Legislature(2007 - 2008)BARNES 124

05/02/2007 01:00 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ HB 15 BOARD OF FISHERIES CONFLICTS OF INTEREST TELECONFERENCED
Scheduled But Not Heard
+ SB 121 CRUISE SHIP DISCHARGE & INFO TELECONFERENCED
Moved Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 128 OIL & GAS PRODUCTION TAX: EXPENDITURES TELECONFERENCED
Failed To Move Out Of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                          May 2, 2007                                                                                           
                           1:11 p.m.                                                                                            
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Carl Gatto, Co-Chair                                                                                             
Representative Craig Johnson, Co-Chair                                                                                          
Representative Bob Roses                                                                                                        
Representative Paul Seaton                                                                                                      
Representative Peggy Wilson                                                                                                     
Representative Bryce Edgmon                                                                                                     
Representative David Guttenberg                                                                                                 
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Vic Kohring                                                                                                      
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
CS FOR SENATE BILL NO. 121(L&C)                                                                                                 
"An  Act relating  to discharge  from small  commercial passenger                                                               
vessels;  relating  to   information-gathering  requirements  for                                                               
small commercial  passenger vessels;  providing for  an effective                                                               
date by  repealing the delayed  effective date found in  sec. 16,                                                               
ch. 153, SLA 2004; and providing for an effective date."                                                                        
                                                                                                                                
     - MOVED CSSB 121(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
HOUSE BILL NO. 128                                                                                                              
"An Act relating to allowable  lease expenditures for the purpose                                                               
of determining  the production tax value  of oil and gas  for the                                                               
purposes of the oil and gas  production tax; and providing for an                                                               
effective date."                                                                                                                
                                                                                                                                
     - FAILED TO MOVE OUT OF COMMITTEE                                                                                          
                                                                                                                                
HOUSE BILL NO. 15                                                                                                               
"An Act relating to participation  in matters before the Board of                                                               
Fisheries  by  members  of  the   board;  and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - SCHEDULED BUT NOT HEARD                                                                                                  
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 121                                                                                                                  
SHORT TITLE: CRUISE SHIP DISCHARGE & INFO                                                                                       
SPONSOR(s): SENATOR(s) SENATOR ELTON                                                                                            
                                                                                                                                
03/14/07       (S)       READ THE FIRST TIME - REFERRALS                                                                        
03/14/07       (S)       L&C                                                                                                    
03/20/07       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/20/07       (S)       Heard & Held                                                                                           
03/20/07       (S)       MINUTE(L&C)                                                                                            
03/22/07       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/22/07       (S)       Moved CSSB 121(L&C) Out of Committee                                                                   
03/22/07       (S)       MINUTE(L&C)                                                                                            
03/23/07       (S)       L&C RPT CS  2DP 3NR   NEW TITLE                                                                        
03/23/07       (S)       DP: ELLIS, DAVIS                                                                                       
03/23/07       (S)       NR: BUNDE, STEVENS, HOFFMAN                                                                            
04/04/07       (S)       TRANSMITTED TO (H)                                                                                     
04/04/07       (S)       VERSION: CSSB 121(L&C)                                                                                 
04/05/07       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/05/07       (H)       RES, JUD                                                                                               
05/02/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 128                                                                                                                  
SHORT TITLE: OIL & GAS PRODUCTION TAX: EXPENDITURES                                                                             
SPONSOR(s): REPRESENTATIVE(s) OLSON                                                                                             
                                                                                                                                
02/12/07       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/12/07       (H)       O&G, RES, FIN                                                                                          
02/22/07       (H)       O&G AT 3:00 PM CAPITOL 124                                                                             
02/22/07       (H)       Heard & Held                                                                                           
02/22/07       (H)       MINUTE(O&G)                                                                                            
03/01/07       (H)       O&G AT 3:00 PM CAPITOL 124                                                                             
03/01/07       (H)       Moved CSHB 128(O&G) Out of Committee                                                                   
03/01/07       (H)       MINUTE(O&G)                                                                                            
03/05/07       (H)       O&G RPT CS(O&G) 3DP 1NR                                                                                
03/05/07       (H)       DP: DOOGAN, RAMRAS, OLSON                                                                              
03/05/07       (H)       NR: SAMUELS                                                                                            
03/19/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/19/07       (H)       Heard & Held                                                                                           
03/19/07       (H)       MINUTE(RES)                                                                                            
03/21/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/21/07       (H)       Heard & Held                                                                                           
03/21/07       (H)       MINUTE(RES)                                                                                            
03/23/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/23/07       (H)       Heard & Held                                                                                           
03/23/07       (H)       MINUTE(RES)                                                                                            
03/26/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/26/07       (H)       -- MEETING CANCELED --                                                                                 
03/28/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/28/07       (H)       Heard & Held; Assigned to Subcommittee                                                                 
03/28/07       (H)       MINUTE(RES)                                                                                            
05/01/07       (H)       RES AT 9:00 AM BARNES 124                                                                              
05/01/07       (H)       Subcommittee Meeting                                                                                   
05/02/07       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
SENATOR KIM ELTON                                                                                                               
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Presented SB 121, as the sponsor.                                                                        
                                                                                                                                
BRYCE BROCKWAY, Vice President of Operations                                                                                    
Cruise West                                                                                                                     
Seattle, Washington                                                                                                             
POSITION STATEMENT:  During testimony on SB 121, answered                                                                     
questions and supported SB 121.                                                                                                 
                                                                                                                                
MICHAEL JONES, Director of Marine Operations                                                                                    
Lindblad Expeditions                                                                                                            
New York, New York                                                                                                              
POSITION STATEMENT:  During testimony on SB 121, answered                                                                     
questions and supported SB 121.                                                                                                 
                                                                                                                                
LYNN TOMICH KENT, Director                                                                                                      
Division of Water                                                                                                               
Department of Environmental Conservation (DEC)                                                                                  
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During discussion of SB 121, responded to                                                                
questions and provided comments.                                                                                                
                                                                                                                                
REPRESENTATIVE KURT OLSON                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Offered a statement as the sponsor of HB                                                                 
128.                                                                                                                            
                                                                                                                                
KONRAD JACKSON, Staff                                                                                                           
to Representative Kurt Olson                                                                                                    
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  During discussion of HB 128, responded to                                                                
questions on behalf of the bill sponsor, Representative Olson.                                                                  
                                                                                                                                
JONATHAN IVERSEN, Director                                                                                                      
Anchorage Office                                                                                                                
Tax Division                                                                                                                    
Department of Revenue (DOR)                                                                                                     
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   During discussion  of HB 128,  responded to                                                             
questions and provided comments.                                                                                                
                                                                                                                                
