Legislature(1995 - 1996)
04/26/1996 08:10 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
April 26, 1996
8:10 a.m.
MEMBERS PRESENT
Representative Joe Green, Co-Chairman
Representative William K. "Bill" Williams, Co-Chairman
Representative Scott Ogan, Vice Chairman
Representative Alan Austerman
Representative Ramona Barnes
Representative John Davies
Representative Pete Kott
MEMBERS ABSENT
Representative Don Long
Representative Irene Nicholia
COMMITTEE CALENDAR
CS FOR SENATE BILL NO. 307(FIN)
"An Act requiring the Department of Natural Resources to exchange
with the federal government state land within, and adjoining, Dude
Creek Critical Habitat Area for federal land adjacent to Fall
Creek; and providing for an effective date."
- PASSED CSSB 307(FIN) OUT OF COMMITTEE
HOUSE BILL NO. 548
"An Act authorizing, approving, and ratifying the amendment of
Northstar Unit oil and gas leases between the State of Alaska and
BP Exploration (Alaska) Inc.; and providing for an effective date."
- PASSED CSHB 548(RES) OUT OF COMMITTEE
CS FOR SENATE BILL NO. 112(RES)
"An Act establishing a discovery royalty credit for the lessees of
state land drilling exploratory wells and making the first
discovery of oil or gas in an oil or gas pool in the Cook Inlet
sedimentary basin."
- HEARD AND HELD
CS FOR SENATE BILL NO. 262(RES)(ct rule fld)
"An Act relating to management of game populations for maximum
sustained yield for human harvest and providing for the replacement
of areas closed to consumptive uses of game; relating to management
of fish and game areas."
- HEARD AND HELD
CS FOR SENATE BILL NO. 247(RLS) am(efd fld)(ct rule fld)
"An Act restricting the use of certain funds deposited in the fish
and game fund; and relating to the powers and duties of the
commissioner of fish and game."
- SCHEDULED BUT NOT HEARD
SENATE BILL NO. 257 am
"An Act relating to the taking of game or fish for public safety
purposes."
- SCHEDULED BUT NOT HEARD
PREVIOUS ACTION
BILL: SB 307
SHORT TITLE: DUDE CREEK HABITAT AREA LAND EXCHANGE
SPONSOR(S): FINANCE
JRN-DATE JRN-PG ACTION
03/12/96 2713 (S) READ THE FIRST TIME - REFERRAL(S)
03/12/96 2713 (S) RESOURCES
03/29/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205
03/29/96 (S) MINUTE(RES)
03/29/96 2972 (S) FIN REFERRAL ADDED
04/01/96 2991 (S) RES RPT 5DP 1NR
04/01/96 2992 (S) FISCAL NOTE (DNR)
04/10/96 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/10/96 (S) MINUTE(FIN)
04/10/96 3110 (S) FIN RPT CS 6DP SAME TITLE
04/11/96 (S) RLS AT 2:35 PM FAHRENKAMP RM 203
04/11/96 (S) MINUTE(RLS)
04/11/96 3149 (S) FISCAL NOTE TO CS (DNR)
04/12/96 3193 (S) RULES TO CALENDAR 4/12/96
04/12/96 3196 (S) READ THE SECOND TIME
04/12/96 3196 (S) FIN CS ADOPTED UNAN CONSENT
04/12/96 3196 (S) ADVANCED TO THIRD READING UNAN CONSENT
04/12/96 3196 (S) READ THE THIRD TIME CSSB 307(FIN)
04/12/96 3197 (S) PASSED Y20 N-
04/12/96 3197 (S) EFFECTIVE DATES SAME AS PASSAGE
04/12/96 3220 (S) TRANSMITTED TO (H)
04/15/96 3733 (H) READ THE FIRST TIME - REFERRAL(S)
04/15/96 3734 (H) RESOURCES, FINANCE
04/26/96 (H) RES AT 8:00 AM CAPITOL 124
BILL: HB 548
SHORT TITLE: NORTH STAR OIL & GAS LEASE AMENDMENT
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
03/28/96 3434 (H) READ THE FIRST TIME - REFERRAL(S)
03/28/96 3434 (H) RESOURCES, FINANCE
03/28/96 3434 (H) FISCAL NOTE (DNR)
03/28/96 3435 (H) GOVERNOR'S TRANSMITTAL LETTER
03/28/96 3436 (H) ATTACHMENT
04/03/96 (H) RES AT 8:00 AM CAPITOL 124
04/03/96 (H) MINUTE(RES)
04/10/96 (H) RES AT 8:00 AM CAPITOL 124
04/10/96 (H) MINUTE(RES)
04/12/96 (H) RES AT 8:00 AM CAPITOL 124
04/15/96 (H) RES AT 5:00 PM CAPITOL 124
04/15/96 (H) MINUTE(RES)
04/23/96 (H) RES AT 3:00 PM CAPITOL 124
04/24/96 4019 (H) WTR REFERRAL ADDED
BILL: SB 262
SHORT TITLE: MANAGEMENT OF FISH/GAME POPULATION & AREA
SPONSOR(S): SENATOR(S) MILLER, Sharp, Pearce, Halford, Green,
Frank, Taylor
JRN-DATE JRN-PG ACTION
02/02/96 2286 (S) READ THE FIRST TIME - REFERRAL(S)
02/02/96 2286 (S) RES, JUD
02/05/96 2309 (S) COSPONSOR(S): TAYLOR
02/12/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205
02/12/96 (S) MINUTE(RES)
03/08/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205
03/08/96 (S) MINUTE(RES)
03/11/96 (S) RES AT 3:30 PM BUTROVICH ROOM 205
03/11/96 (S) MINUTE(RES)
03/12/96 2709 (S) RES RPT CS 5DP 1NR SAME TITLE
03/12/96 2709 (S) FISCAL NOTE TO SB & CS (F&G)
03/18/96 2785 (S) FIN REFERRAL ADDED
03/26/96 2910 (S) JUD REFERRAL WAIVED Y12 N8
04/03/96 (S) FIN AT 9:00 AM SENATE FINANCE 532
04/03/96 (S) MINUTE(FIN)
04/04/96 3065 (S) FIN RPT 2DP 2NR (RES)CS
04/04/96 3065 (S) PREVIOUS FN (F&G)
04/09/96 (S) RLS AT 12:20 PM FAHRENKAMP RM 203
04/09/96 (S) MINUTE(RLS)
04/10/96 3112 (S) RULES TO CAL & 1 NR 4/10/96
04/10/96 3116 (S) READ THE SECOND TIME
04/10/96 3116 (S) RES CS ADOPTED UNAN CONSENT
04/10/96 3116 (S) ADVANCE TO THIRD READING FLD Y12 N8
04/10/96 3116 (S) THIRD READING 4/11 CALENDAR
04/11/96 3168 (S) READ THE THIRD TIME CSSB 262(RES)
04/11/96 3168 (S) PASSED Y12 N8
04/11/96 3169 (S) COURT RULE CHANGES FAILED Y13 N7
04/11/96 3176 (S) TRANSMITTED TO (H)
04/12/96 3690 (H) READ THE FIRST TIME - REFERRAL(S)
04/12/96 3690 (H) RESOURCES, JUDICIARY
04/26/96 (H) RES AT 8:00 AM CAPITOL 124
WITNESS REGISTER
REPRESENTATIVE JERRY MACKIE
Alaska State Legislature
Capitol Building, Room 404
Juneau, AK 99801
Telephone: (907) 465-4925
POSITION STATEMENT: Testified on SB 307.
KEVIN R. BANKS, Petroleum Economist
Division of Oil & Gas
Department of Natural Resources
3601 C Street, Suite 1380
Anchorage, AK 99503-5948
Telephone: (907) 269-8799
POSITION STATEMENT: Testified on HB 548.
KENNETH BOYD, Director
Division of Oil & Gas
Department of Natural Resources
3601 C Street, Suite 1380
Anchorage, AK 99503-5948
Telephone: (907) 269-5948
POSITION STATEMENT: Testified on HB 548.
ERIC LUTTRELL, Vice President Exploration
BP Exploration (Alaska) Inc.
P. O. Box 196612
Anchorage, AK 99519-6612
Telephone: (907) 564-4892
POSITION STATEMENT: Available for questions HB 548.
