added:                                                                                                                          
                                                                                                                                
     This is basically a federal  fishery, and I hate to see                                                                    
     us  change   the  entire   philosophy  of   the  state,                                                                    
     empowering  fishermen, and  going to  this vessel-owner                                                                    
     section for  something that  can be  accomplished under                                                                    
     the current LLP of the [federal government].                                                                               
                                                                                                                                
MR.  SEATON disputed  a previous  statement  that the  small-boat                                                               
fisheries are  all owner-operated.   He said the  primary fishery                                                               
to be impacted  by this bill would be the  [Pacific] cod fishery,                                                               
which is managed in state waters.                                                                                               
                                                                                                                                
TAPE 01-29, SIDE B                                                                                                              
Number 2995                                                                                                                     
                                                                                                                                
MR.  SEATON  mentioned  specific  boat  names,  and  stated  that                                                               
probably  80 to  90 percent  of the  entire harvest  in the  Cook                                                               
Inlet area  is fished  by operators  other than  the owners.   He                                                               
said  the percentage  of  nonowner-operated  vessels is  probably                                                               
greater than  that in  the Sand  Point cod  fishery.   Mr. Seaton                                                               
continued:                                                                                                                      
                                                                                                                                
     If this bill was implemented,  I can very quickly see a                                                                    
     move by people to petition  to have limited entry in to                                                                    
     these  fisheries  -  which are  functioning  just  fine                                                                    
     right  now -  and turn  them into  ... much  more of  a                                                                    
     (indisc.)  fishery,  especially   out  at  Sand  Point,                                                                    
     because  once you  have the  limited  entry system  out                                                                    
     there, then  there wouldn't be any  reason for limiting                                                                    
     the number of gear.                                                                                                        
                                                                                                                                
     The whole idea of the  Board of Fisheries in developing                                                                    
     this  entire  fishery  was   to  give  a  long-duration                                                                    
     fishery that would supply fish  to our communities over                                                                    
     [a]  long period  of time.   I  think that  this [bill]                                                                    
     will undermine that.                                                                                                       
                                                                                                                                
     The state-water  sablefish fishery  is not  the limited                                                                    
     access  fisheries that  we're talking  about in  Prince                                                                    
     William Sound  and Chatham Strait.   We have  two open-                                                                    
     access sablefish fisheries that occur:   one of them in                                                                    
     the  North  Gulf  Coast,  that   operates  on  its  own                                                                    
     guideline harvest - it's open  right now to state-water                                                                    
     fishermen  - and  we  have  the Aleutian  Island/Bering                                                                    
     Sea, which  has its  own (indisc.) -  which is  not the                                                                    
     IFQ  [individual fishery  quota] fishery  that operates                                                                    
     and is totally manageable. ...                                                                                             
                                                                                                                                
     Having these "coincident" fisheries  does not mean that                                                                    
     they are  unmanageable.  And  so, again, under  the LLP                                                                    
     program, ... crab  is limited; you have to  have an LLP                                                                    
     to  fish crab  in  the  Bering Sea.    If  they put  an                                                                    
     endorsement on that ... for  hair crab, that would take                                                                    
     care of their problem.                                                                                                     
                                                                                                                                
     I see severe  ramifications of this in  future CFEC ...                                                                    
     limited entry programs,  and we're going to  have a big                                                                    
     fight  between vessel  owners  and  fishermen when  ...                                                                    
     these  programs come  out.   And  CFEC is  going to  be                                                                    
     caught  in  the  middle,  trying to  make  a  political                                                                    
     decision  as  to  whether,   "Well,  does  this  really                                                                    
     constitute  an  owner-operator  fleet  or  a  nonowner-                                                                    
     operated fleet,  and does that  base on  the percentage                                                                    
     of the catch or on the number of the vessels?"                                                                             
                                                                                                                                
     This  dual  system  here  is  going  to  create  severe                                                                    
     problems within  communities in the future,  when we go                                                                    
     to any new limited entry systems in the state waters.                                                                      
                                                                                                                                
Number 2839                                                                                                                     
                                                                                                                                
JOHN  WINTHER (ph),  testifying  via  teleconference, stated  his                                                               
support  of  HB 206.    He  said,  contrary to  previously  heard                                                               
testimony,  he  does  not  think  "we" will  be  covered  by  LLP                                                               
endorsement.   He  mentioned the  methods of  catcher-processors.                                                               
He discussed the steps that would  be taken to sell his own boat,                                                               
including how  the license  would have  to be  passed on  with an                                                               
individual,  not with  the  vessel.   He  addressed Mr.  Seaton's                                                               
concerns  regarding  the  cod fishery,  owners  of  vessels,  and                                                               
different skippers.  He said he  sees [HB 206] as an opportunity,                                                               
"in that case,"  for ships to remain in the  state.  He mentioned                                                               
multiple skippers  on the  vessels that  have fished  through the                                                               
three- or four-year qualifying period.                                                                                          
                                                                                                                                
Number 2631                                                                                                                     
                                                                                                                                
JOE KYLE testified in support of  HB 206 on behalf of Korean hair                                                               
crab  fishery   vessel  owners.     He   indicated  he   was  not                                                               
representing the scallop fishery.  He said:                                                                                     
                                                                                                                                
     To my  knowledge, there's no  one working on  this bill                                                                    
     from  the   scallop  fishery,  primarily   because  the                                                                    
     scallop  fishery  limited   entry  problem  was  mainly                                                                    
     addressed  by the  "feds," because  there is  a federal                                                                    
     management  plan for  the scallop  fishery, and  so the                                                                    
     "feds" could limit entry there.                                                                                            
                                                                                                                                