KEVIN BANKS, Acting Director                                                                                                    
Central Office                                                                                                                  
Division of Oil & Gas                                                                                                           
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   During discussion  of HB 128,  responded to                                                             
questions and provided comments.                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CO-CHAIR  CARL   GATTO  called   the  House   Resources  Standing                                                             
Committee  meeting  to  order at  1:11:06  PM.    Representatives                                                             
Gatto, Johnson,  Seaton, Roses, Guttenberg, Edgmon,  and Kawasaki                                                               
were  present  at  the  call to  order.    Representative  Wilson                                                               
arrived as the meeting was in progress.                                                                                         
                                                                                                                                
SB 121-CRUISE SHIP DISCHARGE & INFO                                                                                           
                                                                                                                                
1:11:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO announced  that the first order  of business would                                                               
be  CS  FOR  SENATE  BILL  NO.  121(L&C),  "An  Act  relating  to                                                               
discharge from  small commercial  passenger vessels;  relating to                                                               
information-gathering    requirements   for    small   commercial                                                               
passenger vessels;  providing for an effective  date by repealing                                                               
the delayed effective  date found in sec. 16, ch.  153, SLA 2004;                                                               
and providing for an effective date."                                                                                           
                                                                                                                                
1:11:47 PM                                                                                                                    
                                                                                                                                
SENATOR KIM  ELTON, Alaska  State Legislature,  said that  SB 121                                                               
restores the  alternate compliance discharge protocols  that were                                                               
passed unanimously  by the House and  the Senate with HB  522, in                                                               
2004.   He explained  that this is  the alternate  compliance for                                                               
small  cruise  ships  because  the  smaller  size  of  the  ships                                                               
precludes the  same protocols  as the larger  cruise ships.   The                                                               
cruise ship ballot initiative  inadvertently repealed the section                                                               
that had been changed by HB 522.   He emphasized that this is not                                                               
the fault of the initiative sponsors.                                                                                           
                                                                                                                                
1:13:35 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO asked for a definition of cruise ships.                                                                          
                                                                                                                                
SENATOR ELTON  clarified that the  definition in the bill  is for                                                               
small cruise  ships.  He  added that  the sponsors of  the cruise                                                               
ship ballot initiative  support this bill.  He noted  that, as in                                                               
HB 522,  the provisions for the  alternative compliance protocols                                                               
for small cruise ships will be  repealed on January 1, 2016, with                                                               
the assumption that technology will have improved.                                                                              
                                                                                                                                
CO-CHAIR GATTO noted  that the members' packets  include a letter                                                               
in  support of  SB 121  from  Joseph Geldhof,  co-sponsor of  the                                                               
cruise ship ballot initiative, dated March 16, 2007.                                                                            
                                                                                                                                
1:15:40 PM                                                                                                                    
                                                                                                                                
BRYCE  BROCKWAY,  Vice  President  of  Operations,  Cruise  West,                                                               
explained that Cruise  West is a small, family  owned cruise ship                                                               
operator, founded  by an Alaskan.   He expressed his  belief that                                                               
Department  of  Environmental  Conservation (DEC)  supports  this                                                               
bill and the best management practices of Cruise West.                                                                          
                                                                                                                                
CO-CHAIR GATTO  noted that the  Cruise West ship capacity  is 78-                                                               
138 passengers and  he asked if there is a  defined limit for the                                                               
small ship category.                                                                                                            
                                                                                                                                
MR.  BROCKWAY offered  his belief  that  a small  cruise ship  is                                                               
defined as up to 249 passengers on board.                                                                                       
                                                                                                                                
1:17:22 PM                                                                                                                    
                                                                                                                                
MICHAEL   JONES,   Director   of  Marine   Operations,   Lindblad                                                               
Expeditions,   reported  that   Lindblad  Expeditions   has  been                                                               
operating  two small  62 passenger  vessels  in Southeast  Alaska                                                               
since 1989.  He expressed his support for SB 121.                                                                               
                                                                                                                                
CO-CHAIR  GATTO   asked  about   the  disposal  system   for  the                                                               
accumulated waste water on board the ship.                                                                                      
                                                                                                                                
MR.  JONES explained  that the  ships have  blackwater tanks  and                                                               
graywater  tanks  and that  each  is  treated  by a  Coast  Guard                                                               
approved marine sanitation device.                                                                                              
                                                                                                                                
CO-CHAIR GATTO  asked if the  ship passengers disembark  while in                                                               
port.                                                                                                                           
                                                                                                                                
MR. JONES  replied that  passengers are  offered tours  in Sitka,                                                               
Juneau, and Petersburg.                                                                                                         
                                                                                                                                
1:19:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO  asked  if  the  graywater  is  discharged  at  a                                                               
dockside facility or at sea.                                                                                                    
                                                                                                                                
MR. JONES responded  that the graywater is discharged  at sea per                                                               
the DEC approved best management practices.                                                                                     
                                                                                                                                
CO-CHAIR  GATTO  asked  for  a   description  of  the  blackwater                                                               
treatment.                                                                                                                      
                                                                                                                                
MR. JONES explained that the  system is manufactured by Omnipure,                                                               
an electronic  cell that includes  treatment with chlorine.   The                                                               
system includes pumps, settling  systems, and oxidization so that                                                               
the blackwater can be discharged after treatment.                                                                               
                                                                                                                                
CO-CHAIR GATTO asked if the discharge contains chlorine.                                                                        
                                                                                                                                
MR.  JONES  responded  that  the  dechlorination  system  removes                                                               
chlorine to the acceptable standards.                                                                                           
                                                                                                                                
1:21:12 PM                                                                                                                    
                                                                                                                                
LYNN  TOMICH KENT,  Director, Division  of  Water, Department  of                                                               
Environmental Conservation (DEC), clarified  that the DEC has not                                                               
taken a formal position on SB 121.                                                                                              
                                                                                                                                
CO-CHAIR GATTO asked if the DEC has looked at the bill.                                                                         
                                                                                                                                
MS. KENT replied  that SB 121 does exactly as  the sponsor states                                                               
which  is  to  reinstate  provisions  that  the  Legislature  has                                                               
passed.                                                                                                                         
                                                                                                                                
SENATOR  ELTON, in  response to  an  earlier question,  clarified                                                               
that  small   cruise  ships  are  defined   as  having  overnight                                                               
accommodations for 249 or fewer passengers.                                                                                     
                                                                                                                                
1:22:25 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON asked  Ms. Kent  to clarify  that page  2,                                                               
line 2, refers only to the discharge of domestic wastewater.                                                                    
                                                                                                                                
MS.   KENT  explained   that  this   includes  other   wastewater                                                               
discharges from commercial passenger vessels.                                                                                   
                                                                                                                                