ANNETTE KREITZER, Legislative Assistant
to Senator Loren Leman
Alaska State Legislature
Capitol Building, Room 115
Juneau, AK 99801
Telephone: (907) 465-2095
POSITION STATEMENT: Testified on behalf of sponsor SB 112.
MARY GORE, Legislative Assistant
to Senator Mike Miller
Alaska State Legislature
Capitol Building, Room 125
Juneau, AK 99801
Telephone: (907) 3770
POSITION STATEMENT: Testified on behalf of sponsor SB 262.
JULIE PENN, Volunteer
Alaska Environmental Lobby
419 6th Street
Juneau, AK 99801
Telephone: (907) 463-3366
POSITION STATEMENT: Testified against SB 262.
WAYNE REGELIN, Director
Division of Wildlife Conservation
Department of Fish and Game
P. O. Box 25526
Juneau, AK 99802-5526
Telephone: (907) 465-4190
POSITION STATEMENT: Testified against SB 262.
ACTION NARRATIVE
TAPE 96-69, SIDE A
Number 000
CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting
to order at 8:10 a.m. Members present at the call to order were
Representatives Green, Williams, Ogan, Austerman, Barnes, Davies
and Kott. Representatives Long and Nicholia were excused.
SB 307 - DUDE CREEK HABITAT AREA LAND EXCHANGE
REPRESENTATIVE JERRY MACKIE introduced SB 307 saying that the Fall
Creek hydropower project is located in his district about 20 miles
west of Juneau in the community of Gustavus, Alaska.
REPRESENTATIVE MACKIE said SB 307 will facilitate the development
of the Fall Creek hydropower project by authorizing the state to
engage in a land exchange with the federal government, contingent
on Congress passing a land exchange authorization. SB 307 will
play a vital role in the future economic health of the entire state
of Alaska.
REPRESENTATIVE MACKIE continued, "The Power Cost Equalization
program has been cut $3,000,000 this fiscal year and we must
continue to develop alternatives that will provide the state with
efficient cost savings power alternatives.
REPRESENTATIVE MACKIE stated, "It is vital that we work together to
develop and support alternative power resources throughout the
urban and rural areas of the state. Alternative energy resource
development must be a priority for the state of Alaska and
proposals such as SB 307 will minimize the impact of future state
and federal budget restrictions.
REPRESENTATIVE MACKIE proceeded, "This hydropower plant would be
constructed and operated solely from private capital and supply
power to the National Park Service, state of Alaska, and the
community of Gustavus."
REPRESENTATIVE MACKIE stated that SB 307 will potentially save up
to $118,750 per year in decreased power cost equalization costs,
and it would reduce the environmental impact of diesel generation
and bulk fuel storage.
REPRESENTATIVE MACKIE related that SB 307 includes endorsements
from Gustavus Community Association, the Alaska Department of Fish
and Game and the Department of Community & Regional Affairs. The
Department of Natural Resources fiscal note with the analyses which
accompanies SB 307 reflects a one time expenditure of $8,000. This
is for one position for a two month period at a cost of $7,000 for
personnel services, $800.00 for travel and $200.00 for supplies.
This applies only if, and when, the federal legislation passes.
Number 209
REPRESENTATIVE MACKIE continued, "This bill passed the Senate
unanimously 20-0. The timely passage of SB 307 would provide a
strong message to Congress in regards to HR 2561, introduced by
Representative Don Young, which provides federal authority of this
land exchange. This bill is strongly supported by the Governor and
this Administration, by the environmental community and by all the
people involved who work directly with the park service. To my
knowledge there is no opposition whatsoever either on the federal
or the state side with the exception of the National Sierra Club
and one other wildlife organization whose policies include
absolutely no land coming out of wilderness, period."
REPRESENTATIVE MACKIE explained that a portion of Glacier Bay
National Park will be transferred to the state and some critical
habitat area at Dude Creek, adjacent to Glacier Bay National Park,
will be transferred to the park in exchange. The state would own
the property and this privately financed hydropower project can
then travel through the park.
Number 359
REPRESENTATIVE JOHN DAVIES moved that CSSB 307(FIN) be passed out
of the House Resources Committee with individual recommendations
and attached fiscal notes. Hearing no objection, CSSB 307(FIN)
moved from the House Resources Committee.
HB 548 - NORTHSTAR OIL & GAS LEASE PAYMENT
CO-CHAIRMAN GREEN announced the committee would hear HB 548 and he
asked Kevin Banks to come forward.
Number 413
KEVIN R. BANKS, Petroleum Economist, Division of Oil and Gas,
Department of Natural Resources stated that he would address
previously requested sensitivities of DNR's Illustrative Northstar
Model based on assumptions of higher production rates and high oil
prices and a 25 percent savings in capital expenditures.
Number 448
MR. BANKS said, "Table I is the base case. It is the numbers that
we have been talking about and the relevant differences are that in
the base case, we believe the proposal will produce $37 million in
1996 dollars in supplemental royalties versus in the case where the
leases are not amended, development would be delayed until 2002.
It is our intention, as a result, that the net profit shares would
be valued at about $41,000,000."
Number 492
MR. BANKS continued, "As you can see from Table II, changing some
of the assumptions as you requested, all I did was increase the
number of barrels without changing the peak production rate. So,
it added about two years, or so, to the plateau of peak production.
As you can see, there is a significant increase in net profit
shares under that kind of scenario, and an increase in supplemental
royalty associated with the increased volumes."
Number 534
MR. BANKS referred to Tables III and IV illustrating similar kinds
of results.
MR. BANKS said, "To provide some kind of balance, I believe that it
is only fair to look at the down side, as well. If production is
not what we expect, the net profit share goes to zero. If the oil
prices are not as high as we would hope, both the net profit share
and the supplemental royalty fall to zero. Likewise, if capital
expenditures increase by 25 percent, the net profit share basically
evaporates."
Number 584
MR. BANKS referred to graph provided by BP Exploration and stated
that he believed that the cut off for net profit shares occurs if
the capital expenditures are just 10 percent, or so, more than what
they are estimating.
MR. BANKS summarized, "There is a bigger impact on net profit share
than on the supplemental royalty in the up side."
Number 647
MR. BANKS recalled Representative Davies questions from the prior
meeting and said, "I was focusing on late life capital investments
but what he was really talking about was what happens at the end of
field life without further investment. I believe, as an economist,
that as long as there is some positive cash flow in the field, the
field will go on producing. I realize that BP is probably looking
at what the asset generates for the company, what contribution this
asset, that they show on their balance sheet, contributes to the
income of the company. They have to make a decision, I believe,
that ... do we keep this asset or do we sell it? While, I believe
that production would continue as long as there is a contribution
to stockholder equity, in any form, they may come to the conclusion
that it is an underperformer. They would off load the prospect to
someone who could work with smaller margins."
Number 727
MR. BANKS proceeded, "As I have indicated in my letter, we see this
kind of thing happening in the Gulf of Mexico, as that basin has
matured. On the other hand, and, I do add this caveat, the
abandonment cost can go both ways. If a company, or a producer,
recognizes that there is a fairly significant abandonment cost that
is looming in their future. If they can postpone the abandonment
cost, then the net present value of that cost has to be measured
against what kind of income stream they can ... or the losses that
they are going to have to incur, in the meantime. There could be
some incentive to produce even beyond a positive cash flow after
the cash flows fall to negative."
Number 779
MR. BANKS further stated, "The state, however, has some say about
how leases will be dismantled and assigned at the end of field
life. I think, it would be in our interest to make sure that
whoever acquires it, if this hypothetical occurs, has the means to
dismantle and restore the leases to their original condition. That
works the opposite way."
Number 809
CO-CHAIRMAN GREEN thanked Mr. Brooks for his presentation and his
immediate response to committee questions.
Number 850
KEN BOYD, Director, Division of Oil and Gas, Department of Natural
Resources, came to the table.
CO-CHAIRMAN GREEN interrupted to confirm that Eric Luttrell was on
the teleconference network from Anchorage.
Number 863
ERIC LUTTRELL, Vice President Exploration, BP Exploration (Alaska)
Inc., confirmed his presence assuring the chairman that he would
not hear any groans.
Number 879
CO-CHAIRMAN GREEN addressed Mr. Boyd reiterating Representative
Davies question, .. "about what would happen on the abandonment and
the clean up portion, and I really do appreciate Eric's indicating
a likelihood of what might happen. Do you have any formal
requirements that would pass to a subsequent owner?"
