Legislature(2003 - 2004)

02/23/2004 01:36 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                       February 23, 2004                                                                                        
                           1:36 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Nancy Dahlstrom, Co-Chair                                                                                        
Representative Beverly Masek, Co-Chair                                                                                          
Representative Carl Gatto                                                                                                       
Representative Bob Lynn                                                                                                         
Representative Nick Stepovich                                                                                                   
Representative Kelly Wolf                                                                                                       
Representative Beth Kerttula                                                                                                    
Representative David Guttenberg                                                                                                 
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Cheryll Heinze, Vice Chair                                                                                       
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CONFIRMATION HEARING(S)                                                                                                         
                                                                                                                                
Alaska Royalty Oil and Gas Development Advisory Board                                                                         
                                                                                                                                
     Charles E. Cole - Fairbanks                                                                                                
     Kenneth O. Stout - Anchorage                                                                                               
                                                                                                                                
     - CONFIRMATION(S) ADVANCED                                                                                                 
                                                                                                                                
Alaska Oil and Gas Conservation Commission                                                                                    
                                                                                                                                
     John K. Norman - Anchorage                                                                                                 
                                                                                                                                
     - CONFIRMATION(S) ADVANCED                                                                                                 
                                                                                                                                
Alaska Commercial Fisheries Entry Commission                                                                                  
                                                                                                                                
     Frank M. Homan - Juneau                                                                                                    
                                                                                                                                
     - CONFIRMATION(S) ADVANCED                                                                                                 
                                                                                                                                
HOUSE BILL NO. 344                                                                                                              
"An Act relating to annual rental fees for mining claims, and                                                                   
providing for reduced royalties during the first three years of                                                                 
production."                                                                                                                    
                                                                                                                                
     - HEARD AND HELD                                                                                                           
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 344                                                                                                                  
SHORT TITLE: MINING FEES/LABOR/ROYALTIES/ABANDONMENT                                                                            
SPONSOR(S): REPRESENTATIVE(S) FATE                                                                                              
                                                                                                                                
01/12/04       (H)       PREFILE RELEASED (1/2/04)                                                                              
01/12/04       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/12/04       (H)       RES, FIN                                                                                               
02/04/04       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
02/04/04       (H)       Heard & Held                                                                                           
02/04/04       (H)       MINUTE(RES)                                                                                            
02/23/04       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
KENNETH O. STOUT, Appointee                                                                                                     
to the Alaska Royalty Oil and Gas Development Advisory Board                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  As appointee to the Alaska Royalty Oil and                                                                 
Gas Development Advisory Board, discussed the position and                                                                      
answered questions from the committee.                                                                                          
                                                                                                                                
CHARLES E. COLE, Appointee                                                                                                      
to the Alaska Royalty Oil and Gas Development Advisory Board                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  As appointee to the Alaska Royalty Oil and                                                                 
Gas Development Advisory Board, discussed the position and                                                                      
answered questions from the committee.                                                                                          
                                                                                                                                
JOHN K. NORMAN, Appointee                                                                                                       
to the Alaska Oil and Gas Conservation Commission                                                                               
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  Discussed the position and answered                                                                        
questions from the committee.                                                                                                   
                                                                                                                                
FRANK M. HOMAN, Appointee                                                                                                       
to the Alaska Commercial Fisheries Entry Commission                                                                             
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Discussed the position and answered                                                                        
questions from the committee.                                                                                                   
                                                                                                                                
JIM POUND, Staff                                                                                                                
to Representative Hugh Fate                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   Testified on  CSHB 344(RES)  and spoke  to                                                               
changes on behalf of Representative Fate, sponsor.                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 04-07, SIDE A                                                                                                            
Number 0001                                                                                                                     
                                                                                                                                
CO-CHAIR  BEVERLY  MASEK  called  the  House  Resources  Standing                                                             
Committee meeting to  order at 1:36 p.m.   Representatives Masek,                                                               
Dahlstrom,  Lynn,   Stepovich,  Guttenberg,  and   Kerttula  were                                                               
present at  the call  to order.   Representatives Gatto  and Wolf                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
CO-CHAIR MASEK announced for the  record that Representative Wolf                                                               
had joined the meeting.                                                                                                         
                                                                                                                                
^CONFIRMATION HEARING(S)                                                                                                      
                                                                                                                                
                                                                                                                                
CO-CHAIR MASEK announced  that the first order  of business would                                                               
be the  confirmation hearings of  the governor's  appointments to                                                               
various boards as listed above in the committee calendar.                                                                       
                                                                                                                                
^Alaska Royalty Oil and Gas Development Advisory Board                                                                        
                                                                                                                                
Number 0064                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  brought before the  committee the  appointment of                                                               
Kenneth O.  Stout to the  Alaska Royalty Oil and  Gas Development                                                               
Advisory  Board.    She  asked   Mr.  Stout  to  comment  on  his                                                               
appointment to the board.                                                                                                       
                                                                                                                                
Number 0172                                                                                                                     
                                                                                                                                
KENNETH O.  STOUT, Appointee  to the Alaska  Royalty Oil  and Gas                                                               
Development Advisory  Board, discussed the position  and answered                                                               
questions  from the  committee.   He  told the  members that  the                                                               
board attended  a conference  in Fairbanks  and was  well pleased                                                               
with  the  recommendation to  move  ahead  with the  Black  Hills                                                               
purchase.                                                                                                                       
                                                                                                                                
CO-CHAIR  MASEK pointed  out that  Mr. Stout's  resume is  in the                                                               
members' packet for review.                                                                                                     
                                                                                                                                