REPRESENTATIVE   SEATON  asked   for  a   definition  of   "other                                                               
wastewater."                                                                                                                    
                                                                                                                                
MS.  KENT  replied that  other  wastewater  includes ballast  and                                                               
bilge water.   She  reported that  a permit  is required  for the                                                               
wastewater discharge,  but this permit requirement  only pertains                                                               
to the large commercial passenger vessels.                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON  said  he  is   trying  to  get  a  better                                                               
understanding for  the breadth of  the wastewater that  this bill                                                               
will allow a small vessel to discharge.                                                                                         
                                                                                                                                
MS. KENT requested the opportunity to review the bill.                                                                          
                                                                                                                                
1:24:59 PM                                                                                                                    
                                                                                                                                
SENATOR ELTON  explained that Section 2  references existing law,                                                               
and this bill is not changing  existing law.  He noted that there                                                               
are  current definitions  for graywater  and other  wastewater in                                                               
statute.                                                                                                                        
                                                                                                                                
REPRESENTATIVE SEATON said  that he is asking  for assurance from                                                               
DEC  that,  as  SB  121  is  going  to  exempt  small  commercial                                                               
passenger vessels  from the current regulations,  the alternative                                                               
regulations don't  allow the management  of oily bilge  water and                                                               
domestic wastewater in the same way.                                                                                            
                                                                                                                                
1:26:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE EDGMON noted that page  2, line 2, refers to "into                                                               
the marine waters"  and he commented that another  bill refers to                                                               
"waters  of  the United  States."    He  asked  if there  is  any                                                               
difference.                                                                                                                     
                                                                                                                                
SENATOR ELTON replied  that a change in wording  is possible, but                                                               
as these vessels only operate in  marine waters, a change may not                                                               
be necessary.                                                                                                                   
                                                                                                                                
CHAIR GATTO  asked if  the commercial  passenger vessels  ever go                                                               
into fresh water.                                                                                                               
                                                                                                                                
SENATOR ELTON responded that this  question is best answered by a                                                               
ship captain, though he allowed  that the small passenger vessels                                                               
will go into estuaries.                                                                                                         
                                                                                                                                
1:28:47 PM                                                                                                                    
                                                                                                                                
MS. KENT, in response to  Representative Seaton, said that she is                                                               
not able to determine whether  the best management practices plan                                                               
that  is  currently  in  place   covers  [discharge]  other  than                                                               
domestic wastewater  discharge from  the vessels.   She explained                                                               
that  Section   3  reinstates  the  same   conditions  that  were                                                               
inadvertently repealed by the cruise ship ballot initiative.                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  replied  that this  answers  his  earlier                                                               
question.                                                                                                                       
                                                                                                                                
1:29:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO closed public testimony.                                                                                         
                                                                                                                                
CO-CHAIR  JOHNSON  voiced  his concern  with  making  changes  to                                                               
initiatives.   He  expressed his  desire for  the consistency  to                                                               
either  allow or  disallow  changes to  initiatives,  but not  to                                                               
respond to every  whim for an issue.  He  stated that legislators                                                               
make important policy decisions on  the best course of action for                                                               
the  state, and  he requested  the same  respect from  initiative                                                               
writers  to not  just amend  statutes for  their own  needs.   He                                                               
commented that  the committee process  of hearing and  vetting is                                                               
not available  for initiatives.  He  encouraged future initiative                                                               
writers to "get it right."                                                                                                      
                                                                                                                                
1:31:47 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  noted that  [HB 522}  previously passed  both the                                                               
House and the Senate unanimously.                                                                                               
                                                                                                                                
REPRESENTATIVE  KAWASAKI pointed  out  that  the memorandum  from                                                               
Alpheus Bullard,  Division of Legal and  Research Services, dated                                                               
March 26, 2007, affirms that CSSB 121 is constitutional.                                                                        
                                                                                                                                
1:32:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  JOHNSON expressed  his belief  that although  the legal                                                               
opinions on initiatives allow an  entitlement for change, it does                                                               
not always make it acceptable.                                                                                                  
                                                                                                                                
REPRESENTATIVE ROSES  stated that he  supports this bill,  but he                                                               
voiced  his concern  that "people  seem to  pick and  choose when                                                               
they want to break away from an initiative and when they don't."                                                                
                                                                                                                                
1:34:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GUTTENBERG  said,   as   a   sponsor  of   three                                                               
initiatives, that  amending initiatives is taken  very seriously.                                                               
He stated  his concern  that amendments can  mask revisions.   He                                                               
explained that he reviews an  initiative amendment to ensure that                                                               
the  spirit of  the original  initiative is  retained.   He noted                                                               
that this  is the first  time he has seen  the need for  a change                                                               
that is truly beyond the scope  of predication.  He expressed his                                                               
belief   that  the   Alaska  State   Constitution  provides   for                                                               
initiative amendments similar to SB 121.                                                                                        
                                                                                                                                
REPRESENTATIVE  SEATON  moved  to  report CSSB  121(L&C)  out  of                                                               
committee  with individual  recommendations and  the accompanying                                                               
fiscal  notes.   There  being  no  objection, CSSB  121(L&C)  was                                                               
reported from the House Resources Standing Committee.                                                                           
                                                                                                                                
HB 128-OIL & GAS PRODUCTION TAX: EXPENDITURES                                                                                 
                                                                                                                                
1:37:14 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  announced that the  next order of  business would                                                               
be  HOUSE BILL  NO.  128,  "An Act  relating  to allowable  lease                                                               
expenditures for  the purpose of  determining the  production tax                                                               
value  of  oil and  gas  for  the purposes  of  the  oil and  gas                                                               
production tax;  and providing for  an effective date."   [Before                                                               
the  committee was  CSHB 128(O&G),  as amended  at the  March 23,                                                               
2007, hearing.]                                                                                                                 
                                                                                                                                
CO-CHAIR  GATTO  explained that  HB  128  is  now back  from  the                                                               
subcommittee.   He stated  that the  bill has  had more  than six                                                               
hours of discussion  before the committee, so it is  as vetted as                                                               
can be  expected.  He said  that there are some  amendments to be                                                               
introduced.                                                                                                                     
                                                                                                                                
1:38:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KURT  OLSON, Alaska  State Legislature,  said that                                                               
the  bill  addresses who  should  pay  for bad  maintenance,  the                                                               
citizens of Alaska or the responsible  party.  He said that every                                                               
day  there  is  more  information  about  the  flaws  in  British                                                               
Petroleum's North Slope  [maintenance] program.  He  said that he                                                               
is not proud of this bill, but that he believes in it.                                                                          
                                                                                                                                
