Legislature(2011 - 2012)BARNES 124

02/03/2012 01:00 PM RESOURCES


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HJR 26 SEA OTTER MANAGEMENT TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
+= HB 276 OIL/GAS PRODUCTION TAX CREDITS: NENANA TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                        February 3, 2012                                                                                        
                           1:05 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eric Feige, Co-Chair                                                                                             
Representative Paul Seaton, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Alan Dick                                                                                                        
Representative Neal Foster                                                                                                      
Representative Bob Herron                                                                                                       
Representative Cathy Engstrom Munoz                                                                                             
Representative Berta Gardner                                                                                                    
Representative Scott Kawasaki                                                                                                   
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                              
Representative Sharon Cissna                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE JOINT RESOLUTION NO. 26                                                                                                   
Urging federal  agencies to  work with  the Alaska  Department of                                                               
Fish  and  Game,  Southeast  Alaska  Native  leaders,  and  other                                                               
interested  parties to  establish  strategies and  plans for  the                                                               
sustainable management  of the reintroduced sea  otter population                                                               
of Southeast Alaska.                                                                                                            
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 276                                                                                                              
"An Act providing for a credit against the oil and gas                                                                          
production tax for costs incurred in drilling certain oil or                                                                    
natural gas exploration wells in the Nenana Basin."                                                                             
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HJR 26                                                                                                                  
SHORT TITLE: SEA OTTER MANAGEMENT                                                                                               
SPONSOR(s): REPRESENTATIVE(s) P.WILSON                                                                                          
                                                                                                                                
03/31/11       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/31/11       (H)       RES                                                                                                    
02/03/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
BILL: HB 276                                                                                                                  
SHORT TITLE: OIL/GAS PRODUCTION TAX CREDITS: NENANA                                                                             
SPONSOR(s): REPRESENTATIVE(s) THOMPSON, DICK, MILLETT, TUCK,                                                                    
MILLER                                                                                                                          
                                                                                                                                
01/17/12       (H)       PREFILE RELEASED 1/13/12                                                                               
01/17/12       (H)       READ THE FIRST TIME - REFERRALS                                                                        
01/17/12       (H)       RES, FIN                                                                                               
01/30/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
01/30/12       (H)       Heard & Held                                                                                           
01/30/12       (H)       MINUTE(RES)                                                                                            
02/01/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
02/01/12       (H)       Heard & Held                                                                                           
02/01/12       (H)       MINUTE(RES)                                                                                            
02/03/12       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
ARTHUR MARTIN, Intern                                                                                                           
Representative Peggy Wilson                                                                                                     
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Introduced HJR 26 on behalf of the prime                                                                 
sponsor, Representative P. Wilson.                                                                                              
                                                                                                                                
ROSITA WORL, PhD, Chair                                                                                                         
Federal Indian Policy Committee                                                                                                 
Alaska Federation of Natives (AFN)                                                                                              
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HJR 26.                                                                                     
                                                                                                                                
EDWARD THOMAS, President                                                                                                        
Central Council of Tlingit and Haida Indian Tribes of Alaska                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HJR 26.                                                                                     
                                                                                                                                
CARRIE SYKES, Manager                                                                                                           
Business and Economic Development Department                                                                                    
Central Council of Tlingit and Haida Indian Tribes of Alaska                                                                    
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HJR 26.                                                                                     
                                                                                                                                
KIRK HARDCASTLE                                                                                                                 
Commercial Fisherman                                                                                                            
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified on HJR 26.                                                                                     
                                                                                                                                
PHIL DOHERTY, Executive Director                                                                                                
Southeast Alaska Regional Dive Fisheries Association                                                                            
Ketchikan, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of HJR 26.                                                                          
                                                                                                                                
DENNIS WATSON, Mayor                                                                                                            
City of Craig                                                                                                                   
Craig, Alaska                                                                                                                   
POSITION STATEMENT:  Testified in support of HJR 26.                                                                          
                                                                                                                                
JAMES ANDERSON                                                                                                                  
Craig, Alaska                                                                                                                   
POSITION STATEMENT:  Testified on HJR 26.                                                                                     
                                                                                                                                
WILLIAM C. BARRON, Director                                                                                                     
Division of Oil & Gas                                                                                                           
Department of Natural Resources                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the  hearing on HB 276, discussed the                                                             
process of exploration licenses,  leases, and units, and answered                                                               
questions regarding state incentives.                                                                                           
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:05:54 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  ERIC   FEIGE  called   the  House   Resources  Standing                                                             
Committee meeting to  order at 1:05 p.m.   Representatives Munoz,                                                               
Gardner, Foster,  Seaton, and Feige  were present at the  call to                                                               
order.   Representatives  Dick, Kawasaki,  P. Wilson,  and Herron                                                               
arrived as  the meeting was  in progress.   Representative Cissna                                                               
was also present.                                                                                                               
                                                                                                                                
                  HJR 26-SEA OTTER MANAGEMENT                                                                               
                                                                                                                              
1:06:28 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE announced  that the first order  of business would                                                               
be  HOUSE JOINT  RESOLUTION NO.  26, Urging  federal agencies  to                                                               
work  with the  Alaska  Department of  Fish  and Game,  Southeast                                                               
Alaska Native leaders, and other  interested parties to establish                                                               
strategies  and  plans  for the  sustainable  management  of  the                                                               
reintroduced sea otter population of Southeast Alaska.                                                                          
                                                                                                                                
1:06:57 PM                                                                                                                    
                                                                                                                                
ARTHUR MARTIN, Intern, Representative  Peggy Wilson, Alaska State                                                               
Legislature,  on  behalf  of   Representative  P.  Wilson,  prime                                                               
sponsor, reviewed  the differences between the  original bill and                                                               
the  proposed  committee  substitute (CS),  Version  27-LS0717\B,                                                               
Bullard, 1/27/12.   He explained that Version B  would update the                                                               
third whereas clause  on page 1 as follows  [new text underlined,                                                               
deleted text bracketed] [original punctuation provided]:                                                                        
                                                                                                                                
     WHEREAS  more  than  10,560  [5,800]  sea  otters  were                                                                  
     observed in 2003, and a  2010-2011 [2010] aerial survey                                                                  
     by  the   United  States  Fish  and   Wildlife  Service                                                                    
     revealed 20,000  [more than 11,000] sea  otters, for an                                                                  
     approximate  annual  growth  rate   of  12  percent  in                                                                  
     southern Southeast Alaska and  four percent in northern                                                                  
     Southeast Alaska [13 percent]; and                                                                                       
                                                                                                                                
1:08:14 PM                                                                                                                    
                                                                                                                                
MR.  MARTIN  testified that  HJR  26  would "encourage  the  U.S.                                                               
Secretary of the Interior and  other appropriate federal agencies                                                               
to  work  with  Alaska  Department  of  Fish  &  Game,  Southeast                                                               
Alaska's  Native leaders,  and  other interested  parties in  the                                                               
state to  establish strategies and  plans for  sustainable, long-                                                               
term  management of  the reintroduced  sea  otter populations  of                                                               
Southeast Alaska."  He said  the resolution would also "encourage                                                               
federal  authorities   to  consider   broadening  the   scope  of                                                               
allowable uses  of sea otters  taken for subsistence  purposes to                                                               
include the use, transfer, and sale of intact sea otter pelts."                                                                 
                                                                                                                                
MR.  MARTIN next  provided a  history of  sea otter  populations,                                                               
stating that sea otters almost  disappeared completely from North                                                               
America due  to commercial harvesting  between the 18th  and 20th                                                               
centuries.   This  led to  protection  of the  species under  the                                                               
Marine  Mammal Protection  Act, which  transferred management  of                                                               
sea  otters  from the  State  of  Alaska  to  the U.S.  Fish  and                                                               
Wildlife Service.   Sea otters  were reintroduced  into Southeast                                                               
Alaska  from 1965  to 1969  so that  the protected  mammals would                                                               
reach an  optimal sustainable  population range.   The  U.S. Fish                                                               
and Wildlife Service  created a management plan in  1994 that was                                                               
to be  reviewed annually,  revised at least  every three  to five                                                               
years, and modified  subject to new findings,  changes in species                                                               
status, policy changes, or congressional  direction.  However, he                                                               
said that during  his research he could not  locate any revisions                                                               
since that original plan of 18 years ago.                                                                                       
                                                                                                                                
1:10:06 PM                                                                                                                    
                                                                                                                                
MR.  MARTIN  explained  that  today  sea  otters  have  rebounded                                                               
because of a  general harvesting moratorium set by  the U.S. Fish                                                               
and Wildlife Service,  with exception being Alaska  Natives.  Sea                                                               
otter numbers  are rising at  an estimated 10-12 percent  a year,                                                               
with  last year's  count being  approximately 20,000  sea otters,                                                               
and  [a  projected]  28,000  animals   in  three  years.    These                                                               
population increases  have become a  serious issue of  concern to                                                               
commercial  and   subsistence  fishing  because   of  competition                                                               
between the  sea otters  and local  residents for  the resources.                                                               
Although  sea otters  are among  the smallest  of marine  mammals                                                               
they are  the largest of  the North American weasel  family; male                                                               
sea otters in  Alaska may exceed 100 pounds.   Sea otters have no                                                               
blubber for warmth  so they must constantly eat,  consuming up to                                                               
23  percent of  their body  weight  daily in  crab, abalone,  sea                                                               
urchins, sea  cucumbers, clams, and  other shellfish  that humans                                                               
rely upon for commercial and subsistence uses.                                                                                  
                                                                                                                                
MR. MARTIN said that altogether  sea otters consume approximately                                                               
253,000 pounds of  food per day, which translates into  a loss of                                                               
commercial and subsistence  fisheries in Alaska.   According to a                                                               
[November]  2011  report by  the  McDowell  Group [entitled  "Sea                                                               
Otter Impacts on Commercial Fisheries  in Southeast Alaska"], sea                                                               
otter  predation  on red  sea  cucumber,  geoduck clam,  red  sea                                                               
urchin,   and  Dungeness   crab  fisheries   have  directly   and                                                               
indirectly cost the Southeast Alaska  economy $28.3 million since                                                               
1995.   He maintained  that the exponential  growth of  sea otter                                                               
populations is  directly linked with  the demise  of recreational                                                               
and  commercial  Dungeness  crab  fisheries  in  Orca  Inlet  and                                                               
eastern  Prince William  Sound.   Over  a  dozen fishery  harvest                                                               
areas in  Southeast Alaska  have been  closed down  or negatively                                                               
affected by sea otters, he said.                                                                                                
                                                                                                                                