Number 0261                                                                                                                     
                                                                                                                                
REPRESENTATIVE GUTTENBERG commented that  his concern lies with a                                                               
previous  appointee   who  stepped  down  because   of  political                                                               
involvement, and asked Mr. Stout to address the issue.                                                                          
                                                                                                                                
MR.  STOUT  asked for  clarification  that  he has  already  been                                                               
appointed and confirmed as a member of the board.                                                                               
                                                                                                                                
CO-CHAIR MASEK  told Mr. Stout  that while he has  been appointed                                                               
by  the  governor,   he  has  not  yet  been   confirmed  by  the                                                               
legislature.                                                                                                                    
                                                                                                                                
MR. STOUT thanked  Co-Chair Masek for clarifying that  point.  He                                                               
responded that  his political affiliation will  not have anything                                                               
to do with the  way he approaches his service to  the board.  Mr.                                                               
Stout said as the members know,  he is conservative and will work                                                               
to get  the biggest  "bang for  the buck."   In  the case  of the                                                               
Black Hills purchase  he told the members that he  believes it is                                                               
in the  best interest  of the state  to go forward  with it.   He                                                               
confirmed that he  has been a member of the  Republican Party for                                                               
many years,  and reassured the  members that fact would  not have                                                               
any effect on the way he votes on the board.                                                                                    
                                                                                                                                
Number 0453                                                                                                                     
                                                                                                                                
REPRESENTATIVE  KERTTULA asked  Mr. Stout  if he  currently holds                                                               
any party office.                                                                                                               
                                                                                                                                
MR. STOUT  replied that  he does  not.  He  commented that  he is                                                               
running for  the city assembly, but  clarified that it is  a non-                                                               
partisan election.                                                                                                              
                                                                                                                                
REPRESENTATIVE  KERTTULA  asked if  he  is  elected to  the  city                                                               
assembly does  he believe he  will have  enough time to  serve in                                                               
both offices.                                                                                                                   
                                                                                                                                
MR. STOUT responded that he will.   He explained that neither the                                                               
assembly position nor the position  on the Alaska Royalty Oil and                                                               
Gas Development Advisory Board are full time positions.                                                                         
                                                                                                                                
Number 0523                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEPOVICH  commended Mr.  Stout for  his community                                                               
activism   in  running   for  local   office.     He  said   that                                                               
Representative Guttenberg's  question must  have been  spurred by                                                               
an  individual  stepping  down  from  some  other  committee,  as                                                               
Representative  Stepovich does  not recall  anyone on  the Alaska                                                               
Royalty  Oil and  Gas Development  Advisory Board  stepping down.                                                               
He asked Mr. Stout  what he believes he can do  to help the state                                                               
through his service.                                                                                                            
                                                                                                                                
Number 0579                                                                                                                     
                                                                                                                                
MR. STOUT  replied that  his past  experience of  working through                                                               
problems and finding reasonable  solutions will benefit the state                                                               
of Alaska.   He summarized that  he is willing to  do whatever he                                                               
can to help the state.                                                                                                          
                                                                                                                                
CO-CHAIR  MASEK  announced  for the  record  that  Representative                                                               
Gatto had joined the meeting.                                                                                                   
                                                                                                                                
CO-CHAIR DAHLSTROM thanked Mr. Stout  for his military service to                                                               
the United  States.   She noted  that on  Mr. Stout's  resume the                                                               
group called Common  Sense for Alaska is listed  under former and                                                               
current  professional organizations.    Co-Chair Dahlstrom  asked                                                               
him to  comment on his  current involvement.   She noted  for the                                                               
record that  Common Sense  for Alaska  is a  group that  has been                                                               
campaigning for the use of the earnings of the permanent fund.                                                                  
                                                                                                                                
Number 0735                                                                                                                     
                                                                                                                                
MR. STOUT assured the members that  he is not currently active in                                                               
the group and has not been for  many years.  He commented that he                                                               
listed groups that  he has been involved with over  the years, in                                                               
come cases the list goes back 23 years.                                                                                         
                                                                                                                                
MR.  STOUT  pointed  out  that  he also  currently  serves  on  a                                                               
veteran's  commission.   He just  returned from  Washington, D.C.                                                               
where he  attended a meeting.   Part  of that meeting  included a                                                               
visit  to Walter  Reed Army  Medical  Center, Ward  57, which  is                                                               
where amputees  go to  recuperate and have  new limbs  fitted for                                                               
them.    Mr.  Stout  explained   that  [in  the  current  war  on                                                               
terrorism] with the new body  armor soldiers are not being killed                                                               
in as high a numbers as  previous wars; however, they are loosing                                                               
a lot more  limbs, he said.   He told the members  that he cannot                                                               
stress  the incredible  respect  he feels  for  the military  who                                                               
serve our country.                                                                                                              
                                                                                                                                
Number 0926                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  brought before the  committee the  appointment of                                                               
Charles E.  Cole to  the Alaska Royalty  Oil and  Gas Development                                                               
Advisory  Board.     She  asked  Mr.  Cole  to   comment  on  his                                                               
appointment to the board.                                                                                                       
                                                                                                                                
