Legislature(2003 - 2004)

03/28/2003 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                                                                             
                         March 28, 2003                                                                                         
                            1:05 p.m.                                                                                           
MEMBERS PRESENT                                                                                                               
Representative Hugh Fate, Chair                                                                                                 
Representative Beverly Masek, Vice Chair                                                                                        
Representative Carl Gatto                                                                                                       
Representative Cheryll Heinze                                                                                                   
Representative Bob Lynn                                                                                                         
Representative Carl Morgan                                                                                                      
Representative Kelly Wolf                                                                                                       
Representative David Guttenberg                                                                                                 
Representative Beth Kerttula                                                                                                    
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
HOUSE BILL NO. 187                                                                                                              
"An Act  extending the  termination date of  the Board  of Storage                                                              
Tank Assistance; and providing for an effective date."                                                                          
     - MOVED HB 187 OUT OF COMMITTEE                                                                                            
HOUSE BILL NO. 61                                                                                                               
"An  Act establishing  an  exploration and  development  incentive                                                              
tax  credit  for  persons  engaged  in  the  exploration  for  and                                                              
development of  less than 150  barrels of oil  or of gas  for sale                                                              
and  delivery  without  reference   to  volume  from  a  lease  or                                                              
property in the state; and providing for an effective date."                                                                    
     - MOVED CSHB 61(RES) OUT OF COMMITTEE                                                                                      
HOUSE BILL NO. 97                                                                                                               
"An Act authorizing  a long-term lease of certain  Alaska Railroad                                                              
Corporation  land at  Anchorage;  and providing  for an  effective                                                              
     - MOVED HB 97 OUT OF COMMITTEE                                                                                             
SENATE BILL NO. 79                                                                                                              
"An  Act extending  the termination  date of  the Alaska  Minerals                                                              
     - MOVED SB 79 OUT OF COMMITTEE                                                                                             
HOUSE BILL NO. 208                                                                                                              
"An  Act  relating  to  hunting on  the  same  day  airborne;  and                                                              
providing for an effective date."                                                                                               
     - HEARD AND HELD                                                                                                           
HOUSE BILL NO. 191                                                                                                              
"An Act relating  to the Alaska coastal management  program and to                                                              
policies   and  procedures   for  consistency   reviews  and   the                                                              
rendering  of  consistency  determinations   under  that  program;                                                              
relating  to the  functions  of  coastal resource  service  areas;                                                              
creating   an   Alaska   Coastal   Program   Evaluation   Council;                                                              
eliminating the  Alaska Coastal Policy Council;  annulling certain                                                              
regulations  relating to  the Alaska  coastal management  program;                                                              
relating  to  actions  based  on  private  nuisance;  relating  to                                                              
zoning  within  a  third  class  borough  covered  by  the  Alaska                                                              
coastal management program; and providing for effective dates."                                                                 
     - BILL HEARING POSTPONED                                                                                                   
PREVIOUS ACTION                                                                                                               
BILL: HB 187                                                                                                                  
SHORT TITLE:EXTEND BOARD OF STORAGE TANK ASSISTANCE                                                                             
SPONSOR(S): RLS BY REQUEST OF LEG BUDGET & AUDIT                                                                                
Jrn-Date   Jrn-Page                      Action                                                                                 
03/12/03     0511       (H)         READ THE FIRST TIME -                                                                       
03/12/03     0511       (H)         RES, FIN                                                                                    
03/26/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
03/26/03                (H)         -- Meeting Canceled --                                                                      
03/28/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
BILL: HB 61                                                                                                                   
SHORT TITLE:OIL & GAS TAX CREDIT FOR EXPLORATION/DEV                                                                            
SPONSOR(S): REPRESENTATIVE(S)CHENAULT                                                                                           
Jrn-Date   Jrn-Page                      Action                                                                                 
01/24/03     0060       (H)         READ THE FIRST TIME -                                                                       
01/24/03     0060       (H)         O&G, RES, FIN                                                                               
02/04/03                (H)         O&G AT 3:15 PM CAPITOL 124                                                                  
02/04/03                (H)         <Bill Hearing Canceled>                                                                     
02/27/03                (H)         O&G AT 3:15 PM CAPITOL 124                                                                  
02/27/03                (H)         Heard & Held                                                                                
02/27/03                (H)         MINUTE(O&G)                                                                                 
03/06/03                (H)         O&G AT 3:15 PM CAPITOL 124                                                                  
03/06/03                (H)         Moved CSHB 61(O&G) Out of                                                                   
03/06/03                (H)         MINUTE(O&G)                                                                                 
03/14/03     0537       (H)         O&G RPT CS(O&G) NT 5DP 1AM                                                                  
03/14/03     0537       (H)         DP: FATE, ROKEBERG, MCGUIRE,                                                                
03/14/03     0537       (H)         KOHRING; AM: KERTTULA                                                                       
03/14/03     0538       (H)         FN1: ZERO(DNR)                                                                              
03/14/03     0538       (H)         FN2: ZERO(REV)                                                                              
03/26/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
03/26/03                (H)         -- Meeting Canceled --                                                                      
03/28/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
BILL: HB 97                                                                                                                   
SHORT TITLE:LONG-TERM LEASES OF ALASKA  RR LAND                                                                                 
SPONSOR(S): REPRESENTATIVE(S)KOHRING                                                                                            
Jrn-Date   Jrn-Page                      Action                                                                                 
02/14/03     0214       (H)         READ THE FIRST TIME -                                                                       
02/14/03     0214       (H)         TRA, RES, FIN                                                                               
03/06/03                (H)         TRA AT 1:30 PM CAPITOL 17                                                                   
03/06/03                (H)         Moved Out of Committee                                                                      
03/07/03     0462       (H)         TRA RPT 5DP                                                                                 
03/07/03     0462       (H)         DP: HEINZE, KOHRING, FATE,                                                                  
                                    HOLM, MASEK                                                                                 
03/07/03     0463       (H)         FN1: ZERO(CED)                                                                              
03/28/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
BILL: SB 79                                                                                                                   
SHORT TITLE:EXTEND ALASKA MINERALS COMMISSION                                                                                   
SPONSOR(S): SENATOR(S) STEVENS B                                                                                                
Jrn-Date   Jrn-Page                      Action                                                                                 
02/21/03     0242       (S)         READ THE FIRST TIME -                                                                       
02/21/03     0242       (S)         RES, FIN                                                                                    
02/26/03     0276       (S)         COSPONSOR(S): FRENCH                                                                        
03/03/03                (S)         RES AT 3:30 PM BUTROVICH 205                                                                
03/03/03                (S)         -- Meeting Postponed --                                                                     
03/05/03                (S)         RES AT 3:30 PM BUTROVICH 205                                                                
03/05/03                (S)         Moved Out of Committee                                                                      
03/05/03                (S)         MINUTE(RES)                                                                                 
03/06/03     0382       (S)         RES RPT 7DP                                                                                 
03/06/03     0382       (S)         DP: OGAN, STEVENS B, SEEKINS,                                                               
03/06/03     0382       (S)         DYSON, LINCOLN, ELTON                                                                       
03/06/03     0382       (S)         FN1: (CED)                                                                                  
03/13/03     0490       (S)         FIN RPT 7DP                                                                                 
03/13/03     0490       (S)         DP: GREEN, WILKEN, TAYLOR,                                                                  
03/13/03     0490       (S)         BUNDE, STEVENS B, OLSON                                                                     
03/13/03     0490       (S)         FN1: (CED)                                                                                  
03/13/03                (S)         FIN AT 9:00 AM SENATE FINANCE                                                               
03/13/03                (S)         Moved Out of Committee                                                                      
03/13/03                (S)         MINUTE(FIN)                                                                                 
03/17/03     0518       (S)         RULES TO CALENDAR 3/17/2003                                                                 
03/17/03     0518       (S)         READ THE SECOND TIME                                                                        
03/17/03     0518       (S)         ADVANCED TO THIRD READING                                                                   
                                    UNAN CONSENT                                                                                
03/17/03     0518       (S)         READ THE THIRD TIME SB 79                                                                   
03/17/03     0518       (S)         PASSED Y17 N- E2 A1                                                                         
03/17/03     0523       (S)         TRANSMITTED TO (H)                                                                          
03/17/03     0523       (S)         VERSION: SB 79                                                                              
03/19/03     0576       (H)         READ THE FIRST TIME -                                                                       
03/19/03     0576       (H)         RES, FIN                                                                                    
03/19/03     0597       (H)         CROSS SPONSOR(S): KERTTULA,                                                                 
03/28/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
BILL: HB 208                                                                                                                  
SHORT TITLE:HUNTING SAME DAY AIRBORNE                                                                                           
SPONSOR(S): REPRESENTATIVE(S)FATE                                                                                               
Jrn-Date   Jrn-Page                      Action                                                                                 
03/24/03     0617       (H)         READ THE FIRST TIME -                                                                       
03/24/03     0617       (H)         CRA, RES                                                                                    
03/24/03     0622       (H)         REFERRALS REVERSED                                                                          
03/24/03     0622       (H)         RES, CRA                                                                                    
03/24/03     0622       (H)         REFERRED TO RESOURCES                                                                       
03/28/03                (H)         RES AT 1:00 PM CAPITOL 124                                                                  
WITNESS REGISTER                                                                                                              
LAURA ACHEE, Staff                                                                                                              
to Representative Ralph Samuels                                                                                                 
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Presented  HB 187  on behalf  of the  House                                                              
Rules Standing  Committee, sponsor of  the bill by request  of the                                                              
Joint  Committee  on  Legislative   Budget  and  Audit,  which  is                                                              
chaired by Representative Samuels.                                                                                              
JOHN BARNETT, Executive Director                                                                                                
Board of Storage Tank Assistance (BSTA)                                                                                         
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified  in support  of HB 178;  discussed                                                              
the importance  of BSTA  as a mediator  between the Department  of                                                              
Environmental  Conservation  (DEC)  and  contaminated  underground                                                              
storage tank  site operators;  addressed BSTA's  role in  ensuring                                                              
the ongoing and future cleanup of these sites.                                                                                  
GARY WEBER, President                                                                                                           
Alaska Underground Tank Owners and Operators                                                                                    
Wasilla, Alaska                                                                                                                 
POSITION STATEMENT:   Testified  in support  of HB 187;  suggested                                                              
the  tank program  will  continue  as  long as  the  Environmental                                                              
Protection  Agency (EPA)  and DEC  regulations  exist, because  an                                                              
oversight requirement is needed to protect both parties.                                                                        
PAT DAVIDSON, Legislative Auditor                                                                                               
Division of Legislative Audit                                                                                                   
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:   Testified on HB 187; explained  that a four-                                                              
year extension was  recommended based on the role  that BSTA plays                                                              
in the transition from a grant program to a loan program.                                                                       
REPRESENTATIVE MIKE CHENAULT                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as sponsor of HB 61.                                                                                 
CHUCK LOGSDON, Chief Petroleum Economist                                                                                        
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:  Answered questions relating to HB 61.                                                                     
JOHN A. BARNES, P.E., Alaska Business Unit Manager                                                                              
Marathon Oil Company                                                                                                            
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Offered  presentation on  the reasons  HB 61                                                              
is needed; answered questions.                                                                                                  
REPRESENTATIVE VIC KOHRING                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Spoke as the sponsor of HB 97.                                                                             
WENDY LINDSKOOG, Director                                                                                                       
External Affairs                                                                                                                
Alaska Railroad Corporation                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:    During  discussion   of  HB  97,  answered                                                              
MARK MARLOW                                                                                                                     
Alaska Enfranchise Facilities, Inc. (AEF)                                                                                       
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HB 97.                                                                             
THOMAS PEASE                                                                                                                    
Government Hill Community Council                                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified in  opposition to HB 97,  which he                                                              
characterized as special-interest legislation.                                                                                  
JIM POUND, Staff                                                                                                                
to Representative Hugh Fate                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented   HB   208   on   behalf   of                                                              
Representative Fate, sponsor.                                                                                                   
BLAINE HOLLIS, Assistant Attorney General                                                                                       
Natural Resources Section                                                                                                       