Number 907
MR. BOYD said, "I do not believe so. I believe that what we have
is the commissioner, or the director, has broad authority as to
what will happen at the end of lease life and that policy has not
changed to anything specific, yet. One of the things is that in
trying to make decisions today, about abandonment 15 years from
now, begs the question of what actually do we want to do. You
think about Cook Inlet, this may be a frivolous example, take the
platforms in Cook Inlet, could you make them into casinos or
prisons? Do you really decide today to cut them to pieces and drag
them out of here at some extreme cost? Is there some use for the
facilities on the North Slope other than what they are used for
now? So, the short answer to your question is, there is no
specific policy but, again, there is a broad authority to do
something at the end of its life."
Number 957
CO-CHAIRMAN GREEN said, "For example, now we have drifted back on
shore ... with all the road systems, and so on ... if there could
be a beneficial use indicated, they would not necessarily require
that all that gravel be put back in pits ... there may be benefits
for the island at Northstar ... while the wells would be abandoned
they may not need to remove the gravel?"
Number 987
MR. BOYD stated, "That is correct, you have seen some of that
already. I am no expert on this, but I know that there has been
some gravel things that have been turned into fish habitat, for
example. There are some beneficial uses, I think, even for caribou
for insect relief. I, again, am not an expert on this, I just sort
of know this anecdotally. Your case is the same."
Number 1009
CO-CHAIRMAN GREEN recapitulated, "We have had, what I consider a
very reasonable and well presented economic evaluation. Certainly,
at least, as a summary, from my point of view, if there is a
significant increase in the amount of oil, or the rate at which oil
might be produced, or for the length of time that we might be able
to produce the maximum, it would behoove the state, perhaps, to
stay with the program as we have it now with the net profits rather
than a supplemental royalty."
CO-CHAIRMAN GREEN continued overview, "On the other hand, I think,
the economic analysis has indicated that it could go the other way
and the state would tend to lose under a situation like that. So,
I think that then, that brings us to the point where we should have
been all along, and it is not an easy decision, but I think it
should be then to the purview of the commissioner of the Department
of Natural Resources to ... whose staff is expert in this realm to
determine how we throw the dice. Do we want to go for the big one?
Do we want to take the safer, middle of the road, kind of ... hedge
our bet or are we fearful that we may end up with a real poor
situation and lose both ways?"
Number 1085
CO-CHAIRMAN GREEN summarized, "So, it would be my recommendation
from this committee then that we would accept the proposal as has
been agreed to between the Department of Natural Resources and the
operator. My concern now shifts to the fact that there has been
statements, there have been verbal commitments that the operator
would exercise, to the utmost, their desire to try and hire
locally. I do not want to get into the wrong nomenclature, so that
this could somehow be construed as going against the federal court.
But, whether you call it Alaska hire, or people who live in this
state would be hired as much as possible - that the construction of
modules would be done in state. I think, that while the royalty
aspect, the income stream, certainly is of critical nature to the
state, I think the potential for being a staging area for the
developing nations, Russia and the Pacific Rim, I think really
bodes well. We will end up with a trained work force, technically
capable and skillfully trained. I think that is equally important
to this legislature."
Number 1174
CO-CHAIRMAN GREEN said, "Having said all that, there is before you
an amended version of this bill, version G. In essence, what this
version does, it stays with the program that has been agreed to
between the applicant and the department. However, it has expanded
that contract or that bill that was originally introduced. HB 548
was fairly plain ... that was introduced on the 28th of March.
This bill follows that format but adds in ... and I will review the
portions that have been changed for your edification."
Number 1224
CO-CHAIRMAN GREEN, "On page 2, line 14 through page 3, line 18.
That has been instituted at the suggestion of some of the
leadership of the House. Then, again, on page 3, lines 30 and 31
through page 4, line 23. In essence, what that does, it actually
requires the applicant to make a good faith effort and it says that
they will hire at least 85 percent (page 4, line 6) and they will
construct all the necessary paraphernalia that would go with the
development of Northstar within the state of Alaska. That, in
essence, is what is required with no change to agreement itself."
Number 1297
CO-CHAIRMAN WILLIAM K. "BILL" WILLIAMS moved to adopt CS HB 548,
version `G,' as the working document. There were no objections.
Number 1320
CO-CHAIRMAN WILLIAMS noted that the first part of Co-Chairman
Green's amendments were in the findings area and said he had no
question about that. He did have a question on page 4, "How will
these areas be legally enforceable?"
Number 1344
CO-CHAIRMAN GREEN commented that that was a very good question.
"We have talked with the legal drafter and there is a
`severability' that if there is challenge to this, as there may be,
if there is challenge and it fails, only that portion of the
challenge would change and the rest of the document would stay
intact. So, that if, for example, 85 percent is held by federal
court to be unconstitutional, for some reason, then the 85 percent
would drop but there would still be the desire to hire as many
locals as possible. If that wording were held unconstitutional,
then it is just going to back off as much as would be held
unconstitutional. There is, perhaps, even a chance that to require
the applicant to construct their modules within the state. Maybe
a restraint of trade that would not pass muster. But, I think,
that too, would only be a severable portion of it and the rest of
the contract would hold."
Number 1408
CO-CHAIRMAN GREEN continued, "In essence, what this says is, `Go do
your best,' and if there are individual challenges and lose, ...and
that is not to say they would, just because of challenge, lose - at
least, they would be severable and not the whole contract then
(indisc.) would not fall."
Number 1425
REPRESENTATIVE PETE KOTT concurred with the Chairman's comments.
"In my opinion, I do not think that the section dealing with the 85
percent will hold in the court and make Section 3 a moot issue
because there will be no reporting provision. If, in fact, I were
wrong, and the 85 percent is held up which would then trigger the
reporting provision. What would the commissioner of the Department
of Labor do if, in fact, the report showed a 75 percent higher
rate, instate? What is the ramifications of not meeting the
threshold of 85 percent?"
Number 1461
CO-CHAIRMAN GREEN said, "Well, that would be a condition that,
assuming that that 85 percent passed muster, then they would be
required to increase the number of local hire until it met 85
percent of their work force, for that project."
Number 1478
REPRESENTATIVE KOTT said, "My question is, what would happen if
they, ultimately, did not?"
Number 1484
CO-CHAIRMAN GREEN replied, "I would think that would be a breach
and they would be held accountable to either modify their work
force or increase it to accomplish that. That is one of the
reasons for the reporting requirement. So, that they can't get
themselves into a position like that. As they develop their work
force which would be a ramp up, that they would stay with Alaskans
except for those few cases where there is no trained or trainable
work force timely enough to accomplish what needs to be done."
Number 1505
REPRESENTATIVE KOTT stated that he has no reason to believe that
the 85 percent threshold will not be met. "I think we have enough
qualified people in the state. I was just curious as to what the
potential ramification would be if, in fact, for whatever reason,
the 85 percent was not reached. The project, I would not ... they
would just be stopped right in the middle. I am sure there would
be some good faith effort to increase it, if possible. I am sure
there would be some consideration, by the department, on the
percentage."
Number 1530
CO-CHAIRMAN GREEN responded, "I think you bring up a good point
because there could be a `saw tooth effect' that during the period
of adjustment to get it to an operational ... or even during
construction, that might go above 85 percent, and drop below it.
I think that is where we bring the Department of Labor involved to
go along with that, `Whoops, applicant you are down to around 65
percent, you had better do something,' because it does provide for
training, if necessary."
Number 1551
REPRESENTATIVE DAVIES applauded the chairman's efforts to make the
collateral benefit more tangible, but, "I am concerned that because
of the kind of discussions that we have had, I guess I concur with
the Representative from Eagle River that the constitutionality of
this particular provision is problematic. My understanding is that
these sorts of things can, sometimes, pass muster more easily if
they are couched in the terms of incentives. I wondered if you
have considered structuring something so that, depending upon the
level of participation in Alaska hire, the supplemental royalty
might change to provide an incentive?"
Number 1603
CO-CHAIRMAN GREEN stated that he had not considered that. "I think
that would have been a very good thing to discuss if this were
February, or last year, and we would not be in a time constraint
activity which if we don't do something then we have a whole
interim period of time that may not be good. So, I think that
brings up a very interesting point. If this were to pass this way
then I would think that there would be a sudden movement between
the various parties to the situation to address just what you are
talking about. Maybe there is a better way. Or, they could be
saying, `Hey, we know that will be unconstitutional.' I don't know
that nor did the drafter of this. The legal expertise said, `Yes,
100 percent, we know won't work.' Eighty-five percent or any
percent, we tried to find out ... does the possibility of it
passing improve with the decreased minimum number of local hires.