     I  also  want  to  add that  I'm  the  chief  operating                                                                    
     officer  of  one  of  the  CDQ  [Community  Development                                                                    
     Quota] companies  that encompasses the  Aleutian Island                                                                    
     regions, and [am] intimately  involved in the fisheries                                                                    
     from a  management perspective.   Also, I was  a voting                                                                    
     member of the North  Pacific Fishery Management Council                                                                    
     (NPFMC) - Governor Knowles' nominee. ...                                                                                   
                                                                                                                                
     I appreciate  the philosophical  concerns that  the two                                                                    
     gentlemen from  Kodiak and Paul Seaton  from Homer have                                                                    
     mentioned, but  right now there  is no  federal fishery                                                                    
     management  plan  for  the Korean  hair  crab  fishery.                                                                    
     Paul is just  wrong that they can go to  the "feds" and                                                                    
     get  a license  limitation endorsement  - that  is just                                                                    
     wrong.   And I'll be happy  to talk with Paul  about it                                                                    
     offline.                                                                                                                   
                                                                                                                                
     But what will happen ,if  this bill does not eventually                                                                    
     pass, is that the participants  in the Korean hair crab                                                                    
     fishery  will  go  to  the   "feds"  and  seek  federal                                                                    
     management  of  the  fishery in  lieu  of  the  current                                                                    
     ability that the state has to manage the fishery.                                                                          
                                                                                                                                
     To me,  what this  bill does, is  it gives  the limited                                                                    
     entry commission  the opportunity to have  another tool                                                                    
     to  manage   fisheries.    The  major   crisis  in  all                                                                    
     fisheries  is  over-capitalization, over-capacity,  too                                                                    
     many boats in the fisheries.                                                                                               
                                                                                                                                
     The  state has  the ability,  if this  bill passes,  to                                                                    
     manage  this  fishery.    And  I  would  just  ask  the                                                                    
     committee members  to think that there  are Alaskans in                                                                    
     these fisheries.   The Korean  hair crab fishery  has a                                                                    
     CDQ vessel in  it, jointly owned by a CDQ  group out of                                                                    
     St. Paul, with a gentleman from Sitka.                                                                                     
                                                                                                                                
     And  I  would  personally rather  have  the  Commercial                                                                    
     Fisheries Entry  Commission decide  who can be  in that                                                                    
     fishery,   rather  than   the  North   Pacific  Fishery                                                                    
     Management Council,  which has members from  Oregon and                                                                    
     Washington  and  the  federal government,  as  well  as                                                                    
     Alaska.   [If] you  pass this  bill, you  give Alaskans                                                                    
     the  ability to  dictate and  determine who  can be  in                                                                    
     this fishery.  If you  don't, the "feds" will determine                                                                    
     that.                                                                                                                      
                                                                                                                                
Number 2483                                                                                                                     
                                                                                                                                
     The other  thing that  I would like  to ...  mention is                                                                    
     that  the people  testifying against  the  bill, I  ...                                                                    
     really don't  hear - and  I really didn't hear  them in                                                                    
     [the   House   Special   Committee  on   Fisheries]   -                                                                    
     testifying  against limiting  the entry  in the  Korean                                                                    
     hair  crab  fishery.    I hear  it  more  that  they're                                                                    
     worried about  how the entry  commission may use  it in                                                                    
     other fisheries.                                                                                                           
                                                                                                                                
     I know Commissioner McDowell and  the staff have worked                                                                    
     for years to try to figure  out how to get this bill to                                                                    
     a point  where it can  only rarely be used,  and before                                                                    
     they can  use it,  they have to  first find  that their                                                                    
     traditional way of  limiting entry will not  work.  And                                                                    
     right now ... there's only  two fisheries that they can                                                                    
     even  foresee, and  really the  scallop fishery  in not                                                                    
     even  an issue  anymore because  the "feds"  have taken                                                                    
     most of that  problem away.  The only one  you ... have                                                                    
     is this  Korean hair  crab fishery.   ... If  you don't                                                                    
     limit the entry [and] give  the commission the tools to                                                                    
     limit the  entry into  it, the  "feds" will  [limit the                                                                    
     entry].    So,  I  just  ask you  to  please  give  the                                                                    
     commission the tool they are seeking.                                                                                      
                                                                                                                                
     I  would  just  close  by saying  I  know  Commissioner                                                                    
     McDowell  comes  from  a  small-boat,  coastal  Alaskan                                                                    
     background, and  I know she's very  personally familiar                                                                    
     with the  philosophical issues  that we  hear addressed                                                                    
     here.   And  she has  tried to  craft a  bill with  the                                                                    
     staff  that  addresses   those  concerns,  while  still                                                                    
     giving the  practical ability  for the  state to  use a                                                                    
     different program than it normally  uses, in these very                                                                    
     rare fisheries.                                                                                                            
                                                                                                                                
MR. KYLE urged the House Resources Standing Committee to support                                                                
HB 206.                                                                                                                         
                                                                                                                                
Number 2379                                                                                                                     
                                                                                                                                
EDWARD C. FURMAN testified briefly in opposition to HB 206.  He                                                                 
said, "The fishermen from Cordova, Alaska, are against this                                                                     
bill.  That's all I have to say."                                                                                               
                                                                                                                                