REPRESENTATIVE  OLSON  said that  support  of  HB 128  makes  the                                                               
statement that  proper maintenance is rewarded  and that improper                                                               
maintenance  is  not.   He  urged  support  for  HB 128,  and  he                                                               
deferred questions to his aide, Konrad Jackson.                                                                                 
                                                                                                                                
1:39:57 PM                                                                                                                    
                                                                                                                                
KONRAD JACKSON, Staff to Representative  Kurt Olson, Alaska State                                                               
Legislature, offered to  explain the three amendments  that he is                                                               
going to introduce.                                                                                                             
                                                                                                                                
CO-CHAIR GATTO  asked to first discuss  a news release and  an e-                                                               
mail.                                                                                                                           
                                                                                                                                
1:40:27 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO read the e-mail from John Todd, dated 6/4/99:                                                                    
                                                                                                                                
     Due  to budgetary  constraints, the  decision has  been                                                                    
     made  to  discontinue  the   PW  inhibitor  (EC  1081A)                                                                    
     currently being injected at GC 2 and GC 3.                                                                                 
                                                                                                                                
CO-CHAIR GATTO said that he  assumes GC to mean Gathering Center.                                                               
He then read  from a letter by U.S.  Representative John Dingell,                                                               
Chairman of  the House  Committee on  Energy and  Commerce, dated                                                               
May 2, 2007:                                                                                                                    
                                                                                                                                
     We know  that BP  proceeded with cost  cutting measures                                                                    
     that  may   have  compromised  pipeline   safety  while                                                                    
     earning $22 billion in profits,  but what we don't know                                                                    
     is why.                                                                                                                    
                                                                                                                                
     These documents  appear to show  a severe  cost cutting                                                                    
     environment  with respect  to  corrosion mitigation  in                                                                    
     the Prudhoe Bay field.                                                                                                     
                                                                                                                                
CO-CHAIR  GATTO  said  that  he  wants  this  on  the  record  as                                                               
documents that he has received.                                                                                                 
                                                                                                                                
1:42:17 PM                                                                                                                    
                                                                                                                                
MR. JACKSON  replied that Senator Wagoner  distributed the e-mail                                                               
to the Senate Resources Standing  Committee on April 20, 2007 and                                                               
that  the letter  was distributed  earlier today  [May 2,  2007],                                                               
also by Senator Wagoner.                                                                                                        
                                                                                                                                
1:42:55 PM                                                                                                                    
                                                                                                                                
CO-CHAIR   GATTO   clarified   that    the   letter   from   U.S.                                                               
Representative  Dingell  was  released  today and  he  asked  the                                                               
committee if they had any comments on the documents.                                                                            
                                                                                                                                
REPRESENTATIVE  ROSES said  that this  e-mail indicates  there is                                                               
proof  of negligence.   He  emphasized that  he does  not support                                                               
retroactively changing  language to address negligence.   He will                                                               
support the bill  if it is written to be  effective from this day                                                               
forward.                                                                                                                        
                                                                                                                                
1:45:15 PM                                                                                                                    
                                                                                                                                
JONATHAN  IVERSEN,  Director,  Anchorage  Office,  Tax  Division,                                                               
Department of Revenue (DOR), said  that the retroactivity is fine                                                               
from  a  taxation  standpoint.   He  stated  that  the  Petroleum                                                               
Systems  Integrity  Office  (PSIO)  will  be  a  good  guide  for                                                               
determining a definition for proper  maintenance.  He stated that                                                               
the  amendments passed  today will  provide  different tools  and                                                               
organizations to  use and look  at for their standards,  in order                                                               
to get a better understanding of retroactivity.                                                                                 
                                                                                                                                
1:47:01 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  asked for  clarification that  by including                                                               
the retroactivity  section, this  will make  it easier  to define                                                               
negligence in the past or in the future.                                                                                        
                                                                                                                                
MR. IVERSEN explained  that the future benefit will  be review of                                                               
the standards set up by the  PSIO.  He said that looking backward                                                               
must rely on other guidelines and  standards, which may not be as                                                               
clear.                                                                                                                          
                                                                                                                                
1:47:44 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO expressed his belief  that this is a one-time bill                                                               
to address a  past issue.  He allowed that  the PSIO will address                                                               
future issues.                                                                                                                  
                                                                                                                                
MR. IVERSEN  replied that this  is not a  one-time bill, it  is a                                                               
law of general application that will  have future impact.  In the                                                               
future,  there  is  the  benefit  of  the  PSIO  determining  the                                                               
maintenance plans.                                                                                                              
                                                                                                                                
1:48:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON opined  that the PSIO will  establish a set                                                               
of regulations.                                                                                                                 
                                                                                                                                
MR. IVERSEN agreed.                                                                                                             
                                                                                                                                
1:48:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  remarked that  the  PSIO  will develop  a                                                               
series of regulations.  He  offered his understanding that during                                                               
an  audit  a  large  expenditure   will  flag  possible  improper                                                               
maintenance.   He  asked how  a  large expenditure  that has  not                                                               
violated  any regulations  will  be treated  if  it appears  that                                                               
there is improper maintenance.                                                                                                  
                                                                                                                                
MR.  IVERSEN said  that  the audit  process is  going  to be  the                                                               
primary means of  recognition.  He allowed that  the news systems                                                               
will  also be  a means  of monitoring  possible infractions.   He                                                               
said that it  is necessary to be able to  ask the right questions                                                               
to determine  upstream costs.  He  said that DOR will  review the                                                               
claims and  consult with Department  of Natural  Resources (DNR),                                                               
to determine  the proper  questions to  ask.   He noted  that DNR                                                               
will decide whether something is a good oil field practice.                                                                     
                                                                                                                                
1:51:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON posed that  DOR has the statutory authority                                                               
to  challenge  any   expense  that  is  deemed   to  be  improper                                                               
maintenance.                                                                                                                    
                                                                                                                                
MR. IVERSEN explained  that this is not just a  matter of looking                                                               
at a large cost,  but it is the context of that  cost.  He stated                                                               
that DOR  does not have  the personnel to investigate  every cost                                                               
in an audit, so it will  be the auditor's discretion to determine                                                               
what is not in compliance.                                                                                                      
                                                                                                                                
1:53:57 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked how  DOR will  be able  to determine                                                               
whether a cost  in the field is due to  improper maintenance.  He                                                               
cited earlier  testimony stating that  the cost amount will  be a                                                               
main criterion.                                                                                                                 
                                                                                                                                
MR. IVERSEN agreed.  He explained  that all 19 items in Section 1                                                               
of the bill  will be reviewed.  He allowed  that gross negligence                                                               
will be reviewed even though it is  not a specific item.  He said                                                               
that  litigation   may  reveal  improper  maintenance   or  gross                                                               
negligence that is not revealed in an audit.                                                                                    
                                                                                                                                