That is purely speculative, and I want to make sure that everybody
knows what I found out that, `Hey, having any number in there may
not pass muster. So, what you are suggesting is maybe, in order to
keep that as high as possible, that if you do not do this, the
royalty goes up. That too, may find because the court would ... I
am talking way out of school here because I am not legally trained,
but, I would think the court would look through that and say that,
too, ties to local hire and that is what we are holding as an
unconstitutional restraint (indisc.). It may have already been
discussed, Representative Davies, I do not know. We were not privy
to, almost, a year of negotiation that has been going on between
the Department of Natural Resources and the applicant. I have no
idea what all those things ... and this could certainly have been
one. Were you involved in those negotiations, Ken, or was it the
commissioner? I am sure they covered a wide swath of negotiations
and that is duly noted on the record that may be an alternative to
this. Unless, are you suggesting to offer that as an amendment to
the amendment?"
Number 1722
REPRESENTATIVE DAVIES, "In all due respect, Mr. Chairman, I got
this at 8:00 o'clock last night, so I have not had a lot of time to
think about it. I, certainly, do not have an amendment prepared.
It would take some consideration to look at that. What I am
thinking right now, this is different than the version that came to
us from the other side in that there will be a requirement to ...
Number 1751
CO-CHAIRMAN GREEN interjected, "Are you saying the Senate version?
We do not have that yet. We have, kind of, been following it."
Number 1761
REPRESENTATIVE DAVIES agreed that was correct, "I was just
wondering if there might be some opportunity for a conference
committee to have some further thought?"
Number 1770
CO-CHAIRMAN GREEN said, "Well, there would certainly be, there, and
this goes on to Finance and there would be a chance to do something
like you are saying in Finance, or on the Floor, and this also has
a referral to the World Trade Committee."
REPRESENTATIVE DAVIS commented that the World Trade Committee has
sort of global views ...
Number 1788
REPRESENTATIVE ALAN AUSTERMAN recognized what Representative Davies
was saying and his concern, "I, also, do not know how you would
answer that question, and it has been a question throughout the
state for many, many years. I am in favor of this draft and
continuing on in trying to push it forward. I think every step
that we take toward trying to solve, or answer, this question of
local hire, and every time it is going to end up in the courts,
whether we like it or not, that as long as we keep pursuing it and
pounding it, at some point in time, we may come up with the answer
that we are looking for. But, just to draw back and say that we
feel it is unconstitutional and may not pass muster, does not get
us there either. It is going to go to the courts and they are the
ones who are going to end up making the determination if somebody
takes it to court. I am in favor of pursuing this, at this stage
of the game, and seeing if we can get an answer to it and come to
some resolve as to whether it is building a new school, in one of
the villages, or whether it is to drill for oil on the North Slope.
It is an issue that we need to continue to pursue and try to get an
answer to. It is how we put our people to work."
Number 1852
REPRESENTATIVE KOTT appreciated what his colleague from Kodiak is
saying but clarified that what Representative Davies was trying to
get at was, "If there are potential constitutionality problems with
this and this ends up in the court, it may delay the project from
going forward. I, kind of, like the idea of some kind of incentive
mechanism to reach the same goal of hiring 85 percent and whatever
the numbers are that are maxed out in the proposal. I think that
would, certainly, circumvent any potential court or litigation, in
the future. I do not know how long litigation would occur if it
ended up in court. I would certainly not want to prohibit this
project from commencing, at the earliest possible time, to benefit
all the state residents."
Number 1886
CO-CHAIRMAN GREEN said, "Now, we are on a legal question. I would
think that there is no way to know what the court might do. But,
short of an injunction, it seems to me that the worst that could
happen is that the project could continue, but that the court may
strike down this saying, `While this is in litigation, because of
prior cases, you are not going to be held to this.' If you want to
continue operating, we are going to remove that restriction and you
go ahead and build it the way you see. But, do not use that as any
kind of, even an, legal opinion, let alone the court's decision.
I think that as Representative Austerman says, `It is up in the air
now,' and whether that would impact the development of this ... my
feeling would be, that it would not. I think the state, in its
best interest, would find that it is better to move along with the
project and worry about this without it being held. If it turns on
whether `85' is reasonable or if it turns on the fact that you can
not put a number there, I still think that the operator can be
allowed to go ahead and develop. But, that certainly is not a
legal opinion."
Number 1937
REPRESENTATIVE DAVIES said, "My concern is that it also gets to the
question of `sanctions.' I do not know, even if it were to be held
legal, constitutional, I concur with the Representative from Eagle
River's concerns, again, about what you would do to enforce that.
Whereas, if you had an incentive mechanism, the enforcement would
be automatic. You would determine, through the Department of
Labor, what the numbers were, and that would determine what the
supplement royalty would be."
CO-CHAIRMAN GREEN stated that Representative Davies certainly made
an interesting case.
REPRESENTATIVE DAVIES stated that there was one other point that he
wanted to raise, "There is another constitutionality issue
surrounding this whole bill and that has to do with whether we are
meeting the test in the constitution of getting the maximum value,
for the citizens of the state of Alaska, from the resource, maximum
reasonable value. It is a bit of a judgement call. Clearly, there
is no certainty in the world, if we do not know exactly what the
benefits of one course versus the other course are, and that takes
some judgement. That is what we are being asked to do. I think
that is a reasonable request."
REPRESENTATIVE DAVIES continued, "However, in the mean case ... the
best case scenarios, we are explicitly leaving $2,000,000 on the
table and the $41 million compared to the $37-39 million. What we
are saying is that there is some other value to the state. I think
if we were to let ... the other value is things like Alaska hire
which without some such things, what you are trying to do here is
pretty nebulous. I think if we were not to put something like that
in, this thing could be challengeable on that ground. So, there is
no requirement in here to get that other benefit. Therefore, we
have not met our constitutional responsibility to get the best
value for the citizens of the state of Alaska. Whereas, if there
were some such mechanism, as I have suggested, I think it would go
a long ways to meeting that challenge, as well."
Number 2038
CO-CHAIRMAN GREEN acknowledged that Representative Davies made a
very good case, "Again, I would say in the interest of time, and
the fact that there are two more committees of referral, and the
other side, there are ample opportunities to put that in. Also,
there would be time then for the applicant to react to that, too.
I would encourage you to pursue that because I think that you make
a very good point."
Number 2069
CO-CHAIRMAN WILLIAMS commented, "You have, also, in here, entered
into contracts with Alaskan vendors? How many Alaska licensed
firms are available to take ..."
Number 2099
C0-CHAIRMAN GREEN replied, "We actually sent out invitations to one
of our earlier meetings for vendors and contractors to come. I
believe there were 30 or 40 ... there is a list, and we can make
that available ... oil contractors vendors list. We had several,
we had 15 or 20 that actually came, of which, probably 10 or more
testified at one of our hearings. We have several contractors, we
have several constructors and many employment labor forces. I
think ... we have been told, at least, by one of the major
participants in this that they will have the ability ... they even
went beyond what this would require which, I find, really bizarre.
They could construct, in the state of Alaska, things as large as a
seawater treating plant which `blows me away.' Certainly, they can
construct modules large enough for this project."
Number 2132
CO-CHAIRMAN GREEN asked the wish of the committee.
Number 2137
CO-CHAIRMAN WILLIAMS made a motion to move CSHB 548(RES) from the
House Resources Committee with individual recommendations. Hearing
no objection, CSHB 548(RES) passed out of committee.
CO-CHAIRMAN GREEN asked Mr. Luttrell if he had anything to add.
MR. LUTTRELL was not available.
CO-CHAIRMAN GREEN asked for an at ease.
CO-CHAIRMAN GREEN reconvened the House Resources Committee at 9:01
a.m. announcing that the committee would hear from the
subcommittee, Representative Ogan, Chair, Davies and Green, on SB
112.