Number 2351                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK referred to page 2, lines 22-24.  She asked Ms.                                                                  
McDowell about a guarantee that would protect the smaller owner-                                                                
operator fishery.                                                                                                               
                                                                                                                                
MS. McDOWELL  replied that it was  true this issue would  be left                                                               
to  the  CFEC   to  determine.    She   detailed  the  categories                                                               
considered  before any  limitation is  decided upon:   usually  a                                                               
petition  process;  data  analysis  done by  research  and  data-                                                               
processing staff;  a decision  about what program  to use;  and a                                                               
full analysis of ownership patterns.   She said, "In a case where                                                               
we could meet  the purposes of limited entry Act,  based on those                                                               
ownership patterns, we would need to default to this."                                                                          
                                                                                                                                
MS. McDOWELL  mentioned a point  system used to  rank applicants,                                                               
but added that  the dilemma with the current program  is that the                                                               
department is  bound to  create a  "maximum number,"  which means                                                               
that the number of permits that  must be issued in a fishery must                                                               
be set.   Ms. McDowell stated, "The supreme court  has ruled that                                                               
we must  issue permits to  the highest number of  participants in                                                               
any one of the four years prior to a limitation."  She added:                                                                   
                                                                                                                                
     Yes, we could use a  point system to rank those people,                                                                    
     but if the number of permits  that you have to hand out                                                                    
     is much larger than the  number of boats that have been                                                                    
     participating, that's where you  start to run into this                                                                    
     problem of  "grandfathering" in more  participants than                                                                    
     you  had at  the time  of limitation.  ... If  we could                                                                    
     limit with  a number  that would  meet the  purposes of                                                                    
     limited entry  Act, using  our traditional  program, we                                                                    
     would feel bound by this statute to do that.                                                                               
                                                                                                                                
Number 2175                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  mentioned the  zero fiscal  note attached  to the                                                               
bill, but  asked Ms. McDowell if  this would add any  cost to the                                                               
limited commercial fishing industry or the CFEC.                                                                                
                                                                                                                                
MS. McDOWELL  responded, "It wouldn't,  in that this  is enabling                                                               
legislation  that just  creates  another framework,  and for  any                                                               
fishery that petitions us for limited  entry, we would have to go                                                               
through the same process either way."                                                                                           
                                                                                                                                
CO-CHAIR  MASEK  referred  to  previous  comments  about  scallop                                                               
permits going to  a large company, and asked if  it would require                                                               
investigation "if that is happening."                                                                                           
                                                                                                                                
MS. McDOWELL  answered that  the risk that  one company  will buy                                                               
many  permits  is  [addressed] by  the  provisions  allowing  the                                                               
department to cap how many permits  in a given fishery any single                                                               
entity could obtain.   A permit has to be  renewed every year, so                                                               
if  shareholders or  partners change,  that  change of  ownership                                                               
would have to  be reported, for each year, and  could trigger the                                                               
need to transfer it to a human  being.  She said she thought that                                                               
although some details  would need to be worked  out, the language                                                               
of the bill provides protection to avoid consolidation.                                                                         
                                                                                                                                
CO-CHAIR MASEK  inquired how much  a scallop or Korean  hair crab                                                               
boat costs.                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI estimated $600,000 to $1.5 million.                                                                             
                                                                                                                                
MR. KYLE  said he didn't have  an answer regarding the  cost of a                                                               
scallop  boat, but  a  crab  boat runs  between  $600,000 and  $1                                                               
million.                                                                                                                        
                                                                                                                                
CO-CHAIR MASEK asked what percentage  of owner-operators are sole                                                               
owners, versus large corporate owners.                                                                                          
                                                                                                                                
MS. McDOWELL  responded that  according to  her records  "most of                                                               
them are owned  by partnerships."  She added that  only about ten                                                               
vessels  qualified under  the  moratorium  for scallops;  however                                                               
there are  people outside  the state  interested in  getting into                                                               
these fisheries,  if they should  "go open-access."   In response                                                               
to a  follow-up remark  by Co-Chair  Masek, Ms.  McDowell stated,                                                               
"In these fisheries,  there are no smaller vessels.   This is ...                                                               
the whole ...state-water scallop fishery."                                                                                      
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
CO-CHAIR SCALZI announced that HB 206 be held over.                                                                             
                                                                                                                                
[Co-Chair Scalzi called  a brief at-ease at 2:17  p.m. and turned                                                               
the gavel  over to Co-Chair  Masek, who brought the  meeting back                                                               
to order at 2:28 p.m.]                                                                                                          
                                                                                                                                
HCR 8-NORTH SLOPE NATURAL GAS PIPELINE ROUTING                                                                                
                                                                                                                                
Number 1877                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  announced that the  next order of  business would                                                               
be   HOUSE   CONCURRENT   RESOLUTION  NO.   8,   Expressing   the                                                               
legislature's  opposition to  the proposed  "northern" or  "over-                                                               
the-top"  route for  a natural  gas pipeline  to transport  North                                                               
Slope  natural  gas  reserves  to  the  domestic  North  American                                                               
market,   and    expressing   the   legislature's    support   of                                                               
commercialization  of North  Slope  natural gas  for the  maximum                                                               
benefit of the people of the state.                                                                                             
                                                                                                                                
[There  was  a  motion  to  adopt  CSHCR  8(O&G)  for  discussion                                                               
purposes, but it was already before the committee.]                                                                             
                                                                                                                                