CHARLES  E. COLE,  Appointee to  the Alaska  Royalty Oil  and Gas                                                               
Development Advisory  Board, discussed the position  and answered                                                               
questions from the  committee.  He told the members  that he came                                                               
to Alaska  in January of 1954  and since that time  has practiced                                                               
law.   In fact, as  of January 27, 2004  he has practiced  law in                                                               
Alaska for  50 years.   Mr. Cole said that  he spent one  year in                                                               
Juneau  working for  the  territorial  commissioner of  veterans'                                                               
affairs which was  a revolving loan program for  veterans.  After                                                               
about six  months in that position  he went to work  for Attorney                                                               
General  Williams and  served as  assistant attorney  general for                                                               
about six months.   In December of 1954 he  came to Fairbanks and                                                               
met the U.S.  District Attorney Ted Stevens who  persuaded him to                                                               
go  to  work for  the  newly  appointed  U.S. District  Judge  in                                                               
Fairbanks, which he  did for about 18 months.   He shared that in                                                               
1956 he ran for and was  elected to the city magistrate position.                                                               
In April  of 1957 he began  the practice of law  in Fairbanks and                                                               
continued until December  of 1990 when he  was appointed Attorney                                                               
General by Governor  Hickel.  He told the members  that he served                                                               
in  that capacity  until January  of 1994,  and then  returned to                                                               
private practice in Fairbanks, where he currently works.                                                                        
                                                                                                                                
Number 1150                                                                                                                     
                                                                                                                                
REPRESENTATIVE GATTO asked if he is any good at baseball.                                                                       
                                                                                                                                
MR.  COLE  responded that  he  played  professional baseball  for                                                               
three years; two years riding  the buses in the California league                                                               
in the early  1950s, and one year in the  pioneer league in Idaho                                                               
in 1953.                                                                                                                        
                                                                                                                                
REPRESENTATIVE GATTO commented that he  sees that Mr. Cole played                                                               
for Stanford  University.  Did it  have a decent season  when you                                                               
played for them, he asked.                                                                                                      
                                                                                                                                
MR. COLE responded that in the  first year of law school the team                                                               
won   the   California  Inter-collegiate   Baseball   Association                                                               
championship, and went to Washington  to compete.  Unfortunately,                                                               
he said, due  to his miserable performance the  team was defeated                                                               
by "WSC" [Washington  State College].  Mr. Cole  told the members                                                               
that he played every inning  and every game for three consecutive                                                               
years.                                                                                                                          
                                                                                                                                
REPRESENTATIVE GATTO asked  if this position pays as  well as the                                                               
Stanford [University] position.                                                                                                 
                                                                                                                                
MR.  COLE  replied  that  when  he  played  in  Stockton  in  the                                                               
California league he  was paid $350 per month and  $3 per day for                                                               
travel money for meals.  It  wasn't that lucrative in those days,                                                               
he commented.                                                                                                                   
                                                                                                                                
REPRESENTATIVE GATTO  commented that this position  pays a little                                                               
more.                                                                                                                           
                                                                                                                                
MR.  COLE replied  that  he  is not  sure  this appointment  pays                                                               
anything,  but said  that  is okay  with him  because  he is  not                                                               
looking for any compensation from this position.                                                                                
                                                                                                                                
Number 1280                                                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM  thanked Mr.  Cole  for  his service  to  the                                                               
United States.   She commented that she believes both  he and Mr.                                                               
Stout would be excellent resources  for the veterans' committees.                                                               
Co-Chair  Dahlstrom said  that HB  28 passed  both the  house and                                                               
senate last  session.   That bill  provided clarification  of the                                                               
Commissioner of  the Department of Natural  Resources' ability to                                                               
adjust the  state's royalties  to encourage  economic production.                                                               
She  asked Mr.  Cole to  comment on  his experience  with royalty                                                               
modification issues  and also what  his general philosophy  is in                                                               
evaluating proposals  that may  or may  not be  on the  table for                                                               
royalty modification.                                                                                                           
                                                                                                                                
Number 1362                                                                                                                     
                                                                                                                                
MR. COLE responded  that it is hard to say  what his general view                                                               
is for  royalty modification.   He said  he thinks  that whenever                                                               
agreements  are modified  it should  be  done with  care and  the                                                               
modification must be supported with  good solid reasons.  That is                                                               
true because there  had to be good solid reasons  for the initial                                                               
formulation of the agreement, he  explained.  Mr. Cole reiterated                                                               
that  he would  look  upon modifications  of existing  agreements                                                               
with great care.                                                                                                                
                                                                                                                                
REPRESENTATIVE  DAHLSTROM   said  that  with  the   stranded  gas                                                               
application,  the   Alaska  Natural  Gas   Development  Authority                                                               
bringing  natural gas  development issues  to the  forefront, and                                                               
the governor's statement that access to  the North Slope gas is a                                                               
crucial element to Alaska's negotiating  platform, she asked what                                                               
role Mr.  Cole sees  the Alaska Royalty  Oil and  Gas Development                                                               
Advisory Board playing in these  negotiations.  How critical does                                                               
Mr. Cole believe this board's role is, she asked.                                                                               
                                                                                                                                
MR.  COLE  said  that  he  does   not  believe  the  board  is  a                                                               
participant in  any of the  negotiations.   He added that  he has                                                               
not been  briefed on  any negotiations  so he  is totally  in the                                                               
dark with respect to it.  He  said that under the act he believes                                                               
the   board  will   be  required   to  discharge   its  statutory                                                               
responsibilities with respect to any such agreements.                                                                           
                                                                                                                                
Number 1511                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEPOVICH  thanked Mr.  Cole for  his 50  years of                                                               
service to  Alaska, and asked him  what he believes he  can do on                                                               
the board to enhance resource development.                                                                                      
                                                                                                                                
