Legislature(2013 - 2014)BARNES 124

04/06/2014 01:00 PM RESOURCES


Download Mp3. <- Right click and save file as

Audio Topic
01:07:21 PM Start
01:07:29 PM SB138
03:35:52 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Recessed from 4/5/14 --
+= SB 138 GAS PIPELINE; AGDC; OIL & GAS PROD. TAX TELECONFERENCED
Heard & Held
-- Testimony <Invitation Only> --
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
               HOUSE RESOURCES STANDING COMMITTEE                                                                             
                         April 6, 2014                                                                                          
                           1:07 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Eric Feige, Co-Chair                                                                                             
Representative Dan Saddler, Co-Chair                                                                                            
Representative Peggy Wilson, Vice Chair                                                                                         
Representative Mike Hawker                                                                                                      
Representative Kurt Olson                                                                                                       
Representative Paul Seaton                                                                                                      
Representative Scott Kawasaki                                                                                                   
Representative Geran Tarr                                                                                                       
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Craig Johnson                                                                                                    
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
COMMITTEE SUBSTITUTE FOR SENATE BILL NO. 138(FIN) AM                                                                            
"An  Act relating  to the  purposes,  powers, and  duties of  the                                                               
Alaska Gasline  Development Corporation; relating to  an in-state                                                               
natural gas  pipeline, an Alaska  liquefied natural  gas project,                                                               
and  associated   funds;  requiring  state  agencies   and  other                                                               
entities to expedite  reviews and actions related  to natural gas                                                               
pipelines and  projects; relating  to the authorities  and duties                                                               
of  the commissioner  of natural  resources relating  to a  North                                                               
Slope natural gas  project, oil and gas and gas  only leases, and                                                               
royalty gas  and other  gas received by  the state  including gas                                                               
received as  payment for the  production tax on gas;  relating to                                                               
the tax on oil and gas  production, on oil production, and on gas                                                               
production;  relating  to  the  duties  of  the  commissioner  of                                                               
revenue relating  to a  North Slope natural  gas project  and gas                                                               
received   as  payment   for   tax;   relating  to   confidential                                                               
information and  public record status of  information provided to                                                               
or in the custody of the  Department of Natural Resources and the                                                               
Department of  Revenue; relating to apportionment  factors of the                                                               
Alaska  Net Income  Tax  Act; amending  the  definition of  gross                                                               
value at  the 'point of production'  for gas for purposes  of the                                                               
oil  and  gas production  tax;  clarifying  that the  exploration                                                               
incentive credit, the  oil or gas producer  education credit, and                                                               
the film production  tax credit may not be taken  against the gas                                                               
production tax paid  in gas; relating to the oil  or gas producer                                                               
education  credit;  requesting  the   governor  to  establish  an                                                               
interim  advisory  board  to advise  the  governor  on  municipal                                                               
involvement in  a North  Slope natural  gas project;  relating to                                                               
the  development of  a plan  by the  Alaska Energy  Authority for                                                               
developing infrastructure  to deliver affordable energy  to areas                                                               
of the  state that will not  have direct access to  a North Slope                                                               
natural gas  pipeline and  a recommendation  of a  funding source                                                               
for  energy infrastructure  development; establishing  the Alaska                                                               
affordable energy fund; requiring  the commissioner of revenue to                                                               
develop  a  plan  and  suggest  legislation  for  municipalities,                                                               
regional  corporations, and  residents  of the  state to  acquire                                                               
ownership  interests  in  a  North  Slope  natural  gas  pipeline                                                               
project;  making  conforming  amendments; and  providing  for  an                                                               
effective date."                                                                                                                
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 138                                                                                                                  
SHORT TITLE: GAS PIPELINE; AGDC; OIL & GAS PROD. TAX                                                                            
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
                                                                                                                                
01/24/14       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/24/14       (S)       RES, FIN                                                                                               
02/07/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/07/14       (S)       Heard & Held                                                                                           
02/07/14       (S)       MINUTE(RES)                                                                                            
02/10/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/10/14       (S)       Heard & Held                                                                                           
02/10/14       (S)       MINUTE(RES)                                                                                            
02/12/14       (S)       RES WAIVED PUBLIC HEARING NOTICE, RULE                                                                 
                         23                                                                                                     
02/12/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/12/14       (S)       Heard & Held                                                                                           
02/12/14       (S)       MINUTE(RES)                                                                                            
02/13/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/13/14       (S)       Heard & Held                                                                                           
02/13/14       (S)       MINUTE(RES)                                                                                            
02/14/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/14/14       (S)       Heard & Held                                                                                           
02/14/14       (S)       MINUTE(RES)                                                                                            
02/19/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/19/14       (S)       Heard & Held                                                                                           
02/19/14       (S)       MINUTE(RES)                                                                                            
02/20/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/20/14       (S)       Heard & Held                                                                                           
02/20/14       (S)       MINUTE(RES)                                                                                            
02/21/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/21/14       (S)       Heard & Held                                                                                           
02/21/14       (S)       MINUTE(RES)                                                                                            
02/21/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/21/14       (S)       Heard & Held                                                                                           
02/21/14       (S)       MINUTE(RES)                                                                                            
02/24/14       (S)       RES RPT CS  2DP 4NR 1AM   NEW TITLE                                                                    
02/24/14       (S)       DP: GIESSEL, MCGUIRE                                                                                   
02/24/14       (S)       NR:     FRENCH,    MICCICHE,     BISHOP,                                                               
                         FAIRCLOUGH                                                                                             
02/24/14       (S)       AM: DYSON                                                                                              
02/24/14       (S)       RES AT 8:00 AM BUTROVICH 205                                                                           
02/24/14       (S)       -- MEETING CANCELED --                                                                                 
02/24/14       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
02/24/14       (S)       Moved CSSB 138(RES) Out of Committee                                                                   
02/24/14       (S)       MINUTE(RES)                                                                                            
02/25/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/25/14       (S)       Heard & Held                                                                                           
02/25/14       (S)       MINUTE(FIN)                                                                                            
02/25/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
02/25/14       (S)       Heard & Held                                                                                           
02/25/14       (S)       MINUTE(FIN)                                                                                            
02/26/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/26/14       (S)       Heard & Held                                                                                           
02/26/14       (S)       MINUTE(FIN)                                                                                            
02/27/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/27/14       (S)       Heard & Held                                                                                           
02/27/14       (S)       MINUTE(FIN)                                                                                            
02/28/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
02/28/14       (S)       Heard & Held                                                                                           
02/28/14       (S)       MINUTE(FIN)                                                                                            
03/03/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/03/14       (S)       Heard & Held                                                                                           
03/03/14       (S)       MINUTE(FIN)                                                                                            
03/04/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/04/14       (S)       Heard & Held                                                                                           
03/04/14       (S)       MINUTE(FIN)                                                                                            
03/05/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/05/14       (S)       Heard & Held                                                                                           
03/05/14       (S)       MINUTE(FIN)                                                                                            
03/05/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
03/05/14       (S)       Scheduled But Not Heard                                                                                
03/06/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/06/14       (S)       Heard & Held                                                                                           
03/06/14       (S)       MINUTE(FIN)                                                                                            
03/07/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/07/14       (S)       -- MEETING CANCELED --                                                                                 
03/10/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/10/14       (S)       Heard & Held                                                                                           
03/10/14       (S)       MINUTE(FIN)                                                                                            
03/10/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
03/10/14       (S)       Heard & Held                                                                                           
03/10/14       (S)       MINUTE(FIN)                                                                                            
03/11/14       (S)       FIN AT 5:00 PM SENATE FINANCE 532                                                                      
03/11/14       (S)       Heard & Held                                                                                           
03/11/14       (S)       MINUTE(FIN)                                                                                            
03/12/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/12/14       (H)       -- MEETING CANCELED --                                                                                 
03/14/14       (S)       FIN RPT CS  6DP 1AM  NEW TITLE                                                                         
03/14/14       (S)       LETTER OF INTENT WITH FINANCE REPORT                                                                   
03/14/14       (S)       DP: KELLY, MEYER, DUNLEAVY, FAIRCLOUGH,                                                                
                        BISHOP, HOFFMAN                                                                                         
03/14/14       (S)       AM: OLSON                                                                                              
03/14/14       (S)       FIN AT 9:00 AM SENATE FINANCE 532                                                                      
03/14/14       (S)       Moved CSSB 138(FIN) Out of Committee                                                                   
03/14/14       (S)       MINUTE(FIN)                                                                                            
03/14/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/14/14       (H)       <Pending Referral>                                                                                     
03/17/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/17/14       (H)       <Pending Referral>                                                                                     
03/18/14       (S)       TRANSMITTED TO (H)                                                                                     
03/18/14       (S)       VERSION: CSSB 138(FIN) AM                                                                              
03/19/14       (H)       READ THE FIRST TIME - REFERRALS                                                                        
03/19/14       (H)       RES, L&C, FIN                                                                                          
03/19/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/19/14       (H)       Heard & Held                                                                                           
03/19/14       (H)       MINUTE(RES)                                                                                            
03/21/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/21/14       (H)       Heard & Held                                                                                           
03/21/14       (H)       MINUTE(RES)                                                                                            
03/24/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/24/14       (H)       Heard & Held                                                                                           
03/24/14       (H)       MINUTE(RES)                                                                                            
03/25/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
03/25/14       (H)       Heard & Held                                                                                           
03/25/14       (H)       MINUTE(RES)                                                                                            
03/26/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/26/14       (H)       Heard & Held                                                                                           
03/26/14       (H)       MINUTE(RES)                                                                                            
03/27/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
03/27/14       (H)       Heard & Held                                                                                           
03/27/14       (H)       MINUTE(RES)                                                                                            
03/28/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/28/14       (H)       Heard & Held                                                                                           
03/28/14       (H)       MINUTE(RES)                                                                                            
03/31/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
03/31/14       (H)       Heard & Held                                                                                           
03/31/14       (H)       MINUTE(RES)                                                                                            
04/01/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
04/01/14       (H)       Heard & Held                                                                                           
04/01/14       (H)       MINUTE(RES)                                                                                            
04/02/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/02/14       (H)       Heard & Held                                                                                           
04/02/14       (H)       MINUTE(RES)                                                                                            
04/03/14       (H)       RES AT 4:30 PM BARNES 124                                                                              
04/03/14       (H)       Heard & Held                                                                                           
04/03/14       (H)       MINUTE(RES)                                                                                            
04/04/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
04/04/14       (H)       Heard & Held                                                                                           
04/04/14       (H)       MINUTE(RES)                                                                                            
04/05/14       (H)       RES AT 10:00 AM BARNES 124                                                                             
04/05/14       (H)       Heard & Held                                                                                           
04/05/14       (H)       MINUTE(RES)                                                                                            
04/06/14       (H)       RES AT 1:00 PM BARNES 124                                                                              
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
JOE BALASH, Commissioner                                                                                                        
Department of Natural Resources (DNR)                                                                                           
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on CSSB 138(FIN) am,                                                                  
answered questions related to proposed amendments.                                                                              
                                                                                                                                
DAN FAUSKE, President                                                                                                           
Executive Team                                                                                                                  
Alaska Gasline Development Corporation (AGDC)                                                                                   
Department of Commerce, Community & Economic Development (DCCED)                                                                
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:  During the hearing on CSSB 138(FIN) am,                                                                  
answered questions related to proposed amendments.                                                                              
                                                                                                                                
MICHAEL PAWLOWSKI, Deputy Commissioner                                                                                          
Office of the Commissioner                                                                                                      
Department of Revenue (DOR)                                                                                                     
POSITION STATEMENT:  During the hearing on CSSB 138(FIN) am,                                                                  
answered questions related to proposed amendments.                                                                              
                                                                                                                                
DONALD BULLOCK JR., Attorney                                                                                                    
Legislative Legal Counsel                                                                                                       
Legislative Legal and Research Services                                                                                         
Legislative Affairs Agency                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   During the  hearing on  CSSB 138(FIN)  am,                                                             
answered questions related to proposed amendments.                                                                              
                                                                                                                                
CHRISTOPHER POAG, Assistant Attorney General                                                                                    
Labor and State Affairs Section                                                                                                 
Civil Division (Juneau)                                                                                                         
Department of Law (DOL)                                                                                                         
Juneau, Alaska                                                                                                                  
POSITION  STATEMENT:   During the  hearing on  CSSB 138(FIN)  am,                                                             
answered questions related to proposed amendments.                                                                              
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:07:21 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  ERIC   FEIGE  called   the  House   Resources  Standing                                                             
Committee meeting  back to  order at  1:07 p.m.   Representatives                                                               
Hawker, Olson, Seaton, Saddler,  Kawasaki, and Feige were present                                                               
at the  call back to order.   Representatives Tarr and  P. Wilson                                                               
arrived  as  the meeting  was  in  progress.   [The  meeting  was                                                               
previously recessed at 4:44 p.m. on April 5, 2014.]                                                                             
                                                                                                                                
