02/06/2013 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| HB4 | |
| HB77 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | HB 4 | TELECONFERENCED | |
| += | HB 77 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
February 6, 2013
1:03 p.m.
MEMBERS PRESENT
Representative Eric Feige, Co-Chair
Representative Dan Saddler, Co-Chair
Representative Peggy Wilson, Vice Chair
Representative Craig Johnson
Representative Kurt Olson
Representative Paul Seaton
Representative Geran Tarr
Representative Chris Tuck
MEMBERS ABSENT
Representative Mike Hawker
OTHER LEGISLATORS PRESENT
Representative Mike Chenault
Representative Andrew Josephson
COMMITTEE CALENDAR
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4
"An Act relating to the Alaska Gasline Development Corporation;
making the Alaska Gasline Development Corporation, a subsidiary
of the Alaska Housing Finance Corporation, an independent public
corporation of the state; establishing and relating to the in-
state natural gas pipeline fund; making certain information
provided to or by the Alaska Gasline Development Corporation and
its subsidiaries exempt from inspection as a public record;
relating to the Joint In-State Gasline Development Team;
relating to the Alaska Housing Finance Corporation; relating to
the price of the state's royalty gas for certain contracts;
relating to judicial review of a right-of-way lease or an action
or decision related to the development or construction of an oil
or gas pipeline on state land; relating to the lease of a right-
of-way for a gas pipeline transportation corridor, including a
corridor for a natural gas pipeline that is a contract carrier;
relating to the cost of natural resources, permits, and leases
provided to the Alaska Gasline Development Corporation; relating
to procurement by the Alaska Gasline Development Corporation;
relating to the review by the Regulatory Commission of Alaska of
natural gas transportation contracts; relating to the regulation
by the Regulatory Commission of Alaska of an in-state natural
gas pipeline project developed by the Alaska Gasline Development
Corporation; relating to the regulation by the Regulatory
Commission of Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating to the
Alaska Natural Gas Development Authority; relating to the
procurement of certain services by the Alaska Natural Gas
Development Authority; exempting property of a project developed
by the Alaska Gasline Development Corporation from property
taxes before the commencement of commercial operations; and
providing for an effective date."
- HEARD & HELD
HOUSE BILL NO. 77
"An Act relating to the Alaska Land Act, including certain
authorizations, contracts, leases, permits, or other disposals
of state land, resources, property, or interests; relating to
authorization for the use of state land by general permit;
relating to exchange of state land; relating to procedures for
certain administrative appeals and requests for reconsideration
to the commissioner of natural resources; relating to the Alaska
Water Use Act; and providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 4
SHORT TITLE: IN-STATE GASLINE DEVELOPMENT CORP
SPONSOR(s): REPRESENTATIVE(s) HAWKER, CHENAULT
01/16/13 (H) PREFILE RELEASED 1/7/13
01/16/13 (H) READ THE FIRST TIME - REFERRALS
01/16/13 (H) RES, FIN
01/30/13 (H) SPONSOR SUBSTITUTE INTRODUCED
01/30/13 (H) READ THE FIRST TIME - REFERRALS
01/30/13 (H) RES, FIN
02/04/13 (H) RES AT 1:00 PM BARNES 124
02/04/13 (H) Heard & Held
02/04/13 (H) MINUTE(RES)
02/06/13 (H) RES AT 1:00 PM BARNES 124
BILL: HB 77
SHORT TITLE: LAND DISPOSALS/EXCHANGES; WATER RIGHTS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/13 (H) READ THE FIRST TIME - REFERRALS
01/18/13 (H) RES
01/30/13 (H) RES AT 1:00 PM BARNES 124
01/30/13 (H) Heard & Held
01/30/13 (H) MINUTE(RES)
02/01/13 (H) RES AT 1:00 PM BARNES 124
02/01/13 (H) Heard & Held
02/01/13 (H) MINUTE(RES)
02/06/13 (H) RES AT 1:00 PM BARNES 124
WITNESS REGISTER
RENA DELBRIDGE, Staff
Representative Mike Hawker
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Speaking on behalf of the joint prime
sponsors, Representatives Chenault and Hawker, continued review
of the sectional analysis of SSHB 4.
FRANK RICHARDS, Manager
Pipeline Engineering & Government Affairs
Alaska Gasline Development Corporate (AGDC)
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During hearing of SSHB 4, answered
questions.
DAN FAUSKE, President
Alaska Gasline Development Corporation (AGDC)
CEO/Executive Director
Alaska Housing Finance Corporation (AHFC)
Department of Revenue (DOR)
Anchorage, Alaska
POSITION STATEMENT: During hearing of SSHB 4, answered
questions.
LAURA STATS
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 77.
JAMES SULLIVAN, Legislative Organizer
Southeast Alaska Conservation Council (SEACC)
Juneau, Alaska
POSITION STATEMENT: Proposed an amendment to HB 77.
GUY ARCHIBALD, Mining and Clean Water Coordinator
Southeast Alaska Conservation Council (SEACC)
Juneau, Alaska
POSITION STATEMENT: Recommended that HB 77 be amended or not
passed.
REBECCA SEGAL
Alaskans for Responsible Mining (ARM)
Juneau, Alaska
POSITION STATEMENT: Testified in opposition to HB 77.
RICK ROGERS, Executive Director
Resource Development Council for Alaska, Inc. (RDC)
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 77.
RACHAEL PETRO, President/CEO
Alaska State Chamber of Commerce
Anchorage, Alaska
POSITION STATEMENT: Testified in support of HB 77.
ACTION NARRATIVE
1:03:25 PM
CO-CHAIR DAN SADDLER called the House Resources Standing
Committee meeting to order at 1:03 p.m. Representatives Seaton,
Tarr, Olson, Feige, and Saddler were present at the call to
order. Representatives P. Wilson, Tuck, and Johnson arrived as
the meeting was in progress. Representatives Chenault and
Josephson were also present.
HB 4-IN-STATE GASLINE DEVELOPMENT CORP
1:03:47 PM
CO-CHAIR SADDLER announced that the first order of business is
SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 4, "An Act relating to the
Alaska Gasline Development Corporation; making the Alaska
Gasline Development Corporation, a subsidiary of the Alaska
Housing Finance Corporation, an independent public corporation
of the state; establishing and relating to the in-state natural
gas pipeline fund; making certain information provided to or by
the Alaska Gasline Development Corporation and its subsidiaries
exempt from inspection as a public record; relating to the Joint
In-State Gasline Development Team; relating to the Alaska
Housing Finance Corporation; relating to the price of the
state's royalty gas for certain contracts; relating to judicial
review of a right-of-way lease or an action or decision related
to the development or construction of an oil or gas pipeline on
state land; relating to the lease of a right-of-way for a gas
pipeline transportation corridor, including a corridor for a
natural gas pipeline that is a contract carrier; relating to the
cost of natural resources, permits, and leases provided to the
Alaska Gasline Development Corporation; relating to procurement
by the Alaska Gasline Development Corporation; relating to the
review by the Regulatory Commission of Alaska of natural gas
transportation contracts; relating to the regulation by the
Regulatory Commission of Alaska of an in-state natural gas
pipeline project developed by the Alaska Gasline Development
Corporation; relating to the regulation by the Regulatory
Commission of Alaska of an in-state natural gas pipeline that
provides transportation by contract carriage; relating to the
Alaska Natural Gas Development Authority; relating to the
procurement of certain services by the Alaska Natural Gas
Development Authority; exempting property of a project developed
by the Alaska Gasline Development Corporation from property
taxes before the commencement of commercial operations; and
providing for an effective date."
1:04:13 PM
RENA DELBRIDGE, Staff, Representative Mike Hawker, Alaska State
Legislature, on behalf of Representatives Mike Chenault and Mike
Hawker, joint prime sponsors of SSHB 4, continued review of the
sectional analysis of SSHB 4, directing attention to Section 3,
which creates the Alaska Gasline Development Corporation's
(AGDC) corporate identity in statute, including its powers,
responsibilities, and duties. She paraphrased from page 5 of
the sectional analysis [original punctuation provided]:
Sec. 31.25.180, Validity of pledge, declares as valid
and binding any pledge of assets or revenue of the
corporation to payment or interest.
(From AHFC 18.56.120. This is a standard statement
that lenders need to see. It assures lenders that AGDC
has the statutory authority to pledge revenue; in
turn, that protects AGDC contracts under the U.S.
Constitution contracts clause so that future state
legislative action cannot violate protected
contracts.)