Number 1558                                                                                                                     
                                                                                                                                
MR. COLE  said that  he does not  know what the  board can  do to                                                               
enhance  resource  development  because  those  are  the  primary                                                               
responsibilities of  the governor and  the legislature.   He said                                                               
he  thinks that  his experiences  in negotiations,  formulations,                                                               
and  drafting of  agreements over  the years  could be  useful in                                                               
reviewing  and  strengthening  the   agreements  by  looking  for                                                               
pitfalls and  providing oversight.   Mr.  Cole said  he generally                                                               
sees his  role one where he  provides an oversight of  the public                                                               
interest with respect to those  agreements.  He commented that he                                                               
would  not rubber-stamp  any  agreement  that the  administration                                                               
might  make  because  the  members  of the  board  have  a  broad                                                               
responsibility  to the  public.   Mr.  Cole stated  that when  he                                                               
makes  recommendations  with  respect   to  those  agreements  he                                                               
expects  that  the legislature  would  hold  him responsible  for                                                               
discharging  his statutory  duties and  would therefore  act with                                                               
care.                                                                                                                           
                                                                                                                                
REPRESENTATIVE STEPOVICH  noted that  Mr. Cole  did do  that with                                                               
the Exxon  Valdez case,  and he  thanked him for  that work.   He                                                               
recommended that Mr. Cole be confirmed to the board.                                                                            
                                                                                                                                
REPRESENTATIVE GUTTENBERG  thanked him  for his service  and said                                                               
that he  hopes he continues  to hear  his voice speaking  out for                                                               
all Alaskans.                                                                                                                   
                                                                                                                                
CO-CHAIR MASEK  asked Mr.  Cole to  speak on  his opinion  of the                                                               
subsistence issue.                                                                                                              
                                                                                                                                
MR. COLE  said he is  pleased to say  that he believes  the state                                                               
needs  to adopt  a  constitutional amendment  to  obtain as  much                                                               
power  to act  on  the  subsistence issue  as  is possible  under                                                               
Alaska National Interest Lands Conservation  Act (ANILCA).  It is                                                               
important for Alaskans  on all sides of the issue  that the state                                                               
come together  and achieve  as much  control over  subsistence as                                                               
possible, he  said.  Mr. Cole  told the members that  he believes                                                               
it is in the best interest  of Native people, and the fishing and                                                               
hunting population of Alaska.  He  said he will continue to exert                                                               
any  efforts to  achieve  that  end.   Mr.  Cole  warned that  he                                                               
believes it will  be a terrible mistake  if it is not  done.  The                                                               
possibilities of  achieving that  end are rapidly  slipping away,                                                               
and he looks upon that with great regret, he added.                                                                             
                                                                                                                                
Number 1843                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  asked if he believes  changes need to be  made in                                                               
ANILCA before tinkering with the Alaska State Constitution.                                                                     
                                                                                                                                
MR. COLE commented  that he would like to see  changes in ANILCA,                                                               
but believes it  would be very difficult to obtain.   However, if                                                               
the state  went to Senator  Stevens with a unified  position some                                                               
changes are possible.                                                                                                           
                                                                                                                                
REPRESENTATIVE  STEPOVICH commented  that Mr.  Cole will  only be                                                               
getting per diem if he is confirmed to the board.                                                                               
                                                                                                                                
MR. COLE replied  that he is not that interested  in per diem; he                                                               
is just  pleased to make a  contribution to the system.   He told                                                               
the  members that  he hopes  the legislature  approves Mr.  Stout                                                               
because he  has served with  him on  the review of  the Foothills                                                               
Pipe Lines  Ltd. contract for  the North Pole refinery  and found                                                               
that  Mr.  Stout had  a  lot  of  constructive comments  in  that                                                               
process.                                                                                                                        
                                                                                                                                
^Alaska Oil and Gas Conservation Commission                                                                                   
                                                                                                                                
Number 1964                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK said  next appointment for review is  that of John                                                               
K.  Norman to  the  Alaska Oil  and  Gas Conservation  Commission                                                               
(AOGCC).  She  asked Mr. Norman to comment on  his appointment to                                                               
the commission.                                                                                                                 
                                                                                                                                
Number 1990                                                                                                                     
                                                                                                                                
JOHN K. NORMAN, Appointee to  the Alaska Oil and Gas Conservation                                                               
Commission, discussed  the position  and answered  questions from                                                               
the committee.   He told the members that he  came to Alaska 1968                                                               
when he  was transferred  here by  an oil company  in Texas.   He                                                               
explained  that he  had joined  the oil  company after  finishing                                                               
military  service.    In  1968  the  Prudhoe  Bay  discovery  was                                                               
announced, and  he joined  the Department of  Law as  council for                                                               
the Department  of Natural Resources  and had a  good opportunity                                                               
work on oil  and gas matters.   He shared that he  also served as                                                               
the  legal  council  for  the Alaska  Oil  and  Gas  Conservation                                                               
Commission.   He worked  as an  assistant attorney  general until                                                               
November of 1971 when he went  into private practice where he has                                                               
worked  for the  last  32 years.    Recently, Governor  Murkowski                                                               
called  to ask  him to  serve  in this  position and  he said  he                                                               
believes he  is qualified.  This  is not a stepping-stone  to any                                                               
other position  or aspiration.   If confirmed by  the legislature                                                               
he  said  he looks  forward  to  bringing  to this  position  the                                                               
experience that  he has  had gained  over the  last 32  years, he                                                               
summarized.                                                                                                                     
                                                                                                                                
Number 2130                                                                                                                     
                                                                                                                                
CO-CHAIR  MASEK  noted  that  his  statement  in  the  letter  to                                                               
Governor  Murkowski  [dated January  21,  2004]  sites that  this                                                               
commission is a  regulatory body that must  remain independent of                                                               
the Division of Oil and Gas.                                                                                                    
                                                                                                                                
