Legislature(2003 - 2004)

04/07/2004 08:02 AM House STA

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                         April 7, 2004                                                                                          
                           8:02 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bruce Weyhrauch, Chair                                                                                           
Representative Jim Holm, Vice Chair                                                                                             
Representative Bob Lynn                                                                                                         
Representative Paul Seaton                                                                                                      
Representative Max Gruenberg                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative John Coghill                                                                                                     
Representative Ethan Berkowitz                                                                                                  
                                                                                                                                
OTHER LEGISLATORS PRESENT                                                                                                     
                                                                                                                                
Representative Hugh Fate                                                                                                        
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
^OVERVIEW OF STRANDED GAS ACT                                                                                                   
                                                                                                                                
TAPES                                                                                                                         
                                                                                                                                
04-56, SIDE(S) A & B                                                                                                            
04-57, SIDE(S) A                                                                                                                
                                                                                                                                
CHAIR BRUCE  WEYHRAUCH convened  the meeting  of the  House State                                                             
Affairs Standing Committee at 8:02 a.m.                                                                                         
                                                                                                                                
SUMMARY OF INFORMATION                                                                                                        
                                                                                                                                
CHAIR WEYHRAUCH  called the  overview hearing  on the  subject of                                                               
the  Stranded Gas  Development Act  to order  at 8:02  a.m.    He                                                               
specified that testimony would revolve  around development of the                                                               
state's natural gas resource, and  whether the legislature should                                                               
consider any public policy changes to the Stranded Gas Act.                                                                     
                                                                                                                                
WILSON  CONDON,  Chief  Assistant Attorney  General  -  Statewide                                                               
Section  Supervisor, Oil,  Gas &  Mining Section,  Civil Division                                                               
(Anchorage),  Department  of Law,  explained  the  intent of  the                                                               
Stranded  Gas   Act,  which  is   to  provide  a   framework  for                                                               
modification  to  the   state  fiscal  system  as   it  might  be                                                               
applicable to the stranded gas resource.                                                                                        
                                                                                                                                
MR.  CONDON, in  response  to a  question  from Chair  Weyhrauch,                                                               
explained contractor hiring by the  State of Alaska under Section                                                               
240(a) of  the Stranded Gas  Act. Mr. Condon referenced  one such                                                               
contractor, Dr.  Pedro Van Muers, who  is the lead person  on the                                                               
negotiating  team.  The  other team  members  are  two  assistant                                                               
Attorneys General,  Department of Natural Resources  staff, staff                                                               
of the Division of Oil and Gas, and himself.                                                                                    
                                                                                                                                
MR.  CONDON  responded to  an  opinion  from Representative  Holm                                                               
regarding the makeup  of the negotiating team.   He reviewed with                                                               
the committee  the qualifications and  aptitude of Dr.  Van Muers                                                               
and  the  suitability  of  the other  negotiators  on  the  team.                                                               
Others, named  by Mr.  Condon, on  the team  are Bob  Loeffler, a                                                               
State of Alaska  employee who has worked in Oil  and Gas for over                                                               
25 years; and  Jay Lukens of Lukens Energy,  an energy consulting                                                               
corporation.                                                                                                                    
                                                                                                                                
MARTY  RUTHERFORD,  Deputy  Commissioner, Department  of  Natural                                                               
Resources, named  the remaining members of  the negotiating team:                                                               
Larry  Strause and  Bonnie  Harris from  the  Department of  Law;                                                               
Steve Porter,  Roger Marx,  Dan Dickinson and  some of  his staff                                                               
from the  Department of  Revenue; Marty  Rutherford and  Dr. Mark                                                               
Myers, Director  of Oil  and gas from  the Department  of Natural                                                               
Resources;  Sean Parnell  and  Dr. Anthony  Scott  also from  the                                                               
Division of Oil and Gas.                                                                                                        
                                                                                                                                
CHAIR  WEYHRAUCH commented  about a  "blue ribbon  commission" to                                                               
look at these issues and assess Stranded Gas Projects.                                                                          
                                                                                                                                
MR. CONDON replied that the state  would be happy to add depth to                                                               
the team once resources are available.                                                                                          
                                                                                                                                
Mr.  CONDON  responded  to  Chair  Weyhrauch's  comments  on  the                                                               
reimbursement  agreement  portion  of  the Stranded  Gas  Act  by                                                               
saying that, no  applicant had said [he or she]  wouldn't pay for                                                               
reimbursement, prior  to MidAmerican, and  that the state  had no                                                               
experts on  staff at  that time  to address  that portion  of the                                                               
application.                                                                                                                    
                                                                                                                                