Sec. 31.25.190, Capital reserve funds, allows AGDC to
establish capital reserve funds to secure its
obligations, and directs fund management. Requires
annual reports to the governor and legislature.
(From AHFC 18.56.125 with structural modifications per
legal counsel. This section includes a moral, but not
legal, obligation of the state to replenish, if
necessary, a reserve fund created to cover interest
payments due on bonds.)
Sec. 31.25.200, Remedies, permits enforcement of
rights by those holding AGDC obligations.
(From AHFC 18.56.130 with structural changes by legal
counsel. Lenders need to see this standard statement.)
Sec. 31.25.210, Negotiable instruments, declares that
obligations are promises to pay an amount of money.
(From AHFC 18.56.135. This is a standard statement
that lenders need to see.)
MS. DELBRIDGE noted that proposed "Sec. 31.25.200 and Sec.
31.25.210" are a standard bond authority term that lenders would
want to see within the bonding statutory authority.
1:06:58 PM
MS. DELBRIDGE continued her review of the sectional analysis
from which she paraphrased [original punctuation provided]:
Sec. 31.25.220, Obligations eligible for investment,
AGDC obligations as legitimate investments.
(From AHFC 18.56.150. This allows investment in AGDC
bonds by the state and by other private institutions
in the state.)
MS DELBRIDGE explained that the aforementioned proposed statute
provides that Alaska banks and others with fiduciary duties to
their investors can buy into these bonds. She characterized it
as a certified investment. Returning to the sectional analysis
from which she paraphrased [original punctuation provided]:
Sec. 31.25.230, Refunding obligations, permits the
corporation to refund obligations and provides
direction for managing refunds.
(From AHFC 18.56.160. This is a standard statement
that lenders need to see. Bond refinancing is common.
As refinancing occurs, this section allows AGDC to
refund prior obligations.)
MS. DELBRIDGE stated that refinancing is common with revenue
bonds, and therefore there needs to be the ability to refund
their previous obligations as the new ones are assumed.
1:07:55 PM
REPRESENTATIVE SEATON, regarding refunding of obligations, posed
a scenario in which there is a takeover of those obligations
such that the money is refunded to AGDC. If there is an actual
refund, he asked if the money would stay in AGDC or return to
the general fund if it is advanced.
MS. DELBRIDGE related her understanding that because AGDC is
exempt from the Executive Budget Act under this legislation, the
money does not necessarily return to the general fund. She
offered to obtain a more definitive answer on that question.
1:08:44 PM
MS. DELBRIDGE returned to the sectional analysis from which she
paraphrased [original punctuation provided]:
Sec. 31.25.240, Credit of state not pledged, prohibits
AGDC from pledging the state's credit. AGDC
obligations are limited to AGDC's backing.
(From AHFC 18.56.170)
1:08:57 PM
Sec. 31.25.250, Limitation on personal liability,
protects corporation officers from personal liability.
(From AHFC 18.56.180)
MS. DELBRIDGE said that there is an expectation that this
provision should be valuable in terms of attracting qualified
board members. She then returned to the sectional analysis from
which she paraphrased [original punctuation provided]:
Sec. 31.25.260, Tax exemption, exempts AGDC from
paying state and local taxes on corporation property
or property income.
(From AHFC 18.56.190. This exemption applies to the
corporation. The state and local property tax
exemption in HB 4, section 32, applies to a project
owned or financed by, in whole or in part, AGDC.)
Sec. 31.25.270, Annual report, requires an annual
report to the governor, legislature and public,
including an independent audited financial statement.
(From AHFC 18.56.200; omits an additional reporting
requirement for mortgage loans investments.)
1:09:47 PM
REPRESENTATIVE SEATON asked whether the property would be tax
exempt if AGDC becomes a partner in a property. He recalled
that there is a provision [in SSHB 4] that [such property] would
be exempt until commercial operation began. However, this
proposed provision, Sec. 31.25.260, would exempt the property
from all taxation for the life of the project.
MS. DELBRIDGE indicated that both [exemptions] exist. Later in
the bill is a provision that would exempt any AGDC partnership
property, that is a pipeline in which ADGC is involved
regardless of the ownership, from paying state and local
property taxes during construction. Within its corporate
authority, any property AGDC has is always exempt when it is the
owner of the property. Ms. Delbridge said that it is fairly
standard within the state that one state entity does not tax
another state entity, which is why it is included in the
corporate provision.
1:11:07 PM
REPRESENTATIVE SEATON requested a legal analysis regarding this
tax exemption. For instance, he asked whether the Ketchikan
Shipyard for which the state is a partner with the Alaska
Industrial Development and Export Authority (AIDEA) would become
a nontaxable entity. Representative Seaton said that he had no
problem with a tax exemption during construction, but providing
one project a competitive advantage over another project that is
not financed by the state would essentially be picking winners
and losers in the commercial realm.
MS. DELBRIDGE agreed to provide confirmation as to how this
provision would play out.
REPRESENTATIVE SEATON agreed that is what he is seeking, as well
as the limitations as far as the partnership and whether it
would change the competitive status between a project financed
by AGDC and a project independently. Although he did not
believe that to be the case, he expressed the need to be sure.
1:12:51 PM
CO-CHAIR SADDLER inquired as to which section of SSHB 4 has the
provision regarding exemption of AGDC partnerships.
MS. DELBRIDGE specified that the property tax exemption is in
Section 34, which is an exemption of AGDC owned or financed
project from state and local property taxes during construction.
The sponsors included this provision in SSHB 4 because it is one
way the state, having declared AGDC its designee to do pipeline
projects that are in the interest in the state, can help the
project succeed by keeping costs down and not taking taxes from
it during the critical period when risk is high.
1:13:45 PM
REPRESENTATIVE TARR inquired as to the amount of lost revenue to
the state due to the aforementioned property tax exemption.
MS. DELBRIDGE deferred to the AGDC representative.
1:14:22 PM
FRANK RICHARDS, Manager, Pipeline Engineering & Government
Affairs, Alaska Gasline Development Corporation (AGDC), Alaska
Housing Finance Corporation (AHFC) Department of Revenue (DOR),
said that although he did not have those numbers, he recalled
that the taxation rate is about 20 mills. He offered to make
the calculations and provide the information to the committee.
1:14:46 PM
MS. DELBRIDGE continued paraphrasing from the sectional
analysis, as follows [original punctuation provided]:
Sec. 31.25.270, Annual report, requires an annual
report to the governor, legislature and public,
including an independent audited financial statement.
(From AHFC 18.56.200; omits an additional reporting
requirement for mortgage loans investments.)
Sec. 31.25.390, Definitions.
MS. DELBRIDGE informed the committee that definitions in SSHB 4
were from pieces of the former AS 38.34 statute, which was
created through the passage of House Bill 369 [from the 26th
Alaska State Legislature].
1:15:22 PM
MS. DELBRIDGE then moved on to Section 4 of SSHB 4 and
paraphrased from the sectional analysis [original punctuation
provided]:
Section 4 (procurement code exemption), adds new paragraphs
to AS 36.30.850(b), Public Contracts, State Procurement
Code, Application of this chapter, exempting AGDC, its
subsidiaries, and ANGDA contracts from the state
procurement code. The exemption is reinforced in AGDC's
statutes (HB 4 Section 3) and in ANGDA's statutes (HB 4
Section 22).
1:15:50 PM
REPRESENTATIVE TUCK asked why AGDC is being placed under the
Department of Commerce, Community & Economic Development (DCCED)
rather than the Department of Transportation & Public Facilities
(DOT&PF), which already has a solid procurement system in place
and is an agency that deals with infrastructure. He
characterized this as "quite a piece of infrastructure." He
recalled that the Alaska Energy Authority (AEA) does not have
subsidiary powers, and then asked whether DCCED has subsidiary
powers.
MS. DELBRIDGE replied that she is unsure as to whether DCCED has
subsidiary powers, but suggested that it probably does not as it
is a department not a corporation. With regard to why AGDC was
placed under DCCED, she related the sponsors' belief that in-
state gasline projects are about more than simply the project
construction. Such in-state gasline projects are about putting
together the financial deal and terms and negotiate with many
diverse commercial entities. Putting together a package is of
as great importance as the construction process and DCCED fully
represents the benefits to the state the sponsors believe AGDC
will bring in commerce, economic development, and developing
communities.
1:17:36 PM
REPRESENTATIVE TUCK related his understanding that Ms. Delbridge
will provide the committee with a written explanation as to why
the state's procurement codes do not work for a project such as
this.
MS. DELBRIDGE replied yes.