CO-CHAIR DAHLSTROM asked  Mr. Norman to comment on  the fact that                                                               
he was named  to the commission just hours after  a former public                                                               
member  resigned.   She asked  if he  would also  comment on  the                                                               
statutory  situation  with the  commission.    Both drilling  and                                                               
disposal regulations  have advanced quite  a lot in the  last few                                                               
years.  The  commission has been operating on  basically the same                                                               
framework in which it was created.                                                                                              
                                                                                                                                
MR. NORMAN  replied that for  at least the  last 30 years  he has                                                               
closely  followed and  has been  familiar  with the  work of  the                                                               
AOGCC.   He  commented  that he  knew the  first  members of  the                                                               
committee.   Mr.  Norman told  the members  that he  lamented the                                                               
amount of  publicity in the  paper and the lack  of understanding                                                               
of the  important work of the  AOGCC.  When the  opening occurred                                                               
several  people  talked   to  him  about  whether   he  would  be                                                               
interested in applying.  Mr. Norman  said he believed it was time                                                               
for him  to give  something back  to the state,  and it  was then                                                               
that he wrote the letter to the  governor.  He shared that he did                                                               
not know  if he  would be  appointed or not,  but had  heard that                                                               
there might be  some discussion concerning changes  in the AOGCC.                                                               
With that in  mind he wrote the last paragraphs  in the letter to                                                               
clarify that he believed it would  be definite mistake to put the                                                               
regulatory  responsibilities of  the  commission  under the  same                                                               
roof as  the state Department  of Natural Resources.   Mr. Norman                                                               
explained  that   he  felt  it   should  remain   an  independent                                                               
commission and not  slip backwards, as had  been done previously.                                                               
He  said he  thought that  within a  short period  of time  there                                                               
would be  an effort to make  it independent again if  that change                                                               
were made.   Alaska's industry  is dependent on  a well-regulated                                                               
carefully watched oil and gas  industry for a significant part of                                                               
the  revenues  of  state  government  and  contributions  to  the                                                               
private  economy,  he  added.   Mr.  Norman  summarized  that  he                                                               
believed  an independent  regulatory commission  is essential  to                                                               
meet industry  needs in timely  permitting, but  more importantly                                                               
he said  believed it is important  for all Alaskans to  know that                                                               
there is  a commission who is  on watch 24-hours per  day.  Every                                                               
time a  hole is drilled the  AOGCC monitors and follows  it until                                                               
years later when that project may be plugged and abandoned.                                                                     
                                                                                                                                
MR. NORMAN told the members that he  had a sense that some of the                                                               
professionalism that  he had known  in years passed  was slipping                                                               
away, and  that is what  motivated him to  write the letter.   He                                                               
added  that he  had no  idea why  he was  called so  quickly, but                                                               
noted that according  to statute two members are  required.  When                                                               
one  member resigned  the  AOGCC was  down to  one  member.   Mr.                                                               
Norman said  if he had been  able to control the  timing he would                                                               
have provided more  time to wrap up the things  he was working on                                                               
and then move into the position.                                                                                                
                                                                                                                                
Number 2551                                                                                                                     
                                                                                                                                
MR. NORMAN  said in conclusion he  read something he wrote  for a                                                               
publication for the  Alaska Bar Association over 30  years ago as                                                               
follows:                                                                                                                        
                                                                                                                                
     The concern  for all  Alaskans for  orderly development                                                                    
     of the  state's natural  resources is reflected  in the                                                                    
     attitudes  and  policies of  the  state's  Oil and  Gas                                                                    
     Conservation Committee.                                                                                                    
                                                                                                                                
MR. NORMAN commented  that at that time AOGCC was  called the Oil                                                               
and  Gas  Conservation  Committee,  but functioned  much  as  the                                                               
commission does today.  He continued reading his statement:                                                                     
                                                                                                                                
      This committee can be expected to play a significant                                                                      
     role in shaping the future of the natural gas industry                                                                     
     in Alaska.                                                                                                                 
                                                                                                                                
MR.  NORMAN  summarized  that  he   is  not  a  newcomer  to  the                                                               
commission  and  is  very  well  familiar  with  this  and  other                                                               
commissions.   He  said he  is also  cognizant of  the fact  that                                                               
Alaskans  demands a  leading place  in the  area of  oil and  gas                                                               
development.   Alaska  is  looked to  as a  leader  and has  been                                                               
viewed  as having  a first-class,  professional  commission.   He                                                               
told the  members that he has  not sought other positions  in the                                                               
past  33 years  even though  he has  been approached  for federal                                                               
positions.   It is his wish  to make a contribution  to the state                                                               
of Alaska, he concluded.                                                                                                        
                                                                                                                                
Number 2600                                                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM  asked  Mr.   Norman  what  he  believes  the                                                               
commission can  do to attract  smaller independent  oil companies                                                               
to the North Slope.                                                                                                             
                                                                                                                                