         SB 138-GAS PIPELINE; AGDC; OIL & GAS PROD. TAX                                                                     
                                                                                                                                
1:07:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  announced that the  only order of business  is CS                                                               
FOR  SENATE  BILL  NO.  138(FIN)  am, "An  Act  relating  to  the                                                               
purposes, powers,  and duties of  the Alaska  Gasline Development                                                               
Corporation;  relating to  an in-state  natural gas  pipeline, an                                                               
Alaska  liquefied  natural  gas project,  and  associated  funds;                                                               
requiring state  agencies and other entities  to expedite reviews                                                               
and  actions  related  to natural  gas  pipelines  and  projects;                                                               
relating to  the authorities  and duties  of the  commissioner of                                                               
natural resources relating to a  North Slope natural gas project,                                                               
oil and  gas and gas only  leases, and royalty gas  and other gas                                                               
received by the  state including gas received as  payment for the                                                               
production  tax on  gas;  relating  to the  tax  on  oil and  gas                                                               
production, on  oil production, and  on gas  production; relating                                                               
to the duties of the commissioner  of revenue relating to a North                                                               
Slope natural  gas project and  gas received as payment  for tax;                                                               
relating to confidential information  and public record status of                                                               
information provided  to or in  the custody of the  Department of                                                               
Natural  Resources and  the Department  of  Revenue; relating  to                                                               
apportionment factors of the Alaska  Net Income Tax Act; amending                                                               
the definition  of gross value  at the 'point of  production' for                                                               
gas for  purposes of the  oil and gas production  tax; clarifying                                                               
that the  exploration incentive credit,  the oil or  gas producer                                                               
education credit, and  the film production tax credit  may not be                                                               
taken against  the gas  production tax paid  in gas;  relating to                                                               
the  oil  or  gas  producer   education  credit;  requesting  the                                                               
governor to  establish an  interim advisory  board to  advise the                                                               
governor on  municipal involvement in  a North Slope  natural gas                                                               
project;  relating to  the development  of a  plan by  the Alaska                                                               
Energy  Authority   for  developing  infrastructure   to  deliver                                                               
affordable  energy to  areas  of  the state  that  will not  have                                                               
direct  access  to a  North  Slope  natural  gas pipeline  and  a                                                               
recommendation  of a  funding  source  for energy  infrastructure                                                               
development;  establishing  the  Alaska affordable  energy  fund;                                                               
requiring  the commissioner  of  revenue to  develop  a plan  and                                                               
suggest  legislation for  municipalities, regional  corporations,                                                               
and residents  of the state  to acquire ownership interests  in a                                                               
North  Slope  natural  gas pipeline  project;  making  conforming                                                               
amendments; and providing for an effective date."                                                                               
                                                                                                                                
CO-CHAIR FEIGE noted the committee  would resume consideration of                                                               
amendments to CSSB 138(FIN) am.                                                                                                 
                                                                                                                                
1:07:49 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  moved to  adopt Amendment 21,  labeled 28-                                                               
GS2896\I.A.56, Bullock, 4/3/14, which read:                                                                                     
                                                                                                                                
     Page 15, following line 30:                                                                                                
     Insert a new bill section to read:                                                                                         
        "*  Sec. 16.  AS 38.05 is  amended by  adding a  new                                                                
     section to read:                                                                                                           
          Sec. 38.05.023. Prohibited agreement or contract                                                                    
     term  relating  to  the  tax   on  oil  production.  An                                                                  
     agreement     or      contract     negotiated     under                                                                    
     AS 38.05.020(b)(11) or  other agreement or  contract in                                                                    
     which the state is a  party and that is associated with                                                                    
     a North  Slope natural  gas project  may not  include a                                                                    
     provision that reduces  or requires future compensation                                                                    
     to  a producer  for changes  in the  tax levied  on oil                                                                    
     production under AS 43.55.011."                                                                                            
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 28"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 -                                                                     
     61"                                                                                                                        
          Insert "16 - 18, 24 - 28, 30, 31, 38, 40, and 56                                                                      
     - 62"                                                                                                                      
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 39"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
REPRESENTATIVE SADDLER objected.                                                                                                
                                                                                                                                
REPRESENTATIVE SEATON  stated the purpose  of Amendment 21  is to                                                               
address the concerns brought forth  by municipalities that if the                                                               
Alaska  Stranded Gas  Development  Act had  been  passed and  the                                                               
pipeline had  not been  built, the  property tax  structure would                                                               
have been  changed.  Amendment 21  says that the payment  in lieu                                                               
of  taxes (PILT)  being negotiated  will take  effect on  project                                                               
sanction.                                                                                                                       
                                                                                                                                
The committee took an at-ease from 1:09 p.m. to 1:10 p.m.                                                                       
                                                                                                                                
1:10:00 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  said Amendment  21 would separate  oil tax                                                               
revisions  from the  things that  can be  negotiated under  other                                                               
terms by  the administration.   It would take away  any perceived                                                               
authorization  for incorporating  oil tax  fiscal certainty  from                                                               
the   authorization   that   the  legislature   is   giving   the                                                               
administration to  negotiate at this  time that would  be refined                                                               
to gas.  It does that in two  ways.  The tax could not be reduced                                                               
and future  compensation could not  be required in case  a future                                                               
legislature changes the tax on oil.                                                                                             
                                                                                                                                
1:11:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE requested  the administration's  position on  the                                                               
amendment.                                                                                                                      
                                                                                                                                
JOE BALASH, Commissioner, Department  of Natural Resources (DNR),                                                               
stated that although  the department has sympathy  for the intent                                                               
and pursuit of Amendment 21, it  opposes it.  He recollected that                                                               
at a prior  meeting there had been discussion about  how the cost                                                               
for the  state's share of  the gas production  and infrastructure                                                               
is going  to be  carried against oil  revenues, and  he indicated                                                               
that that  is something  the department has  committed to  in the                                                               
HOA.  He stated that while  these future agreements will not take                                                               
on oil taxes  directly, there will be a need  for provisions that                                                               
address  indirect effects  of changes  to  oil in  the future  if                                                               
there is an impact on gas.  He  said one example of that is if 20                                                               
years from now the legislature  decides that a net production tax                                                               
is no longer the  way to go and instead chooses to  go to a gross                                                               
tax, then  upstream costs  would no longer  be recognized  in the                                                               
production tax system.   He questioned what the  parties would do                                                               
in the future if something like  that happened.  For that reason,                                                               
he explained, the  department is concerned that  the language [of                                                               
Amendment  21] would  tie its  hands.   Further, he  said if  the                                                               
production tax rate  were changed up or down  by the legislature,                                                               
the  "knock on"  effect relative  to  gas costs  would have  some                                                               
impact on each of the parties,  including the state.  He said the                                                               
department thinks  having the ability  to address  those what-ifs                                                               
in the agreement is going to be necessary commercially.                                                                         
                                                                                                                                
1:13:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI  asked  whether the  proposed  amendment                                                               
deals solely with the contract  terms related to the LNG proposal                                                               
and AS 38.05.020(b)(11) and not based on any future project.                                                                    
                                                                                                                                
REPRESENTATIVE  SEATON  answered  yes.    He  stated  that  under                                                               
Amendment 21,  the administration  would be allowed  to negotiate                                                               
gas terms, but would not be able  to lower the tax rate on oil or                                                               
- if a future legislature changes the  tax rates on oil - to bind                                                               
the  state to  "take the  treasury and  reimburse for  any amount                                                               
that's  changed on  that."    He added,  "And  this  does say  it                                                               
reduces the tax rates or reduces tax levies."                                                                                   
                                                                                                                                
1:15:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE   questioned  why   the  proposed   amendment  is                                                               
necessary if  the state already  has the authority to  change oil                                                               
taxes and would have to approve the contracts that come back.                                                                   
                                                                                                                                
REPRESENTATIVE SEATON  responded that  if the state  negotiates a                                                               
whole contract  around a reduction in  oil tax or fixing  the oil                                                               
taxes through a  compensation rate for 25 years or  the extent of                                                               
the  contract,  then the  state  will  have  to  come back  to  a                                                               
difficult scenario  of "looking at  a system that  may compromise                                                               
the ability of  the legislature to approve those  contracts."  He                                                               
stated the  purpose of Amendment 21  is to clarify ahead  of time                                                               
that oil  tax rates are  not to be  negotiated in a  gas contract                                                               
and that  future compensation for actions  of future legislatures                                                               
are  not effectively  precluded, and  thus negotiations  could be                                                               
made around terms that the legislature would approve.                                                                           
                                                                                                                                
1:17:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  highlighted the words "reduces  or requires"                                                               
within Amendment  21, and questioned  why the word  "requires" is                                                               
necessary if the primary concern is reduction.                                                                                  
                                                                                                                                
REPRESENTATIVE SEATON  explained there  are two  issues involved.                                                               
The first is  that tax rates could be reduced;  the other is that                                                               
the state  treasury would be  required to  take money out  of the                                                               
treasury and compensate companies for  any increase in costs that                                                               
could occur.                                                                                                                    
                                                                                                                                
1:18:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  offered his understanding that  the stated                                                               
purpose  of  Amendment  21  is  to  prohibit  contractual  fiscal                                                               
certainty.  He opined  that it is not that simple  and there is a                                                               
lot  wrong with  the  language  of the  proposed  amendment.   He                                                               
restated the  language without the future  compensation clause as                                                               
follows:  "agreement or contract in  which the state is a party".                                                               
He said  the state is  not going to  be a party  in a lot  of the                                                               
contracts;   in  some   ways,   an   instrumentality  or   public                                                               
corporation of  the state might be  a party to the  contracts, so                                                               
there is  something there that is  limiting and ill defined.   He                                                               
continued with the  language as follows:   "agreement or contract                                                               
in  which the  state is  a party  and that  is associated  with a                                                               
North Slope natural gas project  may not include a provision that                                                               
reduces" ... "the tax levied on  oil production".  He said he can                                                               
foresee that in the complexity of  all the contracts that will be                                                               
negotiated,  there  may  be a  consequential  effect  of  perhaps                                                               
moving an expense  item into the realm of the  oil production tax                                                               
net regime  that would,  in fact,  reduce the  tax levied  on oil                                                               
production.   He said going to  the gross 13 percent  and the way                                                               
the royalty  agreements will be  written, there could be  a claim                                                               
that "by  cost shifting from  a net tax  on gas  to a net  tax on                                                               
oil, ...  the entire operations  of this legislation  reduces the                                                               
tax levied on  oil production as a result of  its execution."  He                                                               
called this "bad circular logic."                                                                                               
                                                                                                                                
REPRESENTATIVE HAWKER  pointed to  language in Amendment  21 that                                                               
would  require  "a  contract  that  reduces  or  requires  future                                                               
compensation  to  a   producer"  and  said  he   does  not  think                                                               
"compensation" is well-defined or defined  in tax code, and he is                                                               
unsure what  "compensation" is, but questioned  what would happen                                                               
if  there  is  some  sort  of contingent  clause  that  says  "if                                                               
something happens  then the consequence  is this."   He expressed                                                               
concern  over   amendments  that  indicate  the   legislature  is                                                               
thinking it knows with certainty  all the facts and circumstances                                                               
that  will be  encountered  in the  future  of negotiating  these                                                               
complex  arrangements.    Further,   he  expressed  concern  with                                                               
committing things  to words without knowing  the ramifications of                                                               
actually executing  the contracts.  He  recollected that Co-Chair                                                               
Feige had  said that  contracts have  to be  brought back  to the                                                               
legislature for  detailed review, and  with plenty of time  to do                                                               
so.   He opined that that  is the time the  legislature should be                                                               
stepping  into this  role,  not now  by  putting amendments  into                                                               
statute that  "constrain the  ability of  the state  to negotiate                                                               
the  best possible  deals  in executing  a  natural gas  pipeline                                                               
project."                                                                                                                       
                                                                                                                                
1:22:45 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  inquired whether  the Alaska  Gasline Development                                                               
Corporation  (AGDC) has  an  opinion on  how  Amendment 21  would                                                               
affect the corporation.                                                                                                         
                                                                                                                                
DAN   FAUSKE,   President,   Executive   Team,   Alaska   Gasline                                                               
Development   Corporation   (AGDC),   Department   of   Commerce,                                                               
Community & Economic Development (DCCED),  replied he is not sure                                                               
how [Amendment 21] would affect AGDC.                                                                                           
                                                                                                                                