1:12:13 PM                                                                                                                    
                                                                                                                                
MR. MARTIN  noted that  under the  1972 Marine  Mammal Protection                                                               
Act,  Alaska Natives  are denied  the  customary and  traditional                                                               
right to  sell intact sea otter  pelts to non-Natives.   Now that                                                               
the reintroduced  sea otter populations  in Southeast  Alaska are                                                               
healthy  and growing,  it is  time  that the  Native peoples  are                                                               
given back their customary and  traditional right, he said.  This                                                               
would continue to  grow their cultural heritage, as  well as help                                                               
maintain  ecological  balance   while  expanding  their  economic                                                               
opportunity.                                                                                                                    
                                                                                                                                
MR.  MARTIN said  the  passage of  HJR 26  would  serve the  dual                                                               
purpose of  encouraging a renewed  discussion on  the possibility                                                               
of  state  management  of  sea  otters,  as  well  as  a  renewed                                                               
discussion on  the use,  transfer, and sale  of intact  sea otter                                                               
pelts.   He maintained  that this  would help  Southeast Alaska's                                                               
municipalities,  towns, and  villages  as  they face  substantial                                                               
challenges  in  developing  broader  economic  opportunities  for                                                               
their residents.   He said HJR 26 would send  a strong message to                                                               
federal   authorities  that   a  new   management  structure   is                                                               
desperately  needed   to  manage   Southeast  Alaska   sea  otter                                                               
populations.  Additionally, the resolution  would also serve as a                                                               
redress  to Native  people's customary  and traditional  right to                                                               
use, transfer, and sell intact sea otter pelts.                                                                                 
                                                                                                                                
1:13:45 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HERRON asked  what the thought process  was in the                                                               
late 1960s to re-introduce sea otters without a management plan.                                                                
                                                                                                                                
MR.  MARTIN reiterated  that commercial  harvesting in  the 18th,                                                               
19th,  and  20th centuries  nearly  wiped  out  sea otters.    He                                                               
related that  prior to arrival  of the Russians an  estimated one                                                               
million sea otters  were along the North American  continent.  An                                                               
international agreement in  1911 protected sea otters  and in the                                                               
1960s  the  plan  was  to  reintroduce  them  into  their  former                                                               
regions.  The  1972 Marine Mammal Protection  Act transferred sea                                                               
otter management  from the state  to the federal government.   He                                                               
said he  does not know  whether the state  had a plan.   However,                                                               
once management was transferred to  the federal government it was                                                               
the federal government's  responsibility to come up  with a plan,                                                               
which it did in 1994, but the plan was not very specific.                                                                       
                                                                                                                                
REPRESENTATIVE  MUNOZ inquired  whether there  is any  scientific                                                               
evidence  that  ties  declining   herring  stocks  to  sea  otter                                                               
predation.                                                                                                                      
                                                                                                                                
MR. MARTIN responded that he did not know.                                                                                      
                                                                                                                                
1:16:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER asked what the role  of sea otters is in a                                                               
healthy  marine  ecosystem.    For example,  when  there  were  a                                                               
million  sea otters  prior to  the Russians,  were there  healthy                                                               
populations of crabs, geoducks, abalone,  and other mollusks.  In                                                               
regard to the customary and  traditional rights of Natives to use                                                               
intact sea otter  pelts, she inquired about  the exemptions under                                                               
current law and how  those would change if the goal  of HJR 26 is                                                               
achieved.                                                                                                                       
                                                                                                                                
MR. MARTIN  replied that there  has been  a link with  sea otters                                                               
benefitting the  ecological environment.   Many  people attribute                                                               
sea otter  populations to helping  the kelp forest by  eating sea                                                               
urchins which eat kelp.   However, sea otter populations have now                                                               
grown exponentially and have become  a detriment because they are                                                               
eating all the  resources and once the resources are  gone in one                                                               
region the  otters move to  another.  Their populations  have now                                                               
grown to  such a level  that they  are impacting the  economy and                                                               
hurting the ecological system.                                                                                                  
                                                                                                                                
1:19:03 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   GARDNER  asked   whether   there  were   healthy                                                               
populations of  the sea life on  which sea otters prey  back when                                                               
there  were  one million  otters  and  the  Russians had  yet  to                                                               
arrive.  She further asked what  the current number of sea otters                                                               
is in Alaskan waters.                                                                                                           
                                                                                                                                
MR. MARTIN  related that  the 1994  report by  the U.S.  Fish and                                                               
Wildlife  Service,  as  well  as  the  McDowell  report,  briefly                                                               
mention that the  dive fisheries and the crab  fisheries were not                                                               
as big as they are now,  so sea urchins, geoducks, sea cucumbers,                                                               
and crabs  had about 100 years  in which to rebound.   He related                                                               
that  the McDowell  report states  that,  at this  point, if  sea                                                               
otter  numbers keep  increasing, humans  and sea  otters will  be                                                               
unable to  co-exist because  the sea otters  will devour  all the                                                               
commercial fisheries and then move on.                                                                                          
                                                                                                                                
1:21:02 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER  said her question is  whether things were                                                               
in balance back  when there were a million sea  otters in Alaska.                                                               
If there are  fewer sea otters today, then why  are they having a                                                               
greater impact on their food species, she asked.                                                                                
                                                                                                                                
MR. MARTIN  responded that the  question relates back  to optimal                                                               
population range,  which was discussed  in the  1994 conservation                                                               
plan.  The  optimal sustainable population (OSP)  level refers to                                                               
the number  of animals which  result in the  maximum productivity                                                               
of the  population of the  species, keeping in mind  the carrying                                                               
capacity of  the habitat and  the health  of the ecosystem.   Sea                                                               
otters have  gone beyond  that point,  he said.   He  deferred to                                                               
other witnesses to further answer the question.                                                                                 
                                                                                                                                
REPRESENTATIVE  GARDNER   said  she  is  still   looking  for  an                                                               
understanding  of the  carrying capacity  and the  numbers today.                                                               
She reiterated  her question about  the exemptions  to indigenous                                                               
peoples for  pelts and harvesting  and how those would  change if                                                               
the resolution were to achieve its ultimate goal.                                                                               
                                                                                                                                
MR.  MARTIN  answered that  if  HJR  26  were  to pass  it  would                                                               
hopefully  start a  discussion  among the  appropriate state  and                                                               
federal  agencies and  Alaska Natives  to come  up with  a better                                                               
management plan  and see  whether Alaska  Natives want  to expand                                                               
their  ability to  sell intact  sea otter  pelts to  non-Natives.                                                               
This  would  go  back  to  the  management  plan  for  sea  otter                                                               
populations.   The resolution  would start  a dialogue  more than                                                               
anything else.                                                                                                                  
                                                                                                                                
1:23:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  inquired whether  annual reviews  of the                                                               
1994 management plan, and revisions  at least every three to five                                                               
years, have happened.                                                                                                           
                                                                                                                                
MR. MARTIN responded that it has  not been happening as far as he                                                               
knows from  his investigation.   While  research has  occurred by                                                               
different    organizations,   including    state   and    federal                                                               
departments, there has been no revision of the original plan.                                                                   
                                                                                                                                
REPRESENTATIVE   KAWASAKI  observed   that   HJR   26  does   not                                                               
necessarily  ask  for  any significant  changes  to  the  policy,                                                               
rather it urges the U.S. Secretary  of Interior to work under the                                                               
confines of  what is already  current law under  the conservation                                                               
management  plan.   He  asked  whether  the sponsor  is  actually                                                               
asking  for  something  different  or asking  that  [the  federal                                                               
government] work with [the state].                                                                                              
                                                                                                                                
MR. MARTIN said  the purpose of HJR 26 is  to re-engage a serious                                                               
discussion with  the state on  sea otter management  in Southeast                                                               
Alaska.   There seems to be  a disconnect with the  U.S. Fish and                                                               
Wildlife  Service  managing  the   sea  otters;  sea  otters  are                                                               
unmanaged  at this  point  because  they are  growing  at such  a                                                               
tremendous  rate.    The  resolution is  asking  for  a  sit-down                                                               
between  the  state,  federal government,  and  other  interested                                                               
parties to discuss what can be done to resolve this issue.                                                                      
                                                                                                                                
1:25:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KAWASAKI  said   it  is   unclear  whether   the                                                               
resolution is asking that the  State of Alaska become the manager                                                               
of sea otters.   He asked whether this is  what the sponsor wants                                                               
to have happen.                                                                                                                 
                                                                                                                                
MR.  MARTIN replied  "no, that  is  not what  this resolution  is                                                               
asking,"  although having  the state  take over  management is  a                                                               
possibility.  The  resolution is only asking to engage  in a more                                                               
serious dialogue between the appropriate people on this issue.                                                                  
                                                                                                                                
MR. MARTIN, in  response to Co-Chair Feige, confirmed  that he is                                                               
an intern for  Representative P. Wilson.  He said  he is studying                                                               
political science, with a minor  in Russian, at the University of                                                               
Alaska  Fairbanks and  originally  moved from  the former  Soviet                                                               
Union to Prince of Wales Island  in 1997.  He added that actually                                                               
experiencing the  political process  is much better  than reading                                                               
about it in a book.                                                                                                             
                                                                                                                                
1:27:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON  moved  to adopt  the  proposed  committee                                                               
substitute  (CS)  for  HJR   26,  Version  27-LS0717\B,  Bullard,                                                               
1/27/12,  as the  working document.   There  being no  objection,                                                               
Version B was before the committee.                                                                                             
                                                                                                                                
CO-CHAIR FEIGE opened public testimony on HJR 26.                                                                               
                                                                                                                                