Civil Division (Juneau)                                                                                                         
Department of Law                                                                                                               
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   During hearing  on HB  208, provided  legal                                                              
information and answered questions.                                                                                             
DOROTHY KEELER                                                                                                                  
Anchorage, Alaska                                                                                                               
POSITION  STATEMENT:     Testified   in  opposition  to   HB  208;                                                              
suggested  that  if  enacted,  the  bill  will  launch  a  tourism                                                              
boycott  that  will make  the  one  in 1993  tame  by  comparison,                                                              
crippling   the  state's  fragile   economy;  suggested   predator                                                              
control  may   work  for  the   short  term,  but   the  long-term                                                              
consequences, both  planned and unexpected, will not  be worth the                                                              
ROD ARNO                                                                                                                        
Palmer, Alaska                                                                                                                  
POSITION STATEMENT:   Testified  in support  of HB 208;  suggested                                                              
the bill  would provide the  Board of Game  with the  tools needed                                                              
to effectively control predation.                                                                                               
ROBERT FITHIAN, Executive Director                                                                                              
Alaska Professional Hunter Association                                                                                          
Tonsina, Alaska                                                                                                                 
POSITION STATEMENT:   Testified  in support  of HB 208;  suggested                                                              
that the  bill provides sustainability  to Alaska's  residents and                                                              
the people who depend on wildlife resources as a way of life.                                                                   
ACTION NARRATIVE                                                                                                              
TAPE 03-19, SIDE A                                                                                                            
Number 0001                                                                                                                     
CHAIR  HUGH FATE  called the  House  Resources Standing  Committee                                                            
meeting  to  order at  1:05  p.m.   Representatives  Fate,  Masek,                                                              
Gatto, Heinze,  Wolf, and Guttenberg  were present at the  call to                                                              
order.   Representatives  Lynn, Morgan,  and  Kerttula arrived  as                                                              
the meeting was in progress.                                                                                                    
HB 187-EXTEND BOARD OF STORAGE TANK ASSISTANCE                                                                                
CHAIR FATE  announced that  the first order  of business  would be                                                              
HOUSE BILL  NO. 187,  "An Act  extending the  termination date  of                                                              
the  Board  of  Storage Tank  Assistance;  and  providing  for  an                                                              
effective date."                                                                                                                
Number 0201                                                                                                                     
LAURA ACHEE, Staff  to Representative Ralph Samuels,  Alaska State                                                              
Legislature,  presented  HB  187  on behalf  of  the  House  Rules                                                              
Standing Committee,  sponsor by request of the  Joint Committee on                                                              
Legislative Budget  and Audit, which is chaired  by Representative                                                              
Samuels.   She said  it is  a very  simple bill  that extends  the                                                              
[Board of Storage Tank Assistance (BSTA)].                                                                                      
Number 0284                                                                                                                     
JOHN   BARNETT,  Executive   Director,  Board   of  Storage   Tank                                                              
Assistance, testified  that he is  a contracted employee  from the                                                              
private  sector and  has  been fulfilling  the  role of  executive                                                              
director  since the  program's inception  in 1990.   He  explained                                                              
that [BSTA]  is a volunteer board  that serves at the  pleasure of                                                              
the  governor for  the  benefit of  the  industry.   The  industry                                                              
[consists  of] Alaska  underground  tank owners  and operators  of                                                              
service  stations,  small  "mom  and  pop"  [operations],  grocery                                                              
stores,  lodges,  small  aircraft,   and  so  forth,  as  well  as                                                              
contractors  and   various  people  who  have   small  underground                                                              
storage tanks.                                                                                                                  
MR. BARNETT  explained that the board  has a number of  roles, one                                                              
of which  is to mediate disputes  between underground  tank owners                                                              
and  operators and  the Department  of Environmental  Conservation                                                              
(DEC).  He  said BSTA has  certain authorities over DEC  to enable                                                              
it to resolve  those disputes expeditiously.   For over  a decade,                                                              
he  said, BSTA  has resolved  quite a  few disputes.   An  appeals                                                              
board,  BSTA acts  as an  oversight committee  on any  regulations                                                              
proposed  by  DEC  to  ensure  that  they  are  not  an  excessive                                                              
financial  burden  to  the  industry and  yet  still  protect  the                                                              
public health and the environment.                                                                                              
Number 0430                                                                                                                     
MR.  BARNETT  said  BSTA  also  ensures   that  those  regulations                                                              
proposed by  DEC are not  more stringent  than federal law.   When                                                              
loans  and  grants are  processed  by  DEC through  the  financial                                                              
assistance program,  he explained, another  of BSTA's roles  is to                                                              
ensure that  eligible costs are  allowed and to  basically mediate                                                              
disputes when  a cost is denied by  the department.  He  said BSTA                                                              
sets   limits   of  loans   and   grants   each  year   based   on                                                              
appropriations from  the legislature.  The board's  strongest role                                                              
and relationship  is to  mediate disputes  with cleanup  plans and                                                              
with regulations  and to [provide]  a secondary role  in resolving                                                              
disputes  related  to  actual  financial   assistance  grants  and                                                              
loans,  he  explained.    For example,  there  have  been  several                                                              
regulations  that  were proposed  that  were  determined  to be  a                                                              
financial  burden  to the  industry  and  would have  put  several                                                              
[storage tank owners]  out of business; the properties  would have                                                              
been  taken over  by  the state.    However, BSTA  intervened  and                                                              
sought some middle ground on the regulation, he said.                                                                           
Number 0546                                                                                                                     
MR. BARNETT talked  about regulations proposed before  BSTA was in                                                              
place that were  onerous to the industry and [that  resulted in] a                                                              
number  of stations  closing.   He  said in  Anchorage there  were                                                              
piles of  dirt all over the  city, and in Fairbanks,  according to                                                              
the  headlines  of  the  [newspaper],  a  lot  of  issues  weren't                                                              
resolved before  it went to  the legal level  - the  Department of                                                              
Law.  Mr. Barnett  said the Department of Law [exhausted]  most of                                                              
the funds and the "money didn't go into the ground."                                                                            
CHAIR FATE thanked  Representative Carl Morgan, a  new member, for                                                              
joining the committee.                                                                                                          
Number 0682                                                                                                                     
REPRESENTATIVE  GATTO speculated  that many  people have  probably                                                              
purchased 500-gallon  storage tanks  for gasoline and  buried them                                                              
in their  yards.  He  asked whether those  people and  the storage                                                              
tank  locations could  be  identified; he  noted  his belief  that                                                              
there hadn't been  a requirement in place to  report [identifying]                                                              
MR. BARNETT  responded that there  was a fairly  expensive public-                                                              
information campaign  in 1990-1991 directing people  with gasoline                                                              
tanks to register  those tanks; this was done by  both DEC and EPA                                                              
[Environmental Protection  Agency].  There were some  fairly stiff                                                              
penalties for  failure to comply,  he said, and [BSTA]  feels that                                                              
most of those  tanks have been  identified and "closed out."   The                                                              
cost is  currently quite prohibitive  to keep a tank  in operation                                                              
up to current  EPA and state  standards, he suggested.   The state                                                              
program was put  into place shortly after the  federal program and                                                              
also  with the  assistance  program to  ensure  that these  people                                                              
could  stay  in  business  and still  absorb  some  of  the  costs                                                              
related  to those upgrades,  he explained.   Mr.  Barnett said  he                                                              
thought that most  [underground storage tank (UST)  locations] are                                                              
known.   This program  does not  cover heating  oil tanks  or home                                                              
heating oil tanks; it primarily covers gasoline tanks.                                                                          
Number 0783                                                                                                                     
REPRESENTATIVE   MASEK  noted  that   she  had  previously   asked                                                              
Commissioner Ernesta  Ballard of  DEC for information  relating to                                                              
[the cleanup  and maintenance]  of storage  tanks.  She  indicated                                                              
Commissioner  Ballard  said [BSTA]  was  "pretty  much on  target"                                                              
with getting  most its work done  in relation to [UST  cleanup and                                                              
maintenance].   She asked  Mr. Barnett about  the progress  of the                                                              
Number 0823                                                                                                                     
MR.  BARNETT  said  compliance  with  EPA  standards  is  probably                                                              
better than  60 percent statewide  - perhaps 60-65 percent  as far                                                              
as  the   total  number   of  tanks,   which  doesn't   take  into                                                              
consideration  some  of the  worst-case  scenarios.   Mr.  Barnett                                                              
said there are  sites that have been undertaking  ongoing cleanups                                                              
for  over  a  decade  that  are  [extremely]  contaminated.    For                                                              
example,  he  listed  University  Car Care  in  Fairbanks,  Cook's                                                              
Tesoro in  Sterling, a number of  [sites] on the  Kenai Peninsula,                                                              
and several  "here" that  have been operating  for five,  six, and                                                              
seven years.  These are the sites that BSTA is concerned with.                                                                  
MR.  BARNETT  affirmed  that the  grant  program  terminates  next                                                              
year;  it has  about  14  months  left to  go.   However,  a  loan                                                              
program is  currently in  place and will  be available  after [the                                                              
grant  program  expires],  and  it  does  not  have  a  sunset  or                                                              
termination  date.   He  said  facilities  such  as Gold  Hill  in                                                              
Fairbanks, Lucky  Sourdough, Moose Creek General  Store, and [A.M.                                                              
Samuels] will continue  to participate in the program  through the                                                              
loan process,  as long as  it takes to  get the sites  cleaned up.                                                              
He  said  until  they  get no  further  action  letters  from  the                                                              
department, it  is felt that [those  sites] will continue  to need                                                              
BSTA to mediate any possible disputes.                                                                                          
Number 0947                                                                                                                     
REPRESENTATIVE   MASEK  noted  that   the  targeted   [sites]  are                                                              
statewide; she  mentioned that there  are a couple of  areas being                                                              
worked on in  the Matanuska-Susitna area.  She  offered her belief                                                              
that  Trapper  Creek  and  Wasilla  were  both  [targeted  cleanup                                                              
sites];  she  said  she  thought   the  program  has  been  really                                                              
instrumental  in getting the  job done.   She said it's  important                                                              
to extend [BSTA's  termination date] to ensure  that ongoing cases                                                              
will be worked  on.  Representative Masek noted  that this [issue]                                                              
was not  new to her,  and said  she was really  happy to  see that                                                              
[BSTA] is surging ahead and is able to get the job done.                                                                        
Number 1049                                                                                                                     
GARY  WEBER,   President,  Alaska  Underground  Tank   Owners  and                                                              
Operators,  said it seems  [this issue  has been brought  forward]                                                              
every  year  for  the  last  five  years,  and  that  the  [Alaska                                                              
Underground  Tank   Owners  and  Operators]  has   to  defend  the                                                              
existence  of the board,  which the  tank owners  want very  much.                                                              
He  offered his  belief  that the  current  consensus and  [DEC's]                                                              
view of the  board is that the  tank program is coming  to an end.                                                              
However, Mr.  Weber said only  the grant  program is coming  to an                                                              
end;  the tank  program will  continue as  long EPA  and DEC  have                                                              
regulations,  and an oversight  requirement  is needed to  protect                                                              
both parties.   He talked about  the other consensus  that cutting                                                              
the board  would be cost  saving.  Mr.  Weber said when  the board                                                              
was started,  tank owners volunteered  to pay $1,000 per  year for                                                              
their USTs as a  registration fee.  After the  USTs were upgraded,                                                              
an ongoing  $50 annual  registration  fee would  be required.   He                                                              
indicated  Mr. Barnett  would  be the  appropriate  person to  ask                                                              
about the number of USTs in the state.                                                                                          
Number 1138                                                                                                                     
MR. WEBER  said the registration  fee is supposed to  totally fund                                                              
the  board,  and he  suggested  that  the  consensus is  that  the                                                              
department  is capable  of dealing  with the  tank owners  without                                                              
the board.   He said  he appreciated [DEC's]  feeling that  it can                                                              
do that,  and that as  hard as [the issue]  has been for  the last                                                              
13 years,  the relationship  with [DEC] has  been delightful.   "I                                                              
can tell  you that prior  to 1970, it  was pure hell  working with                                                              
them, and there  isn't one of us  tank owners that want  to return                                                              
to  the pre-1990  era," he  remarked.   Mr.  Weber suggested  that                                                              
when regulations  are written that "get into  people's pocketbooks                                                              
and put  them out of  business," there  are going to  be a  lot of                                                              
hard feelings,  headline  news stories, and  total destruction  of                                                              