1:18:16 PM
MS. DELBRIDGE, returning to the sectional analysis, directed
attention to Section 5 [original punctuation provided]:
Section 5 (RCA accounting, conforming) amends AS
37.05.146(c)(22), Public Finance, Fiscal Procedures
Act, Definition of program receipts and non-general
fund program receipts.
MS. DELBRIDGE explained the RCA collects fees from the entities
it regulates under its regulatory framework. The fees are
intended to cover the RCA's costs, and therefore are not
accounted for within the general fund. This legislation adds
another kind of regulatory framework to the RCA's jurisdiction,
and thus this new framework, Chapter 42.08, needs to be added to
the regulatory frameworks from which the RCA can collect fees
without being subject [to being placed] back in the general
fund.
1:19:04 PM
MS. DELBRIDGE continued paraphrasing from the sectional
analysis, which read [original punctuation provided]:
Section 6 (gas or electric utilities, conforming)
amends AS 38.05.180 (bb)(1), Public Land, Alaska Land
Act, Oil and gas and gas only leasing, to conform with
Section 11 creating covenants specific to a contract
carrier pipeline.
MS. DELBRIDGE explained that since a second set of covenants
reflecting contract carriage has been created, statute referring
to covenants for a common carrier would have to now include the
[second set of covenants].
1:20:14 PM
MS. DELBRIDGE, returning to the sectional analysis, directed
attention to the following [original punctuation provided]:
Section 7 (definitions)repeals and reenacts AS
38.34.099, Public Land, In-State Natural Gas Pipeline,
Definitions, to refer to the definitions in the new
31.25 (HB 4, Section 3).
This relocates definitions relevant to AGDC from the
In-State Natural Gas Pipeline statute -created by
[House Bill] 369 in 2010 - to the AGDC corporate
statute in Section 3. As portions of the In-State
Natural Gas Pipeline statute remains, this section
refers to the new location for definitions.
MS. DELBRIDGE pointed out that when House Bill 369 passed, AS
38.34 was created and included definitions specific to this type
of a project and AGDC's work. Since a new corporate structure
for AGDC has been created in statute, the definitions have been
moved into that new corporate structure for AGDC. She then
continued to paraphrase from the sectional analysis:
Section 8 (right-of-way leases, conforming) amends AS
38.35.100(d), Public Land, Right-of-Way Leasing Act,
Decision on application, to conform to Section 11,
right-of-way leasing for a contract carrier.
Section 9 (right-of-way leases, conforming) amends AS
38.35.120(a), Public Land, Right-of-Way Leasing Act,
Covenants required to be included in lease, to conform
to Section 11, right-of-way leasing for a contract
carrier.
Section 10 (right-of-way leases, conforming) amends AS
38.35.120(b), Public Land, Right-of-Way Leasing Act,
Covenants required to be included in lease, to conform
to Section 11, right-of-way leasing for a contract
carrier.
Section 11 (contract carrier covenants) adds a new
section to AS 38.35, Public Land, Right-of-Way Leasing
Act, to establish covenants for a contract carrier gas
pipeline. This section does not alter the existing
covenants in the Right-of-Way Leasing Act. A carrier
must agree to abide by the covenants in order to
receive a state right-of-way lease. Of 14 existing
covenants for common carriers, 11 still apply to a
contract carrier. The others are adapted to reflect
contract carrier principles, while retaining the
policy that pipelines on state rights-of-way should
encourage broader development of oil and gas resources
by expanding when commercial opportunities exist and
shipping without unreasonable discrimination.
1:21:04 PM
MS. DELBRIDGE explained that a carrier would apply to the state
for a right-of-way lease, under either the common carrier
covenants or the contract carrier covenants. A great deal of
negotiating and application is involved before the commissioner
grants the right-of-way lease. Addressing the new covenants,
she said any pipeline wanting to apply as a contract carrier for
a state right-of-way lease could apply under these covenants as
they are not specific only to AGDC. The contract carrier
covenants are very similar to the common carrier covenants as
they require services from the pipeline be offered without
unreasonable discrimination. Therefore, the laws of the state
must be followed and one must not abandon a pipeline until
appropriate and clean up any damages. Ms. Delbridge noted that
there are some key differences in that the common carrier
covenants require expansion as deemed necessary by the RCA while
the new contract covenants respect that under the regulatory
framework the contracts between a shipper and a pipeline have
been used to set the terms for such things as expansions. Thus,
expansions are still required for a contract carrier, but when
that carrier is presented with a commercially feasible
opportunity to expand and not simply do so when told to by
another body.
1:22:56 PM
REPRESENTATIVE SEATON, noting there are a number of contract
carriers on the Kenai Peninsula, inquired as to whether an
application can be made to change from a common carrier pipeline
to a contract carrier pipeline.
MS. DELBRIDGE said she believes that would largely be left to
the Department of Natural Resources (DNR) to govern how they
would manage applications to amend existing right-of-way leases.
She opined that it is a very long and complex process. She then
noted that the DNR commissioner always retains the authority to
decide whether or not an applicant should be issued a right-of-
way lease under whatever set of covenants they apply. The DNR
commissioner, in issuing a lease, determines the kind of a
pipeline [the applicant is].
1:25:00 PM
REPRESENTATIVE SEATON surmised that this authority may provide
pipelines the ability to reapply for existing pipelines and
change gas pipelines from common carrier to a contract carrier
pipeline.
MS. DELBRIDGE said she understands the question, but does not
know the existing DNR process for amending a right-of-way lease,
particularly when the covenants are a key part of that lease.
"It's not a small modification," she stated.
1:25:53 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 12 (right-of-way leases, costs) adds a new
subsection to AS 38.35.140, Public Land, Right-of-Way
Leasing Act, Payment of rental and costs, requiring a
right-of-way lease to be issued at no cost to AGDC.
This reinforces in the Right-of-Way Leasing Act the
provision in HB4, Section 3 (31.25.090, Interagency
cooperation; confidentiality) that leases should be
made at no rental fee/cost to AGDC.
MS. DELBRIDGE highlighted that currently AGDC is paying close to
$200,000 annually for each right-of-way lease it has through the
state. Again, if, through SSHB 4, the legislature finds that
AGDC is doing gas pipelines in the best interest of the state,
it is perhaps, in the sponsors' view, not productive to have to
pay a fee to a state agency as a lease payment. In response to
Co-Chair Saddler, she specified that the current annual payment
is $180,000.
1:26:49 PM
MS. DELBRIDGE continued review of the sectional analysis
[original punctuation provided]:
Section 13 (judicial review) adds new subsections to
AS 38.35.200, Public Land, Right-of-Way Leasing Act,
Judicial review of decisions of commissioners on
application, limiting judicial review of state lease,
permit or other authorization decisions. Claims
challenging this provision must be brought within 60
days of the effective date of HB 4; future claims
alleging a constitutional violation must be brought
within 60 days of the action and must be filed in
superior court. The court may not grant injunctive
relief.
One of the significant risks in megaproject
development is costly delays triggered by lawsuits
and/or injunctive relief while a lawsuit is being
decided. There is precedence for limiting injunctive
relief on projects the state determines are in the
best interests of the public (TAPS and the federal
Alaska Natural Gas Pipeline Act of 2004).
1:27:36 PM
REPRESENTATIVE TARR questioned whether the legislature has the
ability to limit the judicial branch in terms of timing,
particularly on a constitutional issue. She asked if someone
with the Department of Law (DOL) is present to address her
question.
MS. DELBRIDGE answered that no one with DOL is present today.
However, she offered that there are other instances in which
judicial review has been limited. Judicial review was limited
for the Trans-Alaska Pipeline System (TAPS) and on federal
decisions through the Alaska Natural Gas Pipeline Act of 2004.
The intent is that in those instances in which the state has
declared something in the best interest of the public of the
state, it is reasonable to place boundaries on the process of
objecting to those activities.
CO-CHAIR SADDLER said the committee could invite DOL to answer
that question and others.
1:28:49 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 14 (personnel act exemption) exempts AGDC and
subsidiaries from AS 39.25.110, Public Officers and
Employees, State Personnel Act, Exempt service. This
exemption is reinforced in AGDC's corporate statutes.
1:29:12 PM
CO-CHAIR FEIGE inquired as to the reasoning behind Section 14.
More specifically, he asked whether Section 14 is in place to
pay people what they are worth or get outside of the salary
scales the State Personnel Act requires.
MS. DELBRIDGE confirmed that AGDC expects to need to hire a
number of experts in particular fields, and thus needs to be
competitive with the private sector entities with which it will
work to put the pipeline together.