1:28:39 PM                                                                                                                    
                                                                                                                                
ROSITA WORL, PhD, Chair, Federal  Indian Policy Committee, Alaska                                                               
Federation of  Natives (AFN), explained  that she is  speaking on                                                               
behalf of  AFN, but that she  wears multiple hats.   She said she                                                               
is  also  vice  chair  of   the  Sealaska  Corporation  board  of                                                               
directors and president of the  Sealaska Heritage Institute, both                                                               
of which  have a  very direct  interest in  the sea  otter issue.                                                               
She  noted  that   [Alaska  Natives]  have  been   aware  of  the                                                               
increasing sea otter population and  its impact on the resources.                                                               
In  regard to  Representative Gardner's  question, Dr.  Worl said                                                               
that at  the time when there  were a million sea  otter there was                                                               
only an  indigenous population using  the otters  for traditional                                                               
purposes;  there  were  no  commercial  fisheries  or  commercial                                                               
enterprises.    Right now,  Alaska  Natives  know that  the  [sea                                                               
otter]  population is  having an  impact on  both commercial  and                                                               
subsistence resources.   When  AFN became  aware of  this through                                                               
discussions with  its villagers it  attempted to act to  see what                                                               
it could do.                                                                                                                    
                                                                                                                                
1:30:52 PM                                                                                                                    
                                                                                                                                
DR. WORL  related that  the Marine Mammal  Protection Act,  as it                                                               
now stands, allows for Alaska  Natives to take marine mammals and                                                               
use them for  customary purposes for subsistence, as  well as the                                                               
selling of  traditional arts  and crafts products.   At  issue is                                                               
what  is traditional  and what  is  customary.   For example,  an                                                               
Alaska Native  made a teddy bear  and was cited for  it not being                                                               
traditional.   So, AFN  has been  trying to  advance legislation,                                                               
which was  received with mixed  emotions in the  Native community                                                               
because of  the fear  that opening  the Marine  Mammal Protection                                                               
Act  might change  the exemption/protection  for Alaska  Natives.                                                               
However, AFN feels that the  inability to make contemporary items                                                               
is causing problems because a  number of Alaska Natives have been                                                               
cited.  She said AFN  has complained vigorously about enforcement                                                               
practices and has advanced ideas of co-management.                                                                              
                                                                                                                                
1:32:18 PM                                                                                                                    
                                                                                                                                
DR. WORL continued, stating that  AFN's idea was really to change                                                               
the  Marine  Mammal Protection  Act  to  allow  for the  sale  of                                                               
contemporary items.   She shared  that the Sitka Tribe  of Alaska                                                               
(STA) started  a marine mammal  tannery that includes  sea otter.                                                               
She added  that Sealaska Heritage Institute  started holding skin                                                               
sewing  workshops  because this  is  seen  as an  opportunity  to                                                               
develop  economies in  Alaska Native  villages, and  Sealaska has                                                               
started a  subsidiary corporation  directed at  promoting village                                                               
economies.    Sea otters  are  seen  as  one possible  answer  to                                                               
promote sustainable economies in Alaska Native communities.                                                                     
                                                                                                                                
DR.  WORL pointed  out that  the "marine  mammal commission"  has                                                               
worked  for some  time to  advance the  notion of  co-management.                                                               
There is reference  to that in the Marine  Mammal Protection Act,                                                               
she said,  but it is  a long process.   Because of the  impact on                                                               
other resources,  the hope is  that developing  village economies                                                               
around  marine mammal  skin sewing  classes will  be part  of the                                                               
answer.  She said AFN has  met with the Alaska Department of Fish                                                               
& Game about its ideas and  AFN has a proposal to the legislature                                                               
where  it  would continue  its  work  in sponsoring  skin  sewing                                                               
classes.                                                                                                                        
                                                                                                                                
1:34:47 PM                                                                                                                    
                                                                                                                                
DR.  WORL stated  that  AFN  thinks there  are  many good  things                                                               
included in HJR  26.  However, the whereas clause  related to the                                                               
sale of pelts is objectionable and  AFN opposes it.  The language                                                               
is not clear  in specifying who could purchase the  pelts.  Right                                                               
now  Alaska Natives  can sell  pelts to  other Natives.   If  the                                                               
language in  HJR 26  is to allow  for the sale  of pelts  to non-                                                               
Natives,  the AFN  would oppose  that  because of  the impact  it                                                               
would  have on  village economies.   Such  language would  likely                                                               
also generate considerable opposition  from animal rights groups.                                                               
She said AFN  does not support letting the  population expand and                                                               
then collapse, rather it supports sustainable harvest.                                                                          
                                                                                                                                
DR. WORL  informed committee  members that  AFN is  the statewide                                                               
Native  organization, representing  approximately  16 percent  of                                                               
the  population   of  Alaska,   or  200  villages,   13  regional                                                               
corporations,  and  12  non-profit  corporations.    She  said  a                                                               
resolution adopted at  AFN's 2011 convention opposes  any kind of                                                               
change to  the Native exemption  in the Marine  Mammal Protection                                                               
Act  and  opposes  the  sale   of  pelts  to  non-Natives.    She                                                               
reiterated that  AFN would  oppose any provision  in HJR  26 that                                                               
would allow the sale of pelts to non-Natives.                                                                                   
                                                                                                                                
1:37:22 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER inquired  whether  AFN  would oppose  the                                                               
whole resolution if the one clause  promoted the sale of pelts to                                                               
non-Natives.                                                                                                                    
                                                                                                                                
DR. WORL  replied that the resolution  is good in its  intent but                                                               
for that one clause.                                                                                                            
                                                                                                                                
REPRESENTATIVE MUNOZ  asked whether  [AFN] would oppose  the sale                                                               
of pelts to non-Natives in small rural Alaska villages.                                                                         
                                                                                                                                
DR. WORL responded yes.   She added that AFN supports maintaining                                                               
the  Native exemption  language as  it  is in  the Marine  Mammal                                                               
Protection Act.                                                                                                                 
                                                                                                                                
CO-CHAIR FEIGE  inquired whether  the sale  is limited  to Alaska                                                               
Natives or Southeast Natives.                                                                                                   
                                                                                                                                
DR. WORL understood that it is limited to Alaska Natives.                                                                       
                                                                                                                                
CO-CHAIR FEIGE  further inquired  whether that is  Alaska Natives                                                               
anywhere.                                                                                                                       
                                                                                                                                
DR. WORL answered that she knows  a person must live on the coast                                                               
to be eligible to harvest  sea otters, but Native people anywhere                                                               
can purchase sea otter.                                                                                                         
                                                                                                                                
1:39:02 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE said  he thinks that is what HJR  26 states, other                                                               
than he does not  think it puts a limitation on  to who the pelts                                                               
can  be sold.   He  perceived  AFN's intent  as being  to keep  a                                                               
supply of sea otter pelts  that Natives can turn into value-added                                                               
products for sale for making a livelihood.                                                                                      
                                                                                                                                
DR. WORL replied yes.                                                                                                           
                                                                                                                                
CO-CHAIR FEIGE  asked whether  there is  the capacity  to utilize                                                               
all the pelts  that would be taken under a  management plan.  For                                                               
example, a management  plan could call for more sea  otters to be                                                               
taken  than  Alaska Natives  could  process.   He  further  asked                                                               
whether surplus pelts could be stored.                                                                                          
                                                                                                                                
DR. WORL  responded that  someone may  be testifying  about this.                                                               
She said  the STA tannery  has been expanded and  other tanneries                                                               
are being  developed, and there  are tanneries in  Anchorage that                                                               
can accommodate this.   Sealaska has looked  at having facilities                                                               
to freeze excess pelts until they  could be tanned.  She stressed                                                               
that [AFN]  absolutely supports sustainable harvest  and if there                                                               
was  an immediate  increase in  sea  otter harvest  it would  run                                                               
afoul of  people who would like  to oppose any kind  of marketing                                                               
of it.   So [AFN] is  trying to work on  this in a way  that will                                                               
protect Alaska Natives and protect  Alaska Native communities and                                                               
the development of this cottage industry.                                                                                       
                                                                                                                                
1:41:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  surmised that a  gradual ramping up of  sea otter                                                               
take  would  be  something  that  would  be  worked  out  in  the                                                               
negotiation of  the management  plan so that  it would  match the                                                               
increase in capacity for utilizing the pelts.                                                                                   
                                                                                                                                
DR. WORL  agreed that it  would be a ramp  up, but said  it could                                                               
also be  selective.  She  related that in AFN's  discussions with                                                               
the Alaska Department  of Fish & Game, AFN has  proposed that the                                                               
department  identify  areas  for  Alaska Natives  to  target  for                                                               
harvest.                                                                                                                        
                                                                                                                                
1:42:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  DICK  commented  that  conversation  about  local                                                               
economies may  be premature because  the real  goal of HJR  26 is                                                               
just to start a conversation and  the tail end of that discussion                                                               
is what  is being  discussed right  now.   He said  that whatever                                                               
would be  most powerful  in getting  the conversation  started is                                                               
the most important thing that should be said.                                                                                   
                                                                                                                                
DR. WORL  said AFN  has tried  that in  its discussions  with the                                                               
Alaska  Department  of  Fish  &  Game,  the  U.S.  Department  of                                                               
Interior,  the U.S.  Department  of Agriculture,  and the  Alaska                                                               
delegation about the problems and addressing those problems.                                                                    
                                                                                                                                
REPRESENTATIVE  HERRON  complimented  Dr. Worl  by  sharing  that                                                               
people in his  area consider her to  be an Elder.   He then asked                                                               
what  the views  are of  AFN  and Dr.  Worl  on the  meat of  sea                                                               
otters.                                                                                                                         
                                                                                                                                
DR. WORL answered  that she does not know that  AFN has addressed                                                               
that, but  the marine mammal  commission may be working  on that.                                                               
She added that  the marine mammal commission has  been the entity                                                               
doing all of the work on this for 10 years or more.                                                                             
                                                                                                                                