what the last 13  years has built for [UST owners].   He suggested                                                              
that [Alaska] has one of the best programs in the nation.                                                                       
MR.  WEBER concluded  by saying  that as  long as  there are  tank                                                              
owners,  tanks,  and  EPA  regulations,  and as  long  as  DEC  is                                                              
writing  new regulations,  the board  is needed  to oversee  those                                                              
regulations.   Noting that  the board  consists of seven  members,                                                              
he remarked,  "As good as  the people are  at DEC, they've  missed                                                              
things;  they've passed  things up."   He said  the seven  experts                                                              
that review  [information]  can help  DEC or the  tank owner,  and                                                              
can help  both [sides] to come  up with good regulations  that can                                                              
be followed.   Mr. Weber stated that the [Alaska  Underground Tank                                                              
Owners and Operators]  voted for keeping [BSTA] around  as long as                                                              
[UST owners  and operators]  exist.  He  urged members to  move HB                                                              
187 from committee.                                                                                                             
Number 1272                                                                                                                     
REPRESENTATIVE  MASEK  noted  that  USTs  are  for  commercial-use                                                              
purposes such  as gas stations.   She asked Mr. Barnett  to inform                                                              
the committee of the target [of BSTA].                                                                                          
MR. BARNETT  said in the "universe  of tanks," which  is regulated                                                              
by  this  program,  about  40 percent  are  probably  service  and                                                              
retail stations.   The balance of  [UST owners and  operators] are                                                              
a   mixture  of   everything   from   rental  car   companies   to                                                              
construction  contractors, as well  as a  number of small  grocery                                                              
[stores] and other  small businesses such as filling  stations and                                                              
roadhouses.   "It's  actually only  about  30 or  40 percent,"  he                                                              
remarked.    He  said  airports  and  aircraft-related  tanks  are                                                              
associated  with  this program  as  well;  quite a  few  different                                                              
types  of tanks  are  involved, but  they  are primarily  gasoline                                                              
Number 1360                                                                                                                     
REPRESENTATIVE  GUTTENBERG  noted that  usually  when  a board  is                                                              
"sunsetting," a  legislative audit [is  conducted].  He  asked for                                                              
comments or criticisms  on the audit report; he noted  that he had                                                              
not seen it.                                                                                                                    
MR.  BARNETT, in  response,  said  the audit  was  as thorough  as                                                              
usual, and he noted  that he done four [audits to  date].  He said                                                              
[the audit]  usually takes a considerable  amount of time,  and he                                                              
told  the committee  that he  felt  [the auditors]  took an  equal                                                              
amount  of time  with the  department  and the  industry before  a                                                              
consensus   [was   reached].     He   indicated   the  audit   was                                                              
REPRESENTATIVE  GUTTENBERG asked  whether  any improvements  could                                                              
be made.                                                                                                                        
MR. BARNETT said no.                                                                                                            
Number 1435                                                                                                                     
REPRESENTATIVE  GATTO asked  if [BSTA] had  any jurisdiction  over                                                              
aboveground storage tanks.                                                                                                      
MR.  BARNETT,  in   response,  said  [BSTA]  does   not  have  any                                                              
jurisdiction related  to aboveground  tanks, but had  assisted, in                                                              
the past,  when asked; had assisted  in putting on  workshops; and                                                              
had  helped to  put together  documents  over the  past decade  to                                                              
assist.  He noted  BSTA had also lent its expertise  at times, but                                                              
had no authority related to that.                                                                                               
CHAIR FATE, upon  determining that no one else  wished to testify,                                                              
closed public testimony.                                                                                                        
REPRESENTATIVE  GUTTENBERG commented  that  he was  in support  of                                                              
[HB 187]; he noted  he would have liked the committee  to have had                                                              
a copy of the audit for review.                                                                                                 
CHAIR  FATE said  it's always  useful  if there's  a problem  with                                                              
extending  the authority  [of a  board]  or if  that authority  is                                                              
extended,  whether  or not  there  are certain  improvements  that                                                              
have to  improved within  that authority  as outlined.   He  noted                                                              
that he had not  read the audit, but he indicated  he could attest                                                              
to how  that mechanism  works because of  his prior experience  on                                                              
the Joint Committee  on Legislative Budget and Audit.   Chair Fate                                                              
said [HB 187] is  a very simple piece of legislation  and that the                                                              
board  has been  very  useful, as  testimony  had  indicated.   He                                                              
suggested  if  improvements   to  the  board  were   needed,  they                                                              
probably would be pretty minor.                                                                                                 
Number 1559                                                                                                                     
PAT  DAVIDSON,   Legislative  Auditor,  Division   of  Legislative                                                              
Audit, Alaska  State Legislature,  informed the committee  that no                                                              
findings or recommendations  [were made] during the  course of the                                                              
audit  relating   to  making  any  improvements   to  the  board's                                                              
operations.  A  four-year extension was recommended  and was based                                                              
on the role  that the board plays  in the transition from  a grant                                                              
program  into   a  loan  program.     Mentioning   development  of                                                              
regulations,  she said  that  while there  has  been a  decreasing                                                              
amount  of  activity  for  the board,  this  major  shift  in  the                                                              
financing  of cleanup  activities  will result  in new  questions.                                                              
The board  has quite extensive  institutional knowledge  about the                                                              
program,  she said,  and it  was found  that it  is very  helpful.                                                              
Therefore,  based  on  those factors,  a  four-year  extension  is                                                              
Number 1629                                                                                                                     
REPRESENTATIVE  MASEK moved  to  report HB  187  out of  committee                                                              
with  individual  recommendations   and  the  accompanying  fiscal                                                              
notes;  she  asked   for  unanimous  consent.     There  being  no                                                              
objection, HB 187  was reported from the House  Resources Standing                                                              
HB 61-OIL & GAS TAX CREDIT FOR EXPLORATION/DEV                                                                                
CHAIR FATE  announced  that the next  order of  business would  be                                                              
HOUSE  BILL  NO.  61, "An  Act  establishing  an  exploration  and                                                              
development  incentive  tax  credit  for persons  engaged  in  the                                                              
exploration for  and development of  less than 150 barrels  of oil                                                              
or of gas for  sale and delivery without reference  to volume from                                                              
a lease or property  in the state; and providing  for an effective                                                              
Number 1687                                                                                                                     
REPRESENTATIVE  MASEK moved to  adopt CSHB  61(O&G).  There  being                                                              
no objection, it was so ordered.                                                                                                
Number 1720                                                                                                                     
REPRESENTATIVE MIKE  CHENAULT, Alaska State  Legislature, sponsor,                                                              
characterized HB 61  as a bill that would create  a new income tax                                                              
credit  to  encourage increased  exploration  and  development  of                                                              
natural gas  resources in  areas south  of the  Brooks Range.   To                                                              
qualify for  the [income  tax credit] under  HB 61, he  explained,                                                              
operators  must  successfully  drill  and  develop  reserves  that                                                              
produce  natural gas  for  sale and  delivery.   One  modification                                                              
made in the  House Special Committee  on Oil and Gas,  included in                                                              
CSHB 61(O&G),  was the  deletion of  any reference  to oil.   This                                                              
[bill]  is strictly  dealing with  gas issues.   Saying "new  gas"                                                              
was [better  defined], he  paraphrased from  page 3, lines  22-26,                                                              
which read in part:                                                                                                             
     (1)    "qualified  capital   investment"  means  a  cash                                                                   
     expenditure or  binding payment agreement,  as described                                                                   
     in  (b)(1)  of  this  section,   for  real  property  or                                                                   
     tangible  personal property  used in  this state in  the                                                                   
     exploration  and development  of gas  reserves in a  gas                                                                   
     reservoir  for  which  there  has  not  been  commercial                                                                   
     production  if the  reserves  produce gas  for sale  and                                                                   
Number 1781                                                                                                                     
REPRESENTATIVE CHENAULT  said [this legislation] is  a "successful                                                              
efforts  bill," which  means  no  credits will  be  given for  dry                                                              
holes.  He  suggested that the  Cook Inlet area continues  to have                                                              
great potential  for additional natural gas development,  and that                                                              
other  Alaska  basins  outside  the North  Slope  have  a  similar                                                              
potential.    However,  he  said,  a  combination  of  exploration                                                              
risks, high  development costs,  and historically low  natural-gas                                                              
prices have  created a  disincentive to  drill for new  reservoirs                                                              
as compared with other areas of the world.                                                                                      
REPRESENTATIVE CHENAULT  told members  that if credit  is provided                                                              
for successful  efforts, more exploration  will occur  in southern                                                              
Alaska, leading  to much-needed  new natural  gas reserves.   This                                                              
will be  a benefit to  all residents and  businesses at  no direct                                                              
cost to the  state, he suggested.   In addition to the  benefit of                                                              
developing  new gas  reserves, increased  drilling  in Cook  Inlet                                                              
also  will   aid  the  general   economic  status  of   the  Kenai                                                              
Peninsula,  Anchorage, and other  areas of  the state.   Moreover,                                                              
increased  tax revenue from  additional gas  production will  more                                                              
than offset any fiscal impact from the proposed credit, he said.                                                                
Number 1885                                                                                                                     
REPRESENTATIVE   MASEK  turned  attention   to  the   fiscal  note                                                              
provided  by  the  Department  of  Revenue (DOR).    She  cited  a                                                              
section of the  analysis that read, "Corporations  could use their                                                              
tax credits  under this  legislation to reduce  taxes paid  to the                                                              
state for North  Slope production or production  from elsewhere in                                                              
the state."   She asked  about the impact  on current  North Slope                                                              
REPRESENTATIVE  CHENAULT,  in  response,  suggested  the  question                                                              
could be  better answered by  someone with DOR.   He said,  to his                                                              
knowledge, that certain  corporations now work on  the North Slope                                                              
but  don't really  have any  holdings  south of  the Brooks  Range                                                              
that they're  currently drilling.   He suggested DOL  could better                                                              
[determine]  whether that  would have an  effect.   Representative                                                              
Chenault  also  suggested  that  all  corporations  probably  have                                                              
leases in Cook  Inlet and other areas  of the state and  the North                                                              
Slope.  He indicated  the possibility that the  bill could [impact                                                              
current North Slope  producers].  However, he clarified  that this                                                              
tax  [credit] is  not [intended]  for  gas reserves  on the  North                                                              
Slope; rather,  it's for  reserves developed  south of  the Brooks                                                              
REPRESENTATIVE MASEK asked for clarification from DOR.                                                                          
Number 2034                                                                                                                     
CHUCK   LOGSDON,   Chief  Petroleum   Economist,   Tax   Division,                                                              
Department of Revenue, responded:                                                                                               
     Yes, ... in  fact, it's the activity that  generates the                                                                   
     credit,  and if  a corporation  did  have production  on                                                                   
     the  North  Slope  or was  engaged  in  activities  that                                                                   
     generated income  tax on the North Slope,  and they also                                                                   
     began to explore  and develop in the Cook  Inlet, to the                                                                   
     ... extent that  they produced and sold natural  gas, to                                                                   
     the  extent if  they spent  enough money  in the  inlet,                                                                   
     such that their  only limit would be their  total income                                                                   
     in Alaska  ... or  50 percent  of their total  corporate                                                                   
     liability  in Alaska,  which would,  of course,  include                                                                   
     income tax liability  from North Slope operations.   So,                                                                   
     ...  we're not  saying  that necessarily  would  happen,                                                                   
     but that it could happen.                                                                                                  
REPRESENTATIVE  MASEK  turned  attention  to  another  section  of                                                              
DOR's fiscal note, which  read, " Oil and gas corporate income tax                                                              
collections  in FY 2003  and FY  2004 are  currently projected  at                                                              
$160 million and $200 million per year, respectively."                                                                          
Number 2156                                                                                                                     
JOHN A. BARNES,  P.E., Alaska Business Unit Manager,  Marathon Oil                                                              
Company ("Marathon"),  came forward  to provide a  presentation on                                                              
why  Marathon  believes  the  bill  is needed.    Referring  to  a                                                              
handout in  packets, he noted that  [page 2 of the  handout] talks                                                              
about what does.  He told members:                                                                                              
     As was  mentioned, it creates  an income tax  credit for                                                                   
     exploration  development of  gas reserves  south of  the                                                                   
     Brooks  Range.    I'd  just like  to  stress  that  even                                                                   
     though the focus  is on the Cook Inlet, there  are other                                                                   
     basins  in Alaska  that  may have  gas  potential.   And                                                                   