1:23:18 PM                                                                                                                    
                                                                                                                                
MICHAEL   PAWLOWSKI,   Deputy   Commissioner,   Office   of   the                                                               
Commissioner, Department  of Revenue (DOR), stated  that while he                                                               
appreciates  the  sponsor's intent  in  Amendment  21, he  thinks                                                               
Representative Hawker  has brought  up an  important point:   the                                                               
words and how they get interpreted  matter.  He echoed that there                                                               
could be  unintended consequences in  amendments that try  to put                                                               
"sideboards"   in  statute   or   uncodified   law  that   narrow                                                               
development of  agreements that  will already  be coming  back to                                                               
the  legislature for  approval.   In  particular,  he noted  that                                                               
Amendment  21  is  to  a   producer  and  is  limited  solely  to                                                               
production tax.   He said production tax is not  the only way the                                                               
state achieves  value from its  resource development.   Regarding                                                               
durability   and  fiscal   stability,  he   said  he   hopes  the                                                               
legislature continues  to provide  input throughout  the process;                                                               
however,  the agreements  that come  back must  be understood  by                                                               
both  the public  and  the  legislature.   He  opined that  means                                                               
keeping all the  options on the table and  avoiding a specificity                                                               
that may  produce unintended  consequences rather  than promoting                                                               
clarity.   He  stated that  if  the indirect  effects Mr.  Balash                                                               
described  are  necessary in  a  contract,  then they  should  be                                                               
stated up  front for the  public, developed with  the legislature                                                               
over the next  few years, and put forward for  public review.  He                                                               
suggested that  [Amendment 21]  might push  the project  to start                                                               
looking for alternative creative  ways, such as against corporate                                                               
income tax or royalties, and he  stated his preference is to "put                                                               
it  right  out  in  front  and center  for  the  public  and  the                                                               
legislature."                                                                                                                   
                                                                                                                                
REPRESENTATIVE SADDLER maintained his  objection to the motion to                                                               
adopt Amendment 21.                                                                                                             
                                                                                                                                
REPRESENTATIVE SEATON  said the intent of  the proposed amendment                                                               
is not to  micromanage.  He said if the  language of the proposed                                                               
amendment  is  too  specific,  he would  be  willing  to  replace                                                               
Amendment  21  with  a  letter  of  intent  clarifying  that  the                                                               
legislature has  heard the commissioners  say that  the intention                                                               
is not to negotiate oil and that the legislature agrees.                                                                        
                                                                                                                                
1:28:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER emphasized  that a  letter of  intent from                                                               
the  committee  is   not  an  endorsement  of   the  full  House;                                                               
therefore, he said he will not endorse a letter he has not read.                                                                
                                                                                                                                
CO-CHAIR FEIGE told Representative Seaton  he is welcome to craft                                                               
a letter  of intent,  on which  the committee  could then  take a                                                               
vote.                                                                                                                           
                                                                                                                                
REPRESENTATIVE SEATON said  he would never ask anyone  to vote on                                                               
something they had not seen.                                                                                                    
                                                                                                                                
1:29:23 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON withdrew his  motion to adopt Amendment 21.                                                               
He then stated  his intent to draft a letter  of intent and bring                                                               
it back for the committee's review.                                                                                             
                                                                                                                                
1:29:40 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE,  after discussion  with members,  determined that                                                               
amendments   labeled  28-GS2806\I.A.3,   Bullock,  3/31/14;   28-                                                               
GS2806\I.A.55,   Bullock,   4/3/14;  28-GS2806\I.A.61,   Bullock,                                                               
4/3/14;  and  28-GS2806\I.A.66,  Bullock,  4/3/14  would  not  be                                                               
offered at this time.                                                                                                           
                                                                                                                                
The committee took an at-ease from 1:33 pm. to 1:34 p.m.                                                                        
                                                                                                                                
1:34:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI moved to adopt Amendment 22, labeled 28-                                                                
GS2806\I.A.38, Nauman/Bullock, 4/2/14, which read:                                                                              
                                                                                                                                
     Page 25, line 8, following "project":                                                                                  
          Insert "; the commissioner of revenue may not                                                                     
     authorize payments  in lieu of taxes  to a municipality                                                                
     in a  contract negotiated  under this  paragraph unless                                                                
     amounts collected  as payments  in lieu  of taxes  to a                                                                
     municipality  are   not  less   than  the   amount  the                                                                
     municipality  would have  collected under  AS 29.45 and                                                                
     AS 43.56 over  the period of the  agreement between the                                                                
     municipality and  the taxpayer for the  payment in lieu                                                                
     of taxes"                                                                                                              
                                                                                                                                
     Page 26, line 15, following "project":                                                                                     
     Insert  ";   the  commissioner   of  revenue   may  not                                                                    
     authorize payments  in lieu of taxes  to a municipality                                                                    
     in a  contract negotiated  under this  paragraph unless                                                                    
     amounts collected  as payments  in lieu  of taxes  to a                                                                    
     municipality  are   not  less   than  the   amount  the                                                                    
     municipality  would have  collected under  AS 29.45 and                                                                    
     AS 43.56 over  the period of the  agreement between the                                                                    
     municipality and the taxpayer for the payment in lieu                                                                      
     of taxes"                                                                                                                  
                                                                                                                                
REPRESENTATIVE SADDLER objected.                                                                                                
                                                                                                                                
REPRESENTATIVE KAWASAKI prefaced his  explanation of Amendment 22                                                               
by  remarking  that  the  committee  has heard  quite  a  bit  of                                                               
testimony   from  municipalities   across  the   state  and   has                                                               
introduced  intent language  pertaining to  a municipal  advisory                                                               
commission and a  payment in lieu of tax (PILT)  issue.  However,                                                               
he  said he  is  offering  Amendment 22  on  behalf  of those  in                                                               
Fairbanks and  the rest of  Interior Alaska.   He said  under the                                                               
proposed   amendment,  revenues   received  by   the  state   and                                                               
municipalities   over  initial   project  terms   could  not   be                                                               
negotiated  away  and  could  not  be less  than  what  would  be                                                               
collected under current statute.                                                                                                
                                                                                                                                
1:36:39 PM                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI said  the entire advisory commission  process - its                                                               
operations,  documents reviewed,  and recommendations  - will  be                                                               
public.  He  said he sees [Amendment 22]  as potentially limiting                                                               
on that negotiation.   He said as the  governor's advisory board,                                                               
the designated mayors  are a part of that group.   He stated that                                                               
any recommendations to  come forward to change  statute, which is                                                               
what  would need  to  happen for  PILT or  property  tax to  move                                                               
forward, would  be deliberated by  the legislature.   That change                                                               
will  come out  of a  recommendation  of that  group, which  will                                                               
conduct  a public  process.   He  said  at this  time  he is  not                                                               
supportive  of  limiting the  discussion  around  an open  public                                                               
forum.    He said  an  interesting  aspect  of PILTs  and  impact                                                               
payments related  to "the  shapes of the  curves."   He explained                                                               
that  in a  traditional property  tax environment  it starts  off                                                               
high when  the property is  installed and then  depreciation over                                                               
time  reduces  that.    With   time  value  of  money,  he  said,                                                               
consideration may be given to  increasing and escalating payments                                                               
for predictability --  an option that was described  in the Heads                                                               
of  Agreement so  that as  a community  looks out  to the  future                                                               
those increasing  payments over time provide  more predictability                                                               
for their  budgets.  The question  of whether it would  have been                                                               
less  is a  question that  is  very difficult  to determine  when                                                               
things  like the  time value  of  money are  introduced; using  a                                                               
different discount rate  would change that assumption.   A deeper                                                               
problem he  has with  Amendment 22, he  said, is  the implication                                                               
that the  commissioner of DOR could,  through contract, authorize                                                               
a PILT  or a payment in  lieu of taxes.   He said to date  he has                                                               
consistently testified  the department's  belief that  Article 9,                                                               
Sections 3  and 4,  of the  Constitution of  the State  of Alaska                                                               
clearly reserve that power to  the legislature.  Therefore, he is                                                               
uncomfortable with the aforementioned implication.                                                                              
                                                                                                                                
1:39:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER concurred with  Mr. Pawlowski, stating that                                                               
the right to  tax is the sovereign right of  legislators and that                                                               
right cannot be  signed off to the administration  in a contract.                                                               
He said  he thinks [Amendment  22] is  a null and  void proposal.                                                               
He said this sort of amendment  voids the concept of a payment in                                                               
lieu of  taxes (PILT), even  if the legislature chose  to "pursue                                                               
one."  He added, "We're putting  some kind of a measurement under                                                               
there that  would have to  be determined, and that's  this future                                                               
knowledge  of what  taxes  would have  been  collected under  the                                                               
statutes over  the period of the  agreement."  He said  the whole                                                               
point  of  a  PILT  is  to  make  it  easy  on  people  so  those                                                               
calculations, which are  difficult to do with a  huge project, do                                                               
not have to be done.  He said he opposes Amendment 22.                                                                          
                                                                                                                                
1:41:35 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR said  she does not interpret  Amendment 22 as                                                               
taking  away the  authority  of the  legislature  to authorize  a                                                               
contract.   She offered her understanding  that Legislative Legal                                                               
and Research Services did not  bring up any constitutional issues                                                               
when Amendment  22 was  drafted, and  she suggested  someone from                                                               
Legislative Legal and  Research Services could weigh  in on that.                                                               
Regarding  a PILT,  she  said  at some  point  there  will be  an                                                               
agreement  made  as to  the  value,  and  instead of  having  the                                                               
traditional  payment schedule  of larger  payments over  time, as                                                               
Mr.   Pawlowski  mentioned,   [the  payments]   "would  just   be                                                               
equalized."   She  proffered that  under  Amendment 22,  whatever                                                               
stop point of  value and payment schedule is  chosen, the overall                                                               
payments  could  not be  less  than  the  described value.    She                                                               
suggested there  may be two  interpretation of the  language, and                                                               
she questioned whether anyone could address that.                                                                               
                                                                                                                                
CO-CHAIR FEIGE, emphasizing the word  "unless" in the language of                                                               
Amendment 22,  said his  interpretation is  that if  the payments                                                               
are going  to be graded on  what they would receive  by tax, then                                                               
the  commissioner  would be  allowed  to  "authorize that  PILT,"                                                               
which is,  as Representative Hawker  mentioned, not  an authority                                                               
that  the  legislature  necessarily  wants  to  delegate  to  any                                                               
department.                                                                                                                     
                                                                                                                                
REPRESENTATIVE TARR  asked whether anyone from  Legislative Legal                                                               
and Research Services or Department  of Law (DOL) is available on                                                               
line.                                                                                                                           
                                                                                                                                
1:43:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE said there are quite  a bit of unknowns related to                                                               
what  municipalities  will require,  how  they  would want  taxes                                                               
structured, which  is why the governor  issued the administrative                                                               
order to  put that  working group together  to help  collect that                                                               
information,  define  the  problem,  and  recommend  a  potential                                                               
solution.  He  opined that the legislature should  give the group                                                               
time to  report back to  the legislature before its  next regular                                                               
session.   He said he  thinks doing  anything with PILTs  at this                                                               
point is premature.                                                                                                             
                                                                                                                                
REPRESENTATIVE  KAWASAKI  clarified  that Amendment  22  pertains                                                               
solely to the project and  the contracts that would be negotiated                                                               
on  those projects.   He  said  it is  not intended  to give  the                                                               
commissioner the authorization, but  rather that "they don't have                                                               
the  authorization  to create  a  contract  negotiated under  the                                                               
paragraph."   He said  it is  technical amendment  in that  it is                                                               
unknown  what the  taxing authority  of the  municipalities would                                                               
end up costing,  but he opined that language is  needed in SB 138                                                               
to protect municipalities  and their ability to tax.   He said he                                                               
wants the  legislature to make  clear that it  supports municipal                                                               
authority  to  tax  property.    He said  he  does  not  know  if                                                               
Amendment 22 will  achieve that goal, but it is  an attempt to at                                                               
least begin the discussion.                                                                                                     
                                                                                                                                
1:46:14 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON  ventured that "they might  come up with                                                               
something very  unique that's  never been  done before,  but that                                                               
will  do  much better  than  this"  and  she  does not  want  the                                                               
legislature to  prevent any creativity  that could take  place in                                                               
the process.                                                                                                                    
                                                                                                                                
The committee took an at-ease from 1:47 p.m. to 1:48 p.m.                                                                       
                                                                                                                                