REPRESENTATIVE HERRON suggested  that this should be  part of the                                                               
discussion because  there is the potential  that large quantities                                                               
of edible meat will need to be managed as well.                                                                                 
                                                                                                                                
DR. WORL agreed to ask about this.                                                                                              
                                                                                                                                
1:44:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  SEATON  inquired  whether   AFN's  objection  could  be                                                               
resolved  by  eliminating  on  page   4,  line  1,  the  language                                                               
"transfer, and sale  of intact sea otter pelts"  and inserting in                                                               
its place "for contemporary items".                                                                                             
                                                                                                                                
DR. WORL  responded that she does  not have a copy  of Version B,                                                               
but AFN's  concern is the sale  of intact sea otter  pelts and it                                                               
is not clear whether that is limited to Native or non-Native.                                                                   
                                                                                                                                
CO-CHAIR SEATON surmised  that if there is  currently the ability                                                               
to sell  pelts to Natives,  then this does  not need to  be taken                                                               
care  of for  AFN's concern.    However, he  understood that  AFN                                                               
wants to ensure that contemporary items are covered.                                                                            
                                                                                                                                
DR. WORL  said AFN  has been advancing  to Alaska's  delegation a                                                               
clarification that Natives can sell contemporary items.                                                                         
                                                                                                                                
1:45:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  commented that  while the overall  goal is                                                               
to manage  the sea otter  population, he thinks that  the impacts                                                               
on  the  Alaska  Native  community  in terms  of  being  able  to                                                               
reintroduce  and encourage  cultural practices,  and the  impacts                                                               
that  that  could  have  on  the youth,  would  have  impacts  on                                                               
everything, including the  issue of suicide.  He said  he is very                                                               
much in support of the work that AFN is doing on this issue.                                                                    
                                                                                                                                
DR. WORL agreed  about the impacts.  She said  she just completed                                                               
a study  on the status of  Alaska Native women and  one thing she                                                               
found is  that there are  very limited economic  opportunities in                                                               
the villages  and that is  accompanied by social problems.   Some                                                               
of  those social  problems  can be  alleviated  by people  having                                                               
healthy lifestyles and the ability for sustaining themselves.                                                                   
                                                                                                                                
1:47:29 PM                                                                                                                    
                                                                                                                                
EDWARD THOMAS,  President, Central  Council of Tlingit  and Haida                                                               
Indian Tribes of  Alaska, first offered his  appreciation for the                                                               
resolution.  While there are  portions that need clarity and some                                                               
that the council outright opposes, he  said the idea of the State                                                               
of  Alaska,  the  federal  government,  and  the  tribes  working                                                               
together to  manage a  very important resource  is a  good thing.                                                               
He related that he is from  Craig and happened to be living there                                                               
when sea otters  were reintroduced.  At that  time the management                                                               
plan was  not clear as to  whether the sea otters  were available                                                               
for  Natives  or non-Natives.    However,  as the  Marine  Mammal                                                               
Protection  Act became  refined  over time,  the  harvest of  sea                                                               
otters  became part  of the  act for  Alaska Native  utilization.                                                               
That is an important component to  the act, he stressed, and when                                                               
that part of  the act is talked about, the  central council wants                                                               
to  make  sure that  the  purpose  of  that  act is  because  the                                                               
indigenous  populations  relied  on   those  resources  from  the                                                               
beginning of  time and it was  important to the policy  makers to                                                               
continue that practice.                                                                                                         
                                                                                                                                
1:49:31 PM                                                                                                                    
                                                                                                                                
MR. THOMAS said  the resolution does a good  job articulating the                                                               
resource and its growth as well  as the problems that are created                                                               
with the  overpopulation.  When  looking at the problem,  it must                                                               
be  understood that  when the  Marine Mammal  Protection Act  put                                                               
forth the  regulations and requirements  it was  very restrictive                                                               
on what the  pelts could be converted into to  be considered part                                                               
of Native tradition,  not realizing that today's  people are also                                                               
creating traditions.   The practices of Alaska  Native people now                                                               
are Alaska Native practices, he  pointed out, and these practices                                                               
are  not necessarily  100 percent  the way  they were  at contact                                                               
with the Russians.   For example, at the time  of Russian contact                                                               
there was  no commercialization of  crab or bottom  fisheries, so                                                               
the  Alaska  Native  utilization  of  those  resources  was  much                                                               
different.   But  as time  moved forward,  Alaska Natives  became                                                               
involved  in those  fisheries;  people  utilized those  fisheries                                                               
because  the  ability to  gather  them  changed.   Likewise,  the                                                               
utilization  of  pelts  has also  changed,  and  the  interaction                                                               
between Alaska  Natives and other  people for the value  of those                                                               
pelts has changed.                                                                                                              
                                                                                                                                
1:51:24 PM                                                                                                                    
                                                                                                                                
MR.  THOMAS  related  that  Alaska Native  artisans  are  not  so                                                               
worried about  selling a pelt  to somebody in  Juneau, Anchorage,                                                               
or even  Seattle.  The biggest  threat is that if  Alaska Natives                                                               
were allowed to  sell those pelts unaltered they  would come back                                                               
as authentic  Native crafts  made in  Taiwan, as  can be  seen by                                                               
looking  at Juneau's  South Franklin  Street.   That is  just the                                                               
nature  of the  way it  works, he  said, if  places can  be found                                                               
where  people can  make them  much more  efficiently and  cheaper                                                               
with different  methodologies, then that  is where they  will end                                                               
up coming  from.  It  is very important  to preserve not  just an                                                               
Alaska rural economy,  but the economy as it is,  and that is the                                                               
primary reason  why the central  council is very  concerned about                                                               
selling  pelts without  being  very  clear on  how  they will  be                                                               
utilized.  The central council does  not want to have a mass exit                                                               
of these  resources and then  have them  come back to  Alaska for                                                               
sale.                                                                                                                           
                                                                                                                                
1:52:50 PM                                                                                                                    
                                                                                                                                
MR.  THOMAS, regarding  sea otter  management,  said he  believes                                                               
there  could  be  broadened  utilization   of  sea  otter  pelts,                                                               
provided there  is a  loosening up  of the  words that  are being                                                               
used as  traditional or authentic.   A  product made by  a Native                                                               
today and sold  for tourism is authentic, he said,  whether it is                                                               
a  totem pole,  vest, or  other  clothing.   However, the  Marine                                                               
Mammal Protection Act  narrows it down as to how  it must be done                                                               
and  applies certain  other conditions,  such as  being something                                                               
that  was made  way  back  when.   Referring  to  the teddy  bear                                                               
incident  mentioned  by  Dr.  Worl, he  said  nothing  in  Native                                                               
society says  that Alaska Natives  never made teddy bears.   When                                                               
he was  a youngster,  a house  would be built  for a  person that                                                               
died and the  person's belongings would be put in  the casket and                                                               
in the house.   If it was  a child that died,  products were made                                                               
by family  members and  put into  the house  where the  child was                                                               
buried.   Many things were  not seen  as Alaska Natives  made the                                                               
transition to  contemporary society;  a lot  of those  things may                                                               
have existed  and there are  signs that  they did exist  prior to                                                               
contemporary times.                                                                                                             
                                                                                                                                
1:54:19 PM                                                                                                                    
                                                                                                                                
MR. THOMAS continued his discussion  about loosening up the words                                                               
by providing  an example.   If an artisan was  able to use  a sea                                                               
otter pelt  to make a vest  with a zipper it  would be authentic,                                                               
but it  would not be  considered traditional because it  does not                                                               
meet the  criteria.  It  goes without saying that  Alaska Natives                                                               
made blankets  out of skin pelts,  but if trying to  abide by the                                                               
Marine  Mammal  Protection  Act  that would  have  to  be  proved                                                               
somehow.  Since  his grandparents did not use sea  otter pelts to                                                               
make blankets, it is hard for a person like him to prove it.                                                                    
                                                                                                                                
1:55:34 PM                                                                                                                    
                                                                                                                                
MR. THOMAS said  he believes that if Alaska Natives  were able to                                                               
do more  things with the pelts  locally that there would  be more                                                               
incentive to create  tanneries and more incentives  for people to                                                               
do something  with the  by-products.   However, with  the limited                                                               
access and limited utilization, the  problem remains.  By working                                                               
with  the  scientific  community  the  House  Resources  Standing                                                               
Committee  can  help Alaska  Natives  work  through the  maze  of                                                               
federal regulations  so that there  can be better  utilization of                                                               
those resources locally  as well as control the  population so it                                                               
makes sense to the people  utilizing the resources being consumed                                                               
by the sea otter.                                                                                                               
                                                                                                                                
1:57:09 PM                                                                                                                    
                                                                                                                                
CARRIE   SYKES,  Manager,   Business  and   Economic  Development                                                               
Department, Central  Council of  Tlingit and Haida  Indian Tribes                                                               
of Alaska, noted  that she has been sewing sea  otter pelts since                                                               
about 1990,  so she is very  familiar with what is  involved with                                                               
the processes.   She related  that last  March the U.S.  Fish and                                                               
Wildlife Service sponsored a workshop  in Sitka for the southeast                                                               
tribes;  about 12  communities were  represented at  the meeting.                                                               
The workshop  was sponsored because  of the need  for information                                                               
and education.   The tribes were not clear about  what the Marine                                                               
Mammal  Protection  Act allowed  for  them  and were  fearful  of                                                               
harvesting because  of past enforcement  issues that  happened to                                                               
other tribal members.   A lot of issues were  brought up, but the                                                               
biggest issue is that there  needs to be government-to-government                                                               
consultation between the  U.S. Fish and Wildlife  Service and the                                                               
local tribes so  that the tribes can work on  management in their                                                               
local areas.   It  is important  to the tribes  to have  input on                                                               
what is  happening in their  region.   That was started  in 2011,                                                               
but the  person with the  U.S. Fish and Wildlife  Service changed                                                               
jobs  so  the position  is  currently  vacant.   At  an  economic                                                               
development  workshop held  this past  December, the  service was                                                               
urged to fill  this vacant position and it is  now looking at re-                                                               
starting the government-to-government consultation.                                                                             
                                                                                                                                