Number 1825                                                                                                                     
                                                                                                                                
REPRESENTATIVE JIM  WHITAKER, Alaska State  Legislature, sponsor,                                                               
told members that HCR 8  is a special-interest resolution for the                                                               
people of Alaska.   Furthermore, the resolution  does not compete                                                               
with  SB  164, but  stands  alone  as  a resolution  that  states                                                               
clearly that  "the legislature  opposes a  so-called over-the-top                                                               
routing for  a natural  gas pipeline,"  and that  the legislature                                                               
will do  all that is  within its  power to encourage  natural gas                                                               
commercialization  "in  a  manner  consistent  with  our  maximum                                                               
benefit constitutional mandate."                                                                                                
                                                                                                                                
REPRESENTATIVE WHITAKER gave a  PowerPoint presentation, which he                                                               
explained was  the result of  consideration, over  several years,                                                               
of the subject of  natural gas and what it means  to the State of                                                               
Alaska.  [A  written copy of the presentation is  included in the                                                               
committee packet.]                                                                                                              
REPRESENTATIVE  WHITAKER  showed  the first  PowerPoint  "slide,"                                                               
titled "Natural Gas  in Alaska:  What does It  Mean to the People                                                               
of the  State?"   He told  the committee  that natural  gas means                                                               
$680   million  to   $4.2  billion   to  the   state  per   year;                                                               
significantly  lower energy  costs  for all  Alaskans; and  major                                                               
direct and  indirect employment  opportunities for  all Alaskans,                                                               
"if  we  demand  that  our  resource be  developed  in  our  best                                                               
interest."                                                                                                                      
                                                                                                                                
REPRESENTATIVE  WHITAKER  referred  to   charts  provided  by  BP                                                               
[Exploration (Alaska) Inc.].   He said between 1985  and 1998 the                                                               
use of natural gas for  home heating had increased substantially,                                                               
to  70 percent.    Even  though heating  use  has decreased  from                                                               
electrical generation,  other uses have  significantly increased;                                                               
therefore,  use of  natural gas  has  dramatically increased  for                                                               
generating  electricity.   Gas  and  oil  [uses] are  increasing,                                                               
while coal [use] is declining, but gas  is at the top of the "new                                                               
energy mix."                                                                                                                    
                                                                                                                                
REPRESENTATIVE WHITAKER indicated on a  chart that natural gas is                                                               
"clean  and  green," and  he  compared  the differential  between                                                               
waste products associated  with coal versus gas.   Natural gas is                                                               
also significantly less of an  air pollutant, compared to oil and                                                               
coal.  He added, "the demand for natural gas is soaring."                                                                       
                                                                                                                                
REPRESENTATIVE  WHITAKER referred  to  a chart  titled "Supply  &                                                               
Demand  For North  America"  that depicts  a  "demand curve"  for                                                               
natural  gas in  North America,  conservatively projected  by the                                                               
Energy  Information  Administration.     Representative  Whitaker                                                               
indicated a  special additional supply  expected from  Mexico and                                                               
the Rocky  Mountain area, as  well as the Mackenzie  delta supply                                                               
and gas  from an Alaskan pipeline  project.  Based upon  the best                                                               
information available  today, he  concluded that the  demand [for                                                               
natural gas] exceeds the supply.                                                                                                
                                                                                                                                
REPRESENTATIVE  WHITAKER   highlighted  another   chart  entitled                                                               
"Supply  &  Demand  For The  Pacific  Rim,"  showing  "contracted                                                               
supply volume"  and "contracted supply extension."   He mentioned                                                               
an Alaskan  LNG [liquefied natural  gas] project scheduled  to go                                                               
online in 2007 and a Sakhalin  LNG project scheduled to go online                                                               
[by  approximately 2004].   Representative  Whitaker stated  that                                                               
given  a  low  demand,  supply exceeds  demand;  given  a  medium                                                               
demand,  "it's  very tight";  and  given  a high  demand,  demand                                                               
exceeds supply.   He said he  was not nearly as  comfortable with                                                               
this  chart  as   the  previous  one;  however,   he  stated  his                                                               
confidence that "we'll raise supply to this level."                                                                             
                                                                                                                                
Number 1378                                                                                                                     
                                                                                                                                
REPRESENTATIVE  CHENAULT  asked  Representative Whitaker  if  the                                                               
number "70" on  the chart stood for metric tons  or billion cubic                                                               
feet.                                                                                                                           
                                                                                                                                
REPRESENTATIVE  WHITAKER confirmed  that it  was in  metric tons.                                                               
He returned  to the PowerPoint  and introduced the  next category                                                               
entitled  "The  World  Market  Dynamic   Reality:    Supply  Will                                                               
Restrict  Demand For  The Foreseeable  Future," which  means that                                                               
prices will  remain significantly higher  than they have  been in                                                               
the past.   He  said, "Given  that Alaska's  North Slope  has the                                                               
largest undeveloped reserve  of natural gas in  North America, we                                                               
Alaskans,   and  particularly   we  legislators,   need  to   ask                                                               
ourselves,  'how  do  we  take  advantage  of  that  situation?'"                                                               
Representative Whitaker  said the simple answer  to that question                                                               
is that we [Alaskans] take our gas to market.                                                                                   
                                                                                                                                
REPRESENTATIVE  WHITAKER   outlined  routing  options   shown  on                                                               
individual maps:   the "over-the-top"  route, which  he described                                                               
as undesirable;  the [governor's preferred] "highway"  route; the                                                               
TAGS [Trans-Alaska  Gas System]  route, touted by  Jeff Lowenfels                                                               
[of Yukon Pacific Corporation]; and the "hub" approach.                                                                         
                                                                                                                                