MR. NORMAN responded that the  AOGCC can look at its regulations,                                                               
which it  has already been  doing, he  added.  He  commented that                                                               
Alaska  is  a  very  expensive  place  to  operate  and  that  is                                                               
particularly true on the North  Slope.  Mr. Norman explained that                                                               
new  companies look  for infrastructure  and support  facilities.                                                               
One thing  AOGCC could do is  update its records to  provide data                                                               
electronically.   The drilling wells  are being regulated  to the                                                               
West  across  the  boundary  line  into  the  National  Petroleum                                                               
Reserve - Alaska (NPR-A), and  that is a positive development, he                                                               
added.   Mr. Norman told the  members that he believes  the AOGCC                                                               
should be responsive to the  new companies that come into Alaska.                                                               
He added that he is very  impressed with the staff in the agency.                                                               
There is a sense  of urgency in the agency that  could be a model                                                               
for many other agencies, he said.   The oil industry operates 24-                                                               
hours per  day and the  standby cost for  a rig is  thousands and                                                               
thousands of  dollars.  Mr.  Norman noted that  to have a  one or                                                               
two day  delay in a  permit application can be  extremely costly.                                                               
The more  that can  be done  to take the  uncertainty out  of the                                                               
process  and  streamline the  process,  while  at the  same  time                                                               
carefully  regulating   the  industry  will  help   attract  more                                                               
companies to  Alaska.  Companies that  come into an area  look at                                                               
the  regulatory  climate  and   want  an  independent  regulatory                                                               
agency,  he  explained.   The  smaller  companies look  for  that                                                               
because when operating  next to larger companies  it is important                                                               
that the  small companies  are not  improperly excluded  from the                                                               
unit, and  that they are allowed  to produce their fair  share of                                                               
any resource, Mr.  Norman said.  In summary, he  said the biggest                                                               
thing that can be done is to assure land availability.                                                                          
                                                                                                                                
Number 2841                                                                                                                     
                                                                                                                                
CO-CHAIR DAHLSTROM commented that one  of his web sites says that                                                               
one  of   the  functions   is  to   "protect  fresh   water  from                                                               
contamination by  oil, gas, and mud  during drilling, production,                                                               
and abandonment  operations."   She asked  if the  commission has                                                               
been  out to  the Matanuska-Susitna  Valley assuring  people that                                                               
there are laws  and an agency already in place  that will protect                                                               
their drinking waters  from the shallow gas  development that has                                                               
been such a controversial issue.                                                                                                
                                                                                                                                
Number 2860                                                                                                                     
                                                                                                                                
MR.  NORMAN replied  yes.   He told  the members  that AOGCC  has                                                               
participated in  a series  of meetings there.   The  next meeting                                                               
will consist of a presentation this  Saturday.  The focus will be                                                               
on two  areas that are  of considerable concern to  the residents                                                               
of  the  Matanuska-Susitna Valley  in  the  area of  shallow  gas                                                               
leasing.   One of those  areas is  the question of  whether there                                                               
should  be an  allowance  for production  from  the same  aquifer                                                               
where  people get  drinking water.   The  area the  commission is                                                               
focusing on  is to  assure the people  that their  drinking water                                                               
will  be protected  by the  proper completion  of wells  by using                                                               
techniques  that will  seal off  any  potential contamination  of                                                               
aquifers.    Another  area  that   is  being  looked  at  is  the                                                               
stimulation of  wells, or the  fracturing of wells,  where fluids                                                               
are put under  pressure into a reservoir to open  it up and allow                                                               
it to flow more freely, he  said.  Mr. Norman assured the members                                                               
that AOGCC  will be looking  at this extremely closely  to ensure                                                               
that if  development occurs  it will  not proceed  in a  way that                                                               
contaminates or degrade  any aquifer from which  any Alaskan gets                                                               
their drinking water.                                                                                                           
                                                                                                                                
CO-CHAIR DAHLSTROM thanked  Mr. Norman.  There is  much "doom and                                                               
gloom"  being spread  on  that  issue.   She  said  she does  not                                                               
believe that citizens  are convinced of the safety  and urged the                                                               
AOGCC to step up its efforts  and move efficiently as possible to                                                               
get that information out to the public.                                                                                         
                                                                                                                                
REPRESENTATIVE STEPOVICH asked Mr.  Norman how many grievances by                                                               
the public and producers are before the AOGCC currently.                                                                        
                                                                                                                                
TAPE 04-7, SIDE B                                                                                                             
                                                                                                                                
Number 2955                                                                                                                     
                                                                                                                                
MR. NORMAN responded that there  are no active protests currently                                                               
before  the   commission;  however,   there  is  one   matter  in                                                               
litigation in the Alaska Superior Court.                                                                                        
                                                                                                                                
MR. STEPOVICH commented that there  are grievances that come from                                                               
people who have difficulty working  with government agencies.  He                                                               
agreed  with  Mr.  Norman  that  it is  important  the  AOGCC  be                                                               
independent  of  those  agencies.    He  asked  if  the  Attorney                                                               
General's Office is doing any work for the commission.                                                                          
                                                                                                                                
MR.  NORMAN  responded  that  there  is  one  assistant  attorney                                                               
general that is assigned to the  AOGCC.  He said to his knowledge                                                               
his work  does not cross over  to other agencies, and  he is able                                                               
to give the commission independent advice.                                                                                      
                                                                                                                                
Number 2892                                                                                                                     
                                                                                                                                
REPRESENTATIVE  STEPOVICH  said  it  is  his  understanding  that                                                               
Alaska statutes say that the  AOGCC is required to be independent                                                               
of  the   Department  of  Natural  Resources   and  the  Attorney                                                               
General's  Office.   He  asked  Mr.  Norman  if  that is  how  he                                                               
understands it.                                                                                                                 
                                                                                                                                
MR. NORMAN replied that is correct.                                                                                             
                                                                                                                                
REPRESENTATIVE  STEPOVICH  asked  if   Mr.  Norman  believes  the                                                               
commission and the agencies collided in the past.                                                                               
                                                                                                                                
MR. NORMAN said that it is  his personal viewpoint that there may                                                               
have been  a collision in the  past.  However, he  would not want                                                               
to say any more on that  point without further investigation.  He                                                               
assured the members  that whatever the case in the  past, it will                                                               
not occur in the future.                                                                                                        
                                                                                                                                