SB 112 - DISCOVERY ROYALTY CREDIT
Number 2230
REPRESENTATIVE SCOTT OGAN reported that the subcommittee had met
twice with lively discussions centering around, "On the discovery
royalty, making sure that we had very clearly defined who got there
first, what would be considered, the type of structure or pool of
oil that was discovered first. Probably, the most important thing
was establishing when the clock starts ticking. The main amendment
that was being discussed, which was actually divided into three
questions, which was one you offered. We just recently came up
with what, we believe, is a good amendment to the bill that would
define, essentially, when the clock starts ticking. The intent, I
believe, of the subcommittee, and, I believe that we should put on
the record in this committee, is that that person who first starts
producing the oil would be the one who gets the discovery royalty
break. The intent of that would be to encourage ... keep someone
from, maybe, discovered a pool but they will sit on it for five or
ten years and discourage development. The idea of giving the break
is to encourage oil to be developed and not be speculated upon."
Number 2295
REPRESENTATIVE OGAN continued, "Therefore, I think we should offer
up this amendment, we should call Amendment No. 1:
Page 3, Lines 27-32
with parallel language on Page 2, Lines 3-11
"the lessee under a lease issued in the Cook Inlet sedimentary
basin who is [CERTIFIED BY THE COMMISSIONER TO BE] the first to
file a nonconfidential sworn statement with the commissioner
claiming to be and who is certified by the commissioner to be the
first to have drilled a well discovering oil or gas in a previously
undiscovered oil or gas pool and who is certified by the
commissioner within one year of completion of the discovery well to
have drilled a well in that pool which is capable of producing in
paying quantities shall pay a royalty of five percent on all
production of oil or gas from that pool attributable to that lease
for a period of ten years following the date of completion of the
discovery well in that pool, and thereafter the royalty payable on
all production of oil or gas from the pool attributable to that
lease shall be determined and payable as specified in the leases;
the reduced royalty authorized by this paragraph is subject to the
following:
[(A) A LESSEE IS ELIGIBLE TO PAY THE REDUCED ROYALTY
AUTHORIZED BY THIS PARAGRAPH ONLY IF THE LESSEE IS THE FIRST TO
DRILL A WELL DISCOVERING OIL OR GAS IN A PREVIOUSLY UNDISCOVERED
OIL OR GAS POOL;]
[(B)] (A) "
Number 2306
REPRESENTATIVE AUSTERMAN asked, "Do we have a working draft in
front of us now? Did we move to have a working draft in front of
us, and then it went to subcommittee, or did it just go to
subcommittee?"
Number 2313
CO-CHAIRMAN GREEN informed, "We did not request that they bring
back a working draft. I wish I had."
REPRESENTATIVE AUSTERMAN clarified what he was saying, "The draft
I have before me is version `K,' and is that on the table now?"
CO-CHAIRMAN GREEN replied, "That is on the table."
REPRESENTATIVE OGAN commented, "We did not draft a new committee
substitute just because of the short time frame and the fact that
working out the details of the amendment were worked into last
night and, actually, this morning. So, we felt the best way to
handle it would be to strictly offer an amendment to version K."
REPRESENTATIVE AUSTERMAN responded that he just wanted to be sure
that the committee had moved version K, and that was the version
the committee was working from.
REPRESENTATIVE OGAN stated that was correct.
Number 2353
REPRESENTATIVE OGAN further stated that concluded his report.
CO-CHAIRMAN GREEN recalled some discussion about certifying people
with commercial production on pages 3 and 4.
Number 2363
REPRESENTATIVE OGAN agreed, "Mr. Chairman, you are correct. On the
amendment offered by you in the subcommittee, we divided the
question on the amendment, actually, into three different subunits.
What we called numbers two and three which was page 3, line 29, and
on page 4, line 5, there was quite a bit of discussion about
deleting the word `commercial,' and adding the words, `paying
quantities.' Paying quantities is defined in statute ... no, I
believe it is defined in regulation and we were ... there was some
discussion when we left as to which regulation. There were three
different cites in regulation where paying quantities are (indisc.)
and this amendment...
Number 2409
REPRESENTATIVE AUSTERMAN interrupted, "We are at a disadvantage
because we do not have the amendment that he is referring to, that
you made in subcommittee."
CO-CHAIRMAN GREEN thought that amendment had been offered, "There
was one offered that had two ... there was one offered with my name
on it at committee before it went to subcommittee. I think that is
what Representative Ogan is referring to."
Number 2433
REPRESENTATIVE DAVIES inquired, "Can we go back, what are we
talking about?"
CO-CHAIRMAN GREEN answered, "He is just giving us a report as to
what has happened in subcommittee. Then, we have not offered any
amendments, yet. Then, Representative Ogan, was there going to be
a choice made ...."(End Tape)
TAPE 96-69, SIDE B
Number 000
REPRESENTATIVE OGAN is saying...."privy to all the discussions of
what happened after the meeting as far as what the amendment was
going to come up with. I believe that is what this amendment
addressed."
CO-CHAIRMAN GREEN said, "I do not see the definition of `paying
quantities' here."
REPRESENTATIVE OGAN said, "I don't either."
Number 024
REPRESENTATIVE DAVIES suggested that the chairman move an amendment
so the committee would have something to talk about.
Number 030
CO-CHAIRMAN GREEN said, "What we are still trying to get through,
is the committee report. When the committee report is through,
Representative Davies, I will say now, then we can go. Just bear
with us."
CO-CHAIRMAN GREEN stated to Representative Ogan that members of the
Department of Natural Resources were present.
Number 046
REPRESENTATIVE OGAN explained, "What happened was that after the
committee ... the committee decided we were going to insert `paying
quantities' and we were going to cite regulation in statute. We
were going to pick which ..."
CO-CHAIRMAN GREEN said, "That is not a good idea."
REPRESENTATIVE OGAN further explained, "That was one of the things
that we discussed. However, after the committee adjourned there
was quite a bit of discussion that went on afterwards about the
best way to do that. This is what we came up. So, I think, maybe,
there needs to be some clarification."
REPRESENTATIVE OGAN requested an at ease.
CO-CHAIRMAN GREEN requested that the committee stand at ease and
reconvene at 9:20 a.m.
CO-CHAIRMAN GREEN reconvened the meeting at 9:22 a.m.
Number 077
REPRESENTATIVE OGAN apologized for the confusion. "A lot happened
after the meeting. Conceptually, what we agree to do was to adopt
these amendments, number two and three. What the result of that
was what we are introducing as Amendment No. 1, today. We would,
also, like to add language for the purposes of this paragraph or
this statute. We would like to adopt the language from 11 AAC
83.395 and put that in statute and that would define the paying
quantities. A copy of that is forthcoming, 11 AAC 83.395."
REPRESENTATIVE DAVIES signified that he just wanted to make sure
that he understood what the committee is doing.
Number 122
CO-CHAIRMAN GREEN clarified that Representative Ogan had offered
Amendment No. 1 , "and went further to say, in addition, to what you
see there, he is ... for the purpose of determining what `paying
quantities" is, what that term means."
REPRESENTATIVE DAVIES wondered if that should be Amendment No. 2.
REPRESENTATIVE OGAN stated that it is amendment to the amendment.
CO-CHAIRMAN GREEN said, "It is conceptually going to be as part of
... we can do it either way. Did you have a question Representative
Barnes?"
REPRESENTATIVE RAMONA BARNES indicated that she was just listening.
REPRESENTATIVE DAVIES commented that she should listen carefully.
CO-CHAIRMAN GREEN continued, "The amendment language is being
reproduced and what he is suggesting is that because there may be
some indication that paying quantities is a vague term. For the
purpose of this paragraph in statute, there will be a definition.
That definition being the same definition that is included in the
regulations, at the current time. Those words are coming down to
us. We have representatives from the Department of Natural
Resources here if you want to ... for this period of time that we
are talking about, he can tell us what those words are."
Number 164
REPRESENTATIVE DAVIES stated that he was still trying to figure out
... "I want to make sure that I understood exactly what Amendment
No. 1 is that is before us. While we are waiting maybe we can have
another at ease until we get the other language. It says `with
parallel language on page 2,' does that mean that it is to insert
all this stuff, also, on page 2, lines 3-11?
Number 187
REPRESENTATIVE AUSTERMAN interjected, "Before we go any further,
Mr. Chairman, I want to make sure ... have we got Amendment No. 1
on the table now? In version K, on page 3, line 27, it starts,
`with the effective date of this Act.' So, we are going to do what
here? I do not understand the `with parallel language.' Are we
going to just insert this language here starting on line 27 and
move everything down? Are we removing anything out of this
language on page 3? I do not follow this."