     this incentive  would also apply to exploration  efforts                                                                   
     in those areas.  Again, the focus is on natural gas.                                                                       
     A key point  ... is that these are the types  of efforts                                                                   
     that  level the playing  field in  drawing capital  into                                                                   
     the  state  of  Alaska  from  other  opportunities  that                                                                   
     companies  may have around  the world.  ... That is  the                                                                   
     goal, to  draw more  capital to the  Cook Inlet,  ... in                                                                   
     context  to the  other comment  about  other basins,  to                                                                   
     draw potentially more capital to the state of Alaska.                                                                      
     The  next  slide [page  3  of  the handout],  talking  a                                                                   
     little bit  more detail  about how the  bill works:   it                                                                   
     would  apply   to  10   percent  of  qualified   capital                                                                   
     investment.    It  would  apply to  10  percent  of  the                                                                   
     qualified  expenses that  were  associated with  putting                                                                   
     that capital  investment to  work.   It would offset  no                                                                   
     more  than 50  percent of  corporate income  tax in  any                                                                   
     one  year,  but  it  could  be  carried  over  for  five                                                                   
     additional  years.    It  only   applies  to  successful                                                                   
     efforts,  as  was stated;  it  would  not apply  to  dry                                                                   
     holes or other work.                                                                                                       
Number 2274                                                                                                                     
MR. BARNES referred to [page 4 of the handout] and continued:                                                                   
     And finally -  this is important from the  industry side                                                                   
     - it could  be factored into project economics  when you                                                                   
     understand  weighing  investment  opportunities  in  the                                                                   
     state of Alaska  versus other opportunities.   This is a                                                                   
     robust,   easily  identified   factor   that  could   be                                                                   
     Why  is it  needed?   First, natural  gas reserves  have                                                                   
     been and  are continuing to  decline in the  Cook Inlet.                                                                   
     The current  Cook Inlet proven  reserve base is  about 2                                                                   
     ...  tcf [trillion  cubic feet]  ... on  mixed units;  2                                                                   
     tcf is  about 2000 bcf [billion  cubic feet].   Those of                                                                   
     you that talk  about North Slope gas, it's  smaller than                                                                   
     that; I wish  it was that big.  These numbers  are based                                                                   
     on   the   DNR  [Department   of   Natural   Resources],                                                                   
     [Division] of Oil and Gas, 2002 report.                                                                                    
     Finally,  ... despite  recent  increases  in Cook  Inlet                                                                   
     activity,  the reserves  are  not being  replaced on  an                                                                   
     annual  basis.   ...  If  you  don't   replace  reserves                                                                   
     annually, your reserve base will go down.                                                                                  
Number 2317                                                                                                                     
     On the next  slide [page 5 of the handout],  I'll talk a                                                                   
     little bit about  the impact of not replacing  reserves.                                                                   
     This  slide  shows  the  Cook   Inlet  proven  reserves;                                                                   
     that's   gas  that   you  know  is   in  place   through                                                                   
     production and  other geologic testing.  In  1990, there                                                                   
     was  about three  and a  half tcf  of gas,  and in  '95,                                                                   
     '96, to  '97 there  were recalculations  done.  This  is                                                                   
     not the result  of new work; it's just new  estimates of                                                                   
     the reserves  increased ...  to a  higher level in  '97;                                                                   
     then they've  continued to decline until 2002,  in which                                                                   
     I reported they were about two tcf or the 2000 bcf.                                                                        
     Next slide  [page 6  of the handout],  ... why is  House                                                                   
     Bill  61   needed?     Cook  Inlet  deliverability   has                                                                   
     declined  over the last  several years.   Deliverability                                                                   
     is the  ability to  pull gas  out of  the ground.   It's                                                                   
     the rate at which you can produce gas.                                                                                     
Number 2363                                                                                                                     
MR. BARNES continued:                                                                                                           
     Next  slide [page  7 of  the handout]  talks about  Cook                                                                   
     Inlet  peak supply-and-demand  requirements.   The  Cook                                                                   
     Inlet is blessed  for a lot of reasons.  One  is it gets                                                                   
     very cold in  the winter, and because of that  you use a                                                                   
     lot  of  gas  to heat  your  homes  and  provide  light.                                                                   
     Seasonally, that  swing can be about a factor of  3 to 1                                                                   
     between summer heating needs and winter needs.                                                                             
     In 1997,  the Cook Inlet deliverability,  the production                                                                   
     capacity,  which is shown  in red  on this exhibit,  was                                                                   
     about  900  million cubic  feet  a  day, and  the  total                                                                   
     requirements  [were] somewhat  less than  that.   During                                                                   
     the  interim,   since  that   time  in  2003,   Marathon                                                                   
     estimates  Cook   Inlet  deliverability   of  production                                                                   
     capacity  at about  667 million  cubic feet  a day,  and                                                                   
     that falls below  the total requirements that  the inlet                                                                   
Number 2407                                                                                                                     
     Next slide  [page 8 of the  handout], further as  to why                                                                   
     is  it  needed,  what  are  the  consequences  of  these                                                                   
     points   I've  tried   to   make,  supply   and   demand                                                                   
     rationalization  is occurring:   there's not enough  gas                                                                   
     to feed the  low price consumer.  That's  represented by                                                                   
     that  deficit between  requirements and  deliverability,                                                                   
     and  the  gas  price  is  increasing.    That's,  again,                                                                   
     supply and demand.                                                                                                         
     At the current  time, ENSTAR's weighted average  cost of                                                                   
     gas -  or WACOG, which is  the price that  they purchase                                                                   
     the gas  for, not what  they sell it  to the consumer  -                                                                   
     is  about  255 per  million  cubic  feet.   More  recent                                                                   
     ENSTAR contracts  have been signed at prices  that range                                                                   
     from $2.75  per mcf  [thousand cubic  feet] up to  Henry                                                                   
     And many  of you  have seen  different reports of  Henry                                                                   
     Hub  gas  prices,  they  go  up  and  down  a  lot,  but                                                                   
     recently they've  been over $9  an mcf, [and for  a] few                                                                   
     moments, even higher than that.                                                                                            
Number 2457                                                                                                                     
MR. BARNES continued:                                                                                                           
     Looking  ahead on the  next slide  [page 9 of  handout],                                                                   
     the Cook  Inlet reserves and  resources:  as  I've said,                                                                   
     reserves  represent gas that  you know  you have in  the                                                                   
     ground; resources  are gas volumes that you  believe are                                                                   
     there  but  have not  yet  been  proven up  through  the                                                                   
     drill bit.   The current proven  reserve base -  as I've                                                                   
     said,  2,000   bcf  -  represents  about  10   years  of                                                                   
     production  if you assume  that you  have no decline  in                                                                   
     the  rates, that  you  can get  it  out of  the  ground,                                                                   
     which is not actually a valid assumption.                                                                                  
     The potential  gas committee,  which represents  various                                                                   
     professionals,  have estimated  Cook  Inlet resources  -                                                                   
     again,  those are the  reserves that  have not yet  been                                                                   
     discovered  -  at  about  1,050   bcf;  that's  probable                                                                   
     reserves.   And then, even  riskier, these are  reserves                                                                   
     that  have  probably less  than  [a]  20 or  25  percent                                                                   
     chance of  being there  at about 2,100  bcf.  The  point                                                                   
     of that  is that  there is potential  in the Cook  Inlet                                                                   
     and  there is a  reason to  continue to  explore in  the                                                                   
     inlet and probably in other basins around the state.                                                                       
Number 2518                                                                                                                     
     What are  the impacts  to the State  of Alaska [page  10                                                                   
     of handout]?   First, we believe that it  will stimulate                                                                   
     activities  in the Cook  Inlet, and  we would hope  that                                                                   
     it would stimulate  activities in other basins  as well.                                                                   
     We  believe  it  would  aid   in  maintaining  the  Cook                                                                   
     Inlet's   current   200-plus-bcf-per-year    production.                                                                   
     That's  what's  required to  service  all needs  in  the                                                                   
     Cook Inlet.                                                                                                                
     Just  to the  point  of reference,  that  200  bcf in  a                                                                   
     year:   if you  convert that  on an  energy basis to  an                                                                   
     oil basis, that  represents about 33 million  barrels of                                                                   
     oil,  which is about  a thirteenth  month of  production                                                                   
     off the  North Slope.   So, in  world standards,  it's a                                                                   
     pretty  good volume  of  energy that's  being  produced.                                                                   
     What does  it do?   It provides gas  for the Cook  Inlet                                                                   
     utilities,  the "industrials"  that  are present,  jobs,                                                                   
     royalties, and taxes.                                                                                                      
Number 2557                                                                                                                     
MR. BARNES continued:                                                                                                           
     Next slide  [page 11 of  handout]:   I'd like to  talk a                                                                   
     little bit about  potential fiscal impacts to  the State                                                                   
     of Alaska.   And  I think  as it's  been stated, ...  it                                                                   
     may be hard  to measure, but we believe that  they would                                                                   
     be clearly positive to the State of Alaska. ...                                                                            
     The  things  you  need  to look  for  when  you  try  to                                                                   
     understand  what is  the fiscal impact  and measure  it,                                                                   
     you have to  ask yourself how many developments  will be                                                                   
     incentivized  that might  not  have happened  otherwise:                                                                   
     how  much  gas will  ultimately  be  discovered,  what's                                                                   
     that  volume  that  you've found,  what  will  that  gas                                                                   
     sales  price be.   And the  effect of  that is what  the                                                                   
     state sees  on royalties  and severance tax,  obviously.                                                                   
     How   much   will   be   spent   for   exploration   and                                                                   
     development:   that's not  only, obviously, the  measure                                                                   
     of the incentive,  but it also represents  [money spent]                                                                   
     in  jobs in  ...  Alaska.   To begin,  it's  successful-                                                                   
     efforts-driven:   unless gas is found and  developed and                                                                   
     produced, no incentive will be applied.                                                                                    
Number 2610                                                                                                                     
MR. BARNES continued:                                                                                                           
     Next  slide [page  12 of handout]:   I've  tried to  put                                                                   
     together a conceptual  estimate of the impact.  ... I've                                                                   
     [listed]  ...  six  assumptions, and  they're  open  for                                                                   
     discussion  if other professionals  or economists  would                                                                   
     like to look  at it, but I varied the field  size from 0                                                                   
     to 500  bcf.  I  looked at a  development cost  of about                                                                   
     50  cents per  mcf, which  is a  good cost  - we're  not                                                                   
     always  that   effective  -  royalty,   [12.5]  percent;                                                                   
     severance  tax, [7.5  percent]; ad  valorem taxes,  just                                                                   
     based on  sort of an average  2.7 percent.  Then  I used                                                                   
     a  $2.50 gas  sales  price,  which is  at  or near  that                                                                   
     weighted average cost of gas.                                                                                              
Number 2642                                                                                                                     
     The  next  slide's  columns   of  numbers  [page  13  of                                                                   
     handout]:   I'll just  go ahead  and briefly go  across,                                                                   
     and  then  graphically  it's   shown  on  an  additional                                                                   
     exhibit.     If  you  were   to  talk  about   a  50-bcf                                                                   
     discovery,  the second row in  the table, the  producing                                                                   
     company  would probably  spend  $25 million  to  develop                                                                   
     it;  the tax cut  would be  about [$2.5]  million.   The                                                                   
     total  revenue that  would be  generated  at that  $2.50                                                                   
     sales price would  be $125 million.  Royalties  that the                                                                   
     state  would  receive  if  the   state  had  the  entire                                                                   
     leasehold  would  be  $15.6 million;  it  would  receive                                                                   
     about  $9 million  in severance  tax  ad valorem,  which                                                                   
     goes not  only to the state  but to the local  borough -                                                                   
     about $1 million.                                                                                                          
     So, the  total tax  take under  this set of  assumptions                                                                   
     would be about  $26 million, which is about  the same as                                                                   
     the investment  cost that was spent to develop  it.  The                                                                   
     other  thing to  note,  though, is  that  it's about  10                                                                   