1:59:14 PM                                                                                                                    
                                                                                                                                
MS.  SYKES, regarding  the  enforcement  issues, reiterated  that                                                               
tribal members are fearful about  harvesting without some clearer                                                               
definitions about  what is significantly  altered.   She conveyed                                                               
that  a recent  letter from  the U.S.  Fish and  Wildlife Service                                                               
includes  draft language  about  significantly  altered, and  the                                                               
central  council is  very happy  to see  that there  has been  an                                                               
effort to  start to define  that in  regulation so people  have a                                                               
clear  understanding  of  what  is  allowable  and  what  is  not                                                               
allowable.                                                                                                                      
                                                                                                                                
MS. SYKES addressed the question of  what is authentic.  She said                                                               
the central council's position is that  if it is made by a Native                                                               
it is authentic.   Additionally, the central  council considers a                                                               
killed and  tanned hide  to be significantly  altered.   There is                                                               
much  need for  education and  outreach, particularly  when there                                                               
are  groups  that oppose  any  harm  to  sea  otters and  do  not                                                               
understand the  impacts to the  shellfish and  subsistence foods.                                                               
There needs  to be education and  outreach on what is  allowed by                                                               
the Marine Mammal Protection Act.                                                                                               
                                                                                                                                
2:00:23 PM                                                                                                                    
                                                                                                                                
MS.  SYKES said  that  while there  is  opportunity for  economic                                                               
development, there  are lots of  needs, such as training  for how                                                               
to sew the  skins and how to skin the  hides, more facilities for                                                               
tanning,  opportunities  for  marketing,  and  coordinating  with                                                               
others such as bartering the hunters.                                                                                           
                                                                                                                                
MS. SYKES  added that, according  to the hunters, sea  otter meat                                                               
is  not edible.   Regarding  customary and  traditional use,  she                                                               
said it  is documented that  over 200  years ago sea  otters were                                                               
used in  the raven's tail weaving  and those robes are  in Russia                                                               
and other places around the world.                                                                                              
                                                                                                                                
2:02:19 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  inquired whether  under the  Marine Mammal                                                               
Protection Act  the burden of  proof is  on the Alaska  Native to                                                               
prove  that something  is  traditional and  customary  or is  the                                                               
burden of  proof on the  U.S. Fish  and Wildlife Service  to show                                                               
that something is not traditional and customary.                                                                                
                                                                                                                                
MR. THOMAS  replied that  there is very  little burden  of proof;                                                               
the agency utilizes traditional from  its own perception and that                                                               
is  what creates  the problem.   This  makes people  very nervous                                                               
because the  fines for violating the  act are extensive.   When a                                                               
regulator  or   other  person  in  a   high  position  interprets                                                               
something different than did the  Alaska Native, then that person                                                               
is in trouble.  While the  U.S. Fish and Wildlife Service will be                                                               
coming  out  with  proposed  definitions  of  what  significantly                                                               
altered means,  it is a  little late  for a person  like himself.                                                               
He said he  believes that whether something is  authentic is more                                                               
important than what significantly altered  means to the U.S. Fish                                                               
and Wildlife Service.   It sounds like splitting  hairs, be said,                                                               
but it isn't.  If it is  defined properly it will allow people to                                                               
utilize the resource better.                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  said he wanted  to make sure  that Natives                                                               
are not being required to provide a picture from 200 years ago.                                                                 
                                                                                                                                
MR. THOMAS added that there  is some truth to what Representative                                                               
Foster is saying,  because from the perspective of  the U.S. Fish                                                               
and Wildlife Service, if it is  not in a museum somewhere or seen                                                               
somewhere then it is probably not traditional use.                                                                              
                                                                                                                                
2:04:55 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ  asked  how  the cases  of  the  previously                                                               
mentioned people  were resolved, given  that it is the  U.S. Fish                                                               
and Wildlife Service that defines what is acceptable.                                                                           
                                                                                                                                
MS. SYKES said she knows that in  the past it has been left up to                                                               
the U.S.  Fish and Wildlife  Service, and that has  made everyone                                                               
fearful.    However,  the  agency  recently  sent  out  a  letter                                                               
requesting tribal  consultation and  input on its  new definition                                                               
and the comment period ends the end of March.                                                                                   
                                                                                                                                
REPRESENTATIVE  MUNOZ  inquired  whether the  artists  that  were                                                               
cited have paid a fine and are continuing.                                                                                      
                                                                                                                                
MS. SYKES  responded that  she knows  artists from  Ketchikan who                                                               
had hides seized three years and  are still waiting.  In the case                                                               
of one  of those  artists, the hides  were tagged  correctly, but                                                               
the artist  did not have the  paperwork from 15 years  before, so                                                               
the hides  were taken.  Yet,  the U.S. Fish and  Wildlife Service                                                               
did  not  have  its  own  paperwork and  still  took  the  hides.                                                               
Another case is a young man who  did not keep up on his paperwork                                                               
and is  getting ready  to go to  prison.  This  artist sold  to a                                                               
non-Native and his claim is that  he was tricked.  When selling a                                                               
hide is  an artist supposed  to request proof of  whether someone                                                               
is Native; there  again is that burden of proof  and where things                                                               
are unclear.                                                                                                                    
                                                                                                                                
2:07:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ asked whether  the citations are coming from                                                               
local U.S. Fish and Wildlife Service employees.                                                                                 
                                                                                                                                
MS. SYKES  understood that there  are two  arms of the  U.S. Fish                                                               
and Wildlife Service - a management  arm out of Anchorage and the                                                               
enforcement people in Washington, DC.   She said she thinks it is                                                               
the local officers who do the  citing, but it is actually handled                                                               
through Washington, DC.   It was brought up at  the workshop that                                                               
the  agency wants  Alaska  Natives to  harvest,  but that  citing                                                               
people does not make them want to go harvest.                                                                                   
                                                                                                                                
REPRESENTATIVE DICK  said this is  exactly the point that  he was                                                               
trying to  make last year  with his  wood bison legislation.   He                                                               
did  not want  the subsistence  people  in his  district to  find                                                               
themselves litigants.                                                                                                           
                                                                                                                                
2:09:05 PM                                                                                                                    
                                                                                                                                
KIRK   HARDCASTLE,   Commercial    Fisherman,   emphasized   that                                                               
commercial fishing is the stabilizing  economic influence for the                                                               
entire state  of Alaska.  He  said that he is  an entrepreneur, a                                                               
businessman, and  understanding the role  that the sea  otter has                                                               
in  all  of  the  fisheries in  Southeast  Alaska  is  absolutely                                                               
essential.  He  said he studied marine  biology and environmental                                                               
physiology in college and was  born and raised around sea otters.                                                               
The sea otter  is a keystone species; a  keystone being something                                                               
that  holds the  whole arc  together.   Commercial  fishing is  a                                                               
keystone economic influence for the state of Alaska.                                                                            
                                                                                                                                
2:10:43 PM                                                                                                                    
                                                                                                                                
MR. HARDCASTLE  explained that sea  urchins and abalones  make up                                                               
the majority  of the sea  otter diet.   Sea urchins  and abalones                                                               
are grazers,  eating the kelp  that grows  on rocks.   Sea otters                                                               
keep urchins and  other grazers in check so that  there is a kelp                                                               
forest.    Kelp provides  the  rearing  grounds  for all  of  the                                                               
commercial  fisheries  species;   for  example  crab,  shellfish,                                                               
salmon, halibut,  and cod.   All of  those juvenile  species must                                                               
live in the kelp forest before they  move to the outer waters.  A                                                               
tiny  juvenile   fish  does  not  have   protection  from  larger                                                               
predators, but  a kelp forest is  like the entanglement of  a net                                                               
so  that large  predators cannot  get  in.   When [young]  salmon                                                               
leave the  inland water systems  for the open ocean  waters, they                                                               
hide  and live  within those  kelp  forests.   Crab have  several                                                               
different morphic stages, and each  of those different stages may                                                               
live in mud, or  rocks, or open  ocean, but all crab at one stage                                                               
in their  life live in  these kelp  forests.  The  major economic                                                               
value of sea otters is that  they provide rearing grounds for all                                                               
of the fishing industries.                                                                                                      
                                                                                                                                
2:12:39 PM                                                                                                                    
                                                                                                                                
MR. HARDCASTLE  said sea otters  may be  cute, but they  are mean                                                               
and he has been bitten several  times.  The McDowell report talks                                                               
about the impacts of [sea otter]  predation.  However, no one has                                                               
looked at what the economic impact  would be if sea otter numbers                                                               
were  to  rise.    For  example, more  kelp  means  more  rearing                                                               
grounds,  more  rearing  grounds   means  more  availability  for                                                               
juvenile species  to make  it to  the outer  ocean and  then come                                                               
back  and  increase  the pocketbooks  of  fishermen.    Southeast                                                               
Alaskans  rely on  these species  for subsistence  and commercial                                                               
value.   The more  kelp, the  more fish,  but no  one has  done a                                                               
report on the benefits of  having otters and greater kelp forests                                                               
in  Southeast Alaska.   He  related that  in northern  California                                                               
where the sea otter population has  come back, a rebound has been                                                               
seen in all  the other species because there is  a protected area                                                               
to hide in.                                                                                                                     
                                                                                                                                
2:14:10 PM                                                                                                                    
                                                                                                                                
MR.  HARDCASTLE  refuted the  statements  made  about sea  otters                                                               
devouring every resource  and hurting the ecological  system.  He                                                               
said numerous papers show that to  be false.  Otters benefit, not                                                               
hurt, the  ecological system.   As  to devouring  every resource,                                                               
graphs in the McDowell report  and a memorandum [in the committee                                                               
packets]  show that  sea  otters do  not  devour every  resource.                                                               
Only 5-7  percent of  sea otter diet  is comprised  of commercial                                                               
shellfish, 95 percent is non-commercially harvested animals.                                                                    
                                                                                                                                