REPRESENTATIVE  WHITAKER referred  to  a  projection showing  the                                                               
state constitution,  Article VIII,  Section 2, which  reads, "The                                                               
legislature shall  provide for the utilization,  development, and                                                               
conservation  of all  natural resources  belonging to  the State,                                                               
including  land  and  waters,  for the  maximum  benefit  of  its                                                               
people."  He  said that the constitution makes it  clear what the                                                               
responsibility of the legislature is.                                                                                           
                                                                                                                                
REPRESENTATIVE  WHITAKER outlined  his  ideas  for attaining  the                                                               
maximum benefit and  best interest of Alaska.   He emphasized the                                                               
need for maximum market exposure,  saying an overland route alone                                                               
would  exclude markets  throughout the  world, specifically  Asia                                                               
and  probably the  U.S. West  Coast.   By connecting  to multiple                                                               
markets,  "we stabilize  market opportunities  for this  very ...                                                               
valuable commodity  resource."  He noted  that the "over-the-top"                                                               
and "Foothills/highway"  routes exclude Asia, and  the TAGS route                                                               
excludes mid-America; therefore, he  stated that the hub approach                                                               
provides maximum market exposure.                                                                                               
                                                                                                                                
REPRESENTATIVE  WHITAKER next  discussed  how  to obtain  maximum                                                               
dollars to  the state.   He specified two options  for financing:                                                               
public and private.  Public  financing, he explained, will exempt                                                               
the financing component from  federal taxes, "which significantly                                                               
improves the  economics of an  Alaskan gas project  and increases                                                               
the return to the state."   Additionally, Representative Whitaker                                                               
estimated  that  the return  on  financing  a project  this  size                                                               
should  be  "8-12 percent  of  capital  costs  per year,  for  30                                                               
years," which would be a significant return to the state.                                                                       
                                                                                                                                
REPRESENTATIVE  WHITAKER turned  to  the issue  of public  versus                                                               
private  ownership.   He  told the  committee  that under  public                                                               
ownership, besides being exempt from  all federal income taxes, a                                                               
state-owned pipeline would  give a greater netback  to the state.                                                               
Furthermore, the  state would not  pay a tariff for  royalty gas.                                                               
In comparison, under  private ownership the returns  on a project                                                               
would be  much less  to the  state because of  taxes paid  to the                                                               
federal  government and  a tariff  paid  on royalty  gas to  "big                                                               
oil."  Representative Whitaker clarified  that he is not an enemy                                                               
of  "big oil,"  stating that  he  lived in  Alaska before  [those                                                               
companies] were here and that  his options for prosperity and for                                                               
opportunity  were significantly  less than  they are  today.   He                                                               
continued:                                                                                                                      
                                                                                                                                
     What's  the  difference   between  public  and  private                                                                    
     ownership?  We've made an  assumption.  That assumption                                                                    
     is a six bcf [billion  cubic feet] per day project. ...                                                                    
     Given that,  and given a rather  conservative gas price                                                                    
     at  $2.59   per  million   Btu(s),  which   is  roughly                                                                    
     equivalent to 1,000 cubic feet,  in mid-America -- this                                                                    
     is the Purvin  & Gertz model.  We didn't  change it; we                                                                    
     used all their  assumptions.  What we did  insert was a                                                                    
     six bcf project,  [with] four ... bcf per  day going to                                                                    
     mid-America [and] two bcf per day as an "LNG" option.                                                                      
                                                                                                                                
REPRESENTATIVE  WHITAKER  said  assuming  a price  of  $2.59  per                                                               
million  Btu(s),  the  state would  receive  $1.3  billion  under                                                               
public ownership  and only $680 million  under private ownership.                                                               
He indicated that the charts  also gave assumptions of gas prices                                                               
at   $4.50  and   $8.00.     Currently   the   price  is   $5.34.                                                               
Representative Whitaker noted that the  return to the state would                                                               
be a  fair one.   He added, "This  is a huge  commodity resource,                                                               
the power of which should never be minimized."                                                                                  
                                                                                                                                
Number 0765                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEVENS  asked Representative Whitaker  to explain                                                               
what he meant by "tariff."                                                                                                      
                                                                                                                                
REPRESENTATIVE  WHITAKER  replied that  the  tariff  is a  charge                                                               
assessed to those  who use the facility.  In  response to follow-                                                               
up questions, he explained:                                                                                                     
                                                                                                                                
     The owners  of the current TAPS  [Trans-Alaska Pipeline                                                                    
     System] are  those [who] assess  the tariff.   And that                                                                    
     is  charged  to themselves,  as  well  as other  users,                                                                    
     including  the state.   As  the current  owners of  the                                                                    
     existing TAPS  line have the right  and the opportunity                                                                    
     to charge a  tariff - which is essentially  a return on                                                                    
     investment -  so too would  the state ... have  a right                                                                    
     and an  opportunity to  charge a  transportation tariff                                                                    
     [on a state-owned gas pipeline].                                                                                           
                                                                                                                                
REPRESENTATIVE  WHITAKER returned  to  his discussion,  detailing                                                               
"maximum in-state usage opportunities"  that increase in relation                                                               
to two  factors:  the  number of population centers  the pipeline                                                               
crosses,  and the  number of  miles  of pipe  in the  state.   He                                                               
indicated  the "over-the-top"  route does  not include  those two                                                               
factors;  the  "highway" route  is  "close";  the TAGS  route  is                                                               
"closer"; and the hub route works the best.                                                                                     
                                                                                                                                