     times the  tax credit.   So, it  looks like, under  this                                                                   
     set of  assumptions, there's  about a 10-to-1  return to                                                                   
     the state, ultimately, if the efforts are successful.                                                                      
Number 2705                                                                                                                     
MR. BARNES continued:                                                                                                           
     The  next slide [page  14 of  handout] just  graphically                                                                   
     shows the same  data.  I've increased field  size on the                                                                   
     bottom from  0 to 500 bcf, and  you can see the  top two                                                                   
     cost curves,  the development costs, the  little reddish                                                                   
     squares, then  the total tax  take, which is  just above                                                                   
     that,  the  blue  line,  and then  below  that  are  the                                                                   
     different  components,  and you  can  see ...  near  the                                                                   
     bottom  of the  yellow  line,  [it] represents  the  tax                                                                   
     ...   Based  on   this  conceptual   model  subject   to                                                                   
     discussion  or other assumptions,  obviously, the  total                                                                   
     tax  take  from  one  field,   which  was  incentivized,                                                                   
     there's  a couple ways  to look  at it; one  proposition                                                                   
     would  be that  it  pays for  the  credit  for 10  other                                                                   
     fields  or  that  the  state   receives  10  times  that                                                                   
     revenue.   So,  I really don't  know how  you'd want  to                                                                   
     measure that. ...                                                                                                          
     We believe the  credit's needed now; there's  not enough                                                                   
     exploration  currently in  the  Cook Inlet  to meet  the                                                                   
     demands that  are there.   Just as  a point of fact,  if                                                                   
     you do  have a  new discovery, it  will probably  take a                                                                   
     minimum of three years to get first gas production on.                                                                     
Number 2768                                                                                                                     
MR. BARNES continued:                                                                                                           
     Last slide [page  16 of handout]:  what are  the success                                                                   
     measures,  what  I  think  we   ought  to  look  for  to                                                                   
     determine if  this credit was successful.   I would want                                                                   
     to  believe that  you'd  see increased  lease  activity.                                                                   
     The  State of Alaska's  done  a very good  job on  their                                                                   
     areawide   lease  program,  but   maybe  we'd  see   ...                                                                   
     additional  leasing.   I would  hope  to see  additional                                                                   
     drilling  rig activity,  ...  the activity  that  counts                                                                   
     the most.                                                                                                                  
     Subsequent  to discovery is  construction activity  and,                                                                   
     ultimately,  increased  production  and  deliverability.                                                                   
     And, finally,  the credit's  applied to the  income tax.                                                                   
     And  for  every  dollar  of   credit,  approximately  10                                                                   
     dollars  were  spent  developing  new  reserves,  and  I                                                                   
     think that's  a good measure.  There's  been discussions                                                                   
     and  questions in  other meetings  about  impact on  the                                                                   
     ... income  tax that oil  and gas currently  contributes                                                                   
     to the state.                                                                                                              
     One  way to  look at  it would  be,  if you  had a  $10-                                                                   
     million  credit  applied,  that  the state  saw  a  $10-                                                                   
     million  reduction.    The   other  thing  would  be  to                                                                   
     recognize  that 10 times  that amount  - $100 million  -                                                                   
     had been spent  successfully developing new  oil and gas                                                                   
     reserves,  and  Marathon's   suggestion  would  be  that                                                                   
     that's  probably  a  pretty  fair way  to  look  at  it.                                                                   
     Thank you  for your time.   I'm available for  questions                                                                   
     or as required.                                                                                                            
Number 2831                                                                                                                     
CHAIR FATE, upon determining that no one else wished to testify,                                                                
closed public testimony.                                                                                                        
CHAIR FATE turned attention to some proposed amendments that                                                                    
would be offered.  [Typed on one page, the amendments used                                                                      
brackets  to delete  language and  underlining  to add  language.]                                                              
He  said one  has  to do  with  the retroactivity:    there was  a                                                              
retroactive date  that which  would allow this  type of  credit to                                                              
start or to have  started; with concurrence of  the industry, that                                                              
date was  moved ahead, so  this credit won't  begin to  take place                                                              
for  a couple  of  months, to  preclude  any question  of  "double                                                              
dipping."    Chair   Fate  characterized  the  remainder   of  the                                                              
[proposed amendments] as corrections and cleanup language.                                                                      
Number 2900                                                                                                                     
REPRESENTATIVE  MASEK  moved  to  adopt Amendment  1,  which  read                                                              
[original punctuation provided]:                                                                                                
     Page 2, Line 6                                                                                                             
     Delete "December 31, 2002"                                                                                                 
     [December 31, 2002]  June 30, 2003                                                                                   
There being no objection, it was so ordered.                                                                                    
Number 2927                                                                                                                     
REPRESENTATIVE  MASEK  moved  to  adopt Amendment  2,  which  read                                                              
[original punctuation provided]:                                                                                                
     Page 3, Line 11                                                                                                            
     exploration and development of [oil or] gas                                                                              
There being no objection, it was so ordered.                                                                                    
REPRESENTATIVE MASEK  addressed Amendment 3, which  read [original                                                              
punctuation provided]:                                                                                                          
     Page 3, Line 19                                                                                                            
      The expenditures [that support claims for investment                                                                    
     tax credits] authorized under....                                                                                        
REPRESENTATIVE KERTTULA asked for clarification.                                                                                
CHAIR FATE indicated the purpose is to tighten the language up.                                                                 
Number 2973                                                                                                                     
REPRESENTATIVE  MASEK turned  attention  to page  3  of the  bill,                                                              
lines 17-20, subsection (h), which read:                                                                                        
     For  purposes  of determining  allowable  credits  under                                                                   
     this   section,   the  department   shall   allow   only                                                                   
     expenditures  and  payments  that are  not  inconsistent                                                                   
     with   the   expenditures  that   support   claims   for                                                                   
     investment  tax  credits  authorized   under  26  U.S.C.                                                                   
     (Internal    Revenue   Code)    for   exploration    and                                                                   
     development of natural resources.                                                                                          
TAPE 03-19, SIDE B                                                                                                            
Number 2982                                                                                                                     
REPRESENTATIVE  MASEK pointed  out that Amendment  3 deletes  from                                                              
it  the  following:   "that  support  claims  for  investment  tax                                                              
Number 2976                                                                                                                     
REPRESENTATIVE KERTTULA  expressed concern  that those may  be two                                                              
different   things:     expenditures  that   support  claims   for                                                              
investment  tax  credits  are  expenditures   brought  forward  to                                                              
support  those claims,  whereas expenditures  for exploration  and                                                              
development of natural resources seem to be quite a bit broader.                                                                
MR.  BARNES  explained   that  under  the  U.S.   tax  code  there                                                              
currently  aren't  investment  tax  credits;  thus  Representative                                                              
Kerttula was identifying something that no longer existed.                                                                      
Number 2934                                                                                                                     
REPRESENTATIVE  MASEK moved  to adopt Amendment  3 [text  provided                                                              
previously].  There being no objection, it was so ordered.                                                                      
Number 2923                                                                                                                     
REPRESENTATIVE  MASEK  moved  to  adopt Amendment  4,  which  read                                                              
[original punctuation provided]:                                                                                                
     Page 4, Line 31 and Page 5, Line 1                                                                                         
     Eliminate the entire Retroactivity clause                                                                                  
There being no objection, it was so ordered.                                                                                    
Number 2904                                                                                                                     
REPRESENTATIVE  MASEK moved  to report CSHB  61(O&G), as  amended,                                                              
out  of   committee  with   individual  recommendations   and  the                                                              
accompanying   fiscal   notes.     There   being   no   objection,                                                              
CSHB 61(RES)  was  reported  from  the  House  Resources  Standing                                                              
HB 97-LONG-TERM LEASES OF ALASKA RR LAND                                                                                      
Number 2839                                                                                                                     
CHAIR FATE  announced  that the next  order of  business would  be                                                              
HOUSE  BILL NO.  97,  "An Act  authorizing  a  long-term lease  of                                                              
certain  Alaska  Railroad  Corporation   land  at  Anchorage;  and                                                              
providing for an effective date."                                                                                               
The committee took a brief at-ease at 1:57 p.m.                                                                                 
Number 2804                                                                                                                     
REPRESENTATIVE  VIC KOHRING,  Alaska  State Legislature,  sponsor,                                                              
explained that  HB 97 would extend  the lease option  available on                                                              
some  property at  Government  Hill  in Anchorage  from  55 to  75                                                              
years.  Thus  a developer wishing  to build senior housing  on the                                                              
property  would  be able  to  qualify  for  a U.S.  Department  of                                                              
Housing and  Urban Development  (HUD) 202  grant.   Representative                                                              
Kohring  noted   that  just  last  year  the   legislature  passed                                                              
legislation that extended  the lease on lands owned  by the Alaska                                                              
Railroad Corporation  (ARRC) to 55 years so that  developers could                                                              
have a longer period  of time and qualify for financing.   Shortly                                                              
thereafter, HUD  specified that for  the HUD 202 grant,  a 75-year                                                              
lease is required rather than a 55-year lease.                                                                                  
REPRESENTATIVE   KOHRING  informed   the  committee  that   Alaska                                                              
Enfranchise  Facilities,   Inc.,  wishes   to  build   [a  senior]                                                              
facility  funded  through  the  HUD   202  grant.    However,  the                                                              
developer  needs a  75-year  lease  to build.    Therefore, HB  97                                                              
provides  an extension  on that  particular piece  of property  on                                                              
Government Hill.                                                                                                                
Number 2735                                                                                                                     
REPRESENTATIVE  MASEK   posed  a  situation  in   which  there  is                                                              
development  in the future  and this  project is in  the way.   In                                                              
such a  situation, would  the state  or the  railroad have  to buy                                                              
out those who  are building on the  site?  She inquired  as to the                                                              
impact  this  proposed  project   could  have  on  long-term  port                                                              
expansion plans for Anchorage.                                                                                                  
REPRESENTATIVE  KOHRING   responded  that  although   he  couldn't                                                              
predict  the direction  of the  port expansion,  he didn't  expect                                                              
the port  to expand  in the  direction of  Government Hill.   With                                                              
regard  to  Representative  Masek's  concern  with  the  Knik  Arm                                                              
crossing,  he  said the  location  of  that crossing  hadn't  been                                                              
determined  and thus  he didn't  believe  it would  be prudent  to                                                              
hold  up the  construction of  this  project, since  there was  no                                                              
knowledge of when  or if the crossing would be built.   He said he                                                              
has seen some of  the proposed routes; the one  receiving the most                                                              
focus is  to the west  of Government Hill,  far from  the proposed                                                              
building  site.   He  added  that  the location  of  the  proposed                                                              
senior housing is in a highly developed area.                                                                                   
REPRESENTATIVE  MASEK asked where  the state would  fall if  HB 97                                                              
was  passed  and  later  this  project was  in  the  way  [of  the                                                              
construction of the Knik Arm crossing].                                                                                         
REPRESENTATIVE  KOHRING answered  that  he didn't  know who  would                                                              
ultimately be responsible.   However, he guessed  that the federal                                                              
government  would  ultimately  be  responsible  because  it  would                                                              
likely fund the project.  He offered to research the issue.                                                                     
Number 2576                                                                                                                     
REPRESENTATIVE KERTTULA  asked why this  isn't a general  grant of                                                              
leasing authority  to the railroad,  rather than a  special grant.                                                              
"Why don't  we just take  a look at  the policies of  the railroad                                                              
and make it general?" she asked.                                                                                                
REPRESENTATIVE KOHRING  agreed that  the legislature could  make a                                                              
blanket extension from  55 years to 75 years.  He  deferred to the                                                              
ARRC representative.                                                                                                            
REPRESENTATIVE  KERTTULA explained  her concern that  if a  law of                                                              