MR. HARDCASTLE shared that he is  on an Alaska Department of Fish                                                               
& Game advisory committee and has  been involved in the sea otter                                                               
issue  for  quite some  time,  in  addition  to growing  up  with                                                               
otters.   He added  that sea  otters are  a federal  species, not                                                               
state species.   While he does  not need to be  around sea otters                                                               
himself, he does  understand the economic value of  sea otters to                                                               
the  tourism industry  throughout Southeast  Alaska.   He pointed                                                               
out that the unintended consequences  of keeping sea otters alive                                                               
or dead  has not  been studied.   As  a commercial  fisherman, he                                                               
emphasized how  important it is that  there is a large  sea otter                                                               
population so that there are  healthy kelp forest systems for all                                                               
the fisheries.                                                                                                                  
                                                                                                                                
2:16:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GARDNER inquired  what the other 95  percent is of                                                               
the sea otter's diet.                                                                                                           
                                                                                                                                
MR. HARDCASTLE replied  that according to the  McDowell report 52                                                               
percent is  clams followed by other  echinoderms, fish, mollusks,                                                               
scallops,  sand   lance,  geoducks,  shrimp,  tanner   crab,  red                                                               
urchins,  cucumbers,  barnacles,  and unidentified  prey.    Non-                                                               
commercial crabs  make up  almost 95 percent  of sea  otter diet,                                                               
and eliminating  that 5 percent  would impact 100 percent  of the                                                               
fisheries in Southeast Alaska.   Healthy kelp forests are needed.                                                               
These  kelp forests  are  primarily in  the  outside waters,  not                                                               
inside waters.   Sea otters are not moving to  the inside because                                                               
they do  not live  where there is  no kelp.   Sea otters  have no                                                               
blubber  and  do not  float  very  well,  so  they need  to  wrap                                                               
themselves in kelp to keep  afloat.  Higher sea otter populations                                                               
could benefit all the fisheries in the long run.                                                                                
                                                                                                                                
2:18:33 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE MUNOZ asked about the  state of kelp forests today                                                               
and whether  there is any tie-in  with the increase in  sea otter                                                               
population.                                                                                                                     
                                                                                                                                
MR.  HARDCASTLE responded  he  did not  study  that in  Southeast                                                               
Alaska because  he has been  involved in fisheries.   However, in                                                               
marine  biology it  is  common  knowledge that  the  diet of  sea                                                               
otters is urchins  and abalones.  If otters  are eliminated, then                                                               
there  would need  to be  a  massive urchin  harvest industry  to                                                               
maintain the growth of the kelp  forests.  He predicted that such                                                               
a massive industry would require laborers coming from Asia.                                                                     
                                                                                                                                
2:19:47 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  P.  WILSON  read  from page  8  of  the  McDowell                                                               
report,  last paragraph,  first sentence,  which states:   "Other                                                               
studies  tend  to   support  the  notion  that   sea  otters  are                                                               
opportunistic generalists  which adapt  their predation  to their                                                               
environment."   She  said  there  are sea  otters  living in  the                                                               
Wrangell harbor and she sees them  all the time because her house                                                               
is located in the harbor.  She  said sea otters are not like some                                                               
species that  will move  on after  all of  their favored  prey is                                                               
eaten in an  area.  Sea otters are very  adaptable, so once their                                                               
favorite species  is gone  they will go  to their  next favorite,                                                               
and so  on, and do not  move out of  an area until there  is very                                                               
little left.   In the meantime the industries  being talked about                                                               
here are  being affected now and  a big difference is  being seen                                                               
now in these  areas.   She said  she is not saying to  get rid of                                                               
sea otters,  rather the hope is  that Alaska Natives can  do what                                                               
they have  traditionally done  for years  and harvest  the otters                                                               
and make  the skins  into things  that make  money.   Keeping the                                                               
harvest only to Alaska Natives will not result in overharvest.                                                                  
                                                                                                                                
CO-CHAIR FEIGE added  that the point of HJR 26  is advocating for                                                               
a management plan of some kind, not exterminating the species.                                                                  
                                                                                                                                
REPRESENTATIVE P. WILSON agreed.                                                                                                
                                                                                                                                
2:23:20 PM                                                                                                                    
                                                                                                                                
PHIL DOHERTY, Executive Director,  Southeast Alaska Regional Dive                                                               
Fisheries   Association,   disagreed    with   Mr.   Hardcastle's                                                               
statements  pertaining  to  Southeast  Alaska, and  said  it  his                                                               
association's point of  view that when sea  otter populations are                                                               
increasing, millions  and millions  of dollars' worth  of harvest                                                               
potential are  lost.  There  is little doubt, he  continued, that                                                               
where there  were sea otters there  are [now] no sea  urchins, no                                                               
geoduck  clams, and  no sea  cucumbers,  as those  are the  first                                                               
species to  go.  According  to the chart  for sea otter  diet, he                                                               
related, 38 percent is sea  urchins, a harvestable species to his                                                               
association;  10  percent  is  geoducks; and  4  percent  is  sea                                                               
cucumbers.  The problem with that  study, he said, is that it was                                                               
done in  areas that otters had  inhabited for many years,  so the                                                               
sea cucumbers  and sea urchins  were basically gone.   He offered                                                               
his belief that the University of  Alaska study shows that as sea                                                               
otters move into  new areas the first things that  go are the sea                                                               
urchins, sea  cucumbers, and geoducks,  and then the  otters will                                                               
eat more  undesirable food  sources like  hard-shell clams.   Sea                                                               
otters  impact  the  association's fisheries;  for  example,  the                                                               
Alaska Department of Fish & Game  has closed down 14 areas to sea                                                               
cucumber fisheries because of sea otter predation.                                                                              
                                                                                                                                
2:25:56 PM                                                                                                                    
                                                                                                                                
MR. DOHERTY further  pointed out that the  geoduck clam guideline                                                               
harvest levels have  been cut by hundreds of  thousands of pounds                                                               
and next year  another 150,000 pounds of  guideline harvest level                                                               
will  be lost.   In  yesterday's opening,  he continued,  geoduck                                                               
clams fetched $22  a pound according to the  Alaska Department of                                                               
Fish  & Game.   The  department's  latest assessment  of red  sea                                                               
urchins  found  that  there  was five  million  pounds  less  sea                                                               
urchins  in  Southeast Alaskan  than  a  few  years ago  and  the                                                               
department  attributed  that  directly to  sea  otter  predation.                                                               
While  he  realized  that  the  resolution  would  encourage  and                                                               
increase the harvest of sea otters  as an economic benefit to the                                                               
Southeast Alaska Native community, he  said it would probably not                                                               
be  enough to  really  affect the  impacts  on the  association's                                                               
commercial  fishing.   However, he  added, it  is a  step in  the                                                               
right direction and the association fully supports HJR 26.                                                                      
                                                                                                                                
2:26:48 PM                                                                                                                    
                                                                                                                                
MR. DOHERTY  related that over past  two to three years  the City                                                               
of Ketchikan, the  Borough of Ketchikan, the  City of Petersburg,                                                               
the Prince of Wales economic impact  group, the town of Kake, the                                                               
Petersburg  Vessel  Owners   Association,  the  Southeast  Alaska                                                               
Fishermen's  [Alliance],   United  Fishermen  [of   Alaska],  the                                                               
Southeast [Alaska]  Regional Advisory [Council], and  the Central                                                               
Council  Tlingit  Haida have  all  written  resolutions that  sea                                                               
otters  in  Southeast  Alaska  should  be  managed.    Therefore,                                                               
Representative P. Wilson does not stand  alone on this issue.  He                                                               
said that  over the  last three  years he has  met with  the U.S.                                                               
Fish  and  Wildlife  Service numerous  times,  attended  numerous                                                               
meetings of  the Alaska Department of  Fish & Game, and  met with                                                               
other  organizations  and they  all  understand  and realize  the                                                               
impacts  that   sea  otters  are   having  on   Southeast  Alaska                                                               
commercial and subsistence fisheries.   He urged the committee to                                                               
support HJR 26  and to encourage the State of  Alaska to keep the                                                               
pressure on  the U.S. Fish and  Wildlife Service in terms  of the                                                               
Marine  Mammal  Protection Act  and  coming  up with  a  feasible                                                               
management plan for sea otters in Southeast Alaska.                                                                             
                                                                                                                                
2:28:57 PM                                                                                                                    
                                                                                                                                
DENNIS WATSON, Mayor,  City of Craig, said he  disagrees with Mr.                                                               
Hardcastle's comments  and is  testifying in  support of  HJR 26.                                                               
He  said  he is  a  38-year  resident of  Craig  and  has been  a                                                               
commercial fisherman since  his arrival.  For 16  of those years,                                                               
up  until last  year,  he  worked at  a  commercial dive  fishing                                                               
operation harvesting  sea cucumbers.   During his first  15 years                                                               
in this area sea [otters] were a  rare sight and he was amused by                                                               
them.   By  the mid-1980s  large numbers  of otter  became common                                                               
sight  around  southern Southeast  Alaska.    Now  it is  a  rare                                                               
occasion that  a place can be  found where an otter  is not seen.                                                               
He  even sees  them as  far  out as  20 miles  offshore where  he                                                               
trolls.   During his  time in  the dive  fishery, he  spent about                                                               
1,000 hours watching  the bottom of the ocean via  a camera while                                                               
surveying for  cucumbers.  At first  it was amusing to  watch sea                                                               
otters  because they  are quite  efficient  and smart  creatures.                                                               
But after  a while he began  to realize that once  sea otters got                                                               
into an  area they  quickly devastated the  species in  that area                                                               
and then moved  on.  In his experience, the  feeding cycle begins                                                               
with the easy-access shellfish and  sea urchins in the intertidal                                                               
areas; when these  species are depleted the sea  otters move into                                                               
deeper  water  where they  work  on  horse clams,  geoducks,  sea                                                               
cucumbers, and crabs until just  about all the edible species are                                                               
gone; and in the end they eat the starfish.                                                                                     
                                                                                                                                