Number 0585                                                                                                                     
                                                                                                                                
REPRESENTATIVE  WHITAKER  addressed  the  next  PowerPoint  idea:                                                               
"Maximum  Competition For  Gas Production,"  which he  emphasized                                                               
was a key criterion.  He stated:                                                                                                
                                                                                                                                
     Given that a  competitor cannot have equal  access to a                                                                    
     gas  pipeline,  given  that   that  competitor  is  not                                                                    
     receiving the benefit of a  tariff that an owner would,                                                                    
     that competitor is at a  competitive disadvantage.  And                                                                    
     we find  that to  be true with  the current  TAPS line.                                                                    
     We should not allow that to happen again.                                                                                  
                                                                                                                                
     There was a  time when we were producing,  on the North                                                                    
     Slope, 2.1 million barrels of  oil [per day].  Today we                                                                    
     have  three  producers  and they  produce  1.1  million                                                                    
     barrels per day.   A number of factors  relate to that;                                                                    
     certainly depletion is one of  those factors.  But I am                                                                    
     nearly  emphatic in  my  statement  that a  significant                                                                    
     part is played  in the production decline  on the North                                                                    
     Slope   that  relates   directly  to   the  number   of                                                                    
     competitors doing business on the North Slope.                                                                             
                                                                                                                                
REPRESENTATIVE  WHITAKER emphasized  that [Alaska]  should strive                                                               
to have  the maximum number of  competitors for gas on  the North                                                               
Slope,  which it  cannot  do  unless there  is  a publicly  owned                                                               
pipeline, which ensures  that no producer will  be precluded from                                                               
having equal access at an equal cost.                                                                                           
                                                                                                                                
Number 0447                                                                                                                     
                                                                                                                                
REPRESENTATIVE   WHITAKER  turned   attention  to   "Maximum  Job                                                               
Opportunities For  Alaskans," calling  it a "no-brainer"  that it                                                               
is the state's  job to ensure that both  short-term and long-term                                                               
jobs associated  with the  gas pipeline  project are  provided to                                                               
Alaskans.                                                                                                                       
                                                                                                                                
REPRESENTATIVE WHITAKER concluded  his PowerPoint presentation by                                                               
summarizing the reasons that the  hub approach, publicly financed                                                               
and owned, yet  privately operated, would be the  best choice and                                                               
would serve  the best  interests of  all Alaskans.   He  told the                                                               
committee  that  there is  substantial  basis  to what  had  been                                                               
discussed:   sound economics,  and a  sound understanding  of the                                                               
market.   He added, "It is  very clear that Alaska's  natural gas                                                               
resource is  substantially larger than  we might have  thought at                                                               
first glance."                                                                                                                  
                                                                                                                                
REPRESENTATIVE WHITAKER emphasized that  the resolution makes two                                                               
statements:   First, there should  be no  "over-the-top" routing.                                                               
And    second,   the    legislature   should    acknowledge   its                                                               
responsibility to ensure that this  resource goes to market "in a                                                               
manner consistent  with the  best interest of  the people  of the                                                               
state of Alaska."                                                                                                               
                                                                                                                                
Number 0144                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  asked whether  Representative Whitaker  had plans                                                               
to distribute the resolution to any groups in particular.                                                                       
                                                                                                                                
REPRESENTATIVE  WHITAKER answered  that  he hadn't  thought of  a                                                               
distribution  list, but  would certainly  entertain any  thoughts                                                               
the committee  might have  in regard  to that, in  the form  of a                                                               
committee substitute.                                                                                                           
                                                                                                                                
TAPE 01-30, SIDE A                                                                                                              
Number 0053                                                                                                                     
                                                                                                                                
REPRESENTATIVE   WHITAKER,  in   response   to   a  question   by                                                               
Representative  Stevens, said  in "our"  model an  assumption was                                                               
made that  the cost of  a pipeline  project would be  financed by                                                               
the permanent  fund.   He said  it is beyond  him why  "we" would                                                               
borrow money when we have a  substantial amount to begin with; he                                                               
doesn't think  [the state] could  make a better  investment, both                                                               
for infrastructure or on investment  return.  The return from the                                                               
permanent fund this past year  was "less than sterling," which is                                                               
to be expected during a market downturn, he commented.                                                                          
                                                                                                                                
REPRESENTATIVE  WHITAKER  explained  that  this  is  a  long-term                                                               
investment, guaranteeing  a return somewhere in  the neighborhood                                                               
of  8  to  12  percent,  which  outperforms  the  permanent  fund                                                               
historically.  The  risk is that the market would  "go away," but                                                               
Representative Whitaker  said he didn't think  that would happen.                                                               
He  reiterated that  the assumption  is that  the permanent  fund                                                               
would finance the project.                                                                                                      
                                                                                                                                
Number 0211                                                                                                                     
                                                                                                                                
MICHAEL J.  HURLEY, Government Relations, North  American Natural                                                               
Gas Pipeline Group, came forward to testify as follows:                                                                         
                                                                                                                                
     As you are aware,  the three companies participating in                                                                    
     the  group (BP,  Exxon/Mobil, and  Phillips) have  been                                                                    
     working  diligently to  develop an  economically viable                                                                    
     project  to commercialize  North Slope  natural gas  by                                                                    
     pipeline through  Canada to the  Lower 48 market.   And                                                                    
     in doing that, it is  incumbent on us to fully consider                                                                    
     the options that could help us accomplish that goal.                                                                       
                                                                                                                                