Number 212
ANNETTE KREITZER, Legislative Assistant to Senator Loren Leman,
Chairman, Senate Resources Committee, joined the panel. "Part of
this is due to time constraints in drafting the amendment, and I
apologize if it is not clear. The amendment goes to page 3, lines
27-32 beginning on line 27 where it says `the lessee.' So, we are
inserting this following the comma after Act,. If you would like
to correct the amendment to read, `insert following the comma after
Act on that line. That is the intention, of course, the lessee
under a lease issued in the Cook Inlet sedimentary basin. Then,
also, if you will note on the amendment, it also goes over to page
4, and deletes (A), beginning on line 3 through line 5, because it
is not necessary after the amendment is made."
Number 251
REPRESENTATIVE BARNES asked clarification, "Where does it end?"
MS. KREITZER answered, "It is inserted into the language that
begins on line 27, and goes through line 32, and up to the top of
page 4. Then we delete (A), on page 4."
Number 255
REPRESENTATIVE AUSTERMAN confirmed everything after the comma on
line 27.
Number 260
MS. KREITZER assented, "Is replaced with this amendment, and then
through the deletion of (A) on page 4, line 5. Then on line 6, (B)
becomes (A).
CO-CHAIRMAN GREEN asked members if everyone was aware of what was
being deleted?
REPRESENTATIVE BARNES wanted to go back to the top of the page to
make sure she understood everything clearly. "You are deleting all
of (A) through line 5 to (B)?."
CO-CHAIRMAN GREEN agreed, "Yes, but we are actually deleting more
than that. If we start over on page 3, line 27, after the word
Act, that whole part of the rest of the page, clear over through
line 5 on page 4, is all out. Then this language goes in there."
MS. KREITZER explained, "Then the second part of this where it says
with parallel language on page 2, lines 3 through 11, this section
... speaks to the exploration licensing because the sedimentary
basin (indisc. interference with the microphone) expected to be a
bit larger than the box created by the exploration licensing
program. It says `with parallel language' on page 2, lines 3-11,
because this is written slightly differently, and I did not have
the time to create the parallel language that would be necessary to
make it match. If you can accept that, conceptually, the idea is
that you take the same language (indisc. more interference with the
microphone) on page 2 to make it fit. They are written just a
little bit differently, so we could not make the exact amendment to
that section because of the way that this is phrased. I apologize
to the committee for not having the time to make it complete there,
but if you can accept that conceptually...."
Number 356
REPRESENTATIVE AUSTERMAN said, "Let's go to page 2, line 3. Where
in that line are we going to insert the language?
Number 361
MS. KREITZER, "Well, it is going to have to be inserted where it
begins on line 3 ... and, if you could adopt that conceptually
because the drafter will have to make this language fit within that
paragraph. It is written just slightly differently, the words
would be the same within that section, lines 3-11, it is just that
it is written slightly different than page 3."
Number 399
CO-CHAIRMAN WILLIAMS wanted to know, "To make it clear then, we are
putting this language over here, also?"
MS. KREITZER responded, "Yes, Representative Williams, the only
thing that would not go, of course, is the deletion of (A) which is
at the bottom of this amendment."
Number 414
REPRESENTATIVE OGAN wanted to clarify for the record that what is
happening here is that when the subcommittee left, we agreed on
page ... to change, according to page 3, line 29 and page 4, line
5, on these amendments that you offered here. In the meantime,
what has happened is that the drafter of the original bill on the
other body has gotten together with the Department of Natural
Resources and has come up with language that, conceptually, does
the same thing. That is what they are offering here, today. I
just wanted to make that clear."
Number 441
CO-CHAIRMAN GREEN said, "Yes, I think that explains on pages 3 and
4, I think the concern now registered by Representative Austerman
is back on page 2. The problem is that the conforming language,
the way it is drafted doesn't just `shoe horn in' to page 2 like it
does in pages 3 and 4. Then it fits and you can just go from
there, but over here it is parallel. It is the same concept, but
there is going to have to be some massaging of the intro language.
Obviously, as stated, there is no elimination of (A) because there
is no (A) to eliminate. So, this major paragraph will be massaged
in its entrance to where it can fit then on page 2. So that they
are the same."
Number 479
REPRESENTATIVE OGAN understood that stating that he simply wanted
to make the point of what happened at the meeting and why the
committee is dealing with a little bit different amendment, today.
"Essentially, trying to get there ... and that is the issue that we
need to discuss at the meeting here, is if what we agreed on in the
subcommittee meeting, if this amendment, offered today,
accomplishes, conceptually, what we are trying to achieve."
CO-CHAIRMAN GREEN suggested that Representative Ogan might want to
speak to the amendment as to how that does accomplish that, or are
there any questions of the amendments?"
Number 504
REPRESENTATIVE OGAN said, "I believe that it is a good faith effort
to accomplish what we are trying to accomplish with our amendments
in subcommittee. As they say, the `devil is in the details,' as
far as the wording goes, but, conceptually, I believe that it is
very similar."
Number 527
REPRESENTATIVE BARNES requested that a working draft be prepared
and brought back so the committee could look at it in its context.
CO-CHAIRMAN GREEN replied, "We certainly can."
CO-CHAIRMAN WILLIAMS asked to hear from the bill's sponsor.
Number 543
MS. KREITZER apologized if she was confusing people, "It really is
not that difficult of an amendment. I appreciate Representative
Barnes concern about wanting to make sure that she knows exactly
what she is moving out of committee. I very much appreciate that,
but I will just attempt one more time to say, if you look at the
language on page 2, line 2, where it starts, `except that the
lessee who, proceeding under AS 38.05.131 - 38.05.134, that sets
off, of course, this exploration licensing program. My point,
only, was that we could not word-for-word insert Amendment No. 1 in
here because of the beginning of that phrase that says `except that
the lessee who proceeding under 131 to 134. What I would love to
be able to do is to say after the comma, after 4, the lessee under
lease issued in Cook Inlet sedimentary basin. Then, of course, it
would just fit perfectly into page 2. I have to recognize that
that phrase, `except the lessee who, proceeding under 131-134' sits
there. So, I do not know how the drafter will fit this in here.
I do not know if he would agree with the way that I would phrase it
or if he will change it slightly. The intent, of course, is the
same that, `except the lessee who, proceeding under exploration
licensing under a lease issued in the Cook Inlet sedimentary basin
who is the first to file a nonconfidential sworn statement with the
commissioner, claiming to be and who is certified by the
commissioner - take the amendment from there. That is the intent,
Representative Barnes."
Number 601
REPRESENTATIVE BARNES understood the intent, "But, I, also, want to
see what it is, in its context. So, we can all have a clear
reading of what it is that we are doing."
CO-CHAIRMAN GREEN replied, "Okay."
CO-CHAIRMAN WILLIAMS expressed concern, "In the interest of time,
I would agree with that, I know what our time schedule is."
CO-CHAIRMAN GREEN said, "Well, we are constrained. I can understand
that Representative Barnes is a little reluctant to leave it to a
drafter... it is not an uncommon process."
REPRESENTATIVE BARNES agreed that it was not uncommon, but stated
that the chairman could make it a little more clear than what the
committee was doing, today.
Number 630
CO-CHAIRMAN GREEN understood that Representative Davies concurred
with the fact that there is confusion. "So, we will have a
redrafted version ... and have it before us on Monday and it will,
essentially, be, as has been discussed. Are there any other
questions, so that when we do reconvene and look that over, we will
have that in your offices for review. So, I would expect there
will be very little time taken on Monday (April 29)."
Number 654
REPRESENTATIVE DAVIES requested that the draft be delivered with
time enough to review them before 8:00 o'clock Monday morning,
preferably, Saturday or by Sunday afternoon.
Number 674
REPRESENTATIVE AUSTERMAN asked if committee action had eliminated
paragraph (C) on page 4.
CO-CHAIRMAN GREEN said that (C) has not been removed, "it was
discussed earlier in amendments, but those were never accepted."
REPRESENTATIVE AUSTERMAN advised that the chairman, technically,
needed to make that change on the amendment.
REPRESENTATIVE BARNES discussed with the chairman the reordering of
paragraphs.
Number 716
CO-CHAIRMAN WILLIAMS asked if there any other amendments.