2:31:13 PM                                                                                                                    
                                                                                                                                
MAYOR WATSON  said that what  is left  after the sea  otters move                                                               
out, as  seen from his  camera, is big  deep holes in  the bottom                                                               
that were dug  by the otters while chasing after  clams and other                                                               
species.  When  the otters move on the only  thing left are those                                                               
big holes - no starfish, no  urchins, no anything.  Many of these                                                               
species  are  important  to   subsistence  users  and  commercial                                                               
harvesters.   This year  the dive  fishery in  the Craig  area is                                                               
projected to have around a  $20 million ex-vessel value, which is                                                               
huge, especially  in small villages  where there is  virtually no                                                               
economy in the fall and winter  months.  Last year in Craig alone                                                               
the geoduck harvest provided a  payroll of $10 million, excluding                                                               
processors, shippers,  and other support  services.  It is  a big                                                               
economy for Craig and  it is at a time of the  year when there is                                                               
nothing else  to do.  Sea  otters do not have  any predators that                                                               
take very  many of them,  so something needs  to be done  to keep                                                               
their numbers  in balance  with the  rest of  the ecology  of the                                                               
region.                                                                                                                         
                                                                                                                                
2:33:21 PM                                                                                                                    
                                                                                                                                
MAYOR  WATSON added  that he  has heard  from the  U.S. Fish  and                                                               
Wildlife  Service that  it is  unknown how  many sea  otters were                                                               
[originally] in  Southeast Alaska,  and there  could be  way more                                                               
now than there  was at any point  in history.  Humans  have had a                                                               
hand  in depleting  sea  otters  and in  bringing  them back,  he                                                               
continued, and man  needs to move in and  manage these creatures.                                                               
He said his  understanding from talking with a man  who did a PhD                                                               
dissertation   on  this   subject,  is   that  sea   otters  were                                                               
reintroduced in this area to  re-create the commercial harvest of                                                               
otters.   The management plan was  going to be to  trap them, but                                                               
the Marine Mammal Protection Act cut  that short.  He offered his                                                               
hope that Alaska  Natives can be allowed to take  more sea otters                                                               
with less of a  problem.  He shared that some  people in his area                                                               
have gotten  into really hot  water over  what was thought  to be                                                               
very, very  minor violations.   His community  would like  to see                                                               
this cleaned up and would like to see a better management plan.                                                                 
                                                                                                                                
REPRESENTATIVE GARDNER  inquired what  a natural predator  of sea                                                               
otters is, aside from man.                                                                                                      
                                                                                                                                
MAYOR WATSON replied that up  north killer whales really like sea                                                               
otters, but the killer whales in his area are fish eaters.                                                                      
                                                                                                                                
2:35:29 PM                                                                                                                    
                                                                                                                                
JAMES ANDERSON explained that sea  otters are really rich because                                                               
they eat  so much shellfish and  are inedible no matter  how they                                                               
are cooked,  which is  why Native people  have never  eaten them.                                                               
He jokingly  suggested doing  studies on what  could be  made for                                                               
dog food.   He maintained that  there will not be  a dive fishery                                                               
if sea  otters continue  as they  are.  When  a group  of several                                                               
hundred sea  otter come into  an area,  there is nothing  left on                                                               
the bottom once  they are done, even the  starfish cannot survive                                                               
and nothing is able to  reproduce.  Regarding what Alaska Natives                                                               
can and  cannot do with sea  otters boils down to  entrapment, he                                                               
said.  For  example, a man he works with  was talked into selling                                                               
hides to an undercover agent.                                                                                                   
                                                                                                                                
MR. ANDERSON  noted that years  ago Alaska Natives  killed things                                                               
with a  stick, but as time  went on the methods  changed.  Native                                                               
lives  are always  changing all  the time,  he said,  and so  are                                                               
Native  traditions  and  artwork  and this  change  needs  to  be                                                               
considered.   The restrictions  need to be  lightened up  for the                                                               
Natives so they can work with the  sea otters.  After a sea otter                                                               
is shot, trying to  figure out how to legally get  from a skin to                                                               
a product to sell without  getting into trouble almost requires a                                                               
college degree, and this problem needs  to be addressed.  He said                                                               
he would  like to start a  tannery in Craig but  has had problems                                                               
getting grants.   If the workers  had to be Native,  he could put                                                               
Native families to  work on Prince of Wales where  there is a lot                                                               
of sea otter  that would last a  long time if managed  right.  He                                                               
urged that  the issue be studied  and that there be  a lightening                                                               
up for people to use the resource.                                                                                              
                                                                                                                                
REPRESENTATIVE DICK agreed with  Mr. Anderson that Native culture                                                               
is always evolving.  He said  there is an image of Native culture                                                               
as  being  fixed  in  time  like  a  snapshot,  when  in  reality                                                               
throughout millennia it has been a movie.                                                                                       
                                                                                                                                
2:40:25 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE kept public testimony open and held over HJR 26.                                                                 
                                                                                                                                
MR.  ANDERSON added  that he  would like  to see  his community's                                                               
dive fishery continue on.   As a teenager he was  able to pick up                                                               
abalone on the  beach, but he has  not had an abalone  in over 20                                                               
years  between divers  and sea  otters.   However, if  things are                                                               
managed right, everyone  could have some of it.   He said he does                                                               
not want the sea otters decimated, just managed.                                                                                
                                                                                                                                
         HB 276-OIL/GAS PRODUCTION TAX CREDITS: NENANA                                                                      
                                                                                                                                
2:41:32 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  announced that the  next order of  business would                                                               
be HOUSE  BILL NO. 276,  "An Act  providing for a  credit against                                                               
the oil  and gas  production tax for  costs incurred  in drilling                                                               
certain  oil  or natural  gas  exploration  wells in  the  Nenana                                                               
Basin."    [Before the  committee  was  Version M,  the  proposed                                                               
committee substitute (CS)  labeled 27-LS1193\M, Bullock, 1/18/12,                                                               
adopted on 1/30/12.]                                                                                                            
                                                                                                                                
CO-CHAIR  FEIGE said  Mr. Bill  Barron participated  in a  recent                                                               
discussion between  the co-chairs  and their staff  regarding the                                                               
issues  around oil  and gas  exploration  credits and  incentives                                                               
associated with  HB 276  and that Mr.  Barron will  be addressing                                                               
the committee.   Co-Chair Feige explained that  the proposed bill                                                               
would put forward some Cook  Inlet-style credits by incentivizing                                                               
the  first, second,  and  third exploration  drill  holes in  the                                                               
Nenana  Basin.   At  the  same time,  there  is  the question  of                                                               
whether  other exploration  incentives should  be considered  and                                                               
whether this bill  could serve as a template for  other basins in                                                               
addition to the Nenana Basin.                                                                                                   
                                                                                                                                
2:43:19 PM                                                                                                                    
                                                                                                                                
WILLIAM C.  BARRON, Director, Division  of Oil &  Gas, Department                                                               
of  Natural  Resources,  stated  that  providing  incentives  for                                                               
exploration in remote  areas is probably something  that needs to                                                               
be considered very strongly.   Currently, only a handful of areas                                                               
in the  state have  had much  of any  exploration and  even fewer                                                               
have had  development.  He  said that part of  the aforementioned                                                               
discussion  was  about  the   process  of  exploration  licenses,                                                               
leases, and units.                                                                                                              
                                                                                                                                
MR. BARRON  explained that for the  areas of the state  and state                                                               
lands  that are  not part  of the  existing area-wide  lease sale                                                               
program,  there  is  the  opportunity  to  establish  exploration                                                               
licenses.   If a party  or parties want  to explore in  a certain                                                               
area, they  can come to the  state and nominate the  land and the                                                               
area  for that  license.   The state  would then  conduct a  best                                                               
interest  finding (BIF)  for  that area,  which  takes about  two                                                               
years.  Upon completion of that  finding, the state would open up                                                               
that  area for  a  competitive bid  process  for its  exploration                                                               
license  term.   The license  is granted  on a  dollar commitment                                                               
rather  than a  work  commitment.   The term  of  the license  is                                                               
typically 10  years. During that  timeframe the party  or parties                                                               
awarded the  license are required  to expend 25 percent  of their                                                               
commitment within  the first four  years, but have  the remainder                                                               
of the term to spend the rest of  their money.  At the end of the                                                               
license term, the  land or any portion of the  land that was part                                                               
of the  license can be extended  into a lease, at  which time the                                                               
state would gain $3 per acre  lease fees for the designated area.                                                               
The five-  to ten-year  term of the  lease is  negotiated between                                                               
the state and  the party or parties, and is  typically ten years.                                                               
During  that   timeframe  the  parties   are  encouraged   to  do                                                               
additional  exploration work,  driving  the  property closer  and                                                               
closer toward development and production.                                                                                       
                                                                                                                                
2:46:35 PM                                                                                                                    
                                                                                                                                
MR.  BARRON addressed  what  happens  if there  is  a failure  at                                                               
either the license period or  the lease period, a failure meaning                                                               
that nothing  is found  or nothing worth  continuing the  work is                                                               
found.   On the license  side, the  property is just  returned to                                                               
the state.  On  the lease side, if work is  not done the property                                                               
is returned to the  state after the lease period.   If there is a                                                               
success - someone drills a  discovery well and proves hydrocarbon                                                               
and proves  closure -  a unit  is then formed,  which is  done in                                                               
conjunction  with  the  Department of  Natural  Resources  (DNR).                                                               
Forming  a  unit  secures  the   land  for  an  additional  term,                                                               
typically  five  years,  unless the  property  is  developed  and                                                               
producing  and  then  it  is  on until  the  property  no  longer                                                               
produces hydrocarbon.   He said the reason he wanted  to make the                                                               
distinctions between a  license, a lease, and a  unit, is because                                                               
there  are very  definite timeframes,  processes, and  procedures                                                               
that the state follows for  everyone's protection in terms of the                                                               
property, the land, and the resource development.                                                                               
                                                                                                                                
MR. BARRON, regarding the proposed  language he has seen to date,                                                               
said he  thinks that the credits  need to be for  state lands and                                                               
probably for  Native land as well.   Federal property is  a whole                                                               
different issue.  He maintained  that properties for this type of                                                               
tax credit  should exclude  the lands that  are currently  in the                                                               
area-wide  lease sale  because those  areas already  have a  very                                                               
robust process,  credits, tax  programs, and so  forth.   He said                                                               
his understanding of  HB 276 is that it is  intended to encourage                                                               
exploration  activities  in areas  that  have  never really  been                                                               
explored before.                                                                                                                
                                                                                                                                