1:29:45 PM
MS. DELBRIDGE continued review of the sectional analysis
[original punctuation provided]:
Section 15 (public officials disclosures) makes the
board of directors of AGDC and subsidiaries subject to
public official financial disclosure rules in AS
39.50.200, Public Officers and Employees, State
Personnel Act, Definitions.
1:30:08 PM
REPRESENTATIVE SEATON inquired as to whether members of the
board of directors are considered employees, and therefore
exempt as well.
MS. DELBRIDGE specified that the members of the board of
directors are not employees of the corporation. The board of
directors receives compensation per day on official board
business and receives per diem and travel when needed to do so
for board meetings. The members of the board of directors are
not salaried.
1:31:10 PM
CO-CHAIR SADDLER pointed out that the legislation includes many
provisions in which expediency and importance of the project
have motivated some exemptions and streamlining limitations,
whereas Section 15 seems to be contrary to that. Therefore, he
inquired as to the reasoning behind [Section 15].
MS. DELBRIDGE opined that the sponsors have tried to balance
being responsible to Alaskans while at the same time providing
for expediency and eliminate road blocks. The sponsors believe
that Alaskans need to know whether the board members have any
financial interests that would cause a conflict.
CO-CHAIR SADDLER noted his agreement with such public
disclosure, but cautioned that the expansion of public
disclosure to other boards and commissions service has tended to
inhibit people from serving, and thereby limiting the number of
applicants.
1:32:28 PM
REPRESENTATIVE TARR asked if there is a conflict of interest
that one could foresee that would cause a board member to be
dismissed.
MS. DELBRIDGE explained that the governor appoints the members
of this board and they can be removed for cause by the governor.
Part of the reason for Section 15, she opined, is that there
seems to be less of a genuine conflict of interest once one
publicly discloses a conflict of interest.
1:33:09 PM
CO-CHAIR SADDLER asked if there is a provision allowing AGDC
board members to exempt themselves from a vote if there is a
conflict, as is the case in the legislature.
MS. DELBRIDGE replied no.
CO-CHAIR SADDLER then asked whether that would cause any
problems with the voting of the board.
MS. DELBRIDGE clarified that the majority of the board, three
members, would have to vote in the affirmative for something
substantive to pass. She then said that Co-Chair Saddler raises
a good point that the sponsors would like to address.
1:34:00 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 16 (confidentiality) amends AS 40.25.120(a),
Public Records and Recorders, Public Record
Disclosures, Public records; exemptions; certified
copies, to exempt eligible information and information
covered by an AGDC confidentiality agreement from
disclosure under the state Public Records Act. This
relates to HB 4, Section 3, allowing AGDC to keep
certain information confidential.
MS. DELBRIDGE reminded members that Section 3 specifies at
length what types of things can be kept confidential and how
confidentiality agreements with private sector entities and
other state entities would work. She characterized Section 16
as a backstop in that those things that are allowed to be
confidential do not get to be released under the State Public
Records Act.
1:34:41 PM
REPRESENTATIVE SEATON requested identification of the duration
of confidentiality of the various confidential items. He opined
that the public would have more confidence knowing that at some
point confidential items, such as the bids, will be made public
once it is not necessary for them to be confidential. He
suggested that perhaps it could be submitted in the form of a
written spread sheet.
MS. DELBRIDGE agreed to do so.
1:37:05 PM
CO-CHAIR FEIGE asked whether there is anything in SSHB 4 that
limits what can be held confidential versus not confidential.
He further asked whether AGDC could make all its business
confidential or is it limited to particular items. He requested
that the aforementioned be included in the spreadsheet Ms.
Delbridge agreed to provide the committee.
MS. DELBRIDGE said that there are some limits that reflect
commercial harm, which she said she would clearly articulate in
a document.
1:37:48 PM
MS. DELBRIDGE proceeded with the sectional analysis from which
she paraphrased [original punctuation provided]:
Section 17 (ANGDA as gas marketer) amends AS
41.41.010(a), Public Resources, Alaska Natural Gas
Development Authority, Establishment of the authority,
enabling ANGDA to act as a gas marketer instead of a
gas transporter, and eliminating proscriptive language
regarding gas supply and gas markets.
This section retains ANGDA's purpose of acquiring
natural gas produced in the state and delivering it to
market, in sufficient quantity to help assure the
long-term viability of a pipeline, but removes other
purposes including designing, constructing, operating
and maintaining a pipeline and other facilities.
MS. DELBRIDGE noted the purposes of designing, constructing,
operating, and maintaining a pipeline and other facilities is
given to AGDC.
1:38:52 PM
REPRESENTATIVE SEATON recalled that ANGDA had been a bidder on
firm transportation for some other entities/utilities. He then
inquired as to the status of those bids were this legislation to
pass. Upon a request for clarification from Ms. Delbridge,
Representative Seaton said the bids were either those in the
Alaska Pipeline Project for which TransCanada held an open
season or the small diameter pipeline project.
MS. DELBRIDGE related her understanding that ANGDA did place
some bids on the in-state gas arm of the large pipeline
TransCanada put through an open season. However, TransCanada
has closed its open season and moved on to another project.
Therefore, she understood from the Department of Revenue (DOR)
that there are no ongoing debts or liabilities associated with
ANGDA.
1:40:06 PM
CO-CHAIR SADDLER surmised that ANGDA would be "a subsidiary, it
would not be the only subsidiary AGDC would be allowed to have."
He further surmised that the legislation would not limit ANGDA
to be the only gas marketer subsidiary.
MS. DELBRIDGE said Co-Chair Saddler is correct on both counts.
1:40:22 PM
MS. DELBRIDGE moved on to Section 18 of the sectional analysis,
from which she paraphrased [original punctuation provided]:
Section 18 (ANGDA as AGDC subsidiary) amends AS
41.41.010(b), Public Resources, Alaska Natural Gas
Development Authority, Establishment of the authority,
to make ANGDA a subsidiary of AGDC. ANGDA is currently
situated in the Department of Revenue.
Section 19 (ANGDA as gas marketer) amends AS
41.41.010(d), Public Resources, Alaska Natural Gas
Development Authority, Establishment of the authority,
to clarify ANGDA's role as a gas marketer.
Section 20 (ANGDA board) repeals and reenacts AS
41.41.020, Public Resources, Alaska Natural Gas
Development Authority, Authority governing body, to
state that ANGDA will be governed by the AGDC board of
directors.
Section 21 (ANGDA board compensation) amends AS
41.41.060, Public Resources, Alaska Natural Gas
Development Authority, Compensation of board members;
per diem and travel expenses, to reflect the new
31.25.020, entitling AGDC's board to receive
compensation when serving as ANGDA's board.
AGDC's board will receive $400 per day compensation
when acting as ANGDA's board; this is the same amount
board members receive while acting as AGDC's board.
1:41:01 PM
MS. DELBRIDGE, in response to Representative P. Wilson,
confirmed that ANGDA's board will be the same board as AGDC's
board, which she remarked is relatively common with subsidiary
corporations.
1:41:05 PM
REPRESENTATIVE TUCK questioned why it is necessary to have a
subsidiary, an extra layer, a middleman if it is all the same.
MS. DELBRIDGE opined that a middleman or marketer is important
to have with this pipeline. Furthermore, there is a chance that
the smaller entities, including electric utilities, may not have
the credit worthiness or the financial backing to commit to
long-term shipments on this pipeline on their own. Therefore, a
middleman/marketer who can make those long-term commitments and
ship the gas for them could be very important.
1:42:14 PM
REPRESENTATIVE TUCK clarified that he is asking why not just
make that a function of AGDC.
MS. DELBRIDGE specified that it is necessary to have some level
of a firewall between the pipeline company that is offering
space for shipment/sale and those who are buying space, whether
it is a marketer or individual. She characterized it as similar
to ExxonMobil Production Company and ExxonMobil Pipeline
Company, which are the same corporate entity with firewalls
between the parent and its subsidiary.
REPRESENTATIVE TUCK said he understood that ExxonMobil
Corporation would have such a firewall due to liability concerns
and such. Is liability the concern, he asked. He then asked if
Ms. Delbridge could inform the committee why the firewall is
necessary.
CO-CHAIR SADDLER suggested that would be a good question for the
attorneys.
1:43:23 PM
REPRESENTATIVE SEATON asked if this addresses the conflict of
interest that is created when one builds, regulates, and is a
shipper of the pipeline such that one is on both sides of the
table at once. He related his understanding that as a legal
entity, those need to be separated.