CO-CHAIRMAN GREEN asked committee if there were other amendments to
consider.
Number 727
REPRESENTATIVE DAVIES observed, "This is probably a little bit
premature, but we did not actually get the amendment to the
amendment, or Amendment No. 2 before us. I presume that is going
to come as part of the work draft that we are going to get back.
I would like to say, right now, that I object to putting that
language in statute. My view is that we ought to leave `paying
quantities' and just let that be defined in the regulations. For
the record, I wanted to let you know where I am on that."
CO-CHAIRMAN GREEN commented that it sure is easier to strike than
to put in. "Any other comments about what you will be receiving
over the weekend and what we will be doing on Monday with this
bill?"
Number 759
REPRESENTATIVE OGAN suggested that the committee follow up on
Representative Davies objection and discuss that out so we can move
it out expeditiously on Monday. "I guess he objected to putting the
language ... defining `paying quantities' in statute. Maybe we
should discuss it in committee to find out ..."
Number 788
CO-CHAIRMAN GREEN clarified that the committee did not have it
before them. "So, what I am suggesting is that if we put it in, it
is easy to strike. For the purposes of this paragraph, paying
quantities means `Wheeeet' (whistle) and we strike it if we do not
like it."
Number 805
CO-CHAIRMAN GREEN announced that SB 112 would be held until Monday,
April 29, 1996, 8:00 a.m.
SB 262 - MANAGEMENT OF FISH/GAME POPULATION & AREA
Number 875
MARY GORE, Legislative Assistant to Senator Mike Miller, testified
on behalf of the sponsor, "The quick and dirty explanation of this
bill, as Senator Miller likes to say, is to put more moose on the
table of Alaskans. This bill guarantees that game populations in
the state will be managed for maximum sustained yield to allow for
hunting for consumptive use. The bill requires that any land
closed to hunting for consumptive use for subsistence or sport use
with the exception of a biological emergency, a new area three
times the size of the originally closed area will be opened to
allow for consumptive use harvest."
MS. GORE continued, "The bill also acknowledges that there is a
public trust created between the state and the sportsmen of Alaska.
The revenue generated from taxes, licenses and other fees paid by
sportsmen would be breached if public access was restricted on
state game refuges except when restriction on access is to protect
habitat from damage due to the method of access. This trust would
also be breached if, by restricting hunting, fishing and trapping
opportunities in a manner inconsistent with maximum sustained
yield.
MS. GORE read, "Further, revenue generated by sportsmen through
taxes and fees cannot be used in an area where consumptive use of
fish and game is not prohibited or for management of nongame
species. If the state breaches this trust, three times the acreage
will be opened and a civil suit can be brought against the state or
public official to compel compliance.
MS. GORE said, "Included in your packet was a sponsor statement, as
well as a sectional analysis of the bill. I would like to draw
attention to the sectional. It was created for the original
version of the bill and was then modified by the Senate Resources
Committee. There are no substantial changes to the sectional with
the exception of the state being required to open three times the
amount of land instead of five times the amount of land in the
original bill. Also, the word `sport' before fishing was deleted
from the original bill to the Senate Resources bill.
Number 1026
MS. GORE stated, "In the bill offered in the Senate Resources
Committee, Senator Hoffman offered an amendment that would exempt
Board of Game members from being held liable and being sued. That
was not cleaned up in the second section of the bill. So, we have
an amendment today that we would like to offer that would exempt
the Board of Game members in the second section of the bill, to
clean it up and make it consistent all the way through.
Number 1038
MS. GORE addressed the amendment:
Page 3, line 23, after "official" insert:
"other than a member of the Board of Game"
Page 3, line 25, after "official" insert:
"other than a member of the Board of Game"
REPRESENTATIVE DAVIES commented that he had the wrong version.
CO-CHAIRMAN GREEN remarked that the committee had the wrong draft,
it does not match.
REPRESENTATIVE DAVIES verified version CS SB 262(RES) (ct rule
fld).
MS. GORE said that would be it.
CO-CHAIRMAN GREEN replied that something does not mesh with the
amendment.
MS. GORE said, "If you look on page 2 of the bill, subsection (c),
line 10, it says other than a member of the Board of Game."
REPRESENTATIVE KOTT corrected the witness, "page 2, line 9."
MS. GORE stated, "It would be on line 9 then. That needs to be
inserted on page 3, line 19, after the word `official' then on line
21, also.
MS. GORE said, "The (Senate) Resources Committee decided that if a
member of the Board of Game was liable for suit, they would never
get anyone to be a member of the Board of Game. So, it was
probably a good thing to change."
Number 1174
CO-CHAIRMAN GREEN asked if there were questions about the verbal
addition on page 3, lines 19 and 21.
Number 1183
CO-CHAIRMAN WILLIAMS moved that the House Resources Committee
substitute for CS SB 262 (RES) (ct rule fld), version K, be adopted
as the working document.
Number 1199
CO-CHAIRMAN GREEN restated the motion to adopt CS SB 262 (RES) (ct
rule fld) as the working document. Hearing no objection, it was so
ordered.
CO-CHAIRMAN GREEN asked if there was a motion to move the
amendment.
Number 1222
CO-CHAIRMAN WILLIAMS so moved.
CO-CHAIRMAN GREEN said, "There has been a motion to move the
amendment as presented and, also, amended the amendment to add the
same language on ... well, this one actually does not work. It is
the verbal amendment now on lines 19 and 21 that the words other
than a member of the Board of Game, after the word `official' on
both lines. Is there objection to that amendment?" Hearing no
objection, it was so ordered.
Number 1254
CO-CHAIRMAN GREEN stated to Ms. Gore that she has used the word
"trust." "That conjures up the potential for litigation with,
perhaps, some bad vibes as what the consequences might be. Is
there a reason that we established this trust and then the punitive
damage to the state would be three times the amount of area that is
blocked off? Is that assuming that there might be some development
that the state might want to do, or make a park, or do something?"
Number 1288
MS. GORE replied, "The bottom line is that they want to make sure
that the money the sportsmen are paying into the Department of Fish
and Game is used strictly for consumptive use, to manage for
consumptive use. If the department does not manage for consumptive
use, they will be required to open an area three times the size,
and that the public trust of the people paying into the Department
of Fish and Game's budget would be breached if the money was not
use to manage for consumptive use."
Number 1326
CO-CHAIRMAN GREEN said, "There was some indication that if an area
were no longer available, there would also be that...
Number 1339
MS. GORE noted that there were exceptions, "On pages 2 and 3,
numbers (1) and (2). Senator Halford wanted to make sure and added
an amendment, actually, that was line 28 and 29, on page 2, that
would sure that if access was inconsistent, it would still allow
... that area could be closed if the land would be damaged or if
they needed to use the land for something else."
Number 1386
CO-CHAIRMAN GREEN asked, "Okay, and that other land would be
available."
MS. GORE answered, "No, that would be an exemption to this."
CO-CHAIRMAN GREEN stated, "It says the public trust would be
breached by restrictions."
MS. GORE, "Except, when the restriction on access is necessary
solely for the purpose of protecting habitat from damage due to
method of access, or if it is inconsistent with maximum sustained
yield. These are the exceptions."
Number 1415
CO-CHAIRMAN GREEN stated that his concern with the trust is, "If
there was a restriction other than habitat that we have breached
this trust, what are the consequences of that?"
Number 1428
MS. GORE replied, "They will bring suit."
CO-CHAIRMAN GREEN queried, "What will they sue for? What would be
the consequences that they would say, `Okay,' we can't have access
to this 40 acres; what am I suing for?"
MS. GORE answered, "I am suing for 120 acres in a different area of
the state."
CO-CHAIRMAN GREEN theorized, "And, if I do that, and this is right
next to this area that was a really good area ...so, there is three
times as much area of goat pasture, would this open the state to
litigation and damages, perhaps, because of the trust nature of
this?"
MS. GORE responded, "That, I can't answer."
CO-CHAIRMAN GREEN said, "I am not trying to manufacture a problem
but trust always incurs the fear of something nasty. That is the
concern that I have. Like for like, and you know that there is
never two people who can agree to that."
MS. GORE agreed.
Number 1497
REPRESENTATIVE DAVIES expressed concern about allowing people to
bring suit against public officials, "even if we exclude people on
the fish and game boards. I mean, isn't it the same argument about
finding people to serve on the fish and game board would apply to
people who want to work as public officials when they are in a
capacity where they could be sued for making professional
management decisions, personally. Among a long list of other
things that I have concerns with, that is one of them."