general applicability  can be passed [it would  be better because]                                                              
there  may  be constitutional  problems  with  regard  to  special                                                              
Number 2515                                                                                                                     
WENDY  LINDSKOOG,  Director,  External  Affairs,  Alaska  Railroad                                                              
Corporation, acknowledged  that this  question has been  coming up                                                              
throughout  the  hearing  process.    She  explained  that  ARRC's                                                              
statutes specify  that it  has the broad  authority to  lease land                                                              
for up to  55 years.  However,  the law is written such  that ARRC                                                              
has  to obtain  specific legislative  approval to  lease land  for                                                              
over 55  years unless  ARRC reserves  the right  to terminate  the                                                              
lease.    Therefore,  the  law  requires   that  the  railroad  be                                                              
specific  with  regard   to  the  exemptions  ARRC   seeks.    Ms.                                                              
Lindskoog related  her belief that Legislative Legal  and Research                                                              
Services found that [interpretation] to be consistent.                                                                          
REPRESENTATIVE  KERTTULA  said ARRC's  enabling  statute could  be                                                              
changed  to  make [the  railroad's  lease  option] longer  if  the                                                              
legislature  so desires.   She asked  if the  aforementioned  is a                                                              
good idea.                                                                                                                      
MS.  LINDSKOOG informed  the committee  that last  year there  was                                                              
legislation  that  obtained  authorization  for  the  railroad  to                                                              
increase its lease  from 35 years to 55 years, with  which ARRC is                                                              
comfortable.   At that time, HUD  requirements were for  40 years.                                                              
However, the rules for HUD changed to 75 years.                                                                                 
Number 2394                                                                                                                     
CHAIR FATE asked  if ARRC has any other requests  for extension of                                                              
lease terms.                                                                                                                    
MS.  LINDSKOOG answered  that the  55  years brings  ARRC in  line                                                              
with  what  other  state  agencies,  such  as  the  University  of                                                              
Alaska, have.   She reiterated ARRC's  comfort with the  55 years.                                                              
At this point,  there are no  other requests for leasing  land for                                                              
more than  [55 years].   In  further response  to Chair  Fate, Ms.                                                              
Lindskoog  said she didn't  anticipate any  other [lease  requests                                                              
beyond  the  55  years]  unless  another  HUD  financing  proposal                                                              
surfaces.  She said it's hard to guess.                                                                                         
REPRESENTATIVE  KOHRING suggested  that  there was  somewhat of  a                                                              
precedent for  lease extension when  there was the change  from 45                                                              
to 55 years for the Healy housing project in 2000.                                                                              
REPRESENTATIVE KERTTULA  asked what this lease is  for and whether                                                              
there are any specific requirements for the lease itself.                                                                       
Number 2295                                                                                                                     
MARK   MARLOW,   Alaska  Enfranchise   Facilities,   Inc.   (AEF),                                                              
confirmed that the lease is just for the land.                                                                                  
REPRESENTATIVE KERTTULA  pointed out that the claim  has been that                                                              
[HB  97]  is  necessary  because   of  HUD  financing  for  senior                                                              
housing.   She asked what  guarantee the  state has that  the land                                                              
will be  used for [senior  housing] if the  lease is only  for the                                                              
MR.  MARLOW  answered that  if  HB  97 passes,  this  lease  isn't                                                              
automatically  extended.   This  legislation  merely gives  ARRC's                                                              
board  of directors  the authority  to  extend the  lease if  they                                                              
wish to  do so.   He pointed  out that  ARRC's board of  directors                                                              
can make  any extension  contingent on  the land's being  utilized                                                              
for this HUD 202 grant.                                                                                                         
REPRESENTATIVE KERTTULA  asked what Mr. Marlow intends  to do with                                                              
the land if the extension is granted or if it isn't.                                                                            
MR.  MARLOW  replied   that,  in  any  event,  there   will  be  a                                                              
multifamily housing  project built on the land.   However, he said                                                              
his desire  is to position the property  to be eligible  for a HUD                                                              
202 grant  through AEF.   The applications are  due at the  end of                                                              
May.     He   agreed  with   Representative   Kerttula  that   the                                                              
aforementioned is the reason for the 75 years.                                                                                  
Number 2207                                                                                                                     
REPRESENTATIVE KERTTULA  asked if  there is any binding  agreement                                                              
that  Mr. Marlow  could enter  into now  in order  to assure  [the                                                              
legislature] that the land will be used for senior housing.                                                                     
MR.  MARLOW  related  his understanding  that  such  an  agreement                                                              
would  be  appropriate   to  enter  into  with   ARRC's  board  of                                                              
REPRESENTATIVE  KERTTULA  surmised, "So  that  before they  extend                                                              
your lease you've entered into something that's binding."                                                                       
MR. MARLOW  replied, "That's  correct."   In further response,  he                                                              
said  he'd  applied  to lease  the  land  through  ARRC's  leasing                                                              
policy guidelines.   He related  his understanding that  there was                                                              
another   interested  party,   although  it   didn't  pursue   its                                                              
REPRESENTATIVE  KERTTULA asked,  "Would that  change if the  other                                                              
party were similarly able to get a 75-year lease?"                                                                              
MR. MARLOW  said that he  didn't have any  way of answering  that.                                                              
He noted  that 55 years  would outlast any  mortgage and  thus the                                                              
difference  in  the  value  of the  property,  whether  it  had  a                                                              
leasehold for 55 years or 75 years is probably negligible.                                                                      
Number 2130                                                                                                                     
REPRESENTATIVE  GATTO asked if  the lease  would allow  Mr. Marlow                                                              
to build  the proper unit  under the conditions  of the  lease and                                                              
use another  part of  the land as  a parking  lot or racetrack  or                                                              
something different.                                                                                                            
MR.  MARLOW   answered  that  the   zoning  of  the   property  is                                                              
controlled by  the Municipality of  Anchorage.  The zoning  of the                                                              
property is  R-4, which  means multifamily residential  [housing].                                                              
Mr.  Marlow clarified  that he  is representing  AEF, a  501(c)(3)                                                              
nonprofit  [corporation].    He   explained  that  HUD  202  grant                                                              
program is  an outright  grant that's  funneled through  501(c)(3)                                                              
nonprofits to  a community.  The  nonprofits sign a  contract with                                                              
HUD  to use  the buildings  built  with the  funds for  low-income                                                              
housing for people 62 years of age and older.                                                                                   
Number 2022                                                                                                                     
THOMAS PEASE,  Government  Hill Community  Council, noted  that he                                                              
is  a resident  of Government  Hill.   He  informed the  committee                                                              
that Government  Hill Community Council unanimously  opposed HB 97                                                              
at its  last  meeting because  it's special-interest  legislation.                                                              
Mr. Pease  said that  it's interesting  to note  that none  of the                                                              
legislators  representing  Government  Hill  have  signed  on  [as                                                              
cosponsors] of  this legislation.   Furthermore, ARRC,  which owns                                                              
the land, is neutral  on the issue.  Mr. Pease  explained that the                                                              
council  opposes  HB  97  because  ARRC's  leasing  practices  are                                                              
outdated and  ARRC applies  the same  criteria for remote  parcels                                                              
as it  does for parcels in  the heart of  an urban area.   He also                                                              
expressed concerns  with regard to density in  the Government Hill                                                              
area.  Directly  across from this parcel of land  are the highest-                                                              
density multifamily housing complexes in the state.                                                                             
MR.  PEASE turned  to Representative  Kohring's earlier  statement                                                              
that  the developer  is stuck  because of  the HUD  change in  its                                                              
minimum lease  requirement.  He  informed the committee  that last                                                              
year  at  this  time  there  were  two  applicants  interested  in                                                              
leasing  the  property.   Before  any  lease  was signed  on  this                                                              
property, HUD announced  that it was changing its  minimum leasing                                                              
requirements.   In fact,  one of the  two applicants  withdrew its                                                              
application  because  of the  changes.   The  current  leaseholder                                                              
knew before  signing the  lease that he  wouldn't qualify  for HUD                                                              
202 grant  money under  the 55-year  lease term.   Thus  Mr. Pease                                                              
said he considered HB 97 to be special-interest legislation.                                                                    
Number 1814                                                                                                                     
REPRESENTATIVE  GATTO said  he has  some notes  referring to  some                                                              
railroad  disputes over  easement lands  in Nenana.   He asked  if                                                              
Representative Kohring knows any history [about that].                                                                          
REPRESENTATIVE KOHRING  answered that he wasn't aware  of any.  In                                                              
response   to   Representative    Lynn,   Representative   Kohring                                                              
confirmed  that Mr.  Marlow is  the  same gentleman  who owns  the                                                              
McKay building.                                                                                                                 
Number 1755                                                                                                                     
REPRESENTATIVE GUTTENBERG  directed attention to page  1, line 13,                                                              
and  the  language   reading  "without  reserving   the  right  to                                                              
terminate  the   lease  if  the   land  is  needed   for  railroad                                                              
purposes".  He asked if that is standard language.                                                                              
MS.  LINDSKOOG   answered  that  it's  standard   language.    She                                                              
explained that legislative  approval is required to  lease land in                                                              
excess  of  55  years  unless  the   railroad  had  the  right  to                                                              
terminate.   Therefore,  the legislation  allows  the railroad  to                                                              
issue a  longer-term lease  without the right  to terminate.   The                                                              
right  to terminate  is  something that  financers  don't view  as                                                              
stable when  issuing long-term projects.   In further  response to                                                              
Representative  Guttenberg,  Ms. Lindskoog  said  that she  didn't                                                              
believe that  ARRC has leased anything  for longer than  55 years,                                                              
but would have to check to be sure.                                                                                             
Number 1659                                                                                                                     
CHAIR FATE  requested that Ms.  Lindskoog enlighten  the committee                                                              
with  regard to  the applicant  who withdrew  due to  the HUD  202                                                              
grant requirements.                                                                                                             
MS. LINDSKOOG  identified Anchorage  Neighborhood Housing  as that                                                              
applicant.      Anchorage  Neighborhood   Housing   withdrew   its                                                              
application   because   of  HUD's   75-year   lease   requirement.                                                              
Furthermore,   she   recalled   that   there   were   some   other                                                              
environmental  issues  involved  in  that  it was  going  to  take                                                              
Anchorage  Neighborhood Housing  longer to  perform due  diligence                                                              
and be  able to  make lease payments  on the  land.  However,  Mr.                                                              
Marlow said that  he could make lease payments on  the land at the                                                              
time and he  maintained his application.  Therefore,  ARRC's board                                                              
was  left with  one application  to review  for this  lease.   She                                                              
acknowledged that there were concerns from the neighborhood.                                                                    
CHAIR FATE  asked if  there has been  any examination  with regard                                                              
to the  impact such a  project would have  on a high-density  area                                                              
such as Government Hill.                                                                                                        
MS. LINDSKOOG replied  no, although ARRC's board  directive was to                                                              
review ARRC's  lease policy  and see  if it  should be  updated to                                                              
allow for  consideration when the area  is dense.  Now  that there                                                              
is  a full  board, the  aforementioned  is being  reviewed and  an                                                              
updating of ARRC's policy should occur.                                                                                         
Number 1496                                                                                                                     
REPRESENTATIVE GATTO  related his assumption that  the lease would                                                              
include a default  clause such that the land would  be returned if                                                              
the developer didn't perform.                                                                                                   
[Ms. Lindskoog nodded yes.]                                                                                                     
CHAIR FATE  noted that the  next committee  of referral for  HB 97                                                              
is the  House Finance  Committee.  Chair  Fate said that  although                                                              
he has  some reservations,  he would like  to see the  legislation                                                              
move  from  committee.   He  inquired  as  to  the wishes  of  the                                                              
Number 1323                                                                                                                     
REPRESENTATIVE GATTO  moved to report HB 97 out  of committee with                                                              
individual recommendations and the accompanying fiscal notes.                                                                   
Number 1314                                                                                                                     
REPRESENTATIVE  KERTTULA objected.   She said  she didn't  believe                                                              
HB 97  meets the standard  of not being  special legislation.   "I                                                              
think  it's a  second bite  of the  apple,  and I  don't like  the                                                              
testimony I've heard today," she added.                                                                                         
A  roll call  vote  was  taken.   Representatives  Gatto,  Heinze,                                                              
Lynn, Morgan,  Wolf, Masek, and Fate  voted in favor  of reporting                                                              
HB 97  from committee.   Representatives  Guttenberg and  Kerttula                                                              
voted  against it.    Therefore, HB  97 was  reported  out of  the                                                              
House Resources Standing Committee by a vote of 7-2.                                                                            
CHAIR FATE  noted his agreement with  some of those  in opposition                                                              