MS. DELBRIDGE agreed that is one reason to want to separate
these. Certainly, private sector partners will want to know
that their shippers are getting a fair deal and fair
negotiations made at an arm's length and that there is not a
special deal for a marketer. A marketer, for example, may not
specifically ship just the state's utility gas. "It is a matter
of keeping things fair and very clear," she said.
1:44:25 PM
REPRESENTATIVE SEATON requested that Ms. Delbridge follow-up
regarding the tax consequences, the tax non-liabilities for
taxes, and whether SSHB 4 places ANGDA in a different tax
situation than another shipper.
MS. DELBRIDGE nodded in that she would do so.
1:45:47 PM
REPRESENTATIVE P. WILSON inquired as to why ANGDA is necessary
and expressed interest in further clarification of the firewall
concept.
MS. DELBRIDGE clarified that the board of directors for AGDC and
ANGDA would be the same, but the firewall exists so that the two
corporations are distinct. Distinct in that they would not talk
to each other when making a deal. With regard to the specific
legal recourse with a subsidiary and its parent corporation, she
offered to provide the committee with that information.
1:48:07 PM
DAN FAUSKE, President, Alaska Gasline Development Corporation
(AGDC), CEO/Executive Director, Alaska Housing Finance
Corporation (AHFC), Department of Revenue (DOR), pointed out
that currently the board of directors for the Alaska Housing
Finance Corporation is the same as the board of directors for
the Northern Tobacco Securitization Corporation, the Alaska
Capital Management Corporation, and the Alaska Corporation for
Affordable Housing. As mentioned by Ms. Delbridge, the board
would have to be very careful as it conducted its business with
the individual corporations. The federal government, under the
Federal Energy Regulatory Commission (FERC) guidelines and
others, is very strict in reference to a pipeline company and a
shipping company. There has to be a clear firewall as there
cannot be an association in which the two are doing business as
one. Although there can be a board that oversees it and a
separate board meeting to conduct the business of that
organization separately, there are very strict guidelines as to
how that business activity occurs. The goal is to prohibit a
situation in which the same people who run AGDC, for instance,
building the pipeline are in a room with the people who will
ship it with no public input or oversight in conducting
business. However, he stated that there are ways to do it that
are efficient. For instance, AHFC held its meeting, adjourned,
and then called to order the annual Northern Tobacco
Securitization Corporation meeting and conducted a separate
meeting.
1:50:06 PM
REPRESENTATIVE P. WILSON surmised that it is just a way of
getting around the rules and regulations.
MR. FAUSKE disagreed. If SSHB 4 proceeds as it is written, the
authority will be created and the board members will have an
equal opportunity to serve on the AGDC Board for the pipeline
activities as well as the gas marketing because the job
descriptions and requirements will seek people in the industry.
The idea of the same board handling similar business is very
common. The day-to-day operations of the separate entities have
to be very clearly delineated. He highlighted that the bonds of
the Northern Tobacco Securitization Corporation are not a
liability of AHFC, even though it is a subsidiary of AHFC. The
structure was such that when the bonds were sold there was a
premium paid.
1:51:54 PM
REPRESENTATIVE TARR, regarding the liability, asked whether that
would also be true of this proposed separation such that a
financial obligation through ANGDA that is not met would only
impact the subsidiary corporation while not having a financial
impact on the parent corporation.
MR. FAUSKE said that is the way he would advise structuring it,
but the individual transaction would have to be reviewed. For
instance, if AGDC were involved in the issuance of the debt on
behalf of this pipeline, it would be a wholly owned debt of the
corporation not a debt of the state, AHFC, or ANGDA; it would be
a wholly owned subsidiary separate and clear from other
activities. Mr. Fauske highlighted that investors are made
aware of this situation.
1:53:50 PM
REPRESENTATIVE TARR noted that AHFC makes very large capital
expenditures, but related her understanding that the Northern
Tobacco Securitization Corporation will eventually dissolve as
the payments dwindle. She then requested a comparison of the
relative size and scale of the financial obligation that the
other few are making in comparison to the relationship of this
one. She asked whether the examples with AHFC are the same
scale in terms of financial obligations through the separate
corporations as is the entities involved in SSHB 4.
MR. FAUSKE replied no, for instance on an annual basis he
requests from the legislature the authority for a specific
amount of bonding activity. There are no further dealings with
the legislature in regard to that transaction unless he needs to
exceed the amount specified. Therefore, there are checks and
balances on the amount of debt. He reminded the committee that
AHFC has its own general obligation credit, which is used on a
limited basis. The majority of the work is revenue anticipation
notes, revenue bonds, mortgage revenue bonds; the full faith and
credit of the deal is based on the security of the economy and
the state, the credit scores of the borrowers, and all the
things that go into analyzing where the money comes to pay the
bonds. A mortgage revenue bond is based on the credit
worthiness of those paying their mortgages because in the
secondary market [AHFC] sells bonds in the market and uses that
cash to purchase mortgages from the banks.
1:56:17 PM
MR. FAUSKE then turned to AGDC and the potential $7.5-$8 billion
project. He said, "This, too, is a revenue bond." However, it
is not based on the full faith and credit of the state nor is it
based on the full faith and credit of AHFC. Rather, it will be
a stand-alone deal, which means one must go before the investors
and the rating agencies, and other checks and balances because a
product is being sold. The product has to be creditworthy and
noteworthy, in the sense that there are many choices for
investors. Therefore, the due diligence and scrutiny is severe.
For instance, the revenue bonds that could be sold by AGDC could
be purchased by pension funds, insurance companies,
municipalities, and others that actively pursue such. The bonds
would be about the last transaction made. Before going to Wall
Street to initiate a deal, all the firm transportation,
precedent agreements, etcetera will have to be in place for the
investor to see a clear path between the investment and the
project in which the investor invests. Often the contracts span
10-20 years. The bonds would then be sold to help pay off the
project.
1:59:13 PM
REPRESENTATIVE SEATON, referring to Section 21 and the $400 per
day compensation of the board members, surmised that the
compensation would not be received concurrently.
MS. DELBRIDGE deferred to Mr. Fauske regarding how it would work
for AHFC.
MR. FAUSKE advised that although there can be a situation in
which the board meetings occur on the same day, the meetings
would be activities of two separate boards. He noted that over
the years there have been attempts to increase the AHFC Board
stipend as it remains at $100, which was established in 1972.
The board members for the Northern Tobacco Securitization
Corporation Board are paid more as it was modeled after the
Permanent Fund Board in an attempt to attract board members.
Mr. Fauske said it is possible the board members could draw pay
for each board meeting, but he expressed the need to research it
further and get back to the committee.
MS. DELBRIDGE added that the sponsor's intent is that if a
person has to be prepared and invest the time for any meeting,
even when separate meetings are held concurrently, that person
is compensated as that board member for that official business.
2:01:17 PM
REPRESENTATIVE SEATON inquired as to how ANGDA is going to bring
assets to the table to secure this gas marketing deal if ANGDA
is not pledging the bonding or assets of AGDC.
MR. FAUSKE reminded the committee that ANGDA would be a
marketing arm of the corporation that is separate and would
negotiate the price of the gas and market the gas. Whereas,
AGDC is a pipeline company and thus ANGDA would serve as AGDC's
marketing arm.
2:02:51 PM
REPRESENTATIVE SEATON related his understanding that ANGDA has
value because it is bringing security assets.
MR. FAUSKE stated that one of the advantages when this was first
discussed a year ago was that the enabling legislation that
created ANGDA was already in place, and therefore there would be
no need to reinvent the wheel. One of the primary factors to
utilize the existing statutes was it also honors that the voters
had voted to create ANGDA.
2:04:00 PM
REPRESENTATIVE TUCK requested documentation of the pros and cons
of having the ANGDA marketing subsidiary with this particular
project in SSHB 4.
MS. DELBRIDGE agreed to do so.
2:05:17 PM
MS. DELBRIDGE returned to the sectional analysis from which she
paraphrased [original punctuation provided]:
Section 22 (ANGDA procurement) amends AS 41.41.070(d),
Public Resources, Alaska Natural Gas Development
Authority, Authority staff, to include legal and bond
counsel in the services for which ANGDA may contract,
and exempts contracted services from the state
procurement code.
With the repeal (HB 4, Section 35) of the provision
making the attorney general the legal counsel for
ANGDA, this section enables ANGDA to contract for
legal and bond services.
Section 23 (ANGDA disclosure) amends AS 41.41.090(b),
Public Resources, Alaska Natural Gas Development
Authority, Conflicts of interest, to remove
involvement with a "project" from the circumstances
requiring disclosure. ANGDA board members must
disclose conflicts of interest; as ANGDA will no
longer be developing projects, an interest in a
project in which ANGDA has invested assets does not
need to be disclosed.