1:48:12 PM                                                                                                                    
                                                                                                                                
DONALD   BULLOCK  JR.,   Attorney,  Legislative   Legal  Counsel,                                                               
Legislative  Legal  and  Research Services,  Legislative  Affairs                                                               
Agency, Alaska State Legislature,  in response to Co-Chair Feige,                                                               
explained  that  Article  9,  Section   1,  of  the  constitution                                                               
prohibits  surrendering,  suspending,  or  contracting  away  the                                                               
power to tax,  except as provided in that article.   He said this                                                               
is  an issue  that Legislative  Legal and  Research Services  has                                                               
dealt  with often  in the  past in  terms of  the Alaska  Gasline                                                               
Inducement Act (AGIA),  under which an exemption  was provided to                                                               
producers who  committed during the  first open season.   He said                                                               
the constitution  appears to  prohibit taxing  away the  power of                                                               
taxation.  He concluded as follows:                                                                                             
                                                                                                                                
     So,  in other  words, if  a  payment in  lieu of  taxes                                                                    
     provided that  a tax payer  would pay a  certain amount                                                                    
     over time  rather than allow  the municipality  and the                                                                    
     assembly  each year  to  determine  what the  necessary                                                                    
     mill rate  was for  the municipality,  if that  was the                                                                    
     ...  contract,  it   would  be  unconstitutional  under                                                                    
     Article 9, Section 1.                                                                                                      
                                                                                                                                
1:50:19 PM                                                                                                                    
                                                                                                                                
MR.  BULLOCK,  in  response  to  Representative  Tarr,  said  the                                                               
commissioner  of DOR  administers the  oil and  gas property  tax                                                               
under  AS 43.56  and there  is  a link  between the  department's                                                               
taxation of oil and gas  property with municipalities that impose                                                               
a property tax on the same property.  He continued as follows:                                                                  
                                                                                                                                
     So,  if it  was a  tax  issue and  the commissioner  of                                                                    
     revenue  is  negotiating  something  that  effects  the                                                                    
     municipalities   tax  under   his   power  under   this                                                                    
     particular part of the bill  that's being amended, then                                                                    
     this sets  a limit that if  a payment in lieu  of taxes                                                                    
     survived   a   constitutional   challenge,   that   the                                                                    
     municipality would  not suffer by receiving  less under                                                                    
     a payment in  lieu of taxes agreement  compared to what                                                                    
     they would  anticipate receiving  as mil  rates evolved                                                                    
     and as  property values  changed over  the life  of the                                                                    
     contract.                                                                                                                  
                                                                                                                                
MR. BULLOCK  indicated that over a  period of time, a  payment in                                                               
lieu of  taxes could not be  less than what a  municipality would                                                               
have otherwise received from its property tax.                                                                                  
                                                                                                                                
1:52:20 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON asked for  clarification regarding "may not                                                               
authorize unless".                                                                                                              
                                                                                                                                
MR. BULLUCK  said there  are two  issues at play.   The  first is                                                               
whether  the commissioner  of DOR  can even  enter into  or be  a                                                               
party to  a negotiation over payment  in lieu of taxes.   If that                                                               
survived  a constitutional  challenge,  then the  second part  is                                                               
what the  terms would be  that relate to  the payment in  lieu of                                                               
tax.  He said  the terms are that over all,  that payment in lieu                                                               
of  tax could  not result  in  less revenue  to the  municipality                                                               
compared to  if the municipality  "just taxed it" as  it normally                                                               
would.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  SEATON summarized  that  the  "unless" would  not                                                               
authorize the commissioner to negotiate  the taxes; it just means                                                               
if  the commissioner's  negotiations  are deemed  constitutional,                                                               
then they would have to meet certain requirements.                                                                              
                                                                                                                                
MR. BULLOCK  confirmed that  if the  commissioner was  allowed to                                                               
negotiate  a PILT,  he/she  could not  negotiate  one that  would                                                               
result in  less money.   In response  to a follow-up  comment, he                                                               
stated that  the problem with  Amendment 22  is that it  makes it                                                               
sound as if a PILT is  all right, and the legislature must decide                                                               
whether it wants to take the chance  that a court is not going to                                                               
strike down this type of agreement.                                                                                             
                                                                                                                                
1:54:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  stated that that problem  exists without the                                                               
amendment, so  it is  not the amendment  that is  presenting that                                                               
constitutional  issue.    "It's  the  very  issue  of  suggesting                                                               
negotiating PILT," she surmised.                                                                                                
                                                                                                                                
MR. BULLOCK concurred;  there nothing in the  bill that addresses                                                               
PILT.  The  bill authorizes the negotiation  of certain contracts                                                               
and gives  the power very  generally.   Amendment 22, as  well as                                                               
some  of  the others  the  committee  has been  considering,  are                                                               
putting some  sort of boundaries as  to what the issues  are that                                                               
may  be addressed  in  contract or,  if  an issue  is  part of  a                                                               
contract, what  the legislature's desire  is as to how  the issue                                                               
should be considered.                                                                                                           
                                                                                                                                
1:56:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER [maintained his objection].                                                                              
                                                                                                                                
REPRESENTATIVE KAWASAKI reiterated that  he thinks there needs to                                                               
be  some protections  for property  tax  payers.   He noted  that                                                               
property tax  payers in Fairbanks  pay some of the  highest taxes                                                               
in the  state, and he  said he feels uncomfortable  allowing CSSB                                                               
138(FIN) am to  move forward without some sort  of treatment that                                                               
would ensure taxes are spread equitably across all properties.                                                                  
                                                                                                                                
1:57:25 PM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives Seaton,  Tarr, and                                                               
Kawasaki  voted in  favor of  the motion  to adopt  Amendment 22.                                                               
Representatives  Hawker, Olson,  P.  Wilson,  Saddler, and  Feige                                                               
voted against  it.  Therefore, Amendment  22 failed by a  vote of                                                               
3-5.                                                                                                                            
                                                                                                                                
1:58:54 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR moved to adopt Amendment 23, labeled 28-                                                                    
GS2806\I.A.28, Bullock, 4/2/14, which read:                                                                                     
                                                                                                                                
     Page 15, following line 30:                                                                                                
          Insert a new bill section to read:                                                                                    
        "*  Sec. 16.  AS 38.05 is  amended by  adding a  new                                                                
     section to read:                                                                                                           
          Sec. 38.05.023. Limitation relating to the toll                                                                     
     structure  for transporting  natural gas.  An agreement                                                                  
     or contract  associated with a North  Slope natural gas                                                                    
     project that  provides for  the state  to pay  a person                                                                    
     for   transporting    natural   gas   under    a   firm                                                                    
     transportation  services agreement  may  not include  a                                                                    
     toll structure  that bases a charge  for transportation                                                                    
     on  a  return  on  equity  of  more  than  15  percent,                                                                    
     including any  adjustment to a base  rate determined at                                                                    
     the time of the final investment decision."                                                                                
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 28"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 -                                                                     
     61"                                                                                                                        
          Insert "16 - 18, 24 - 28, 30, 31, 38, 40, and 56                                                                      
     - 62"                                                                                                                      
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 39"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
REPRESENTATIVE SADDLER objected.                                                                                                
                                                                                                                                
REPRESENTATIVE TARR noted Amendment  23 references the Memorandum                                                               
of Understanding  (MOU), Exhibit  C, page  2, Key  Processing and                                                               
Transportation Commercial Terms 6,  [Terms & Conditions 6], which                                                               
relates  to  return on  equity  (ROE)  as  modified by  [Terms  &                                                               
Conditions 8], which is the  rate tracker differential.  She said                                                               
this  subject  came  up  during  discussions  with  Roger  Marks,                                                               
[contract consultant to Legislative  Budget and Audit Committee],                                                               
who talked about  conditions in the market that  could change and                                                               
ensuring "a good  deal" in a relationship with  TransCanada.  She                                                               
said, "Right now they can have  a return on equity of 12 percent,                                                               
which would be  adjusted by the rate tracker  differential."  She                                                               
said the rate tracker differential  is the difference between the                                                               
interest rate  of a 30-year U.S.  Treasury note when the  MOU was                                                               
signed, which  was January  14, 2014,  and at  the time  of final                                                               
investment decision (FID), which she  estimated may be five years                                                               
from now.   She said Amendment 23 would ensure  that in the event                                                               
of  a spike  in interest  rates, TransCanada's  actual return  on                                                               
investment could  not increase by  more than 3 percent  above the                                                               
negotiated  contract  term.   Representative  Tarr  said she  was                                                               
interested  in  the  proposed   amendment  following  Mr.  Marks'                                                               
suggestion that [Alaska's] relationship  with TransCanada is more                                                               
like that of  a bank and [the  state] may be able  to find better                                                               
financing  terms  in  the  market.    She  said,  "So,  this  ...                                                               
maintains  that  relationship, but  just  puts  some ...  of  the                                                               
sidebars in  there."  She related  that in the analysis  seen for                                                               
TransCanada,  the modeling  has been  done at  12 percent  and no                                                               
work has  looked at  what would happen  if interest  rates spiked                                                               
and the  ROE increased.   She added,  "So, this  amendment limits                                                               
that again to the 15 percent."                                                                                                  
                                                                                                                                
2:00:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  HAWKER   observed  that  the  word   "person"  in                                                               
Amendment 23  means a corporate  citizen, and he  questioned what                                                               
would happen if  that person was a "go-it-alone"  entity, such as                                                               
AGDC, and  the state would therefore  be paying itself to  be the                                                               
transporter of the  gas.  He indicated that the  structure of the                                                               
return on  the state's  own equity in  the transportation  of its                                                               
own gas is an unknown quantity:   it could be 2 percent; it could                                                               
be  18  percent ....    He  opined that  those  are  the kind  of                                                               
elements in the deliberations that  the legislature should not be                                                               
constraining at  this point,  and if  the legislature  trusts the                                                               
administration to negotiate contracts and  bring them back to the                                                               
legislature, then it should not  attempt to predict the future by                                                               
telling  the administration  now that  it cannot  make a  certain                                                               
decision.  He said, "This is  where we have killed every pipeline                                                               
project that  has come along to  date."  He stated  opposition to                                                               
Amendment 23.                                                                                                                   
                                                                                                                                
CO-CHAIR FEIGE  remarked that the  legislature has  ultimate veto                                                               
power on the contract when it comes back for legislative review.                                                                
                                                                                                                                
2:02:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SADDLER  offered his  recollection that  there had                                                               
been  some  analysis   of  the  interest  rates   and  return  on                                                               
investment  in the  Black  &  Veatch analysis.    He added,  "So,                                                               
that's entirely  accurate."  He  said he also has  concerns about                                                               
predicting  future economic  and financial  arrangements, and  he                                                               
said [Amendment  23] gets into "the  weeds of the finances."   He                                                               
stated he would not support Amendment 23.                                                                                       
                                                                                                                                
2:03:27 PM                                                                                                                    
                                                                                                                                
MR.  BALASH said  DNR opposes  Amendment  23.   He explained  one                                                               
reason for the opposition is that  it would be in direct conflict                                                               
with  the  terms of  agreement  with  TransCanada and  create  an                                                               
uncertainty for all  parties.  He observed that "this  would be a                                                               
feature  of the  general  law  for such  time  as  it remains  in                                                               
place."   He said  that markets and  conditions change,  which is                                                               
one of  the reasons that  the department  agreed "to rely  on the                                                               
30-year treasury  as a marker  for this rate  tracker mechanism."                                                               
He continued as follows:                                                                                                        
                                                                                                                                
     If those  numbers are escalating ...,  then our returns                                                                    
     on our  various funds and  other wealth will  also rise                                                                    
     in  the  returns  that   they're  achieving,  we  would                                                                    
     expect.   So,  we think  that 15  is just,  frankly, an                                                                    
     arbitrary  number that  may mean  something today,  but                                                                    
     over time may not.                                                                                                         
                                                                                                                                
2:04:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  requested Mr. Balash to  address, within the                                                               
context  of the  proposed  amendment, Mr.  Marks' concerns  about                                                               
whether the  state could  be getting  a better  financing option.                                                               
She directed attention to the  phrase "with a North Slope natural                                                               
gas project", within  Amendment 23, and said she  thinks it would                                                               
be confined "to this particular  project," although "because it's                                                               
specific to  a term of  the MOU with  TransCanada - that  part is                                                               
not referenced here."  She stated  that the intent is "not for it                                                               
to fly outside of this particular instance."                                                                                    
                                                                                                                                
MR. BALASH responded that Representative  Tarr is correct that it                                                               
is related to a North Slope  project that would be subject to the                                                               
agreements  negotiated in  AS  38.05.020(b)(10-11); although,  he                                                               
said  DNR  does not  know  with  certainty  that the  Alaska  LNG                                                               
Project, as  contemplated in the  HOA, is going to  be successful                                                               
and  go forward.   He  said DNR  is optimistic,  but its  view of                                                               
TransCanada's role  in Alaska  differs starkly  from that  of Mr.                                                               
Marks.   He  explained that  DNR does  not see  TransCanada as  a                                                               
bank.   "If  we thought  they were  simply providing  a financial                                                               
service for us,  we could do better  and we would do  better.  We                                                               
can do better with our friends  at the Department of Revenue, for                                                               
crying out loud."                                                                                                               
                                                                                                                                