     Indeed,  the   Federal  Energy   Regulatory  Commission                                                                    
     [FERC], before  it will issue  a certificate  of public                                                                    
     convenience  and  necessity,  requires  us  to  analyze                                                                    
     alternative  pipeline  route  options as  part  of  the                                                                    
     application process.                                                                                                       
                                                                                                                                
     This  project  has  the potential  to  be  the  largest                                                                    
     energy  project  in  North America,  and  will  require                                                                    
     capital investments in the billions  of dollars.  These                                                                    
     investment decisions cannot be  taken lightly, and must                                                                    
     be made with the confidence  that can only be gained by                                                                    
     a  thorough  evaluation  of the  alternatives,  and  an                                                                    
     understanding of their  relative strengths, weaknesses,                                                                    
     risks, and  rewards.  Such  an approach  is fundamental                                                                    
     to good business decision-making.                                                                                          
                                                                                                                                
     Our  efforts   have  been   focused  on   creating  and                                                                    
     understanding     opportunities,    not     prematurely                                                                    
     discarding them.   This resolution seems  to suggest we                                                                    
     do  the latter.    We believe  that legislative  action                                                                    
     which recommends shutting down  options before they are                                                                    
     fully understood limits dialog  and interferes with the                                                                    
     fundamental dynamics of a free-market economy.                                                                             
                                                                                                                                
     It cannot  be forgotten  that any Alaskan  gas project,                                                                    
     whether  it's  LNG,  GTL [gas-to-liquids]  or  pipeline                                                                    
     technology,  must be  able to  deliver products  to the                                                                    
     market  at  a competitive  cost  in  order to  succeed.                                                                    
     There are  many other competing sources  of supply, and                                                                    
     buyers will  be going elsewhere  if a project  fails to                                                                    
     deliver  in  this regard.    If  either Alaska  project                                                                    
     advances, the  benefits to the  state and  its citizens                                                                    
     and  businesses will  be substantial,  and will  make a                                                                    
     significant contribution to Alaska's economic future.                                                                      
                                                                                                                                
     Finally,  the work  we are  undertaking this  year will                                                                    
     yield  information that  we believe  will be  necessary                                                                    
     for reasoned  decision making.  We  have been listening                                                                    
     to  the views  and concerns  of the  Alaska legislature                                                                    
     and  Alaska's  citizens,  and  we  will  be  evaluating                                                                    
     alternatives on  the basis of seven  criteria:  overall                                                                    
     project  economics, Alaskan  access  to  gas, jobs  for                                                                    
     Alaskans, revenues to  the state, safety, environmental                                                                    
     protection, and project timing.                                                                                            
                                                                                                                                
                                                                                                                                
MR.  HURLEY said  [his group]  doesn't  feel that  it has  enough                                                               
information to make  a "route" decision based  on those criteria,                                                               
which  is  the reason  for  its  aggressive  work program.    The                                                               
interest of  commercializing North  Slope gas  is best  served by                                                               
creating, not  eliminating, choices.   [The group]  expects there                                                               
will  be  many  opportunities  in   the  future  for  legislative                                                               
guidance and action.                                                                                                            
                                                                                                                                
Number 0565                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI  asked if  [the group has  put] a  value on                                                               
what benefits Alaska might utilize  in terms of production of gas                                                               
in  the state  and  the [sustainability  of  the] workforce  when                                                               
assessing choices.                                                                                                              
                                                                                                                                
MR. HURLEY said  that is part of the seven  criteria; [the group]                                                               
understands  that those  are interests  to the  citizens and  the                                                               
legislature of  the state.   [The  group] understands  what those                                                               
things mean  to the parties  involved, and [they] are  taken into                                                               
account.  For any kind of analysis  one does on a project of this                                                               
magnitude, there is always a balance of benefits.                                                                               
                                                                                                                                
MR. HURLEY noted  that those balances need to be  made in an open                                                               
discussion between industry and  the stakeholders in the project.                                                               
This will include the State of  Alaska, Canada, some of the Lower                                                               
48 states  that the pipeline  will pass  through, as well  as the                                                               
relevant federal [agencies].   All will have a stake  in how this                                                               
decision  ultimately  gets made;  [the  group]  wants to  try  to                                                               
recognize the interests of all parties involved.                                                                                
                                                                                                                                
Number 0730                                                                                                                     
                                                                                                                                
REPRESENTATIVE SCALZI asked if  an environmental impact statement                                                               
(EIS) is  going to be  done to quantify  a dollar value  to these                                                               
things,  or whether  there will  just be  the "generic  tradeoff"                                                               
language.                                                                                                                       
                                                                                                                                
MR. HURLEY explained  that [the group] fully expects  that an EIS                                                               
will be done during this  process, as well as other socioeconomic                                                               
studies  that  are  required  as   part  of  the  Federal  Energy                                                               
Regulatory Commission  (FERC) application process.   He said that                                                               
is part  of the  program [the  group] is  working on  during this                                                               
year, which needs to be concluded before the applications go in.                                                                
                                                                                                                                
Number 0783                                                                                                                     
                                                                                                                                
REPRESENTATIVE   FATE   referred   to  FERC's   issuance   of   a                                                               
certificate.  He  asked if the discussion on  this point referred                                                               
to the northern or "over-the-top route,"  or to a route that FERC                                                               
had already issued  certificates on, the southern  route down the                                                               
pipeline.                                                                                                                       
                                                                                                                                