1:56:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked how improper maintenance,  which may                                                               
not  be simple  or gross  negligence, will  be treated  under the                                                               
bill.                                                                                                                           
                                                                                                                                
MR. IVERSEN stated  that an issue will be noted  for later review                                                               
during  the audit  cycle and  then DNR  will determine  if it  is                                                               
improperly maintained.                                                                                                          
                                                                                                                                
1:57:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROSES asked  when  the PSIO  regulations will  be                                                               
available.                                                                                                                      
                                                                                                                                
MR. IVERSEN responded that is best be answered by DNR.                                                                          
                                                                                                                                
1:58:23 PM                                                                                                                    
                                                                                                                                
KEVIN BANKS, Acting  Director, Central Office, Division  of Oil &                                                               
Gas, Department  of Natural Resources  (DNR), said that  the PSIO                                                               
will be  working on  the regulations  and coordinating  this with                                                               
other   participating    agencies,   including    Department   of                                                               
Environmental  Conservation   (DEC)  and   Alaska  Oil   and  Gas                                                               
Conservation Commission  (AOGCC).   He related  that much  of the                                                               
PSIO authority will originate with  the [oil] lease contract, and                                                               
he expressed that the challenge will  be to define in statute the                                                               
regulations  which  originate  in  the lease  contract,  yet  not                                                               
impair the contract.                                                                                                            
                                                                                                                                
2:00:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked about  the procedure  should someone                                                               
violate the PSIO regulations.                                                                                                   
                                                                                                                                
MR.  BANKS said  that  the regulations  governing  the PSIO  will                                                               
focus  on  systems integrity,  and  the  physical maintenance  of                                                               
records  related to  company  plans for  quality  assurance.   He                                                               
explained that  DNR will  focus on  violations of  regulations or                                                               
maintenance per the  lease contract.  He mentioned  that DOR will                                                               
focus on the question of deductibility.   He reported that if DOR                                                               
is concerned  that costs  have been deducted  with relation  to a                                                               
failure of maintenance, they will  consult with DNR and PSIO, who                                                               
will  go  to  the  records  and opine  whether  it  was  improper                                                               
maintenance.                                                                                                                    
                                                                                                                                
2:02:28 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON asked  to clarify  that a  company can  be                                                               
following the  regulations for pipeline  integrity and  can still                                                               
fall under the improper maintenance category.                                                                                   
                                                                                                                                
MR.  BANKS  replied that  if  an  operator  meets the  rules  and                                                               
demonstrates   that  they   have   met   the  quality   assurance                                                               
regulations, then  this is  evidence of  proper maintenance.   If                                                               
this is the case, DNR will tell DOR that the cost is deductible.                                                                
                                                                                                                                
2:04:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked if it  is willful misconduct  when a                                                               
company does not follow the regulations.                                                                                        
                                                                                                                                
MR. BANKS responded that this is a legal question.                                                                              
                                                                                                                                
2:05:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON moved  to  adopt Amendment  1, which  read                                                               
[original punctuation provided]:                                                                                                
                                                                                                                                
     Page 3, lines 21-22:                                                                                                       
       Delete   "Alaska   Oil    and   Gas   Conservation                                                                   
     Commission"                                                                                                            
          Insert "person in the Department of Natural                                                                       
     Resources  who  is  the   lead  person  for  exercising                                                                
     oversight  over   the  maintenance   of  oil   and  gas                                                                
     facilities,  equipment,   and  infrastructure   in  the                                                                
     state"                                                                                                                 
                                                                                                                                
CO-CHAIR JOHNSON objected.                                                                                                      
                                                                                                                                
2:05:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON said  that this amendment is  to ensure the                                                               
right people are in the discussion.                                                                                             
                                                                                                                                
The committee took an at-ease from 2:05:55 PM to 2:17:25 PM.                                                                
                                                                                                                                
2:17:26 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked for the sponsor to explain Amendment 1.                                                                  
                                                                                                                                
MR. JACKSON explained that this same amendment was added to SB                                                                  
80 (the Senate Version of HB 128).  He said that Amendment 1                                                                    
will include the PSIO coordinator in the consultation group.                                                                    
                                                                                                                                
MR. JACKSON relayed that an  e-mail from John Norman, Chairman of                                                               
AOGCC, dated  April 25, 2007,  stating support for  the amendment                                                               
is in  the members'  packets.   He mentioned  that Administrative                                                               
Order 234 to authorize the PSIO is also included.                                                                               
                                                                                                                                
CO-CHAIR JOHNSON withdrew his objection.                                                                                        
                                                                                                                                
There being no objection, Amendment 1 was adopted.                                                                              
                                                                                                                                
2:19:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON moved to adopt Conceptual Amendment 2,                                                                    
which read [original punctuation provided]:                                                                                     
                                                                                                                                
     Add a new paragraph (4) to AS 43.55.165(j):                                                                                
          (4) "improper maintenance" is defined as any                                                                          
     maintenance that is not consistent  with good oil field                                                                    
     practice.                                                                                                                  
                                                                                                                                
     Add a new paragraph (5) to AS 43.55.165(j):                                                                                
          (5) "good oil field practice" is defined as a                                                                         
     practice that  is generally accepted  to be  good, safe                                                                    
     and  efficient in  carrying out  oil field  operations,                                                                    
     including,  but   is  not   limited  to,   the  design,                                                                    
     construction,  testing, operating,  and maintaining  of                                                                    
     production,  processing  and transportation  facilities                                                                    
     and equipment,  consistent with  standards such  as the                                                                    
     American Petroleum Institute  (API) or American Society                                                                    
     for Testing and  Materials (ASTM), federal regulations,                                                                    
     maintenance  programs   consistent  with   the  program                                                                    
     requirements set forth by the  person in the Department                                                                    
     of  Natural  Resources  who  is  the  lead  person  for                                                                    
     exercising oversight  over the  maintenance of  oil and                                                                    
     gas  facilities, equipment,  and infrastructure  in the                                                                    
     state,   or   other   applicable  standards   for   the                                                                    
     production, processing and  transportation of oil, gas,                                                                    
     produced water, and other fluids.                                                                                          
                                                                                                                                
CO-CHAIR JOHNSON objected.                                                                                                      
                                                                                                                                
2:19:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   SEATON  asked   to  clarify   that  as   design,                                                               
construction,  testing,   and  operating  are  included   in  the                                                               
definition of "good oil field  practice", are these also included                                                               
in the definition of "improper maintenance."                                                                                    
                                                                                                                                