2:05:48 PM
CO-CHAIR SADDLER requested that Ms. Delbridge return to the
committee with information regarding why it is necessary for
ANGDA to have its own bond and legal counsel.
MS. DELBRIDGE agreed to do so.
2:06:30 PM
REPRESENTATIVE P. WILSON, referring to Section 22, asked whether
the provision eliminates or gives the attorney general as legal
counsel for ANGDA.
MS. DELBRIDGE explained that in the repealer section the statute
that makes the attorney general legal counsel for ANGDA is
repealed. In order to provide some statutory direction for
ANGDA, language allowing ANGDA to contract for legal counsel is
inserted.
2:07:36 PM
MS. DELBRIDGE continued to paraphrase from the sectional
analysis [original punctuation provided]:
Section 24 (ANGDA confidentiality) amends AS
41.41.150(a), Public Resources, Alaska Natural Gas
Development Authority, Public access to information,
to expand ANGDA's existing confidential records
authority to include information in a confidential
agreement between ANGDA and AGDC.
2:08:12 PM
REPRESENTATIVE JOHNSON remarked that Section 24 is not a very
effective firewall.
MS. DELBRIDGE acknowledged that Section 24 could cause some
firewall problems. She offered to clarify in conjunction with
the discussion regarding why a marketing subsidiary is required
and a firewall should be in place to include how the exchange of
confidential information through confidential agreements would
impact that.
2:08:44 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 25 (ANGDA as gas marketer) amends AS
41.41.200, Public Resources, Alaska Natural Gas
Development Authority, Powers of the authority. This
removes ANGDA's authority to exercise eminent domain,
as ANGDA would serve as a marketing arm and not as a
pipeline builder.
Section 26 (ANGDA property) amends AS 41.41.450,
Public Resources, Alaska Natural Gas Development
Authority, Property of the authority. As HB 4 deletes
the definition of "project" from ANGDA's statutes,
references to a "project" are changed to mean 'for the
purposes of the corporation.' With this change, ANGDA
is able to acquire property for the corporation's
purpose, but not for a project.
2:09:32 PM
MS. DELBRIDGE, in response to Co-Chair Saddler, specified that
"the corporation" refers to ANGDA.
2:09:46 PM
REPRESENTATIVE P. WILSON inquired as to what type of property
could be acquired for the corporation's purpose, but not for a
project.
MS. DELBRIDGE explained that a corporation might have property
for a project that is tangible property on which the project
sits, such as a pipeline; whereas a corporation could have
property that is not physical property/land such as information,
financial property, and other assets. She clarified that
financial property would be money, investments, accounts, debts,
liabilities, and bonds. At one point ANGDA had a conditional
EIS for some right-of-way, which would be considered to be
property of the corporation. In further explanation, Ms.
Delbridge specified that the sponsors' intent was that ANGDA
would remain a corporation, a subsidiary of AGDC, even if it no
long performed projects. Therefore, ANGDA would need to retain
the ability to have and manage property.
2:11:22 PM
REPRESENTATIVE SEATON asked whether that property would include
gas. Would ANGDA have the ability to purchase gas or is that
excluded as a conflict of interest, he further asked.
MS. DELBRIDGE answered that ANGDA, as a marketing subsidiary,
would pay AGDC a fee to ship gas on the pipeline. Therefore,
ANGDA could own gas that it is then contracting with AGDC for
shipment of.
2:12:05 PM
REPRESENTATIVE SEATON expressed discomfort with going from a
marketer to an owner of gas, and therefore he requested a
written explanation regarding the difference between AGDC as an
owner and shipper of gas versus as a marketer of gas. This, he
opined, seems to be outside the discussions of what the purpose
of ANGDA would be.
MS. DELBRIDGE agreed to do so. However, she clarified that in
the context of SSHB 4 the term marketer means to take a
commodity and then market it - that is move it from sellers to
buyers. She said that if "marketer" means owning it in the
middle that is the intent of the middle man/aggregator concept.
2:13:33 PM
MS. DELBRIDGE returned to the sectional analysis [original
punctuation provided]:
Section 27 (ANGDA PLAs) amends AS 41.41.500, Public
Resources, Alaska Natural Gas Development Authority,
Contract terms relating to use of Alaska resources. As
HB 4 deletes the definition of "project" from ANGDA's
statutes, references to a "project" are changed to
mean 'for the purposes of the corporation.' With this
change, ANGDA shall have project labor agreements that
secure timely completion of a project of the
corporation.
Section 28 (ANGDA definitions) amends AS 41.41.990,
Public Resources, Alaska Natural Gas Development
Authority, Definitions. The definition of "board" is
changed to mean the AGDC board acting as ANGDA's
board.
2:14:29 PM
REPRESENTATIVE TUCK related his understanding that projects were
eliminated from ANGDA's capabilities, and therefore he inquired
as to what exactly Section 27 is doing.
MS. DELBRIDGE, noting that she had to ask the same question to
Legislative Legal Services, explained that when the definition
of "project" was deleted in another part of ANGDA statute, the
term "project" had to be eliminated from this section as well.
CO-CHAIR SADDLER mentioned "corporate purposes labor agreement."
2:15:05 PM
REPRESENTATIVE TUCK clarified he was referring to "project" in
terms of "secure timely completion of a project of the
corporation," for which the corporation has been identified as
ANGDA. He acknowledged that the intent is to keep the ANGDA
wishes of the public, but Sections 19-28 seem to strip ANGDA of
what it once was.
MS. DELBRIDGE said Representative Tuck's comment was duly noted.
She then stated that the sponsors' did not intend to strip ANGDA
but rather intended to find a continuing role for ANGDA within a
gasline project that is going forward, although ANGDA no longer
has offices, personnel, or funding.
REPRESENTATIVE JOHNSON reiterated his question as to why
maintain ANGDA. He remarked he has yet to hear a good reason to
maintain ANGDA.
MS. DELBRIDGE acknowledged there is no need since AGDC has the
ability to create other subsidiaries for whatever purposes it
deems necessary to carry out its corporate mission. The
sponsors recognize that ANGDA was created by the voters, and
thus it is politically difficult to eliminate. However, ANGDA
had a specific mission to have a pipeline operational by 2007, a
legislative audit in 2010 recommended that ANGDA sunset as it
had likely exceeded its statutory authority in pursuing some of
the other projects it pursued after no longer able to deliver on
its original mission. She characterized it as a balancing act.
2:18:52 PM
CO-CHAIR SADDLER held over SSHB 4.
2:19:06 PM
The committee took an at-ease from 2:19 p.m. to 2:21 p.m.
HB 77-LAND DISPOSALS/EXCHANGES; WATER RIGHTS
2:21:47 PM
CO-CHAIR FEIGE announced that the next order of business is
HOUSE BILL NO. 77, "An Act relating to the Alaska Land Act,
including certain authorizations, contracts, leases, permits, or
other disposals of state land, resources, property, or
interests; relating to authorization for the use of state land
by general permit; relating to exchange of state land; relating
to procedures for certain administrative appeals and requests
for reconsideration to the commissioner of natural resources;
relating to the Alaska Water Use Act; and providing for an
effective date."
CO-CHAIR FEIGE opened public testimony.
2:22:31 PM
LAURA STATS, paraphrased from the following written statement
[original punctuation provided]:
I am here to speak against the passage of HB 77.
I come to you on behalf of my family and all the
people who hunt, fish and gather food from this great
land we call Alaska. Most importantly, I come on
behalf of my grandson, Huck Daugherty, who is 4 years
old and who at his tender age has already gone out
with his parents and uncles to harvest salmon taller
than he is and prawns bigger than his own hands, for
him there is a magic in that; and in that magic lies
an honest reality which must be protected in
perpetuity. And you have the responsibility to protect
our lands, streams and oceans.
Please look to our Alaska Constitution when making
your decision on voting for HB 77. It states in
Article 8 section 3
Titled: Common Use
"Wherever occurring in their natural state, fish,
wildlife, and waters are reserved to the people for
common use."
It explains in the Citizen Guide of the Alaska
Constitution and 1 quote: "This section enshrines in
the Alaska Constitution the common law doctrine that
natural resources must be managed by the state as a
public trust for the benefit of the people as a whole,
rather than for the benefit of the government,
corporations, or private persons."
Who will HB 77 be protecting and representing, will it
be protecting the common use clause of our
constitution and the rights of the citizens of Alaska
or does it protect a corporation which has it's own
special interest not consistent with that of
preserving the tender balance of the streams and
waterways where our food arises from?