MR. HURLEY responded  that the "over-the-top" route  would need a                                                               
new  certificate.   It  is  [the  group's] expectation  that  the                                                               
southern route  may end  up getting a  new certificate,  too, but                                                               
[the group]  doesn't know that.   Right now, there is  a lot that                                                               
FERC is unsure of, according  to some of FERC's recent documents.                                                               
What [the  group] is  doing right  now is to  push forward  as if                                                               
these are  going to be  "two green options," because  [the group]                                                               
doesn't  want to  wait for  that to  be resolved  before starting                                                               
work.                                                                                                                           
                                                                                                                                
MR.  HURLEY   said  in  either   case,  whether   using  existing                                                               
certificates or  new ones,  he believes  a lot  of the  work that                                                               
will be done by  the group during the year will  be necessary.  A                                                               
lot of the new environmental  work and socioeconomic will need to                                                               
be  done;  those  kinds  of   things  aren't  under  an  existing                                                               
certificate.                                                                                                                    
                                                                                                                                
Number 0926                                                                                                                     
                                                                                                                                
REPRESENTATIVE  FATE  referred to  the  seven  criteria used  for                                                               
evaluation.  He  questioned the one that  says, "Alaskans' access                                                               
to gas" and asked if the intent was for local markets.                                                                          
                                                                                                                                
MR. HURLEY responded affirmatively.   He said "we" understand the                                                               
need  and interest  in having  gas for  local consumption  in the                                                               
state.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  FATE  said  he didn't  see  anywhere  where  [the                                                               
group]  had taken  into account  the political  awareness or  the                                                               
Alaska constitutional  mandate, which was seen  on the PowerPoint                                                               
presentation.   He asked  if it  would be  among the  points that                                                               
[the group] uses as criteria.                                                                                                   
                                                                                                                                
MR. HURLEY  replied that he  wouldn't put  it that way,  but many                                                               
things  inherent in  the constitutional  mandate are  things [the                                                               
group] is  looking at  in the seven  points.   The constitutional                                                               
mandate is a  mandate to the legislature;  [the group] recognizes                                                               
the  things [the  legislature] is  interested in,  and is  taking                                                               
those into account within the seven points.                                                                                     
                                                                                                                                
Number 1065                                                                                                                     
                                                                                                                                
REPRESENTATIVE McGUIRE  said she  sees in Mr.  Hurley's testimony                                                               
that  FERC  requires  an  analysis  of  multiple  options  before                                                               
issuing  a  certificate.     She  asked,  "Are   you  making  the                                                               
assumption that anything in this  resolution that the legislature                                                               
passes ...  would preclude you  from still analyzing  those other                                                               
options."                                                                                                                       
                                                                                                                                
MR.  HURLEY replied  no.   He explained  that a  resolution is  a                                                               
statement of preference, and said  the legislature absolutely has                                                               
a right  to have a preference.   [The North American  Natural Gas                                                               
Pipeline Group]  would suggest [to  the legislature] that  it may                                                               
be  premature to  have a  preference in  that there  is a  lot of                                                               
information  currently  being  developed.   He  noted  that  [the                                                               
group] is  spending $75 million this  year developing information                                                               
about the  alternatives, which will  provide more  information in                                                               
order to make a better decision.                                                                                                
                                                                                                                                
Number 1189                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEVENS asked Mr. Hurley  if he disagrees with any                                                               
of  the   figures  that  Representative  Whitaker   used  in  his                                                               
presentation.                                                                                                                   
                                                                                                                                
MR. HURLEY  responded that he  [would disagree].  However,  he is                                                               
not prepared to  talk about the facts and figures  in detail.  He                                                               
stated   that  he   is  suggesting   that  there   is  additional                                                               
information  that will  be appropriate  for [the  legislature] to                                                               
think about before making a decision on a preference.                                                                           
                                                                                                                                
REPRESENTATIVE  STEVENS remarked  that he  assumes Mr.  Hurley is                                                               
not objecting to the figures that were used.                                                                                    
                                                                                                                                
MR. HURLEY  replied that he does  disagree with some of  them and                                                               
has some  questions; one  example is with  respect to  the tariff                                                               
number  that  was asked  about  earlier.   His  understanding  of                                                               
tariffs, having done  them for some of the  North Slope pipeline,                                                               
is that they  are primarily made up of two  components:  cost and                                                               
rate of return.   He noted that he has not had  chance to look at                                                               
Representative  Whitaker's numbers;  therefore,  he doesn't  know                                                               
what they represent.                                                                                                            
                                                                                                                                
REPRESENTATIVE KERTTULA commented that  she didn't understand how                                                               
the tariffs worked either.                                                                                                      
                                                                                                                                
Number 1399                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK made a motion  to adopt a conceptual amendment, at                                                               
the  bottom of  the resolution,  adding,  "copies to  be sent  to                                                               
President Bush, Secretary of Interior  Gail Norton, the Governor,                                                               
U.S. Congress, and other major development companies."                                                                          
                                                                                                                                
Number 1500                                                                                                                     
                                                                                                                                
REPRESENTATIVE  FATE  made a  motion  to  move CSHCR  8(O&G),  as                                                               
amended,  out of  committee with  individual recommendations  and                                                               
attached fiscal  note.   There being  no objection,  CSHCR 8(RES)                                                               
moved from the House Resources Standing Committee.                                                                              
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:10 p.m.                                                                 

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