REPRESENTATIVE DAVIES said, "By setting up this trust and inviting
people to sue us, as state agencies, and as public officials, that
we are creating a situation where there will be a lot of law suits.
Sort of like a lawyers employment bill."
CO-CHAIRMAN WILLIAMS commented, "By public officials, meaning
us, right?"
CO-CHAIRMAN GREEN wondered who the bill drafter is and whether it
would be possible to get that person here to review some of these.
Number 1627
JULIE PENN representing the Alaska Environmental Lobby testified,
"SB 262 indicates that `game populations shall be managed solely on
a biological basis' and that `consumptive use of game is the
highest and best use of game.' But, `managing on a biological
basis' and `managing for maximum sustained yield for human
consumption are mutually inconsistent terms. In fact, all of the
terms used in this bill that sound biological, such as maximum
sustained yield and harvestable surplus, are not biological terms
at all. You will not find them defined in any biology textbook the
way they are defined in this bill. This bill is social engineering
with no foundation in biological science and no relationship to the
sound management of resources expected of the Department of Fish
and Game.
MS. PENN continued, "If we are managing Alaska's game populations
entirely on a biological basis, then why does SB 262 attempt to
manage our game by acreage rather than by the health of the
ecosystem? Mandating that the Board of Game open three acres for
every acre closed is management by map and ruler rather than by
biological principles. It does not exemplify biologically sound
management.
MS. PENN proceeded, "Alaska Department of Fish and Game studies
show that nonconsumptive users of Alaska's wildlife spend 30
percent more on its wildlife than consumptive users. Placing into
law the assumption that human consumption is the highest and best
use of wildlife could cause the state to lose money as well as its
worldwide reputation as a haven for wild nature at its best.
MS. PENN concluded, "Alaska and Alaska's wild resources deserve
better management than SB 262 provides.
MS. PENN further stated that the bill had not been amended to
protect the members of the Board of Fisheries as well as other
public officials. "It is, also, not clear in the bill whether
commercial fishing is included or excluded among fish. So,
closures of commercial areas could require areas three times larger
opened to commercial fishing which is a whole new way of managing
commercial fishing."
Number 1805
WAYNE REGELIN, Director, Division of Wildlife Conservation,
Department of Fish and Game testified that this legislation will
change quite a few existing statutes. "It would mandate that game
populations, in most areas of the state, would be managed solely
for maximum sustained yield. Then it goes on and defines what that
means ... It comes back to one third of all the animals born in a
year. The department does its best, most places, to manage for
high harvest levels. We also take other things into consideration
besides just maximum sustained yield. The board has areas where
they manage areas slightly different because that is what the
hunting public primarily has desired. You have to also remember
that wildlife is a public resource owned by all residents of the
state ... and to say that only one use is the highest and best, I
am not sure that is very appropriate. I think that hunting is one
of the most legitimate uses ... very legitimate uses of wildlife
resources and we do our very best to provide that opportunity.
But, there are other uses that are also legitimate."
Number 1898
MR. REGELIN continued, "The section that mandates that the Board of
Game, if it closes an area or restricts an area ... hunting in an
area, that you open one three times larger or remove the
restrictions of an area three times as large causes us some
concerns. I think that the Board of Game would have real difficulty
closing any season under the provisions of the bill. Most of the
time you are not going to find an area that the state has any
jurisdiction over to open that is three times larger. There are
very few areas in the state that are closed to hunting that have
been done by the Board of Game. Most of the closed areas are
federal areas that are national parks. In the 14 years that I have
worked for the department, the board has only closed hunting in one
area. That was for one species and that was in the McNeil River
area which was highly controversial decision but it was ... and
that maybe what this is referring to. But, I certainly do not
think that is a very big problem and what I think you would end of
having is a lot of ... the board not being able to close areas or
reduce seasons or make restrictions when it is necessary because
they would not have an area to open up."
Number 2000
MR. REGELIN proceeded, "I think that there is another section of
the bill then that would forbid the restrictions of public access
on any refuge or sanctuary or critical habitat area. That is the
part that says that they can sue me if that happens. I do not like
that much. It also gets then into the restrictions on how we can
spend our money which is the same language that was in SB 77, and
the identical language that is in SB 247."
MR. REGELIN said, "To reduce our ability to restrict public access
could really threaten some of our refuges, in my mind, and some of
our sanctuaries. But, it could also really take away a tool that
the Board of Game uses to manage its wildlife in control use areas.
They have a lot of these areas where they control the method of
access to provide certain advantages to some people, like our
trophy sheep areas in Tok, and in Delta, where access is restricted
and we have really some trophy areas. We would not be allowed to
do that anymore, we would not be allowed to have controlled use
areas like the Koyukuk Control Use Area, out by Galena, which is
one of the premier moose hunting areas in the state, and it is
managed for access by boat. And, that gives ... for lots of reasons
the board has done that for years and I think it has worked out
extremely well. Those things, I think, would be prohibited under
this law. I think that the department has worked hard for a very
long time, since the ANILCA was passed in 1980, to identify 17B
easements so we can have access across federal lands and (indisc.)
for navigable waters, and other ways. I think we are trying to
preserve our access rights to these areas. But, I think there is
a real difference between trying to work preserving our rights for
access and guaranteeing rights to access in legislation."
Number 2130
MR. REGELIN continued, "When you guarantee rights of access for
hunting to all of our refuges, critical habitat areas, and things
like that, which is the areas that it guarantees them for, it
really raises some serious questions in my mind how we would do
that. Would we be allowed to restrict the one area that was closed
that would be reopened under this would be McNeil River. When that
was opened, we limited it to six permits every other year. Under
this legislation, that would be reopened and we would not be able
to limit it by permits. The way I read this legislation, our whole
permit system on these types of areas would be illegal because we
would be limiting access to hunts that is guaranteed in this
legislation. I think that there is just some really poor wildlife
policy in this bill. I think it has some real problems technically
and some specifically. But, also, the whole idea of it, I think,
is flawed policy that you are going to try to remove all of the
balance that the Division of Wildlife has, and our responsibility
to try to manage wildlife for all residents of the state. So, we
are opposed."
Number 2277
REPRESENTATIVE DAVIES asked Mr. Regelin to address the way the
shifting of funds would go to cover costs in the current programs
that have been funded in fish and game federal aid funds and shift
to the general fund.
MR. REGELIN replied that the only source of funds that the Division
of Wildlife gets is federal aid and license fees. "It would
prohibit us to expend those funds on any programs that are not
directly related to consumptive use. Right now, we spend about a
little less than five percent of our budget, each year, on programs
for wildlife viewing and wildlife education. In the broad sense,
I think they do benefit hunters and hunting in a large sense, very
significantly but, in a narrower sense, people say that everyone is
benefitting so the hunter should not have to pay. That is what
this is trying to say. We are working very hard to find
alternative sources of funding to pay for these programs of viewing
and wildlife education and we have some things going on in Congress
and, also, working on some ideas on how to match that federal money
when it comes. But, that is a couple of years down the line. Our
feeling was that we have always had general funds until last year
to pay for these programs. We lost all of our general funds last
year after ... the big reason was we have a $5.5 million surplus in
our dedicated fish and game fund. So, it was hard to get general
funds and what I have done is to ask people to have some patience
while we find alternative sources. I think that most hunters
readily agree that wildlife education and teaching about hunting in
the schools is very important and most of them enjoy watching
wildlife .....(END TAPE)
TAPE 96-70, SIDE A
Number 000
MR. REGELIN is saying ..."dollars from the federal government and
that is a tax on arms and ammunition and archery equipment, and a
whole lot of people buy guns and ammunition besides just hunters.
I do not want to argue against the dedicated fund, but, I think
they are taking a very narrow view of this issue."
Number 037
CO-CHAIRMAN GREEN asked Mr. Regelin if he could appear before the
committee on Monday, April 29, for further discussion on SB 262.
MR. REGELIN indicated he would be in attendance.
CO-CHAIRMAN GREEN suggested that the sponsor of SB 262 also request
the presence of the bill drafter to address legal consequences.
ADJOURNMENT
Number 076
There being no further business to come before the House Resources
Committee Co-Chairman Green adjourned the meeting at 10:00 a.m.
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