2:06:48 PM                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI added  that page 20 of CSSB 138(FIN)  am contains a                                                               
broad definition  for a  North Slope  natural gas  project, which                                                               
could be applied  to any project.  He said  it is unknown whether                                                               
the permutations  of the  context of  this amendment  within that                                                               
statute would  be broader.   He said the equity  option agreement                                                               
with TransCanada allows  the state to "stand on both  sides."  He                                                               
stated  that  the legislature  needs  to  work further  on  those                                                               
agreements as they  evolve.  He said the state  may find it wants                                                               
to wholly  finance and  get a  return or that  the return  in the                                                               
equity option  is equally  as important, and  that may  depend on                                                               
"where that resides  within the state and the  revenues the state                                                               
returns from that equity option."                                                                                               
                                                                                                                                
2:07:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  stated one  concern related to  the charts                                                               
and  graphs presented  by Black  & Veatch  showed that  a lot  of                                                               
value  in the  project  was  in the  transportation  aspect.   He                                                               
expressed his concern  that depending on what prices  are for the                                                               
actual product,  the state may  need to extract revenue  from the                                                               
transportation portion, instead of just  the sales agreement.  He                                                               
said he does not think  the state should limit itself, especially                                                               
if  it turns  out  that the  state  is paying  itself.   He  said                                                               
transportation related revenue  is a more even  source of revenue                                                               
than just looking at the sales  price on the spot market or based                                                               
on how  long a term contracts  are.  For those  reasons, he said,                                                               
he does not support Amendment 23.                                                                                               
                                                                                                                                
2:09:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  said she thinks  if this  particular project                                                               
does not go  forward, the legislature is going  to be "redefining                                                               
everything";   however,   because  of   Representative   Seaton's                                                               
expressed concerns,  she asked  if "this could  be written  to be                                                               
more specific  to that particular TransCanada  MOU relationship."                                                               
While waiting for a response  from Mr. Bullard, she asked whether                                                               
there is  a percentage  at which  the administration  feels would                                                               
not  restrict  negotiations  but   would  meet  the  concerns  of                                                               
Alaskans  that  the  state  would   get  a  fair  return  on  its                                                               
investment on its resource.                                                                                                     
                                                                                                                                
MR.  PAWLOWSKI responded  the  current  MOU provides  flexibility                                                               
related to "lots of other terms,"  such as the blend between debt                                                               
and  equity.    He  said, "It  makes a  huge difference  when you                                                               
start to  move one term on  what the operations are  of the other                                                               
terms."  He said  he does not believe there would  be a term that                                                               
the administration would be comfortable with outside the MOU.                                                                   
                                                                                                                                
2:13:05 PM                                                                                                                    
                                                                                                                                
MR.  BALASH added  that this  is  speaking to  an agreement  that                                                               
provides  for the  state  to pay  a person,  and  a person  could                                                               
include   AGDC;  therefore,   he  opined,   the  point   made  by                                                               
Representative Seaton  is a good one  to keep in mind.   Speaking                                                               
to Representative  Tarr's question about an  agreeable percentage                                                               
amount, he  said because this  is a general  law that will  be on                                                               
the books unless changed, he  thinks "it is just something that's                                                               
inappropriate to put  into a statute like this."   He said if the                                                               
general economy and market at large  is changing so much that 30-                                                               
year treasuries have  gone up a full 300 basis  points, he thinks                                                               
the state will be facing  "cross-pressures across the board" that                                                               
will challenge the economics of this project.                                                                                   
                                                                                                                                
REPRESENTATIVE TARR agreed.                                                                                                     
                                                                                                                                
2:14:36 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR asked Mr. Bullock  whether there is a way for                                                               
[Amendment 23]  to be written  to be  more specific to  the issue                                                               
she is  addressing, because "a  few percentage points on  ... the                                                               
dollars we're  talking about  make a  big difference."   Further,                                                               
she  asked him  to address  the use  and definition  of the  word                                                               
"person".                                                                                                                       
                                                                                                                                
2:15:12 PM                                                                                                                    
                                                                                                                                
MR. BULLOCK  replied some of  the amendments that have  been seen                                                               
are  in uncodified  law related  to the  types of  contracts that                                                               
might be  signed; however, Amendment 23,  as well as some  of the                                                               
others, is  put in  codified law.   The amendments  in uncodified                                                               
law are  intended to be more  responsive to the MOU  and, in some                                                               
cases, the  HOA.   They are  in uncodified  law because  they are                                                               
meant to take affect for a  limited period of time.  When putting                                                               
them in  uncodified law, the  law will apply to  the negotiations                                                               
on this particular project.  He  said Amendment 23 is in codified                                                               
law, thus is intended to apply  into any future contract that DNR                                                               
negotiates with  a person that would  carry the state's gas.   He                                                               
said  Amendment 23  could be  put into  uncodified law,  in which                                                               
case  the  15 percent  may  be  more  reasonable in  the  current                                                               
environment.  Notwithstanding  that, he said all the  oil and gas                                                               
contracts and projects  discuss rate of return on  equity and the                                                               
amount  of debt,  and the  legislature can  always determine  how                                                               
much it wants the state to  be liable for.  He said circumstances                                                               
may change in  the future, in which case the  15 percent could be                                                               
amended in  the future, and  it would  be the prerogative  of the                                                               
legislature to make that decision.                                                                                              
                                                                                                                                
2:17:17 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  expressed his hope  that all the rules  would not                                                               
have to  be renegotiated every  time.  He said  the legislature's                                                               
job should be to establish  the framework so that entities beyond                                                               
the state  can know with certainty  what Alaska's rules are.   He                                                               
said this  particular project does  require some  statute changes                                                               
because  of  its  nature;  however,  he  does  not  envision  the                                                               
constant need for revision of rules on all future projects.                                                                     
                                                                                                                                
2:18:34 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER maintained his objection to the motion to adopt                                                                
Amendment 23.                                                                                                                   
                                                                                                                                
2:18:39 PM                                                                                                                    
                                                                                                                                
A roll  call vote was  taken.  Representatives Tarr  and Kawasaki                                                               
voted   in  favor   of  the   motion  to   adopt  Amendment   23.                                                               
Representatives Olson,  Seaton, P.  Wilson, Hawker,  Saddler, and                                                               
Feige  voted against  it.   Therefore, Amendment  23 failed  by a                                                               
vote of 2-6.                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:19 p.m. to 2:40 p.m.                                                                       
                                                                                                                                
2:40:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR moved to adopt Amendment 24, labeled 28-                                                                    
GS2806\I.A.44, Nauman/Bullock, 4/3/14, which read:                                                                              
                                                                                                                                
     Page 1, line 4, following "projects;":                                                                                   
          Insert "relating to the investments of the Alaska                                                                   
     Housing  Finance  Corporation,  the  Alaska  Retirement                                                                  
     Management  Board,  the constitutional  budget  reserve                                                                  
     fund, and the Alaska permanent fund;"                                                                                    
                                                                                                                                
     Page 2, following line 15:                                                                                                 
     Insert a new bill section to read:                                                                                         
        "* Section  1. AS 18.56.090 is  amended by  adding a                                                                
     new subsection to read:                                                                                                    
          (g)  Funds of the corporation may not be invested                                                                     
     in an Alaska liquefied  natural gas project, as defined                                                                    
     in AS 31.25.390, unless  specifically authorized by the                                                                    
     legislature."                                                                                                            
                                                                                                                                
     Page 2, line 16:                                                                                                           
          Delete "Section 1"                                                                                                  
          Insert "Sec. 2"                                                                                                     
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 12, following line 8:                                                                                                 
          Insert new bill sections to read:                                                                                     
        "*  Sec. 15.  AS 37.10 is  amended by  adding a  new                                                                
     section to read:                                                                                                           
          Sec.   37.10.225.    Limitation   on   investment.                                                                  
     Notwithstanding AS 37.10.220, the  board may not invest                                                                  
     in an Alaska liquefied  natural gas project, as defined                                                                    
     in AS 31.25.390, unless  specifically authorized by the                                                                    
     legislature.                                                                                                               
        * Sec. 16. AS 37.10.430(c) is amended to read:                                                                        
          (c)  A special subaccount is established in the                                                                       
     budget reserve fund (art. IX,  sec. 17, Constitution of                                                                    
     the State of Alaska). Money  in the subaccount shall be                                                                    
     invested  to   yield  higher  returns  than   might  be                                                                    
     feasible  to  obtain with  other  money  in the  budget                                                                    
     reserve   fund.  In   establishing  or   modifying  the                                                                    
     investment   policy   for   the   subaccount   in   the                                                                    
     constitutional  budget reserve  fund, the  commissioner                                                                    
     of revenue  shall assume that  those funds will  not be                                                                    
     needed for at least five  years. Income earned on money                                                                    
     in the  subaccount shall be retained  in the subaccount                                                                    
     by the department.  Funds of the subaccount  may not be                                                                
     invested in  an Alaska  liquefied natural  gas project,                                                                
     as   defined  in   AS 31.25.390,  unless   specifically                                                                
     authorized by the legislature.                                                                                         
        * Sec. 17.  AS 37.13.120 is amended by  adding a new                                                                  
     subsection to read:                                                                                                        
          (f)  The board may not invest money from the fund                                                                     
     in an Alaska liquefied  natural gas project, as defined                                                                    
     in AS 31.25.390, unless  specifically authorized by the                                                                    
     legislature."                                                                                                              
                                                                                                                                
     Page 14, line 3:                                                                                                           
          Delete "sec. 14"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 21"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 34"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 41"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 27"                                                                                                      
                                                                                                                                
     Page 54, line 25:                                                                                                          
          Delete "sec. 14"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "Sections 1 - 14, 16, 17, 23 - 27, 29, 30,                                                                     
     37, 39, and 55 - 61"                                                                                                       
          Insert "Sections 1 - 18, 20, 21, 27 - 31, 33, 34,                                                                     
     41, 43, and 59 - 65"                                                                                                       
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 42"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 66 and 67"                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
REPRESENTATIVE TARR  said early  in the  process she  submitted a                                                               
list  of  questions  [to  the   commissioners  of  DNR  and  DOR]                                                               
regarding   the  project's   investment  scenarios   and  funding                                                               
sources.   [The 3/21/14] response from  [Commissioner Balash] and                                                               
Commissioner Rodell indicated that  investment could be made from                                                               
the funds  listed [in Amendment  24] without appropriation.   She                                                               
related there was a concerned  response that brought forward more                                                               
explanation,  which  elicited  "additional concern."    She  said                                                               
there are some sidebars, such  as the prudent investment rule for                                                               
the Alaska  Permanent Fund.   She said  there are a  couple other                                                               
issues, which  may, "because of  timeframes, constrict  the other                                                               
funds from  being used."   She  stated, "I just  want to  make it                                                               
clear on  the record,  because those two  instances where  it was                                                               
...   publicly  stated   that  that   could  happen   without  an                                                               
appropriation, that  that's not in  fact what we will  likely see                                                               
happen;  that's not  the  intention.   Of  course everybody  gets                                                               
concerned  when people  talk about  spending  from the  permanent                                                               
fund."                                                                                                                          
                                                                                                                                
2:42:59 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE OLSON  said he  had a  problem with  Amendment 24.                                                               
He stated that  one of the reasons the  aforementioned funds have                                                               
been successful over the years  is that [the legislature] has not                                                               
been able  to micromanage them.   Left  to the management  of the                                                               
funds,  they have  prospered.   He said  there have  been several                                                               
attempts  over  the last  10  years  to either  prohibit  certain                                                               
investments or direct  funds to be spent in a  particular way and                                                               
that, he opined, is not the responsibility of the legislature.                                                                  
                                                                                                                                
REPRESENTATIVE HAWKER  concurred with  Representative Olson.   He                                                               
posited  that "in  the dialog  on this"  there should  not be  "a                                                               
takeaway  that says  it is  certainly  my intent  to prohibit  an                                                               
investment by any one of these  entities in an Alaska North Slope                                                               
natural  gas  pipeline  if  it  does, in  fact,  fit  into  their                                                               
investments  profiles,   all  of  their  prudent   investor  rule                                                               
compliance, all their investment  guidelines, all the issues they                                                               
have regarding  concentration of  risk, but something  that meets                                                               
the muster that all investments must  meet prior to being made by                                                               
these agencies or  funds.  We're not restricting  them either, by                                                               
dropping this amendment and not taking it further."                                                                             
                                                                                                                                
2:44:29 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI  asked for  confirmation that  the intent                                                               
of Amendment  24 is not  that the funds  could be used,  but that                                                               
they would have to be authorized by the legislature.                                                                            
                                                                                                                                