to  HB  97 because  the  legislation  does  [seem to  be  special-                                                              
legislation],  although he  didn't  want to  stand in  the way  of                                                              
good economic  development.  He related  his belief that  the next                                                              
committee of  referral would  address that.   [HB 97  was reported                                                              
from committee.]                                                                                                                
SB 79-EXTEND ALASKA MINERALS COMMISSION                                                                                       
CHAIR FATE  announced  that the next  order of  business would  be                                                              
SENATE  BILL NO. 79,  "An Act  extending the  termination date  of                                                              
the Alaska Minerals Commission."                                                                                                
Number 1120                                                                                                                     
REPRESENTATIVE  KERTTULA moved to  report SB  79 out of  committee                                                              
with  individual  recommendations   and  the  accompanying  fiscal                                                              
notes.   There being  no objection,  SB 79  was reported  from the                                                              
House Resources Standing Committee.                                                                                             
HB 208-HUNTING SAME DAY AIRBORNE                                                                                              
CHAIR FATE  announced that  the final order  of business  would be                                                              
HOUSE BILL  NO. 208, "An Act relating  to hunting on the  same day                                                              
airborne; and providing for an effective date."                                                                                 
Number 1016                                                                                                                     
JIM  POUND,  Staff  to  Representative  Hugh  Fate,  Alaska  State                                                              
Legislature,  testified that  HB 208  would make  some changes  to                                                              
existing  statute in  that it  gives additional  authority to  the                                                              
Board  of Game  to evaluate  the  management of  the resource  for                                                              
sustained   yield,  rather   than  [managing]   on  just   a  prey                                                              
population basis.   He explained that current  statute only allows                                                              
for  this very  limited  means for  making  a determination,  even                                                              
though many  other factors actually  play into a  total evaluation                                                              
of prey situations.                                                                                                             
MR.  POUND  said  the  bill  also   adds  language  to  allow  the                                                              
commissioner of [the  Alaska Department of Fish  and Game (ADF&G)]                                                              
to  permit airborne  or  same-day-airborne  shooting for  predator                                                              
control if  it is determined by  the Board of Game  that predation                                                              
is a key to  the problem.  Currently, this form  of management may                                                              
only be done from  an in-flight, moving aircraft.   Mr. Pound said                                                              
these changes  give  the appointed  experts on  the Board of  Game                                                              
and the  commissioner [of ADF&G]  valuable, effective tools  in an                                                              
effort  to  manage  game  for  sustained  yield.    He  urged  the                                                              
committee to support HB 208.                                                                                                    
Number 0866                                                                                                                     
REPRESENTATIVE HEINZE  asked if an  agent of ADF&G would  be doing                                                              
the shooting and how the agent would be defined and chosen.                                                                     
MR. POUND  offered his  understanding that it  could either  be an                                                              
agent  of  ADF&G  or  an  individual   who  is  permitted  by  the                                                              
commissioner; it would be a special permit.                                                                                     
REPRESENTATIVE  HEINZE  asked for  clarification  regarding  those                                                              
responsible  for  doing  the  shooting.    She  said  this  really                                                              
concerned her.                                                                                                                  
Number 0761                                                                                                                     
BLAINE  HOLLIS,  Assistant  Attorney  General,  Natural  Resources                                                              
Section,  Civil  Division  (Juneau),   Department  of  Law  (DOL),                                                              
testified that  with regard to the  agency issue, [DOL's]  view is                                                              
that it  really doesn't change  the status quo  on that.   He said                                                              
with regard  to the  two changes  to the  bill, one would  clarify                                                              
whether  both land-and-shoot  and airborne  shooting are  allowed,                                                              
whereas currently  there is some question about  whether land-and-                                                              
shoot would be allowed.   He said DOL's view is  that probably the                                                              
best  reading of  the current  statute  is that  both are  allowed                                                              
currently,  but  the   bill  would  clarify  that   and  remove  a                                                              
potential ambiguity  from the statute, clarifying  that both types                                                              
of predator control,  land-and-shoot and aerial,  are available to                                                              
the department pursuant to subsection (a).                                                                                      
MR. HOLLIS said  the second change that the bill  would make is to                                                              
clarify  that in  addition  to  just considering  prey  population                                                              
objectives,  the  board and  the  department  could also  look  at                                                              
harvest objectives  and the  other objectives  that are  specified                                                              
in  AS 16.05.255(g),  whereas currently  there  is some  ambiguity                                                              
about  whether   they  are  just   limited  to  looking   at  prey                                                              
populations   or   whether   they  may   also   consider   harvest                                                              
objectives.   The bill  would make  those two clarifications,  but                                                              
it doesn't  really go to the  question - assuming that  a predator                                                              
control  program is  implemented  under subsection  (a)  - of  who                                                              
could engage in it.                                                                                                             
MR. HOLLIS  said the  language in  the statute currently  provides                                                              
that a person may.   It is [DOL's] reading of  the statute, in its                                                              
current  form,  that   it  is  not  limited  just   to  department                                                              
employees,  and that  if  a program  were  instituted pursuant  to                                                              
[subsection] (a),  the department could authorize  agents or other                                                              
persons to participate in such a program.                                                                                       
CHAIR  FATE, sponsor  of HB  208, offered  his understanding  that                                                              
[persons  participating in  the program]  would be  agents of  the                                                              
MR. HOLLIS,  in response, said that's  if it's how  the department                                                              
structures it.                                                                                                                  
Number 0592                                                                                                                     
REPRESENTATIVE HEINZE  said this is a very big thing  to her.  She                                                              
asked who those  persons [participating in the  program] would be,                                                              
how many there would be, and how often they could participate.                                                                  
MR. HOLLIS,  in response,  said the reality  is that  the statute,                                                              
in its current  form, doesn't really limit that,  and [DOL's] view                                                              
is  to largely  leave  that to  the  department  to determine  and                                                              
fashion  an appropriate  predator-control program  to address  the                                                              
needs.   There  is  a  limitation in  the  second section  of  the                                                              
statute,  to   just  department   employees,  but  that's   for  a                                                              
different  type  of  program;  that's  a  separate  type  of  game                                                              
management  program.    The type  of  program  contemplated  under                                                              
subsection  (a)  is really  two  different  ways of  dealing  with                                                              
predator   control.     Under  current   law,  only   departmental                                                              
employees  are  allowed  to engage  in  management  programs  that                                                              
involve aerial shooting  without going through all  kinds of steps                                                              
that  are  outlined  in [subsection]  (a),  but  [subsection]  (a)                                                              
contains no limitation  on who may participate.  He  said in DOL's                                                              
view, it  essentially leaves  it to the  department and  the board                                                              
to  structure a  program  to meet  the  appropriate  needs on  the                                                              
ground at the time.                                                                                                             
Number 0478                                                                                                                     
REPRESENTATIVE  WOLF offered  his  understanding that  one of  the                                                              
former  governors  of Alaska  used  to  be  an agent  in  predator                                                              
control for aerial  wolf hunting.  He  said it was set  up at that                                                              
time  to  be  done  through  an   agent  that  worked  within  the                                                              
department.   Representative Wolf  related his understanding  that                                                              
the department,  commissioner, and  Board of  Game would  have the                                                              
ability to structure  it as an agent for the department  who would                                                              
be authorized to engage in predator control through this bill.                                                                  
MR. HOLLIS  suggested that  the statute in  its current  form does                                                              
that; he  said he doesn't  think the bill  changes that.   The two                                                              
things  that the  bill  seeks to  change don't  really  go to  the                                                              
question  of whether  an  agent may  participate  in the  program.                                                              
The two  changes in the  bill go to  the following:   one, whether                                                              
the shooting  can be  both land-and-shoot and  aerial or  just one                                                              
of them;  and, two,  the type  of population  objectives that  the                                                              
board  and the  department  can look  at  in deciding  whether  to                                                              
implement  [such a  program].   Neither  of  those changes  really                                                              
addresses  who  may  participate  in  the  program.    Mr.  Hollis                                                              
offered  his view  that current  law  would be  unchanged by  this                                                              
bill with regard to that issue.                                                                                                 
Number 0316                                                                                                                     
REPRESENTATIVE  LYNN asked  if there  is a provision  in the  bill                                                              
regarding the harvesting  of pelts from animals  shot through this                                                              
program, and if  so, who would own those pelts.   He indicated his                                                              
concern is that the pelts are not wasted.                                                                                       
MR.  HOLLIS  said he  didn't  think  those issues  were  addressed                                                              
either in the bill or in current statute.                                                                                       
CHAIR FATE  said it isn't addressed  in this bill or meant  to be.                                                              
He said he  suspected it would  probably be dealt with  another by                                                              
another section of the statute.                                                                                                 
REPRESENTATIVE LYNN  asked if this subject was  covered in another                                                              
CHAIR FATE  answered  that it will  be covered  because there  are                                                              
other  statutes  that  cover  the   treatment  of  hides  and  the                                                              
trapping  and sealing of  those hides,  but they  are not  in this                                                              
particular section.                                                                                                             
Number 0180                                                                                                                     
REPRESENTATIVE   GATTO   turned   attention   to  page   2,   sub-                                                              
subparagraphs (i) and  (ii).  He asked if there  are diseases that                                                              
can spread from predators to prey or if that would be unusual.                                                                  
MR. HOLLIS deferred the question to ADF&G.                                                                                      
REPRESENTATIVE  GATTO  remarked,  "If  the answer  was  yes,  then                                                              
would  it  be  a  situation  where  we  would  want  to  eliminate                                                              
predator and prey to eliminate the disease ...."                                                                                
MR. HOLLIS  said he  really didn't  know the  answer to  that, but                                                              
it's not  an issue that  is affected by this  bill.  He  said that                                                              
is a reflection of current law and it wouldn't be changed.                                                                      
Number 0093                                                                                                                     
REPRESENTATIVE  GATTO said  another  way to  control predators  is                                                              
with [Compound]  1080, a poison  used in bait.   He asked  if that                                                              
was still in use, prohibited, or no longer available.                                                                           
MR. HOLLIS said he didn't know.                                                                                                 
REPRESENTATIVE  GATTO  said  it  was  pretty  effective  but  also                                                              
pretty devastating  in that predators would lose  their hair, walk                                                              
in circles, whine and yell, and then die a miserable death.                                                                     
Number 0004                                                                                                                     
REPRESENTATIVE  GUTTENBERG asked  if  the bill  allows the  public                                                              
[to participate] in same-day-airborne shooting.                                                                                 
TAPE 03-20, SIDE A                                                                                                            
Number 0001                                                                                                                     
MR. HOLLIS,  in response, said  his view  is that the  law already                                                              
allows that.   This  bill would clarify  that a person  authorized                                                              
pursuant  to  an  appropriate  program   could  either  engage  in                                                              
shooting from the  air or could engage in land-and-shoot,  if that                                                              
were  deemed  necessary  and  appropriate.     He  said  the  bill                                                              
clarifies that both  options are available for  a predator-control                                                              
REPRESENTATIVE GUTTENBERG  asked if Ballot Measure 6,  voted on in                                                              
[2000], would be contradicted or overturned by this bill.                                                                       
Number 0109                                                                                                                     
MR. HOLLIS  said he  thought people  who may  testify later  would                                                              
say so, but that  is not [DOL's] view.  He said  his understanding                                                              
is that  the 2000  referendum did  not affect  subsection (a);  it                                                              
affected  only subsection  (b), a  different  approach that  would                                                              
authorize departmental  employees to  engage in airborne  predator                                                              
control without  having to go through  all of the  steps specified                                                              
in subsection (a).   The 2002 referendum removed  the word "agent"                                                              
from  that   section,  he  said;   although  prior  to   the  2000                                                              
referendum,   subsection  (b)  authorized   not  only   department                                                              
employees  but also  agents of the  department  to engage in  that                                                              
type of activity  under subsection (b), and it removes  that.  Mr.                                                              
Hollis said DOL's  view is that removing that  essentially created                                                              
the  situation whereby  only  departmental  employees can  operate                                                              
under subsection (b),  but it didn't impose any  limitation on who                                                              
a person is under subsection (a).                                                                                               