MR.  JACKSON explained  that Conceptual  Amendment  2 is  cobbled                                                               
together from  a variety of  sources, and that  Legislative Legal                                                               
and  Research Services  has not  yet reviewed  it.   He suggested                                                               
that  "design"  might  not  be  included  in  the  definition  of                                                               
"improper maintenance" and  that some other terms may  need to be                                                               
added.                                                                                                                          
                                                                                                                                
2:21:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 1  to Conceptual                                                               
Amendment 2, as follows:                                                                                                        
                                                                                                                                
     Line 8:                                                                                                                    
          Delete ",but is not limited to, the design,                                                                           
     construction, testing, operating, and"                                                                                     
                                                                                                                                
MR.  JACKSON expressed  his concern  with  eliminating the  words                                                               
"but  is not  limited to".   He  recommended that  the definition                                                               
should not be so focused to exclude any new advances.                                                                           
                                                                                                                                
2:22:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO  relayed that Mr.  Bullock from  Legislative Legal                                                               
and  Research Services  has previously  stated that  "but is  not                                                               
limited to" is not necessary.                                                                                                   
                                                                                                                                
REPRESENTATIVE  WILSON expressed  her belief  that "testing"  and                                                               
"operating" should remain in Amendment 2.                                                                                       
                                                                                                                                
2:23:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked if "maintenance" is  expanded to now                                                               
include  operations of  the pipeline,  or if  "maintenance" means                                                               
maintaining production, processing  and transportation facilities                                                               
and equipment.                                                                                                                  
                                                                                                                                
MR.  JACKSON  responded  that  the  only  reason  "operating"  is                                                               
included in  the definition is  that part of the  operation would                                                               
be the testing, or pigging, of the line.                                                                                        
                                                                                                                                
2:24:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO asked where the definition derived from.                                                                         
                                                                                                                                
MR.  JACKSON  described  the  definition  as  an  attempt  to  be                                                               
reasonably broad and include a reference to the PSIO.                                                                           
                                                                                                                                
CO-CHAIR GATTO asked if Mr. Jackson drafted Amendment 2.                                                                        
                                                                                                                                
MR. JACKSON said that he did.                                                                                                   
                                                                                                                                
2:25:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG said that  he supports maintaining "not                                                               
limited to"  as this will cover  aspects that the PSIO  might not                                                               
cover in the earlier referenced analysis.                                                                                       
                                                                                                                                
CO-CHAIR GATTO  objected to Amendment  1 to  Conceptual Amendment                                                               
2.                                                                                                                              
                                                                                                                                
A roll call  vote was taken.  Representatives  Seaton, Roses, and                                                               
Johnson voted in favor of  Amendment 1 to Conceptual Amendment 2.                                                               
Representatives Guttenberg,  Edgmon, Kawasaki, Wilson,  and Gatto                                                               
voted  against it.    Therefore, the  Amendment  1 to  Conceptual                                                               
Amendment 2 failed by a vote of 3-5.                                                                                            
                                                                                                                                
2:28:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON  moved to  adopt Amendment 2  to Conceptual                                                               
Amendment 2, as follows:                                                                                                        
                                                                                                                                
     Line 8:                                                                                                                    
          Delete "the design, construction,"                                                                                    
                                                                                                                                
                                                                                                                                
CO-CHAIR GATTO objected.                                                                                                        
                                                                                                                                
2:29:30 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON asked for an explanation.                                                                                      
                                                                                                                                
CO-CHAIR  GATTO explained  that he  has another  amendment he  is                                                               
going to offer.                                                                                                                 
                                                                                                                                
[The committee  treated Co-Chair Gatto's  objection as if  it was                                                               
withdrawn.]                                                                                                                     
                                                                                                                                
A roll call  vote was taken.   Representatives Roses, Guttenberg,                                                               
Edgmon,  Kawasaki,  Wilson, Seaton,  Johnson  voted  in favor  of                                                               
Amendment  2 to  Conceptual  Amendment 2.   Representative  Gatto                                                               
voted  against   it.    Therefore,  Amendment   2  to  Conceptual                                                               
Amendment 2 passed by a vote of 7-1.                                                                                            
                                                                                                                                
2:32:11 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON asked if Conceptual  Amendment 2 as amended                                                               
is still answering the sponsor intent.                                                                                          
                                                                                                                                
MR. JACKSON  responded that  not following  those good,  safe and                                                               
efficient practices is "improper maintenance."                                                                                  
                                                                                                                                
2:32:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  asked if  not  following  good, safe  and                                                               
efficient  testing   and  operation   is  defined   as  "improper                                                               
maintenance."                                                                                                                   
                                                                                                                                
MR.  JACKSON agreed  that "improper  maintenance"  is defined  by                                                               
going  to  the   definition,  and  if  the   maintenance  is  not                                                               
consistent with  testing and operating,  and the "good  oil field                                                               
practice" has not been followed, there is improper maintenance.                                                                 
                                                                                                                                
2:34:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  asked to clarify  that if a  [pipe]line is                                                               
improperly operated, is that defined  as improper maintenance, or                                                               
is improper  maintenance only  if some  work is  not done  on the                                                               
[pipe]line.                                                                                                                     
                                                                                                                                
MR.  JACKSON  said that  if  the  [operators] are  not  operating                                                               
properly as recognized by the  American Petroleum Institute (API)                                                               
or the  American Society for  Testing and Materials  (ASTM), then                                                               
this is "improper maintenance."                                                                                                 
                                                                                                                                
2:35:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON   expressed  his  desire  to   define  the                                                               
parameters  of  the   definition.    He  asked   if  an  improper                                                               
operation, for example  too much pressure in an  oil pipeline, is                                                               
also defined as "improper maintenance."                                                                                         
                                                                                                                                
MR.  JACKSON allowed  that  Mr.  Banks might  be  best suited  to                                                               
answer.                                                                                                                         
                                                                                                                                
2:37:00 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO offered that  intentional improper operation would                                                               
be different than "improper maintenance."                                                                                       
                                                                                                                                
MR. BANKS agreed  with Chair Gatto.  If  someone is intentionally                                                               
operating improperly, this  is a gross negligence  violation.  If                                                               
equipment  fails  because  it is  not  properly  maintained,  the                                                               
standards of  API and ASTM  or any qualified assurance  plan will                                                               
dictate improper maintenance.                                                                                                   
                                                                                                                                
2:38:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO   moved  to  adopt  Conceptual   Amendment  3  to                                                               
Conceptual Amendment 2, as follows:                                                                                             
                                                                                                                                
     Line 8:                                                                                                                    
          Delete " operating, and maintaining"                                                                                  
          Add "operation, and maintenance"                                                                                      
                                                                                                                                