REPRESENTATIVE TARR answered yes.   She reiterated that there was                                                               
concern  that funds  could  be  appropriated without  legislative                                                               
approval.                                                                                                                       
                                                                                                                                
2:45:05 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE said those serving  on the boards and corporations                                                               
listed  in  the  proposed  amendment are  nonpolitical  and  have                                                               
expertise the  legislature does  not have  to make  the decisions                                                               
they  make.   He  asked  if the  administration  had feedback  on                                                               
Amendment 24.                                                                                                                   
                                                                                                                                
MR. PAWLOWSKI  said the  investments of these  funds are  done by                                                               
professional  investment  managers,  under  investment  policies,                                                               
rules, and  guidelines.  He  mentioned the  Constitutional Budget                                                               
Reserve (CBR)  and said there are  limits on the duration  of the                                                               
investments.   The  subaccount  in  the CBR  was  created by  the                                                               
legislature to  allow for slightly  longer duration;  however, he                                                               
surmised that "even  this type of investment does  not fit within                                                               
that."  He said a hands-off  approach is used regarding those who                                                               
manage the  permanent fund.  He  deferred to Chris Poag  from the                                                               
Department of Law to offer further information.                                                                                 
                                                                                                                                
2:48:29 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  reviewed Amendment  24 and asked  Mr. Christopher                                                               
Poag to speak to it.                                                                                                            
                                                                                                                                
CHRISTOPHER  POAG, Assistant  Attorney General,  Labor and  State                                                               
Affairs  Section,  Civil  Division (Juneau),  Department  of  Law                                                               
(DOL), replied his  understanding of the MOU is that  if the time                                                               
comes to  exercise an equity  option, then the  legislature would                                                               
be involved  in that decision;  therefore, he does not  think any                                                               
of the  fund [managers]  would have the  ability to  exercise the                                                               
option without  the legislature speaking  to the investment.   He                                                               
indicated that  if the  time came where  the legislature  and the                                                               
administration encouraged the exercise  of the option and thought                                                               
it would  be a  good idea  to use the  assets of  one of  the two                                                               
funds -  the Alaska Retirement Management  (ARM) Board retirement                                                               
assets or the Permanent Fund  Corporation assets - "this would be                                                               
... in probably a smaller  portion of" the portfolio, as "special                                                               
opportunity investments."                                                                                                       
                                                                                                                                
MR.  POAG added  he is  not  familiar with  the size  of the  ARM                                                               
Board's   "special  opportunities,"   but   surmised  that   even                                                               
considering  the  size  of the  board's  aggregate  assets,  this                                                               
probably  would  be outside  the  scope  of the  board's  current                                                               
investment policies  for this type of  investment.  Nevertheless,                                                               
he said  he thinks it  is plausible  that if the  legislature and                                                               
the administration  encouraged that  investment, the  board would                                                               
then  - unless  [the legislature]  modified the  prudent investor                                                               
rule  - have  to consider  whether that  investment met  the risk                                                               
profiles  and the  size  of the  allocation  consistent with  the                                                               
board's investment  portfolio, before  the board would  make that                                                               
decision.                                                                                                                       
                                                                                                                                
MR.  POAG  talked  about  the  constitutional  mandate  that  the                                                               
Permanent  Fund  Corporation  shall  engage  in  income-producing                                                               
investments.  He said the corporation  used to provide a list for                                                               
the  legislature's  review, but  somewhere  along  the line,  the                                                               
corporation proved itself with a  good track record and was given                                                               
carte  blanche by  the legislature,  as long  as its  investments                                                               
were consistent with  the prudent investor rule.   He stated, "If                                                               
this  were, for  example, an  investment that  had a  higher risk                                                               
profile than  they would have  otherwise invested in,  unless you                                                               
mandated or direct  them to make that investment,  they would not                                                               
use that  prudent investor rule  that's provided to them  to make                                                               
the investment."  He said it  is speculative at this point to say                                                               
whether  or  not the  investment  would  fit within  the  profile                                                               
because  the risk  profile  is unknown.    Also, the  legislature                                                               
needs  to give  the green  light to  the investment.   For  those                                                               
reasons,  he   said  he  thinks  Amendment   24  is  unnecessary.                                                               
Theoretically, if  the time comes  and the  legislature, assuming                                                               
this  did not  fit within  its prudent  investor rule,  wishes to                                                               
direct that  investment, the  constitution certainly  would allow                                                               
for that.                                                                                                                       
                                                                                                                                
2:52:58 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER said Amendment  24 does not specify whether                                                               
it pertains  to an equity  investment, which is  buying ownership                                                               
in a  project, or  something different, such  as buying  the debt                                                               
behind  the  project.    He  said  the  debt  could  be  that  of                                                               
TransCanada, ConocoPhillips, or BP,  specifically to promote this                                                               
project.  He said  even if it was the State  of Alaska's debt, it                                                               
likely  would  be rated  high  quality,  with a  low-profile  and                                                               
predictable return in  the fixed return component  of the state's                                                               
portfolios.   Representative Hawker  said there is  a presumption                                                               
[in Amendment  24] that the  Permanent Fund  [Corporation] cannot                                                               
step up to  the plate and take an equity  position in the project                                                               
without authorization  from the legislature; however,  he said it                                                               
does not  address "whether that's a  direct or an indirect."   He                                                               
indicated  that the  last he  heard,  one of  the largest  single                                                               
holdings  of  the  Alaska  Permanent   Fund  was  the  ExxonMobil                                                               
Corporation, and by  the state holding that, it  has an indirect,                                                               
but very real  investment in the project going forward.   He said                                                               
if the amendment  is to be considered further,  the language must                                                               
be clarified as to direct  and indirect investment, equity, debt,                                                               
and other  concerns.  He  echoed Representative  Olson's previous                                                               
statement  that  the  legislature  has  been  successful  in  the                                                               
management  of  the  state's  investments,  the  liquid  capital,                                                               
because the legislature  has hired the best  qualified people and                                                               
not put constraints on them beyond proper investment guidelines.                                                                
                                                                                                                                
2:55:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI  recalled  that  at the  outset  of  his                                                               
testimony,  Mr. Poag  mentioned  that equity  options would  come                                                               
back the  legislature at some point  in time.  He  said he thinks                                                               
"the concern  addressed in this  amendment is that  the permanent                                                               
fund -  prudent invest rule  out of the  way - that  AHFC [Alaska                                                               
Housing  Finance  Corporation],  ARM   Board,  or  one  of  these                                                               
organizations  can  make an  investment  without."   He  inquired                                                               
whether it is the case that they can.                                                                                           
                                                                                                                                
MR.  POAG  stated he  assumes  the  purpose  of Amendment  24  is                                                               
specifically to  prevent these funds  from exercising  the option                                                               
in the  MOU.  He  requested correction  if his assumption  is not                                                               
right.                                                                                                                          
                                                                                                                                
2:56:52 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR  said  a question  she  asked  [Commissioner                                                               
Balash and  Commissioner Rodell] and their  [3/21/14] response to                                                               
that question are as follows:                                                                                                   
                                                                                                                                
     The  MOU Equity  Option  term sheet  mentions that  the                                                                    
     state's  equity  share  could   be  owned  by  a  state                                                                    
     investment fund such as the  CBR.  Would it be possible                                                                    
     for an equity  investment to be made  by fund managers,                                                                    
     as  part   of  their  portfolio,  without   an  act  of                                                                    
     appropriation by the legislature?                                                                                          
                                                                                                                                
     Yes, it would  be possible for an  equity investment to                                                                    
     be made  without a legislative  appropriation, assuming                                                                    
     the  entity charged  with managing  the  assets of  the                                                                    
     fund   determined   the    investment   satisfied   the                                                                    
     investment  criteria   that  they  are  bound   by  [AS                                                                    
     37.10.071, AS 37.13.120].  ...  It is the intent of the                                                                    
     MOU to only allow the state  or one of its funds to own                                                                    
     the  equity interest.   An  external manager  would not                                                                    
     actually own  the equity option, but  they could manage                                                                    
     the  option, as  it  has been  exercised  by the  state                                                                    
     using state funds they manage.                                                                                             
                                                                                                                                
REPRESENTATIVE  TARR stated  [Amendment 24]  addresses the  point                                                               
that [an equity  investment] could be done  without a legislative                                                               
appropriation.   She  indicated her  constituents have  expressed                                                               
concern  that the  legislature  be involved  with  how the  state                                                               
spends its money.  Amendment 24  is an attempt to ensure that the                                                               
legislature is engaged [in how the state's money is spent].                                                                     
                                                                                                                                
REPRESENTATIVE SADDLER  posited that the legislature  is engaged,                                                               
because it established the  prudent investor operating guidelines                                                               
under which these funds are managed.                                                                                            
                                                                                                                                
2:59:13 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  OLSON asked  Representative Tarr  if she  has any                                                               
documentation from  her constituents,  such as e-mails,  that can                                                               
be added  to the committee  packet so  their concerns will  be on                                                               
the record.                                                                                                                     
                                                                                                                                
REPRESENTATIVE TARR answered yes.   She related that people asked                                                               
her about this  at a constituent meeting.   The [3/21/14] answers                                                               
[from the commissioners]  were made public a few days  ago and in                                                               
response to  that a news article  was written about one  piece of                                                               
it  and this  issue came  up.   She noted  that she  has been  in                                                               
frequent  communication with  the administration  about this  and                                                               
her intent  here was  to have the  conversation, because  this is                                                               
public information,  to clear this  up and then she  was planning                                                               
to remove the amendment.                                                                                                        
                                                                                                                                
3:00:00 PM                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI  expressed  appreciation for  Representative  Tarr                                                               
reading  that  question  into  the   record  because  within  the                                                               
department's answer was a good  illustration of the dialogue that                                                               
has been had.   He offered his belief that  many of the committee                                                               
members were  instrumental in  constructing the  prudent investor                                                               
rule.                                                                                                                           
                                                                                                                                
CO-CHAIR FEIGE surmised  that many constituents may  not be aware                                                               
of the rule.                                                                                                                    
                                                                                                                                
MR.  PAWLOWSKI,  regarding  the  department's  response  read  by                                                               
Representative  Tarr,  emphasized  that  there  is  a  difference                                                               
between exercising  the option and  owning the option.   He noted                                                               
that  this  came  up  from  the   term  sheet  in  the  MOU  with                                                               
TransCanada,  [Exhibit C],  page  2.   In that  term  sheet is  a                                                               
provision that would  allow the transfer of the  equity option to                                                               
a  fund, if  the legislature  were to  exercise the  option.   He                                                               
reminded  members   that  the   option  is   part  of   the  firm                                                               
transportation  services agreement  which will  come back  to the                                                               
legislature   for  consideration.     He   said  right   now  the                                                               
administration  has agreed  to  work with  AGDC  on that  option;                                                               
however, the  legislature could  decide that  that is  a valuable                                                               
asset that could  be transferred to a fund.   He said, "We didn't                                                               
want that to be taken off of  the table."  He recollected that in                                                               
the  department's  aforementioned  response,  it  used  the  term                                                               
"ownership of  the option" and  not "exercise" [the  option], and                                                               
he  explained  that  is  because  of  the  linkage  to  the  firm                                                               
transportation services  agreement.  He opined  that "getting the                                                               
order of events is important in considering this question."                                                                     
                                                                                                                                
3:01:39 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  KAWASAKI asked  whether  AHFC and  the ARM  Board                                                               
have  the same  strict prudent  investor rules  as the  Permanent                                                               
Fund Corporation.                                                                                                               
                                                                                                                                
MR. POAG answered  he cannot speak to AHFC; however,  he said the                                                               
ARM Board  has one of  the more vigorous prudent  investor rules,                                                               
which occurs in  AS 37.10.071 and references  sole financial best                                                               
interest.  He  said it is a prudent investor  rule different from                                                               
that which  was codified by  the legislature in AS  37.13.120 and                                                               
followed by the Permanent Fund Corporation.                                                                                     
                                                                                                                                
CO-CHAIR FEIGE  recollected that Mr.  Fauske was the  former head                                                               
of AHFC; he therefore  fielded Representative Kawasaki's question                                                               
to him.                                                                                                                         
                                                                                                                                
MR. FAUSKE responded  that AHFC dealt in  short-term money market                                                               
funds,  not   equity  investments,  because  of   the  cash  draw                                                               
requirements on the corporation as it purchased mortgages.                                                                      
                                                                                                                                
3:04:07 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER, in response  to the Co-Chair, withdrew his                                                               
objection  for  the  purpose  of  allowing  Amendment  24  to  be                                                               
withdrawn.                                                                                                                      
                                                                                                                                
REPRESENTATIVE TARR  responded further to  Representative Olson's                                                               
prior request for documentation for the record.                                                                                 
                                                                                                                                