Number 0217                                                                                                                     
REPRESENTATIVE  KERTTULA  asked how  [ADF&G]  has used  subsection                                                              
(a) historically.                                                                                                               
MR. HOLLIS deferred the question to [ADF&G].                                                                                    
REPRESENTATIVE  KERTTULA  asked   if  the  historic  use  of  that                                                              
section would play  any part in the determination  of whether this                                                              
bill might run up against the initiative [as a matter of law].                                                                  
MR. HOLLIS  remarked,  "No; ... more  than two  years has  passed.                                                              
... There's  a couple  of ways of  looking at it.   You  could say                                                              
it's only  an amendment  or even  if it were  somehow viewed  as a                                                              
referral, it's been more than two years."                                                                                       
Number 0274                                                                                                                     
REPRESENTATIVE  KERTTULA asked,  if  it were  inside the  two-year                                                              
period, whether  the courts  would look at  the historic  facts of                                                              
how  the  department  had  used  [subsection]  (a)  to  make  that                                                              
MR. HOLLIS,  in response,  said the  court would  look at  factors                                                              
like how  the department  had implemented  the section  in perhaps                                                              
discerning the  intent of the statute.   He said he was  unsure of                                                              
whether  [the court]  would  look  at that  in  terms of  deciding                                                              
whether the constitutional  limitation on amending  or repealing a                                                              
referendum is implicated.                                                                                                       
CHAIR  FATE said  because of  time  constraints, public  testimony                                                              
would not  be closed  during this meeting  and would  be continued                                                              
during the next hearing on the bill.                                                                                            
Number 0476                                                                                                                     
DOROTHY KEELER  testified in opposition  to HB 208.   She provided                                                              
the following testimony:                                                                                                        
     It's hard  to believe  that this  hearing is not  taking                                                                   
     place in the  1800s, when the only good wolf  was a dead                                                                   
     wolf.   Fortunately,  the  world population  has  become                                                                   
     better  educated  since  then  and we  are  counting  on                                                                   
     their revulsion  of what this bill allows  to end aerial                                                                   
     predator control  with a tourism  boycott, just  like it                                                                   
     did in 1993.                                                                                                               
     My   husband,  Leo,   was   on  the   McGrath   Adaptive                                                                   
     Management  Team, and has all  the studies [ADF&G]  paid                                                                   
     for  that did  not support  predator control.   We  both                                                                   
     felt it  odd that none of  those studies were  posted on                                                                   
     the ADF&G web  site.  Rest assured, however:   the media                                                                   
     can find them posted on ours.                                                                                              
     John  Blackstone  from  CBS   News,  "Eye  on  America,"                                                                   
     covered  our  work to  protect  the McNeil  River  bears                                                                   
     twice  in 1995.   He  covered  our work  to protect  the                                                                   
     Toklat wolves  in 1999, and  stories of that  effort are                                                                   
     still  posted on  the  CBS News  web  site.   He  stands                                                                   
     ready to help us spread the word on this.                                                                                  
     I am currently  freelancing for CBS News.   That's why I                                                                   
     have  filmed,  on  TV-quality   broadcast  video,  every                                                                   
     Board  of Game  meeting  and testimony  concerning  that                                                                   
     issue.   That is  why I  am filming  this hearing as  we                                                                   
     speak.   That is why  we created a  web site devoted  to                                                                   
     this issue  and have showcased  it on four of  our other                                                                   
     web  sites,  two  of which  currently  rival  the  daily                                                                   
     traffic of KTUU, Channel 2, web site.                                                                                      
Number 0641                                                                                                                     
     Since reason  and logic have apparently  been abandoned,                                                                   
     we are fighting  this with the only weapon left  to us -                                                                   
     world  opinion.    Are  you   really  prepared  for  the                                                                   
     tourism  boycott  that  your  actions  are  leading  to?                                                                   
     This  bill, if enacted,  will launch  a tourism  boycott                                                                   
     that  will make  the  one in  1993 tame  by  comparison,                                                                   
     crippling our fragile economy.                                                                                             
     Actually, due  to the speed  and reach of the  Internet,                                                                   
     and  the studies by  ADF&G that  prove that  overhunting                                                                   
     is  the cause  of the  decline -  and just  look at  the                                                                   
     bull-cow ratio  in McGrath to  verify that - I  feel the                                                                   
     outcome will be swifter and far more damaging.                                                                             
     Choosing  to start  predator control  to increase  moose                                                                   
     numbers  is  like  using DDT  to  increase  crop  yield.                                                                   
     Both  are guaranteed  to work  for the  short term,  but                                                                   
     the   long-term    consequences,   both    planned   and                                                                   
     unexpected, will  not be worth the cost.   The worldwide                                                                   
      traveling public will see to that.  However, it's not                                                                     
        too late to void this fiasco.  I urge you to vote                                                                       
MS. KEELER,  in response to a  question from Chair Fate,  said she                                                              
and her  husband are wildlife  photographers who  have specialized                                                              
in  filming the  Toklat wolves,  the McNeil  River bears,  [other]                                                              
bears,  eagles,   and  wolves  throughout  Alaska.     Ms.  Keeler                                                              
clarified  that  she  was  referring  to  her  and  her  husband's                                                              
photographic work.                                                                                                              
Number 0798                                                                                                                     
ROD ARNO  testified.  Mr.  Arno noted that  he has been  attending                                                              
the Board  of Game [meetings] for  the last 10  years representing                                                              
the Alaska  Outdoor Council,  and has  been a professional  hunter                                                              
for  the  last 30  years.    Expressing  support  for HB  208,  he                                                              
suggested  the   bill  will  help   the  state  achieve   economic                                                              
stability  through  resource  development   while  increasing  the                                                              
opportunity  for  29,000  Alaskan  hunters to  provide  moose  for                                                              
their families to eat.                                                                                                          
MR.  ARNO  said  the  change  from  prey  population's  being  the                                                              
"trigger"  to  harvest   objectives  -  as  well   as  those  prey                                                              
population objectives  - is important for the Board  of Game.  For                                                              
example,  10  years ago,  GMU  [Game  Management  Unit] 13  had  a                                                              
population  of approximately 23,000  moose; after  10 years  of no                                                              
predator  control   that  population  has  fallen   below  10,000.                                                              
Furthermore,  he   said  under  AS  16.05.255(g)   the  population                                                              
objective is set between 20,000 and 25,000 moose for that area.                                                                 
MR. ARNO said  the problem of just going by  population objectives                                                              
is  the difficulty  in counting  each  moose.   He suggested  that                                                              
this  bill  would make  it  much  easier  to record  the  reported                                                              
harvest.   He said the  reported harvest  objective for GMU  13 is                                                              
from 1,200  to 2,000 moose, whereas  the average 10 years  ago for                                                              
GMU 13 was 921  moose.  Today, he said, that's  fallen down to 430                                                              
[moose],  which  is below  the  level  that the  board  determined                                                              
necessary of  600 [moose] for  subsistence use.   Furthermore, the                                                              
board estimates  3,000 subsistence moose  hunters in GMU  13 [will                                                              
be  competing for]  150 subsistence  permits.   He suggested  that                                                              
the bill  will provide a  better record for  the Board of  Game to                                                              
recognize that those harvest objectives are not being met.                                                                      
Number 1005                                                                                                                     
MR.  ARNO  said  since  the  Knowles  Administration  stopped  all                                                              
predator control,  56 percent of moose populations  identified for                                                              
intensive management  by the  board are  declining.  He  suggested                                                              
it was  important for  the legislature and  for Alaskan  voters to                                                              
keep in  mind the fact  that airborne  wolf hunting and  land-and-                                                              
shoot wolf-hunting  tools are  banned in 60  percent of  the state                                                              
because of  federal laws;  he said there's  another 20  percent of                                                              
the  state where  predator control,  due  to habitat  limitations,                                                              
urban  centers,  and economic  infeasibility,  "says  we won't  do                                                              
it."  Mr.  Arno indicated that  this bill would provide  the Board                                                              
of  Game with  the  tools to  do  predator-prey  management in  15                                                              
percent of  the state, at  the most.   He suggested  airborne wolf                                                              
control and land-and-shoot  wolf hunting are defensible  tools for                                                              
predator-prey management.   He again  urged the passage of  HB 208                                                              
from committee.                                                                                                                 
Number 1082                                                                                                                     
REPRESENTATIVE  MASEK  asked Mr.  Arno  if any  consideration  had                                                              
been given to hunting wolves for bounties.                                                                                      
MR. ARNO  said yes;  in fact, legislation  had been introduced  to                                                              
do  just that.   He  noted that  bounty hunting  existed prior  to                                                              
statehood,  and that he  had been  hunting since  1966.   Mr. Arno                                                              
said  prior to  the  board's ban  on land-and-shoot  [hunting]  in                                                              
1991,  what  worked  adequately  was  having  trapper's  licenses,                                                              
liberal bag  limits, and seasons in  place to allow persons  to go                                                              
out in  their own  aircraft and  do land-and-shoot  hunting.   Mr.                                                              
Arno  said those  hides  were  sold for  up  to $400  each,  which                                                              
adequately  paid  for those  few  people  who were  proficient  at                                                              
land-and-shoot  wolf hunting.   Until  the  land-and-shoot ban  in                                                              
1991,  he  said  that method  alone,  without  the  bounties,  was                                                              
enough to keep wolf predation down.                                                                                             
Number 1225                                                                                                                     
ROBERT  FITHIAN, Executive  Director,  Alaska Professional  Hunter                                                              
Association,  testified  that  the   [hunting]  industry  annually                                                              
contributes  well   over  $100  million   to  Alaska.     He  said                                                              
Article I,  Section  1,  of the  state  constitution  defines  the                                                              
inherent rights  of the state's  citizens, including the  right to                                                              
life, liberty, happiness,  and the rewards of their  own industry;                                                              
it also states  that all persons  are equal and entitled  to equal                                                              
rights.    Furthermore,  it  closes  with  a  statement  that  all                                                              
persons  have  corresponding  obligations  to the  people  of  the                                                              
state.   He  remarked, "It's  very unique  to see  that the  first                                                              
section of  our constitution lays  out our rights but  then closes                                                              
with a stewardship requirement for us."                                                                                         
MR.  FITHIAN  read  Article  VIII,   Sections  3  and  4,  to  the                                                              
committee.   He  remarked,  "It's  sad to  sit  and  look back  on                                                              
Alaska and  see where  the tides  of special interests  advocating                                                              
for  environmentalism  by  regulatory  strangulation  and  natural                                                              
science  have taken  us to."   He suggested  this has  contributed                                                              
much to  the lack  of natural  resource economy,  to pitting  user                                                              
groups against  each other, and  to the decay  of the way  of life                                                              
of the people  that depend on the state's wilderness  and wildlife                                                              
resources to sustain themselves.                                                                                                
MR.  FITHIAN said  these  tides have  also left  a  high mark  for                                                              
nonprudent  stewardship of  the state's resources.   He  suggested                                                              
that it is important  [for user groups] to turn  together and work                                                              
to  help cement  policies  for  governing  the industry  based  on                                                              
common  use, proven  science,  and  constitutional  mandates.   He                                                              
suggested that  it is important to  note that in  any geographical                                                              
areas of the state  where the survival rate of  moose, caribou, or                                                              
Dall  sheep  born  annually  falls below  10  percent,  there's  a                                                              
minimal chance at recoupment of these species.                                                                                  
MR. FITHIAN  told members  that the end  result of this  situation                                                              
is that status  quo management policies will continue  to pit user                                                              
groups against each  other, and people dependent  on wildlife will                                                              
be the losers.   He said HB 208 is a start in  the right direction                                                              
to relieve  this situation and is  not just a bill  that adversely                                                              
affects  the  wolves of  Alaska.    The  population of  wolves  in                                                              
Alaska  has never  been threatened  or  endangered, he  suggested.                                                              
Urging the  committee to  support and  pass the  bill, he  said HB                                                              
208 provides sustainability  to Alaska's residents  and the people                                                              
who depend on wildlife resources as a way of life.                                                                              
Number 1425                                                                                                                     
CHAIR  FATE announced  that HB  208 would  be held  over and  that                                                              
public testimony would resume on [4/2/03].                                                                                      
There being  no further business  before the committee,  the House                                                              
Resources Standing Committee meeting was adjourned at 3:02 p.m.                                                                 

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