MR.  CONDON  responded  to  Representative  Berkowitiz'  comments                                                               
regarding  exclusivity  by saying  he  has  not looked  into  the                                                               
precise legal  boundaries of the  exclusivity clause of  the Act.                                                               
He went  on say he  is not exactly sure  of the definition  as it                                                               
relates to  the Stranded Gas  Act. He agreed  with Representative                                                               
Berkowitz that it  would be helpful to have a  written opinion as                                                               
to  the meaning  of  exclusivity.   Mr.  Condon,  in response  to                                                               
Representative  Berkowitz' question  as to  whether the  economic                                                               
analysis  in the  Alaska North  Slope Gas  Commercialization team                                                               
report  to the  governor in  1998 was  still accurate,  said that                                                               
some of it would still be  accurate today. There is not a current                                                               
study  on the  subject.  Dr. Van  Muers is  prepared  to share  a                                                               
different analysis than the one he  did in 1996.  With respect to                                                               
Representative Berkowitz' statement  regarding the economic limit                                                               
factor (ELF), Mr. Condon responded  that the conclusion regarding                                                               
the  tax-free  treatment  afforded  by  the  ELF  being  prorated                                                               
between oil and  gas based on relative volumes  produced is still                                                               
true and impacts negotiations with the producers.                                                                               
                                                                                                                                
MR.  CONDON   answered  a   question  from   Representative  Fate                                                               
regarding exclusivity, by saying  that he believes Representative                                                               
Fate is correct in terms of final, exclusive arrangements.                                                                      
                                                                                                                                
CHAIR  WEYHRAUCH  asked  the  audience   to  submit  any  written                                                               
comments  with  regard to  the  issue  of  stranded gas,  to  the                                                               
committee  for  distribution  to  other  legislators.  (none  was                                                               
received).                                                                                                                      
                                                                                                                                
MR.  CONDON   responded  to  Representative   Seaton's  questions                                                               
regarding  whether Attorney  General  Renkes  and the  Governor's                                                               
Chief of  Staff, Jim Clark, are  part of the negotiating  team by                                                               
saying  that they  are part  of  the "Gas  Cabinet", which  meets                                                               
periodically to review  the negotiating team's work.  He said the                                                               
negotiating team reports to the Gas Cabinet.                                                                                    
                                                                                                                                
MR. CONDON  confirmed he was  the commissioner of  the Department                                                               
of  Revenue  at  the  time  the  department  completed  a  report                                                               
entitled,  "State Financial  Participation in  an Alaska  Natural                                                               
Gas Pipeline."   He  also confirmed  the cost  of the  report was                                                               
between $100,0000 and $200,000.                                                                                                 
                                                                                                                                
MR. CONDON, in response to  Representative Holm, said he was sure                                                               
Dr. Van  Muers had negotiated  a gas  contract, but he  could not                                                               
say that anyone  else on the team  had ever done so.   Mr. Condon                                                               
went on  to respond to  Representative Holm's  comments regarding                                                               
the lack of  negotiating expertise on the current  team by saying                                                               
he believes the current team is  well prepared, but that he would                                                               
like to see more members added.                                                                                                 
                                                                                                                                
Committee  members and  Representative Fate  offered their  final                                                               
comments on the subject of the Stranded Gas Act.                                                                                
                                                                                                                                
ANNOUNCEMENTS                                                                                                                 
                                                                                                                                
There were no announcements.                                                                                                    
                                                                                                                                
COMMITTEE ACTION                                                                                                              
                                                                                                                                
The committee took no action.                                                                                                   
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
CHAIR WEYHRAUCH adjourned the hearing at 9:15 a.m.                                                                              
                                                                                                                                
NOTE:   The meeting was  recorded and handwritten log  notes were                                                               
taken.  A  copy of the tape(s)  and log notes may  be obtained by                                                               
contacting the  House Records  Office at  State Capitol,  Room 3,                                                               
Juneau,  Alaska  99801  (mailing address),  (907)  465-2214,  and                                                               
after  adjournment  of the  second  session  of the  Twenty-Third                                                               
Alaska  State Legislature  this  information may  be obtained  by                                                               
contacting the Legislative Reference Library at (907) 465-3808.                                                                 

Document Name Date/Time Subjects