3:05:24 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR [withdrew Amendment 24].                                                                                    
                                                                                                                                
3:06:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  TARR moved  to adopt  Amendment  25, labeled  28-                                                               
GS2806\I.A.25, Nauman/Bullock, 4/1/14, which read:                                                                              
                                                                                                                                
     Page 1, line 7, following "on gas;":                                                                                     
          Insert "relating to an option for the state to                                                                      
     acquire an ownership interest in a North Slope natural                                                                   
     gas project;"                                                                                                            
                                                                                                                                
     Page 15, following line 30:                                                                                                
     Insert a new bill section to read:                                                                                         
        "* Sec. 16. AS 38.05 is amended by adding a new                                                                     
     section to read:                                                                                                           
          Sec. 38.05.023. State option to acquire an                                                                          
     ownership  interest  in  a   North  Slope  natural  gas                                                                  
     project. (a)  An agreement or contract  associated with                                                                  
     a  North Slope  natural  gas project  that includes  an                                                                    
     option for  the state to acquire  an ownership interest                                                                    
     in  a  gas pipeline  or  gas  treatment plant  may  not                                                                    
     require  the  state  to   exercise  the  option  before                                                                    
     December 31, 2016.                                                                                                         
          (b)  In this section, "gas pipeline" and "gas                                                                         
    treatment   plant"   have   the   meanings   given   in                                                                     
     AS 31.25.390."                                                                                                             
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 17, line 24:                                                                                                          
          Delete "sec. 17"                                                                                                      
          Insert "sec. 18"                                                                                                      
                                                                                                                                
     Page 21, line 16:                                                                                                          
          Delete "sec. 27"                                                                                                      
          Insert "sec. 28"                                                                                                      
                                                                                                                                
     Page 25, line 9:                                                                                                           
          Delete "sec. 30"                                                                                                      
          Insert "sec. 31"                                                                                                      
                                                                                                                                
     Page 31, line 18:                                                                                                          
          Delete "sec. 37"                                                                                                      
          Insert "sec. 38"                                                                                                      
                                                                                                                                
     Page 53, lines 24 - 25:                                                                                                    
          Delete "sec. 23"                                                                                                      
          Insert "sec. 24"                                                                                                      
                                                                                                                                
     Page 56, line 6:                                                                                                           
          Delete "16, 17, 23 - 27, 29, 30, 37, 39, and 55 -                                                                     
     61"                                                                                                                        
          Insert "16 - 18, 24 - 28, 30, 31, 38, 40, and 56                                                                      
     - 62"                                                                                                                      
                                                                                                                                
     Page 56, line 8:                                                                                                           
          Delete "Section 38"                                                                                                   
          Insert "Section 39"                                                                                                   
                                                                                                                                
     Page 56, line 9:                                                                                                           
          Delete "secs. 62 and 63"                                                                                              
          Insert "secs. 63 and 64"                                                                                              
                                                                                                                                
REPRESENTATIVE HAWKER objected.                                                                                                 
                                                                                                                                
3:06:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  explained Amendment 25 is  another issue she                                                               
has been discussing with the  administration.  She said a concern                                                               
that  has come  up, given  the number  of issues  that are  being                                                               
addressed here,  is the speed  at which things are  happening and                                                               
some pressure on  people to make decisions quickly  that they may                                                               
not  be comfortable  with.    She noted  that  the  MOU says  the                                                               
state's  equity option  is  available through  the  end of  2015.                                                               
Given all  of the  different agreements  and the  timeline within                                                               
which  they are  supposed to  happen, delaying  this by  one year                                                               
will  not  impact  anything  else.     She  understood  from  her                                                               
conversations with the administration,  however, that also in the                                                               
MOU  is some  flexibility should  both  parties not  be ready  at                                                               
12/31/15.   She said the  attempt in  Amendment 25 is  because of                                                               
the  importance  in  deciding whether  to  exercise  that  equity                                                               
option  without feeling  pressure.   Her  last conversation  with                                                               
Commissioner  Balash,  she  related,   was  about  delaying  that                                                               
decision until  the end of  the 2016 legislative  session, rather                                                               
than 12/31/16,  because that  would give a  little more  time for                                                               
the appropriation to be made  than would be necessary potentially                                                               
to exercise  that option.   She  requested the  administration to                                                               
address the date.                                                                                                               
                                                                                                                                
3:08:25 PM                                                                                                                    
                                                                                                                                
COMMISSIONER  BALASH confirmed  there has  been ongoing  dialogue                                                               
with  the  sponsor  of  Amendment 25  regarding  this  and  other                                                               
amendments.   In  this particular  case, he  said, what  is being                                                               
talked  about  is the  intent  of  parties  to have  this  option                                                               
available  at the  movement  from  Pre-Front-End Engineering  and                                                               
Development (Pre-FEED)  to Front-End Engineering  and Development                                                               
(FEED), and  the date of 12/31/15  was inserted as a  backstop to                                                               
that.   Everyone is optimistic that  the project will be  at that                                                               
particular  juncture  and have  some  action  before the  end  of                                                               
calendar 2015.   However, he  continued, if it  becomes necessary                                                               
to extend the  date to sync up with the  transition from Pre-FEED                                                               
to FEED  and that particular  date, there will be  opportunity to                                                               
work with the  counter-parties to go ahead and  extend that date.                                                               
He said  he is concerned  that stating upfront that  an extension                                                               
of time is  needed now will put the state  in an awkward position                                                               
relative to the counter-parties and  that it will have the effect                                                               
of  potentially giving  the counter-parties  leverage to  extract                                                               
some other concession from the state,  which is not the intent of                                                               
the amendment  sponsor.  The administration  would appreciate the                                                               
flexibility,  he  noted,  and would  appreciate  the  legislature                                                               
keeping it  informed about this  particular concern as  time goes                                                               
on through 2015.                                                                                                                
                                                                                                                                
3:10:31 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON understood  Amendment 25 is  not saying                                                               
hold off  until then, but rather  to extend the date  so there is                                                               
that  flexibility.   She asked  whether the  administration would                                                               
have the flexibility to do that anyway.                                                                                         
                                                                                                                                
COMMISSIONER BALASH  responded the  administration will  have the                                                               
flexibility to  pursue that  with TransCanada.   It is  an agreed                                                               
upon term in the MOU, so  the administration will need to work it                                                               
out with  TransCanada.  He  said he does not  want to have  to do                                                               
that until  he needs  to do  that.  If  it is  going to  cost him                                                               
something as  a negotiator to get  that extension of time,  he is                                                               
not going  to ask for  that extension  unless he thinks  he needs                                                               
it,  in which  case  he  is sure  there  will  be something  that                                                               
TransCanada will be interested in at the time.                                                                                  
                                                                                                                                
3:11:42 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  noted this  is a statutory  one-year delay                                                               
in  moving the  project  forward with  certainty and  assuredness                                                               
about how  it is  going to take  form.  This  is not  a cost-free                                                               
amendment, he  argued.  There  has been testimony that  each year                                                               
of delay  is a cost  of $800 million  to the project.   Currently                                                               
the MOU has a deadline that is  making sure all of the parties to                                                               
the MOU and  HOA keep moving forward at an  appropriate pace.  He                                                               
said he does  not want to give the other  parties another year to                                                               
find excuses  for doing this or  that, he wants to  see a project                                                               
keep moving  forward and moving  forward on the  reasonable track                                                               
that has been agreed to by all the parties.                                                                                     
                                                                                                                                
REPRESENTATIVE  TARR maintained  that  is not  what Amendment  25                                                               
does.  It says "before" December  31, so it does not prohibit the                                                               
parties from  doing things any  earlier; it could even  be before                                                               
12/31/15 as  anticipated.  However,  she said, she has  talked to                                                               
the administration and everybody is  expecting there will be some                                                               
slippage in the  timeline as set forth now.   Amendment 25 offers                                                               
flexibility  with that  decision making,  she argued,  it is  not                                                               
requiring things to take longer; it is only if it is necessary.                                                                 
                                                                                                                                
REPRESENTATIVE HAWKER responded that is  the whole point -- these                                                               
are negotiations.   Right now there is a hard  fast closure date,                                                               
he said, and the legislature  is gratuitously giving a whole year                                                               
without  asking  for  anything  in  return  from  all  the  other                                                               
counter-parties in the agreement, and that is wrong.                                                                            
                                                                                                                                
3:13:56 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER maintained his objection.                                                                                 
                                                                                                                                
REPRESENTATIVE  TARR related  she has  been working  closely with                                                               
the administration on  all of her amendments.   Every effort, she                                                               
said, is  to do what  she can to  help move this  project forward                                                               
and to  ensure it has direct  benefits for Alaskans and  that the                                                               
state gets  a fair  return.   She said  she does  not want  to do                                                               
anything  that hinders  the  administration.   In  the spirit  of                                                               
working together she withdrew her motion to adopt Amendment 25.                                                                 
                                                                                                                                
3:15:05 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KAWASAKI moved to adopt Amendment 26, labeled 28-                                                                
GS2806\I.A.64, Bullock, 4/3/14, which read:                                                                                     
                                                                                                                                
     Page 13, line 18, following "paragraph":                                                                               
          Insert "(A)"                                                                                                      
                                                                                                                                
     Page 13, line 20, following "contract;":                                                                               
          Insert "and                                                                                                       
               (B)  must include a provision that requires                                                                  
     that each  party to the  agreement or contract  pay, in                                                                
     proportion  to the  party's ownership  interest in  the                                                                
     North  Slope natural  gas project,  the  costs of  that                                                                
     portion of infrastructure downstream  from the point of                                                                
     production  that  are  directly related  to  the  North                                                                
     Slope natural  gas project; the  state may not  pay for                                                                
     any costs  of infrastructure  upstream of the  point of                                                                
     production; infrastructure  costs include the  costs of                                                                
     construction,  improvement, and  maintenance of  roads,                                                                
     bridges, port facilities, and utilities;"                                                                              
                                                                                                                                
     Page 15, line 12, following "paragraph":                                                                                   
          Insert "(A)"                                                                                                          
                                                                                                                                
     Page 15, line 14, following "contract;":                                                                                   
          Insert "and                                                                                                           
               (B)  must include a provision that requires                                                                      
     that each  party to the  agreement or contract  pay, in                                                                    
     proportion  to the  party's ownership  interest in  the                                                                    
     North  Slope natural  gas project,  the  costs of  that                                                                    
     portion of infrastructure downstream  from the point of                                                                    
     production  that  are  directly related  to  the  North                                                                    
     Slope natural  gas project; the  state may not  pay for                                                                    
     any costs  of infrastructure  upstream of the  point of                                                                    
     production; infrastructure costs include the costs of                                                                      
      construction, improvement, and maintenance of roads,                                                                      
     bridges, port facilities, and utilities;"                                                                                  
                                                                                                                                
3:15:13 PM                                                                                                                    
                                                                                                                                
CO-CHAIR SADDLER objected.                                                                                                      
                                                                                                                                
REPRESENTATIVE  KAWASAKI explained  Amendment 26  deals with  the                                                               
[4/2/14]  discussion the  committee  had with  the Department  of                                                               
Transportation & Public Facilities  (DOT&PF) regarding impacts to                                                               
the state's roads,  rails, and ports, and the  disposition of who                                                               
ends up  paying for those.   Testimony was heard from  the deputy                                                               
commissioner regarding  the airport  in Deadhorse,  for instance,                                                               
where  federal highway  funds cannot  be  used and  the state  is                                                               
paying for those facilities.   He said Amendment 26 clarifies who                                                               
is  responsible for  those roads,  rails,  and ports  and who  is                                                               
responsible  for their  construction.   The committee  heard that                                                               
under the Alaska  Stranded Gas Development Act there  was a great                                                               
undertaking with  DOT&PF and  the producers  about how  much that                                                               
was going  to cost.   Under  the AGIA  license, he  added, DOT&PF                                                               
also  did a  complex study  on how  much the  increase to  roads,                                                               
rails, and ports would cost,  which was approximately $2 billion.                                                               
He said he does not think  the state should be exclusively on the                                                               
hook.    Testimony   was  heard  that  the  state   will  not  be                                                               
exclusively on  the hook and  that somehow industry  will benefit                                                               
from  the  roads  as  well   as  legislators'  constituents,  and                                                               
Amendment  26  requires it  in  advance.    He maintained  it  is                                                               
necessary that this be clarified  before getting too far down the                                                               
road on this bill.                                                                                                              
                                                                                                                                
3:17:43 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  posed a scenario in  which a new bridge  is built                                                               
over  the Yukon  River  to carry  the LNG  pipeline  across.   He                                                               
understood Representative Kawasaki to be  saying that if this new                                                               
bridge  is  a  supplementary  or a  replacement  bridge  for  the                                                               
current bridge,  that the bridge would  then be owned by  each of                                                               
project partners  in the  same proportion that  they are  part of                                                               
the project.  He asked who  would pay for the maintenance on that                                                               
bridge as it is utilized over its lifespan.                                                                                     
                                                                                                                                