REPRESENTATIVE  SEATON   advised  that  further  tenses   in  the                                                               
amendment will also need to be adjusted.                                                                                        
                                                                                                                                
There being  no objection, Conceptual  Amendment 3  to Conceptual                                                               
Amendment 2 was passed.                                                                                                         
                                                                                                                                
CO-CHAIR JOHNSON  withdrew his objection to  Conceptual Amendment                                                               
2.                                                                                                                              
                                                                                                                                
There being no  objection, Conceptual Amendment 2  as amended was                                                               
passed.                                                                                                                         
                                                                                                                                
2:40:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO brought  attention to  the amendment  labeled 25-                                                               
LS0561\K.2, Bullock, 3/21/07, and labeled this as Amendment 3.                                                                  
                                                                                                                                
REPRESENTATIVE KAWASAKI moved to adopt Amendment 3, which read:                                                                 
                                                                                                                                
     Page 4, lines 9 - 10:                                                                                                      
          Delete "lease expenditures that may not be                                                                            
     deducted"                                                                                                                  
          Insert "costs that may not be treated as lease                                                                        
       expenditures or claimed as a credit based on costs                                                                       
     that may not be claimed as lease expenditures"                                                                             
                                                                                                                                
     Page 4, line 10:                                                                                                           
          Delete "AS 43.55.165(e), as amended"                                                                                  
          Insert "AS 43.55.165(e)(19), as enacted"                                                                              
                                                                                                                                
     Page 4, line 13, following "AS 43.55.020(a)":                                                                              
         Insert "before the effective date of this Act"                                                                         
                                                                                                                                
     Page 4, line 15:                                                                                                           
          Delete "lease expenditures that may not be                                                                            
     deducted"                                                                                                                  
          Insert "costs that may not be treated as lease                                                                        
       expenditures or attributable to a credit based on                                                                        
     costs that may not be claimed as lease expenditures"                                                                       
          Delete "AS 43.55.165(e) as amended"                                                                                   
          Insert "AS 43.55.165(e)(19), as enacted"                                                                              
                                                                                                                                
     Page 4, following line 17:                                                                                                 
     Insert a new subsection to read:                                                                                           
          "(c)  Interest on an additional amount of tax due                                                                     
     under  (a) of  this section  or  on the  amount of  the                                                                    
     underpayment  of  an  installment  under  (b)  of  this                                                                    
     section does  not begin to  accrue until 90  days after                                                                    
     the effective date of this Act."                                                                                           
                                                                                                                                
CO-CHAIR GATTO objected.                                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON objected.                                                                                                      
                                                                                                                                
2:41:30 PM                                                                                                                    
                                                                                                                                
MR.  JACKSON explained  that Amendment  3 is  drafted by  Mr. Don                                                               
Bullock,  Division  of Legal  and  Research  Services, and  is  a                                                               
technical change  for the transitional  language on Page 4  of HB                                                               
128.   He noted that a  memorandum from Mr. Bullock,  Division of                                                               
Legal  and  Research  Services,  dated April  4,  2007,  is  also                                                               
included in the members' packets.   He pointed out that page 3 of                                                               
the   memorandum  explains   that  the   amendment  changes   are                                                               
"technical and not substantive corrections to the bill."                                                                        
                                                                                                                                
CO-CHAIR GATTO pointed out that  the referenced amendment on page                                                               
3 of the memorandum, is labeled M.2.                                                                                            
                                                                                                                                
MR. JACKSON  explained that the amendment  labeled K.2, currently                                                               
in  front of  the committee,  is identical  to an  earlier Senate                                                               
bill amendment  labeled M.2.   He reported that he  attached this                                                               
earlier memorandum from Mr. Bullock  that explains amendment M.2,                                                               
as it is the identical explanation for amendment K.2.                                                                           
                                                                                                                                
2:42:42 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO noted that Mr.  Bullock is essentially saying "not                                                               
substantive."                                                                                                                   
                                                                                                                                
MR. JACKSON clarified that Mr.  Bullock's memorandum is referring                                                               
to page 1 of the amendment, not page 1 of the bill.                                                                             
                                                                                                                                
2:44:15 PM                                                                                                                    
                                                                                                                                
CO-CHAIR GATTO withdrew his objection.                                                                                          
                                                                                                                                
CO-CHAIR JOHNSON maintained his objection.                                                                                      
                                                                                                                                
2:44:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES asked for the effective date of the bill.                                                                  
                                                                                                                                
MR. JACKSON  responded that page 4,  line 20, of the  bill states                                                               
the effective date to be retroactive to April 1, 2006.                                                                          
                                                                                                                                
CO-CHAIR  GATTO asked  if the  Senate  version of  the bill  also                                                               
included retroactivity.                                                                                                         
                                                                                                                                
MR. JACKSON said yes.                                                                                                           
                                                                                                                                
2:45:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROSES asked  to clarify  that the  amendment will                                                               
now  state "common  negligence"  instead  of "gross  negligence,"                                                               
will  be  retroactive to  April  1,  2006,  and will  not  charge                                                               
interest until July 1, 2006.                                                                                                    
                                                                                                                                
MR. JACKSON  explained that he  misspoke, and the  effective date                                                               
is stated on page 4, line 21 of  the bill, which is 90 days after                                                               
the bill passes.                                                                                                                
                                                                                                                                
2:46:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROSES  asked to clarify that  retroactivity is not                                                               
being determined  on the money  due, but on the  determination of                                                               
negligence.                                                                                                                     
                                                                                                                                
CO-CHAIR JOHNSON expressed his belief  that the effective date is                                                               
April 1,  2006, and that  the interest  begins to accrue  90 days                                                               
later.                                                                                                                          
                                                                                                                                
2:47:08 PM                                                                                                                    
                                                                                                                                
MR. IVERSEN  explained that the  90-day provision  is coordinated                                                               
with transition provisions of the  PPT to allow companies time to                                                               
adjust to the bill.  He said  that prior to 2007 all the payments                                                               
were made  under the Economic  Limit Factor (ELF).   The payments                                                               
are  not  accruing  interest under  the  Production  Profits  Tax                                                               
(PPT).                                                                                                                          
                                                                                                                                
CO-CHAIR JOHNSON asked  when the interest will  start accruing if                                                               
this bill passes.                                                                                                               
                                                                                                                                
MR. IVERSEN  replied that interest  will begin 90 days  after the                                                               
bill passes.                                                                                                                    
                                                                                                                                
2:49:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON offered  his belief  that the  retroactive                                                               
date is only for Section 1 of the bill.                                                                                         
                                                                                                                                
CO-CHAIR GATTO agreed with Representative Seaton.                                                                               
                                                                                                                                