Please vote against the passage of this bill.
Thank you for hearing me with your open hearts and
strong minds.
2:25:27 PM
JAMES SULLIVAN, Legislative Organizer, Southeast Alaska
Conservation Council (SEACC), paraphrased from the following
written remarks [original punctuation provided]:
Thank you for the opportunity to testify.
There has been much discussion, within this committee
and with our organization and with our friends, about
the issue of water reservations and revoking personal
use reservations. We find this issue problematic and
want to make sure that our environment is being
protected and that anadromous streams have the highest
priority when permits are being issued.
We would like to propose that amend this bill so that
when any entity applies for a water right on any
anadromous body of water that [Department of Natural
Resources] DNR issue a water reservation on behalf of
the fish. DNR can simply refer to the Anadromous
Waters Catalog to see if the waterway is on there,
then put in an appropriate reservation.
This would align DNR with our state constitution and
its public trust responsibility. It would ensure the
protection of our salmon. It would enhance sustainable
economic development across our state.
Salmon is our greatest renewable resource, it is in
our legislature's best interest to put in a mechanism,
in statute, that protects that resource as other
entities apply for water rights.
Alaska Constitution Article 8 § 3. Common Use
"Wherever occurring in their natural state, fish,
wildlife, and waters are reserved to the people for
common use."
2:27:39 PM
REPRESENTATIVE SEATON highlighted the language in Section 1,
which read: "the issuance of a general permit if the
commissioner finds that the activity is unlikely to result in
significant and irreparable harm to state land or resources."
He asked whether SEACC finds the language problematic in that
irreparable harm rather than significant harm has to occur
before a general permit is issued.
MR. SULLIVAN said SEACC has discussed the issue of irreparable
harm and having some sort of proving ground to do that, which is
why he is recommending amending HB 77 such that DNR would issue
a water reservation on behalf of the fish when any entity
applies for a water right on any anadromous body of water and
that mechanism would limit the type of work that can be done on
the stream or waterway. Mentioning the Anadromous Fish
Protection Act, he then offered his opinion that there are
conflicts with the use of irreparable harm and existing statute.
2:29:50 PM
GUY ARCHIBALD, Mining and Clean Water Coordinator, Southeast
Alaska Conservation Council (SEACC), in response to
Representative Seaton's question, informed the committee that
irreparable harm is not well defined. He noted that he mainly
deals with federal lands. For instance, the Greens Creek Mine
has a draft environmental impact study (EIS) that requires the
filling in of a major portion of an anadromous salmon stream.
The mine is located within the Admiralty Island National
Monument where it is mandated by Congress not to produce any
harm to the salmon. The U.S. Forest Service does not consider
filling in that salmon stream with toxic tailings to be
irreparable harm to the monument values.
MR. ARCHIBALD then related his confusion with Commissioner
Sullivan's testimony that Alaska ranks second to last in the
world in terms of producing permits for large projects,
especially when [Glenn] Haight, Development Manager, Development
Section, Division of Economic Development, Department of
Commerce, Community & Economic Development (DCCED), stated [on
January 31, 2013] that "Alaska has a very favorable environment
in the mining industry." There is evidence that answers the
question, which comes from the Fraser Institute's Annual survey
to over 5,000 international mining companies. This last year
over 800 companies, which were responsible for $6.3 billion of
exploration funding in 2011, responded to that survey. The
results from that survey ranked Alaska number four in the world
in combined policy and mineral potential. The survey compared
Alaska to over 90 separate mining districts in the world. The
survey also found that only 1 percent of respondents cited
environmental regulations as being a mild or strong deterrent in
Alaska. Furthermore, only 1 percent of the respondents thought
the tax regime, both the rate of the tax and the complexity of
the code, was either a mild or strong deterrent to permitting in
Alaska. Part of the backlogging and permits is that there is no
trigger for evaluation of a permit; once a permit is applied for
DNR must process it. He noted that mining is highly speculative
and many of the companies are junior companies and almost all of
them apply for permits when they do not have a proven ore
reserve. The ore reserves are certified as an implied ore body,
which by definition means they have zero certainty of an
economic ore. They apply for permits, he opined, because it
adds to the value to the project they are trying to sell and
basically fuels speculation. Therefore, Mr. Archibald requested
that DNR institute a trigger such that an application will be
reviewed when certification of a proven ore body is submitted.
With such a trigger, those resources used on mines that will
never enter into production, can be transferred and used for
larger projects. He suggested that the aforementioned would
reduce the backlog of permits. Mr. Archibald highlighted that
the state did attempt a streamlined permitting process with the
Rock Creek Mine north of Nome, which was permitted in less than
two years. The Rock Creek Mine was located entirely on state
land, so did not require a National Environmental Policy Act of
1969 (NEPA) process. The Rock Creek Mine operated for six
months, after which it shut down, the company walked away, and
the tailings pond immediately filled with water. The Department
of Environmental Conservation (DEC) had to remedy the situation
for which the estimated cost of cleanup is $20-$30 million.
Since the Rock Creek Mine was only bonded for $9.6 million, the
difference between the bonded amount and the actual cleanup
costs will be borne by Alaska's taxpayers. In conclusion, Mr.
Archibald requested that HB 77 not move forward or if it does,
that it moves forward with significant amendments.
2:34:51 PM
REPRESENTATIVE TARR asked if Mr. Archibald had specific
amendments.
MR. ARCHIBALD reiterated his suggestion to include an amendment
that creates a trigger for review. In the anti-degradation of
water quality there is a trigger level to review an application,
which he would suggest using for any project [in order to
determine] how legitimate is it that a project will enter into
production before the state spends many state resources. He
pointed out that the Greens Creek Mine EIS cost the U.S. Forest
Service over $1 million to produce.
2:35:52 PM
REPRESENTATIVE TUCK surmised then that the intent of Mr.
Archibald's suggestion is to have a filter to eliminate the
projects for which there is no intention for them to make it to
fruition and actually focus on the ones that are intended to
[produce].
MR. ARCHIBALD agreed, adding that many of the speculative mines
will produce a preliminary economic assessment for their
investors long before there is any certainty with their ore
body. There is a 401 certification process in which a third
party evaluates whether there is a legitimate, profitable,
economical ore body.
2:36:42 PM
REPRESENTATIVE P. WILSON related her understanding that the
state does not allow people to just go out and mine, but rather
requires they obtain permits and core drillings. She emphasized
that there is no way to determine whether a site is profitable
until a lot of research is performed, research that requires
permits. Therefore, she questioned how to utilize Mr.
Archibald's suggestion, noting that often companies only need
three to four permits to determine whether the site is
economical. Still, it takes a lot of work and time to reach the
point of determining whether a site is economical.
MR. ARCHIBALD said that is true, but pointed out that these
exploration permits fall under a categorical exclusion. A
categorical exclusion is used because the land manager estimates
that the drilling impacts to the human health environment are so
small that it is not worth the time or effort to assess it, and
thus the company is given a categorical exclusion from further
analysis and the permits, which are two to three pages long,
allow companies to drill. He mentioned that he has observed up
to 70 drill holes in a year. This permit is a conditional use
permit that is valid for a year. However, the companies apply
for such a permit year after year. When the companies reach the
point of building a mill and a tailings dam and needs a solid
waste permit, an air quality permit, and wastewater discharge
permit, the project would then reach the level of review of
DNR's large mine permitting program. At that point, the EIS
then requires review of the human health effects as well as
environmental effects, which is when the costs arise. At the
point of the EIS is when the trigger should come into play, he
clarified. Given the current price of gold, it will not take
much to reach the [economical] threshold for gold mining, he
opined. The threshold/trigger, he reiterated, would winnow out
the legitimate projects versus those speculative projects.
2:39:52 PM
REPRESENTATIVE P. WILSON begged to differ, saying that it
depends on the price of metals and various other aspects.
Therefore, what one may refer to as speculative may be
considered in the running economically one year but not the next
due to price fluctuations.
MR. ARCHIBALD noted his agreement, acknowledging that there will
be some agency discretion. However, he maintained that there
are many examples of mine projects that were "beyond the pale of
speculation." For instance, less than two years ago a company
from Oklahoma staked 92 square miles of the Yakutat forelands
and announced that there was $34.5 billion worth of gold there,
more gold than has been mined in the history of the state. The
company did note that there were issues with the chain of
custody on the assay samples, which no one took with any
credibility and in the meantime the company's stock rose and the
principals made money from selling their allocated 20,000 shares
a quarter. He characterized the aforementioned as an egregious
example of pure speculation.