REPRESENTATIVE  KAWASAKI responded  the sizes  of facilities  are                                                               
being  ramped up  and  his question  during  the discussion  with                                                               
DOT&PF was whether  there is any actual figuring of  how much the                                                               
maintenance and  operation are going  to be once those  roads are                                                               
done.  He  said there is no  real matrix in which to  do that and                                                               
the state  ought to  be concerned  every time  it builds  a road.                                                               
Under Amendment 26, a negotiation  will happen between DOT&PF and                                                               
the partners  in this  project.   He recognized  the state  has a                                                               
responsibility  to  those  roads,  too, but  said  the  state  is                                                               
spending millions of  dollars on roads north of  Fairbanks and on                                                               
airports in  remote locations.   Those costs  should be  borne by                                                               
the folks utilizing them the most,  he argued, and this should be                                                               
clarified in the language of the bill before moving forward.                                                                    
                                                                                                                                
3:20:09 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE HAWKER  addressed Amendment  26 in the  context of                                                               
where its  provisions would be placed  in the statute.   He noted                                                               
the proposed amendment language  states "must include a provision                                                               
that requires  that each party  to the agreement or  contract" to                                                               
do the aforementioned.   He pointed out that the  section of CSSB                                                               
138(FIN) am  [in which this  language would be inserted]  is page                                                               
15,  [lines  8-14],  which  is   about  the  authorities  of  the                                                               
commissioner  of the  department of  natural resources  and which                                                               
state,  "in  consultation  with   the  commissioner  of  revenue,                                                               
participate  in  the  negotiation   of  agreements  that  include                                                               
balancing,  marketing, disposition  of natural  gas, and  offtake                                                               
and contracts  and development  of terms  for inclusion  in those                                                               
proposed agreements  and contracts associated with  a North Slope                                                               
natural  gas project".   Amendment  26  is a  tax assessment,  he                                                               
maintained, and  it seems that  if the committee wants  to create                                                               
specific assessments  on roads,  highways, and  infrastructure on                                                               
the  producers, it  ought to  be structured  in statute  entirely                                                               
differently.   He  argued  he  does not  see  the gas  balancing,                                                               
marketing,   gas  sales   contracts,   and  project   development                                                               
contracts contemplated under this  provision of statute as having                                                               
much relevance to that infrastructure development.                                                                              
                                                                                                                                
REPRESENTATIVE KAWASAKI  responded Amendment 26 has  to be placed                                                               
in  this section  of the  bill because  when the  commissioner of                                                               
natural resources is  negotiating all of the other  terms this is                                                               
a term that [legislators] would like  included.   He said he does                                                               
not think  it is  specifically DNR's  responsibility to  find out                                                               
how  much  those roads  are  going  to  cost;  rather that  is  a                                                               
negotiation  between  DOT&PF  and  the producers.    He  recalled                                                               
explanations during the Alaska Stranded  Gas Development Act that                                                               
the  producers spent  a lot  of time  interacting with  DOT&PF to                                                               
figure  out what  kinds of  things  the producers  would need  to                                                               
advance a  project.   He said  Amendment 26 speaks  to that.   He                                                               
deferred to Mr. Bullock for further explanation.                                                                                
                                                                                                                                
3:23:26 PM                                                                                                                    
                                                                                                                                
CO-CHAIR FEIGE  offered his  view that  ongoing maintenance  is a                                                               
reason for property  tax statutes.  He inquired  whether the cost                                                               
of infrastructure that  would be addressed in  Amendment 26 would                                                               
not  already  be  accounted as  per  the  committee's  discussion                                                               
regarding the impact  aid and the PILTs that must  be fleshed out                                                               
by the advisory board.                                                                                                          
                                                                                                                                
REPRESENTATIVE KAWASAKI  replied he  thinks there  definitely are                                                               
municipalities  that  want  to  weigh  in  on  their  direct  and                                                               
indirect  impacts,   which  was  addressed  by   [Amendment  15].                                                               
However,  he continued,  there is  a lot  of unorganized  borough                                                               
where  there will  not  be  these impacts.    He reiterated  that                                                               
during  the  AGIA discussions,  DOT&PF  said  the price  tag  for                                                               
getting to the point of being  ready to build a pipeline would be                                                               
$2 billion.   He said that while this is  a different project and                                                               
the testimony was  that it would cost much less  than $2 billion,                                                               
it is still unknown what the cost will be.                                                                                      
                                                                                                                                
CO-CHAIR FEIGE  noted that even  unorganized borough  property is                                                               
still subject  to the 20  mil tax, which goes  to the state.   He                                                               
maintained  that the  committee  has already  accounted for  what                                                               
Amendment 26 is looking for.                                                                                                    
                                                                                                                                
3:25:24 PM                                                                                                                    
                                                                                                                                
MR.  BULLOCK believed  one of  the  precedents for  this type  of                                                               
agreement has  to do with  the road  to Skagway where  the mining                                                               
company that  was shipping ore  down the highway paid  for things                                                               
like beefing  up Captain Moore  Bridge to  be able to  handle the                                                               
trucks.   It would not necessarily  be part of the  ownership, he                                                               
said, it is  more like a user fee.   Responding to Representative                                                               
Kawasaki, Mr.  Bullock explained that  Amendment 26 was  put into                                                               
the section  of the bill  related to the responsibilities  of the                                                               
commissioner of  natural resources  because when the  request was                                                               
made  it was  an  important  enough provision  that  it was  tied                                                               
directly  into   the  powers  of   the  commissioner   within  AS                                                               
38.05.020(b)(11).   He said he  does not  know the reason  why it                                                               
had such a high level of importance as opposed to other terms.                                                                  
                                                                                                                                
3:26:50 PM                                                                                                                    
                                                                                                                                
CO-CHAIR  FEIGE   requested  the  administration's   position  on                                                               
Amendment 26.                                                                                                                   
                                                                                                                                
MR. PAWLOWSKI  said the  concern underlying  Amendment 26,  as he                                                               
understands it, comes  from a reading of the  Heads of Agreement,                                                               
particularly on  page 16, Article 10.   He explained there  was a                                                               
broad recognition within the Heads  of Agreement group that there                                                               
are  additional needs  for  state support  of  the project  going                                                               
forward.   He  said [Article  10.1.c] references  "appropriations                                                               
and  permitting  for  the   construction  of  necessary  in-state                                                               
infrastructure" and  he noted that  that has been  interpreted by                                                               
people to imply  that it is solely the  state's responsibility to                                                               
pay for  that infrastructure.   He expressed  his wish  that that                                                               
specific  question  would  have  been   asked  of  the  Heads  of                                                               
Agreement sponsors  when they were  before the  committee because                                                               
he believes  he has  heard them  say in  other committees  or, if                                                               
not,  in the  walk-arounds he  has done  with them,  it is  not a                                                               
presumption that it  is solely the state's  responsibility.  This                                                               
is part of  the impact aid discussion, he added.   Just as DOT&PF                                                               
told  the committee,  he continued,  there  are natural  dividing                                                               
lines  behind   what  is  general  use   infrastructure  and  the                                                               
improvements to  that infrastructure that go  specifically to the                                                               
project.  He said he understands  the concern and agrees it is an                                                               
important one to  talk about and to recognize that  it is not the                                                               
state's interpretation of that section  of the Heads of Agreement                                                               
that it is solely the  state's responsibility for infrastructure.                                                               
In that  context, he  noted that  Amendment 26,  page 1,  line 6,                                                               
states, "requires  that each party  to the agreement  or contract                                                               
pay,  in proportion  to  the party's  ownership  interest in  the                                                               
North Slope  natural gas  project, the costs  of that  portion of                                                               
infrastructure downstream  from the  point of production".   This                                                               
worries him, he said, because  it ties the administration's hands                                                               
to agree to a  payment of a portion.  In  this project, the state                                                               
will be a party either through  an agent like AGDC or TransCanada                                                               
and  the  state will  have  up  to a  25  percent  share in  this                                                               
project.   Amendment 26,  he argued,  would imply  it is  a given                                                               
that  the  state  will  pay  25  percent  of  the  cost  of  that                                                               
infrastructure.  Given that has  not been negotiated or discussed                                                               
yet,  he said  he is  concerned about  setting that  precedent in                                                               
statute  going into  that discussion  because the  administration                                                               
would  like the  freedom, both  in the  impact discussion  and to                                                               
push for  the lowest possible  state share, of  any appropriation                                                               
support.  Recognizing  there will be some, he  continued, he does                                                               
not want to start off at 25 percent  and be bound to a 25 percent                                                               
number when the state could potentially push for lower.                                                                         
                                                                                                                                
3:30:15 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE TARR  said she appreciates having  this discussion                                                               
and getting it  on the record because Article 10  is in regard to                                                               
additional state support for the  Alaska LNG Project.  Therefore,                                                               
it is  easy to  interpret the  language about  appropriations and                                                               
permitting for  the necessary infrastructure  as meaning  that it                                                               
will  be borne  by  the  state solely.    She  related that  when                                                               
drafting  Amendment 26,  it was  awkward trying  to say  what the                                                               
proportional  amount   would  be  because,  depending   upon  the                                                               
location,  one  project  sponsor could  have  a  disproportionate                                                               
benefit to  that infrastructure  development.  The  point brought                                                               
up  by DOT&PF  the  other  day, and  like  the  user fee  example                                                               
suggested  by  Mr.  Bullock,  was   that  DOT&PF  will  typically                                                               
apportion a new road; for  example, a new shopping center needing                                                               
turning lanes  will pay some portion  and the rest would  be paid                                                               
by the state.   She said she wants to put on  the record that she                                                               
hopes  what  is  negotiated  is  not  just  proportional  to  the                                                               
ownership interest, but thinking  about improvements that benefit                                                               
one project sponsor more than  the others, and whether the public                                                               
is getting the  benefit.  The committee was shown  by DOT&PF that                                                               
its use of the state's  flexible highway funding for improvements                                                               
on  the  Parks  Highway  is  of  great  benefit  to  the  state's                                                               
residents and  visitors.  As  infrastructure development  for the                                                               
project is  moved into, she  continued, it may be  become clearer                                                               
that one  project sponsor benefits  more than the  general public                                                               
of Alaska.                                                                                                                      
                                                                                                                                
3:32:08 PM                                                                                                                    
                                                                                                                                
MR. PAWLOWSKI offered his  appreciation for Representative Tarr's                                                               
statements.   He said  he would  like to put  on the  record that                                                               
AIDA  is currently  involved  in  building an  ore  shed [at  the                                                               
Captain  Moore Bridge]  to expand  the state's  facilities there,                                                               
and this  is being done  based on  a five-year contract  with the                                                               
mining company who  will ship its product through.   He explained                                                               
AIDA  is  relying  on  that long-term  contract  to  finance  the                                                               
development  of that  ore  shed.   He  said  he  can see  similar                                                               
opportunities  with  railways and  ports  where  [the Alaska  LNG                                                               
Project] will  have a  long-term contract to,  say, move  pipe on                                                               
the rail out  of Port MacKenzie.  The state  would potentially be                                                               
paying  for  that  upgrade  through  a  financing  based  on  the                                                               
commitment  of  the contract  to  use  the infrastructure,  which                                                               
reminds him that Amendment 26  might actually limit [the state's]                                                               
ability to  do that in  a way  that serves the  state's interest.                                                               
He  assured  members   that  these  are  all   things  that  [the                                                               
administration] is going to be working on and considering.                                                                      
                                                                                                                                
3:33:26 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KAWASAKI    appreciated   the   administration's                                                               
clarification of  Article 10.1.c of  the Heads of Agreement.   He                                                               
said  he now  understands that  the proportion  to the  ownership                                                               
provision [within  the amendment]  does not actually  make sense.                                                               
He offered  his hope that during  negotiations for infrastructure                                                               
that will  help everyone, and  when the state is  building things                                                               
to ramp  up to a project,  that the state does  not expose itself                                                               
to  huge maintenance  and  operating  costs in  the  future.   He                                                               
withdrew his motion to adopt Amendment 26.                                                                                      
                                                                                                                                
3:34:12 PM                                                                                                                    
                                                                                                                                
[CSSB 138(FIN) am was held over.]                                                                                               
                                                                                                                                
The committee took an at-ease from 3:34 p.m. to 3:35 p.m.                                                                       
                                                                                                                                
3:35:52 PM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no further business before the committee, the House                                                                 
Resources Standing Committee meeting was adjourned at 3:36 p.m.                                                                 

Document Name Date/Time Subjects