2:50:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON withdrew his objection to Amendment 3.                                                                         
                                                                                                                                
There being no objection, Amendment 3 was passed.                                                                               
                                                                                                                                
CO-CHAIR  GATTO clarified  that  HB 128  requires  five votes  to                                                               
report it from the committee.                                                                                                   
                                                                                                                                
2:50:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to adopt Conceptual  Amendment 4, as                                                               
follows:                                                                                                                        
                                                                                                                                
     Page 2, line 3:                                                                                                            
          Insert "(8) costs incurred as a result of an                                                                          
     action  or  inaction  in violation  of  regulations  or                                                                    
     procedures  adopted by  the  pipeline safety  integrity                                                                    
     organization or other appropriate agency."                                                                                 
                                                                                                                                
          Renumber accordingly.                                                                                                 
                                                                                                                                
REPRESENTATIVE  SEATON explained  that  it is  unclear whether  a                                                               
violation  of  the  PSIO  regulations  will  fall  under  willful                                                               
misconduct.    He  expressed  his  desire  for  regulations  that                                                               
clarify both  operations and the  penalties for violation  of the                                                               
regulations.                                                                                                                    
                                                                                                                                
2:53:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE WILSON objected to Conceptual Amendment 4.                                                                       
                                                                                                                                
REPRESENTATIVE SEATON restated Conceptual Amendment 4.                                                                          
                                                                                                                                
REPRESENTATIVE WILSON removed her objection.                                                                                    
                                                                                                                                
There being no objection, Conceptual Amendment 4 was passed.                                                                    
                                                                                                                                
2:54:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON moved to adopt Amendment 5, as follows:                                                                        
                                                                                                                                
     Page 4, line 20:                                                                                                           
          Delete all material                                                                                                   
                                                                                                                                
CO-CHAIR GATTO objected.                                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON explained that  he is deleting the retroactivity                                                               
clause.                                                                                                                         
                                                                                                                                
2:55:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GUTTENBERG asked for clarification of the intent.                                                                
                                                                                                                                
CO-CHAIR JOHNSON explained that the  regulations to be drafted by                                                               
DOR and PSIO will still allow collection of any funds.                                                                          
                                                                                                                                
2:56:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROSES said  that deductions  are not  allowed for                                                               
negligence.     This  bill  lowers   the  burden  of   proof  for                                                               
negligence.   He emphasized  that he has  a serious  problem with                                                               
"reactive" legislation as well as  "retroactivity," as he doesn't                                                               
support a change to the rules after the fact.                                                                                   
                                                                                                                                
A roll call  vote was taken.  Representatives  Roses, Wilson, and                                                               
Johnson  voted   in  favor  of  Amendment   5.    Representatives                                                               
Guttenberg,  Edgmon, Kawasaki,  Seaton, and  Gatto voted  against                                                               
it.  Therefore, Amendment 5 failed by a vote of 3-5.                                                                            
                                                                                                                                
2:59:46 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  stated that  PPT has two  goals: encourage                                                               
investment and  raise more  money for  the state.   He  said that                                                               
encouraging  investment  requires  certainty on  investment,  but                                                               
that this  bill allows  a lot  of risk, as  no standard  has been                                                               
set.  He  reported that the definition  of "improper maintenance"                                                               
has not  been tested in court  and is not even  contained in law.                                                               
He pointed out  that it does not have to  include negligence.  He                                                               
emphasized  that changing  the standard  for the  entire industry                                                               
across Alaska, and removing the  certainty for investment that is                                                               
so critical for the PPT, goes against his feelings.                                                                             
                                                                                                                                
REPRESENTATIVE WILSON agreed with Representative Seaton.                                                                        
                                                                                                                                
3:02:23 PM                                                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON  offered a synopsis of  the subcommittee report.                                                               
He said  that there is  a recommendation for  this bill to  go to                                                               
House  Judiciary  Standing  Committee  because  there  are  legal                                                               
issues involved.   He said  that retroactivity is a  concern, but                                                               
the  amendments solve  some of  those issues.   He  said that  he                                                               
supports the  concept, but  he offered his  belief that  a better                                                               
job needs to  be done with the definitions.   He stressed that he                                                               
does not want to sacrifice quality legislation for expediency.                                                                  
                                                                                                                                
REPRESENTATIVE   GUTTENBERG  said   that  the   concern  of   the                                                               
legislature  is reflected  by the  number of  co-sponsors on  the                                                               
bill.  He ascertained that  the oil industry makes every decision                                                               
based on  maximizing returns,  and that no  matter what  is done,                                                               
the oil industry will take the  state to court.  He expressed his                                                               
belief that the  committee owes it to the people  of the state to                                                               
move this bill from committee.                                                                                                  
                                                                                                                                
3:06:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO offered  his opinion,  summarizing that  the bill                                                               
addresses  the responsibility  to monitor  what is  defined as  a                                                               
deduction against revenue, in order to protect the net tax.                                                                     
                                                                                                                                
A roll call vote was  taken.  Representatives Guttenberg, Edgmon,                                                               
Kawasaki,   and  Gatto   voted   in  favor   of  CSHB   128(O&G).                                                               
Representatives Wilson,  Seaton, Roses and Johnson  voted against                                                               
it.   Therefore, CSHB 128(O&G) failed  to be reported out  of the                                                               
House Resources Standing Committee by a vote of 4-4.                                                                            
                                                                                                                                
3:07:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO announced  that  the committee  may  look at  the                                                               
subcommittee report and hear the bill again.                                                                                    
                                                                                                                                
CO-CHAIR JOHNSON said that this  bill has potential, but it needs                                                               
some work, and he asked to hear the bill again.                                                                                 
                                                                                                                                
3:08:12 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  GATTO asked  if Co-Chair  Johnson  will reconsider  his                                                               
vote  if  there  is  a   referral  to  House  Judiciary  Standing                                                               
Committee.                                                                                                                      
                                                                                                                                
CO-CHAIR JOHNSON said that he will reconsider his vote.                                                                         
                                                                                                                                
REPRESENTATIVE ROSES said he will reconsider his vote, as well.                                                                 
                                                                                                                                
3:09:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GUTTENBERG  moved   to  rescind  the  committee's                                                               
action on CSHB 128(O&G).                                                                                                        
                                                                                                                                
CO-CHAIR JOHNSON  objected and  allowed that  the Speaker  of the                                                               
House is the only person  who can change the committee assignment                                                               
for the bill.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  GUTTENBERG withdrew  his  motion  to rescind  the                                                               
vote.                                                                                                                           
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Resources Standing Committee meeting was adjourned at 3:10 p.m.                                                                 

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