REPRESENTATIVE  STEPOVICH  asked  how  many staff  work  for  the                                                               
commission and how many members are on the commission right now.                                                                
                                                                                                                                
MR. NORMAN replied  that there are 23 full-time  employees.  They                                                               
are  geologists, petroleum  engineers,  and reservoir  engineers.                                                               
Of  those  particular  professionals  there are  two  teams  that                                                               
operate and regulate the industry  statewide.  Each team consists                                                               
of a geologists, a reservoir  engineer, and a petroleum engineer.                                                               
Those  six   professionals  have  a  responsibility   to  oversee                                                               
literally hundreds  of industry  professionals across  the state.                                                               
There are  also inspectors  on the wells  inspecting a  number of                                                               
operations.     The  commission   maintains  a   repository  with                                                               
historical records  of every well  that has ever been  drilled in                                                               
Alaska.   There are three  commissioners provided for  by statute                                                               
and the commission currently has two.                                                                                           
                                                                                                                                
Number 2829                                                                                                                     
                                                                                                                                
REPRESENTATIVE STEPOVICH  asked Mr.  Norman if he  believes there                                                               
is a movement to phase out the AOGCC.                                                                                           
                                                                                                                                
MR. NORMAN  responded that he  does not  see a movement  to phase                                                               
out the  commission.  He said  he believes if that  were to occur                                                               
it would be huge mistake for the state of Alaska.                                                                               
                                                                                                                                
REPRESENTATIVE STEPOVICH  asked if Mr.  Norman is pushing  to add                                                               
another member to the commission.                                                                                               
                                                                                                                                
MR. NORMAN  told the members  that he is  looking at the  work of                                                               
the  commission  and plans  to  submit  a recommendation  to  the                                                               
governor.  He said currently he  has not recommended that a third                                                               
member be appointed  because he believes the work can  be done by                                                               
two commissioners.   Mr.  Norman requested  that the  position be                                                               
held open until  the completion of his review, when  he will make                                                               
a recommendation.                                                                                                               
                                                                                                                                
CO-CHAIR  MASEK  pointed out  that  the  AOGCC does  not  appoint                                                               
members to the commission; the governor makes the appointments.                                                                 
                                                                                                                                
REPRESENTATIVE STEPOVICH commented that when  there was no one on                                                               
the commission it  left a void.  Alaska Oil  and Gas Conservation                                                               
Commission has  a strong role,  and he said  he has not  seen the                                                               
commission fulfill  that role in  past administrations.   He said                                                               
he was concerned with the recent  "back biting" that was going on                                                               
within the  commission.  He  said he  wants a commission  and Mr.                                                               
Norman  to  stand  independent   of  the  Department  of  Natural                                                               
Resources, the Attorney  General's Office, and work  for the good                                                               
of all Alaskans.                                                                                                                
                                                                                                                                
Number 2700                                                                                                                     
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  referred  to   one  of  Mr.  Norman's                                                               
published works,  Considerations When Entering the  Alaska Energy                                                             
Market, [IBC Global Conferences] in  September 2002.  He asked if                                                             
it is Mr. Norman's opinion that  the bar has been raised too high                                                               
for the energy industry.                                                                                                        
                                                                                                                                
MR. NORMAN  responded that there is  no question that the  bar is                                                               
high here in Alaska.  Some of it  is simply the fact that this is                                                               
a state where infrastructure costs  are higher and it is required                                                               
that  development  proceed in  an  orderly,  well regulated  way.                                                               
That's not bad, he said.  He said  he does not believe the bar is                                                               
high,  but  acknowledged  that  there  is  a  problem  with  land                                                               
availability and access.  Mr.  Norman pointed out that the Arctic                                                               
National Wildlife Refuge  (ANWR) is the most  striking example of                                                               
that problem, but  that is beyond the state's control.   He noted                                                               
that there is a  trend over the last 18 to 36  months of a number                                                               
of  smaller,  independent companies  coming  into  the state  and                                                               
taking up  a position.  Very  often these are the  companies that                                                               
find the oil and gas, he added.                                                                                                 
                                                                                                                                
                                                                                                                                
^Alaska Commercial Fisheries Entry Commission                                                                                 
                                                                                                                                
Number 2595                                                                                                                     
                                                                                                                                
CO-CHAIR DAHLSTOM  said the next  appointment for review  is that                                                               
of  Commissioner   Frank  M.  Homan  to   the  Alaska  Commercial                                                               
Fisheries  Entry  Commission (CFEC).    She  asked Mr.  Homan  to                                                               
comment on his appointment to the commission.                                                                                   
                                                                                                                                
Number 2578                                                                                                                     
                                                                                                                                
FRANK  M. HOMAN,  Appointee to  the  Alaska Commercial  Fisheries                                                               
Entry Commission,  discussed the position and  answered questions                                                               
from the  committee.  He told  the members that in  the summer of                                                               
1946 he  arrived in Ketchikan  on the Canadian  steamship, Prince                                                               
Rupert,  which was  the  beginning of  his  adventure in  Alaska.                                                               
During World War  II his father worked on the  Alaska Highway for                                                               
a  couple  of years  so  that  was  his introduction  to  Alaska.                                                               
Originally,  his family  was  from  San Francisco.    He said  he                                                               
started 1st  grade in  Ketchikan and been  in Alaska  ever since.                                                               
In the early  days his family was in the  fish buying business in                                                               
Southeast  Alaska.   They had  a series  of fish  buying stations                                                               
around  Prince of  Wales, he  explained.   This was  in the  days                                                               
before iceboats.   Fish was purchased daily and then  a scow came                                                               
once a week to  pick up the fish and deliver them.   That was his                                                               
life experience  until he  went to college.   During  his college                                                               
days  he worked  in the  pulp  mill in  the summers.   Mr.  Homan                                                               
summarized  that his  background  has always  been in  resources.                                                               
Part way  through college he went  into the U.S. Army,  and after                                                               
his military  service he returned  to college.  When  he finished                                                               
college in 1967  he came to Juneau because he  had an opportunity                                                               
to work on  resource issues as an economist in  the newly created                                                               
Department of Economic Development.                                                                                             
                                                                                                                                