2:41:48 PM
REBECCA SEGAL, Alaskans for Responsible Mining (ARM), began by
informing the committee that ARM is a statewide coalition of
communities and conservation organizations. She said that upon
thorough review, ARM opposes the passage of HB 77.
2:42:31 PM
RICK ROGERS, Executive Director, Resource Development Council
for Alaska, Inc. (RDC), paraphrased from the following written
testimony [original punctuation provided]:
RDC is a statewide business association representing
forestry, oil and gas, mining, tourism, and fishing
industries. Our mission is to grow Alaska through
responsible resource development.
A top legislative priority of RDC is to encourage the
state to promote and defend the integrity of Alaska's
permitting processes and advocate for predictable,
timely, and efficient state and federal permitting
processes based on sound science and economic
feasibility.
RDC supports HB 77. The Alaska Legislature, to its
credit, provided DNR with additional resources to
address what had become an untenable backlog of
permits and authorizations. Such backlogs negatively
affect our resource industries as well as individual
Alaskans seeking required state authorizations. We
understand that while a backlog still exists, DNR has
made real progress in catching up on that work.
Ramping up staff to adjudicate a backlog is addressing
the symptom, however systematic improvements to what
has become a very complex set of statutes authorizing
DNR's work is also needed to help prevent future
backlog and delays.
The Governor, with the support from DNR Commissioner
Sullivan and his staff, has identified specific means
of improving the efficiency of our complex permitting
system. The administration should be applauded for
proposing numerous changes to the DNR enabling
statutes in order to make their processes more timely
and efficient. Adapting our key DNR statutes to
ensure we are adjudicating our land and resource
authorizations in a more timely and efficient manner
is overdue.
We encourage this committee to support the
administration's efforts to more efficiently manage
DNR's tremendous workload as the reach of the
department affects a broad cross section of Alaska
businesses, resource industries and individuals.
Thank you for the opportunity to comment.
2:45:20 PM
REPRESENTATIVE SEATON noted that Section 1 of HB 77 allows
granting of a general permit, which seems to increase the
efficiencies of certain activities. However, he asked whether
the standard for a general permit should be significant and
irreparable harm.
MR. ROGERS replied that his reading of the language is that it
"is unlikely to result in significant or irreparable harm",
which he characterized as a fairly reasonable standard. From
his experience, the department does not issue general permits
except for the most innocuous activity. Typically, general
permits are the type of activity that is not benefitting
industry as much as individual Alaskans who are attempting to
accomplish more de minimis activities. However, he deferred to
Commissioner Sullivan. Mr. Rogers opined that general permits
have not been overused and characterized them as a far more
efficient tool. He said he did not believe there is the desire
to create a situation in which Alaskans have to obtain permits
for activities for which a general permit would adequately
protect the public interest.
2:48:09 PM
REPRESENTATIVE SEATON noted his agreement with Mr. Rogers
regarding the ability to have general permits. He then related
his understanding that Mr. Rogers is saying that a general
permit can be issued if the activity is unlikely to cause
significant or irreparable harm, not a combination of the two.
2:48:53 PM
CO-CHAIR SADDLER recalled testimony from SEACC regarding the
impact of Alaska's existing permitting process and its standing
in terms of mineral development. He then inquired as to whether
RDC views Alaska's permitting process as helpful or harmful to
the mineral industry in the state.
MR. ROGERS stated that the permitting process is absolutely
necessary for the state's mineral industry, but clearly Alaska
ranks near the bottom in terms of the timeframes to permit large
projects. He characterized the argument that the permitting
system is fine and needs no improvements as somewhat outrageous.
Aside for the impact on industry, Mr. Rogers expressed the need
to consider the impact on the state. While the mineral industry
is one of the impacted entities with respect to DNR permits, Mr.
Rogers stressed how far DNR reaches into the everyday lives of
Alaskans. There are so many activities that require a DNR
authorization irrespective of the mining industry that he
cautioned focusing solely on the mining industry. Still, he
maintained that improvements can be made [to the permitting
process].
2:51:04 PM
REPRESENTATIVE TARR recalled that the testimony mentioning non-
commercial forest products should have referred to non-timber
forest products because those permits are actually generally for
commercial application. She then inquired as to what Mr. Rogers
considers to be sound science and whether he had examples of
projects that are being held up under the existing permitting
process that would move forward under the proposal in HB 77.
MR. ROGERS, regarding sound science, related RDC believes it is
important that these decisions are made on the true costs,
benefits, and impacts to the environment. Therefore, standards
and permitting decisions should be made on empirical evidence
and the best available technology and understanding how best to
develop the resources. In further response to Representative
Tarr, Mr. Rogers said he could not point to a specific project,
rather he viewed [HB 77] as an incremental tweak to the DNR
statute. Although he didn't believe HB 77 to be changes that
would suddenly make it a lot simpler for businesses to obtain
authorizations, it is worth supporting. Some of the changes
embodied in HB 77 will not impact the resource industries that
RDC represents. For instance, not requiring a public notice for
a short plat of property in an unorganized borough where there
are no easements is not earth-shattering for the mining and oil
and gas industries. However, it makes sense for all industries
if it frees up DNR staff hours to focus on something that is far
more important to the state, makes it easier for the public to
get things done, and relieves some fiscal pressure on the
limited resources of the state. Ultimately, Mr. Rogers gave
deference to DNR.
2:55:42 PM
REPRESENTATIVE TUCK asked Mr. Rogers to provide any statistics
regarding where Alaska ranks in terms of permitting that differ
from those presented thus far.
MR. ROGERS agreed to do so.
2:56:14 PM
RACHAEL PETRO, President/CEO, Alaska State Chamber of Commerce,
paraphrased from the following written testimony [original
punctuation provided]:
The Alaska Chamber is a statewide membership
organization made up of all sizes and types of
businesses from across Alaska.
The Alaska Chamber's primary mission is to advocate
for policies that improve Alaska's business climate.
Efficient, predictable and common sense regulations
and permitting processes are integral to creating an
environment in which businesses, new and old, can
succeed. Each Fall Alaska Chamber members gather to
set its legislative agenda for the following year.
For the past several years in a row, including this
year, Alaska Chamber members have expressed strong
support for Alaska's policies and regulations that
guide development of Alaska's natural resources while
protecting Alaska's environment. At the same time, we
have also advocated for streamlining those same
regulations and policies where bureaucratic and
business efficiencies can be gained.
In regard to the Fraser Institute's study, referenced
earlier today in testimony, internationally, Alaska
ranks just below Kazakhstan and just above Columbia in
regard to uncertainty concerning environmental
regulations. In regard to regulatory duplication and
inconsistencies Alaska ranks below Honduras and just
above Niger. Alaska Chamber members believe Alaska can
do better!
The Alaska Chamber supports the provisions within HB
77/SB26 because they provide clarity, eliminate
unnecessary processes, and modernize statutes based on
the experience gained over many years from the
professional staff within the Department of Natural
Resources.
It is our belief that HB 77 is a common sense piece of
legislation that should receive broad bipartisan
support. Thank you for the opportunity to testify this
afternoon.
2:58:47 PM
CO-CHAIR SADDLER inquired as to where in the Alaska State
Chamber's priority list was permitting ranked.
MS. PETRO answered that permitting was ranked number 2 in over
25 priorities. She noted that permitting has long been one of
the Alaska State Chamber's priorities. In further response to
Co-Chair Saddler, Ms. Petro confirmed that membership of the
Alaska State Chamber of Commerce is not just the resource
industry but all aspects of state business and economic
activity, that is all sectors of the economy.
2:59:39 PM
REPRESENTATIVE TUCK asked whether there is a separate statistic
for permitting from the Fraser Institute's study.
MS. PETRO said she could not answer that question, but noted
that the Fraser Institute study has multiple sub-rankings, of
which she referred to two. She informed the committee that the
Fraser Institute study is on-line and there is a link to it on
the Alaska State Chamber's web site or she could forward
interested members a copy.
3:00:33 PM
CO-CHAIR FEIGE kept public testimony open and held over HB 77.
3:01:06 PM
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:01 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| HB04 AMA Letter.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 4 |
| HB04 Leg Audit ANGDA Summary.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 4 |
| HB04 Leg Audit ANGDA.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 4 |
| HB 77 AK State Chamber.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 Archibald-SEACC.PDF |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 Laura Stats.PDF |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 RDC.pdf |
HRES 2/6/2013 1:00:00 PM |
HB 77 |
| HB77 Sullivan - SEACC.PDF |
HRES 2/6/2013 1:00:00 PM |
HB 77 |