2:49:16 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE,  in regard to including  Native corporation lands                                                               
along  with state  lands, asked  how Alaska  Mental Health  Trust                                                               
lands and private mineral holdings should be handled.                                                                           
                                                                                                                                
MR. BARRON replied  he would have to give that  more thought.  In                                                               
concept, they could  be rolled in in the same  manner.  There are                                                               
some  subtleties relative  to Native  land,  he added.   At  this                                                               
juncture there  would need  to be some  very clear  definition of                                                               
the acquisition  of information  and data  and sharing  that data                                                               
either  to the  state or  publicly.   Right now  that is  not the                                                               
typical format  for Native land exploration;  that information is                                                               
typically not  made public.  So,  that would have to  be adjusted                                                               
in some manner if the intent  is to encourage exploration and the                                                               
intent is  for the state  to gain data  and then share  that data                                                               
with other parties.                                                                                                             
                                                                                                                                
2:50:20 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  inquired what an  appropriate timeframe  would be                                                               
for release of that data  when moving from an exploration license                                                               
to a lease.                                                                                                                     
                                                                                                                                
MR. BARRON said that in a  license a single group has exclusivity                                                               
for 10  years.  Having  that data  made available before  then is                                                               
really of no  value to anybody, unless for the  securing of those                                                               
credits  the party  agrees that  the license  term be  shortened.                                                               
For example,  if the statute  reads that  to be eligible  for the                                                               
credit  seismic data  is released  to the  public in  four years,                                                               
then the license term should  also be truncated along those lines                                                               
for the  reason being that  people would want  to be able  to use                                                               
that  data to  encourage more  exploration.   If  the license  is                                                               
truncated,  then  there needs  to  be  an immediate  move  toward                                                               
leasing of  that area for  the protection  of the party  that did                                                               
the  work.   There  needs  to  be  a  strike of  balance  between                                                               
releasing the data and ensuring  that the parties that have taken                                                               
a risk are  also balanced with their ability to  retain rights to                                                               
do more exploration during the leasing program.                                                                                 
                                                                                                                                
CO-CHAIR  FEIGE understood  Mr. Barron  to  be saying  that if  a                                                               
party is given  four years for an exploration  license, then that                                                               
party should  have first rights  on leases before  the expiration                                                               
and before the data is made public.                                                                                             
                                                                                                                                
MR. BARRON answered that that would be one way to look at it.                                                                   
                                                                                                                                
2:52:36 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SEATON recollected  that in testimony the  other day the                                                               
party with  the license said that  it did not mind  releasing the                                                               
data early  because it  had the  license.   He asked  whether Mr.                                                               
Barron has a different position.                                                                                                
                                                                                                                                
MR. BARRON  replied not  necessarily.  The  party that  made that                                                               
claim  might  have that  opinion;  another  party might  have  an                                                               
issue.     He  said   he  does  not   have  a   counter  opinion.                                                               
Intuitively, if  a party has  a 10-year license and  that license                                                               
is then  rolled to a lease,  at which time the  party has another                                                               
10 years,  releasing the  data probably does  no harm.   However,                                                               
there  is  the question  that  if  there  are areas  within  that                                                               
general area where seismic data  is secured by one party, another                                                               
party  might interpret  that data  differently  or see  something                                                               
that the first party  did not see or understand.   So, there is a                                                               
balance  in  terms of  when  the  data  is  made public  and  the                                                               
unintended consequences to a player that strode up first.                                                                       
                                                                                                                                
CO-CHAIR SEATON commented that the  state is heavily investing in                                                               
that project because  it wants to get development  and that might                                                               
help get  development that is  outside of the leased  or licensed                                                               
area.  It would be a choice  that the party applying to the state                                                               
for the credit could make.                                                                                                      
                                                                                                                                
MR. BARRON agreed that that would be their choice.                                                                              
                                                                                                                                
2:54:43 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE FOSTER  noted that  the committee is  also looking                                                               
at the possibility of whether a  template could be set up so that                                                               
this  could be  applied to  other  basins in  addition to  Nenana                                                               
Basin.    He  related  that  there  has  been  some  interest  in                                                               
including credits for Kotzebue Basin  and Norton Sound Basin.  He                                                               
related  that Mr.  Bob Swenson  of the  Division of  Geological &                                                               
Geophysical  Surveys  said  that  there  is  nothing  significant                                                               
enough for even  local use and this would mean  having to look to                                                               
offshore.  He asked how far out the federal offshore waters are.                                                                
                                                                                                                                
MR. BARRON responded that state water is up to three miles.                                                                     
                                                                                                                                
REPRESENTATIVE FOSTER requested Mr.  Barron to expand on possible                                                               
options for encouraging exploration in federal waters.                                                                          
                                                                                                                                
MR.  BARRON answered  that the  federal  outer continental  shelf                                                               
(OCS) program is  a program all to  its own and he  would have to                                                               
think about  how to  involve state credits  in a  federal program                                                               
where  there  are not  the  same  mechanisms  for return  of  the                                                               
state's investment.                                                                                                             
                                                                                                                                
2:56:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  MUNOZ  inquired  whether Mr.  Barron  thinks  the                                                               
approach of legislating  one basin at a time is  best or should a                                                               
bill like this be a template.                                                                                                   
                                                                                                                                
MR. BARRON replied  the conundrum is that having a  template is a                                                               
good idea,  but trying  to figure  out where  to target  those in                                                               
specific  areas might  actually be  a deferral  of the  activity.                                                               
Even though there are some  reasonably good ideas for guiding the                                                               
state in  terms of  where those  areas should  be, having  it one                                                               
step at  a time might  actually encourage the  exploration rather                                                               
than  delay it,  whereas  it  is delayed  because  it  had to  be                                                               
thought about too  much.  Areas that are known  might be included                                                               
early and as more is learned programs could be added.                                                                           
                                                                                                                                
2:57:59 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE presented a  hypothetical example of incentivizing                                                               
a seismic job where something  promising is found, an exploratory                                                               
well is then  drilled, and then another to delineate  a find, and                                                               
something is  found that is  potentially developable.   The party                                                               
goes through the process of  wells, facilities, transportation of                                                               
the product to market and now the  party is making money.  By way                                                               
of  subsidization the  state has  invested  a significant  dollar                                                               
amount at this  point.  He asked  whether it would be  seen as an                                                               
incentive or  disincentive that the  party taking the  credits is                                                               
obligated  to  pay  back  a  certain  amount  until  the  state's                                                               
investment is paid back.                                                                                                        
                                                                                                                                
MR.  BARRON  responded  that  the  payback  requirement  is  very                                                               
typical of what is  in the Cook Inlet sale.  He  said he does not                                                               
know  that he  would make  any adjustment.   In  philosophy, what                                                               
[the committee] is  trying do is reasonable, just  as the current                                                               
Cook Inlet bill is reasonable in asking for that return.                                                                        
                                                                                                                                
CO-CHAIR FEIGE inquired whether, in  addition to the jack-up rig,                                                               
there  are other  payback  requirements in  other  parts of  that                                                               
particular body of law.                                                                                                         
                                                                                                                                
MR. BARRON  said not that he  recalls, but he would  defer to the                                                               
Department of Revenue to provide a more clear response.                                                                         
                                                                                                                                
3:00:19 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE, at  the request of Co-Chair  Seaton, related that                                                               
the co-chairs have discussed that  these projects are essentially                                                               
broken   into   phases:   data  collection,   exploratory   well,                                                               
production,  and  commercialization.     As  a  prerequisite  for                                                               
receiving a  state subsidy the  co-chairs feel it  is appropriate                                                               
in between  each of  these phases for  the Department  of Natural                                                               
Resources and all  its divisions to have some say  as a check and                                                               
balance,  rather  than  rash  commercialization  utilizing  state                                                               
money.   He  asked whether  Mr. Barron  feels the  department can                                                               
handle that  and has  the expertise  to handle  that or  would it                                                               
need to be  contracted out.  He further asked  whether Mr. Barron                                                               
thinks that that would be an appropriate mechanism.                                                                             
                                                                                                                                
MR.  BARRON  replied  that  right now  he  will  not  necessarily                                                               
address  the manpower  requirements  and  whether the  department                                                               
would do  that in-house or  contract it out.   He said  he thinks                                                               
that  having  that  pre-qualification  meeting  and  setting  the                                                               
standards of location  and direction and goals  and objectives is                                                               
very critical  in this  process.   It is  very important  for the                                                               
state, if it  is going to be issuing these  credits, to have that                                                               
discussion up front  and early and everybody agree  with what the                                                               
targets are.                                                                                                                    
                                                                                                                                
[HB 276 was held over.]                                                                                                         
                                                                                                                                
3:02:44 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 3:03 p.m.                                                                 

Document Name Date/Time Subjects
CSHJR26 Sea Otter Management.pdf HRES 2/3/2012 1:00:00 PM
HJR 26 Explanation of Changes.pdf HRES 2/3/2012 1:00:00 PM
HJR 26 Sponsor Statement.pdf HRES 2/3/2012 1:00:00 PM
HJR026.pdf HRES 2/3/2012 1:00:00 PM
HJR 26 1994 Conservation Plan for Sea Otter.pdf HRES 2/3/2012 1:00:00 PM
HJR 26 Combined Effort Study SE 2010.pdf HRES 2/3/2012 1:00:00 PM
HJR 26 Support Documents.pdf HRES 2/3/2012 1:00:00 PM
HJR 26 Welch News Story.pdf HRES 2/3/2012 1:00:00 PM
HJR26 1-26-12.pdf HRES 2/3/2012 1:00:00 PM
McDowell Group - Sea Otter Impacts 2011 (HJR 26).pdf HRES 2/3/2012 1:00:00 PM
CSHJR26 Sea Otter Management.pdf HRES 2/3/2012 1:00:00 PM
HRES HJR 26 Additional Public Comments 2.3.12.pdf HRES 2/3/2012 1:00:00 PM