MR. HOMAN  said that in  1971 he left  the state and  created his                                                               
own  business  for  a  number  of years  where  the  company  did                                                               
economic analysis  for businesses  and communities.   The company                                                               
was known as  the Homan-McDowell Associates, and is  now known as                                                               
the McDowell Group.   In the mid-1980s he had  the opportunity to                                                               
work for  Senator Arliss Sturgulewski  as a  resource development                                                               
specialist and went on  to work for her for many  years.  In 1991                                                               
he was appointed to the  Limited Entry Commission for five years.                                                               
After  that service  he did  private consulting  and a  number of                                                               
other interesting jobs, his favorite  was working with the cruise                                                               
ship industry, a company that  provided shore support services to                                                               
the cruise ships.   Last year another  opportunity occurred where                                                               
he  was offered  a position  as a  special assistant  to Governor                                                               
Murkowski in resource  development.  When the  position came open                                                               
in  the  Alaska  Commercial  Fisheries Entry  Commission  he  was                                                               
pleased that the governor appointed him, he said.                                                                               
                                                                                                                                
Number 2320                                                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM   told  the   members  that   the  Commercial                                                               
Fisheries Entry  Commission position is  a salaried.   The salary                                                               
is  $85,397 per  year, and  the commission  meets throughout  the                                                               
year.   She commended Mr. Homan  for his military service  to the                                                               
United States.                                                                                                                  
                                                                                                                                
Number 2291                                                                                                                     
                                                                                                                                
REPRESENTATIVE WOLF  asked if he  currently serves on  the Alaska                                                               
Commercial Fishing and Agriculture Bank (CFAB).                                                                                 
                                                                                                                                
MR. NORMAN  responded that in the  early 1980 he was  chairman of                                                               
the Alaska Commercial Fishing and Agriculture Bank.                                                                             
                                                                                                                                
Number 2258                                                                                                                     
                                                                                                                                
CO-CHAIR  DAHLSTROM moved  to  forward the  names  of Charles  E.                                                               
Cole, Kenneth  O. Stout  for the Alaska  Oil And  Gas Development                                                               
Advisory Board;  the name of  John K.  Norman for the  Alaska Oil                                                               
and Gas Conservation  Commission; and the name of  Frank M. Homan                                                               
for  the  Alaska Commercial  Fisheries  Entry  Commission to  the                                                               
joint session  of the House  and Senate for confirmation.   There                                                               
being  no  objection,  the  confirmations  of  Charles  E.  Cole,                                                               
Kenneth  O.  Stout, John  K.  Norman,  and  Frank M.  Homan  were                                                               
advanced from the House Resources Standing Committee.                                                                           
                                                                                                                                
HB 344-MINING FEES/LABOR/ROYALTIES/ABANDONMENT                                                                                
                                                                                                                                
Number 2204                                                                                                                     
                                                                                                                                
CO-CHAIR DAHLSTROM  announced that the  final order   of business                                                               
would be HOUSE  BILL NO. 344, "An Act relating  to  annual rental                                                               
fees  for mining  claims, and  providing   for reduced  royalties                                                               
during the first three years of production."                                                                                    
                                                                                                                                
Number 2192                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK  moved to adopt the  proposed committee substitute                                                               
(CS),  Version 23-LS1298\I,  Bullock,  2/20/04 as  a work  draft.                                                               
There being no objection, Version I was before the committee.                                                                   
                                                                                                                                
Number 2167                                                                                                                     
                                                                                                                                
JIM  POUND,  Staff  to Representative  Hugh  Fate,  Alaska  State                                                               
Legislature, speaking on behalf  of Representative Fate, sponsor,                                                               
told the committee that the sponsor is  in support of the CS.  He                                                               
explained that under current statute if  a miner files his or her                                                               
paperwork -  a statement of annual  labor or the payment  of rent                                                               
or  royalties  - one  day  late,  the  state considers  the  mine                                                               
abandoned.   Mr.  Pound said  CSHB 344(RES)  will change  that by                                                               
allowing a  "cure" for  the miner,  but it  does not  prevent the                                                               
miner  from meeting  the  requirements in  statute,  nor does  it                                                               
allow the miner the right to  "let it slide without there being a                                                               
penalty."  Under  the penalty clause of CSHB  344(RES), the miner                                                               
will have to  pay a late fee  equal to at least  one year's rent.                                                               
He said  the CS  accomplishes what was  intended in  the original                                                               
bill,  which was  to keep  the  miners working  and "bring  their                                                               
local  economy stimulus"  to Alaska.   He  urged the  committee's                                                               
support.                                                                                                                        
                                                                                                                                
Number 2100                                                                                                                     
                                                                                                                                
CO-CHAIR MASEK clarified  that her motion to  adopt CSHB 344(RES)                                                               
was for purposes of discussion.                                                                                                 
                                                                                                                                
Number 2076                                                                                                                     
                                                                                                                                
CO-CHAIR DAHLSTROM announced that HB 344 would be held over.                                                                    
                                                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 2:42 p.m.                                                                 

Document Name Date/Time Subjects