Legislature(1993 - 1994)
04/12/1994 09:05 AM Senate FIN
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
MINUTES
SENATE FINANCE COMMITTEE
April 12, 1994
9:05 a.m.
TAPES
SFC-94, #67, Side 1 (000-end)
SFC-94, #67, Side 2 (end-000)
SFC-94, #69, Side 1 (000-750)
CALL TO ORDER
Senator Drue Pearce, Co-chair, convened the meeting at
approximately 9:05 a.m.
PRESENT
In addition to Co-chair Pearce, Senators Rieger, Kerttula,
Jacko and Kelly were present. Co-chair Frank and Senator
Kelly joined the meeting after it was in progress.
ALSO ATTENDING: Senator Judith Salo; Donald Stolworthy,
Director, Charitable Gaming Division, Department of Revenue;
Tom Dow, Vice President of Hotels, Princess Cruises; David
Rogers, legal consultant to Senate Finance Committee; Jim
Eason, Director, Division of Oil and Gas, Department of
Natural Resources; Ken Boyd, Deputy Director, Division of
Oil & Gas, Department of Natural Resources; Jack Chenoweth,
Attorney, Legislative Legal Counsel, Division of Legal
Services, Legislative Affairs Agency; Susan Sorensen, fiscal
analyst, Legislative Finance Division; representatives of
the media, aides to committee members and other members of
the legislature.
VIA TELECONFERENCE: Mary Ann Lundquist, Assistant Attorney
General, General Civil Section, Department of Law,
Anchorage.
SUMMARY INFORMATION
CSSB 67(FIN): An Act amending provisions of ch. 66,
SLA 1991, that relate to reconstitution
of the corpus of the mental health trust
and to the manner of enforcement of the
obligation to compensate the trust; and
providing for an effective date.
Scheduled but not heard. (Rescheduled
for April 14, 1994.)
CSSB 308(RES): An Act modifying administrative
procedures and decisions by state
agencies that relate to uses and
dispositions of state land, property,
and resources, and to the interests
within them, and that relate to uses and
activities involving land, property, and
resources, and to the interests within
them, that are subject to the coastal
management program when the use or
activity is to be authorized or
developed in phases; and providing for
an effective date.
Amendments 1 through 10 were ADOPTED for
incorporation within CSSB 308(FIN) work
draft "U". David Rogers, legal
consultant to Senate Finance Committee;
Jim Eason, Director, Division of Oil and
Gas, Department of Natural Resources;
and Jack Chenoweth, Attorney,
Legislative Legal Counsel, Division of
Legal Services, Legislative Affairs
Agency, spoke to the work draft. Mary
Ann Lundquist, Assistant Attorney
General, General Civil Section,
Department of Law, testified via
teleconference from Anchorage. CSSB
308(FIN) was REPORTED OUT of committee
with a "do pass," with a fiscal note for
the Department of Natural Resources for
$34.2, and zero fiscal notes for the
Department of Fish & Game, the
Department of Environmental
Conservation, and the Office of the
Governor.
SB 370: An Act providing an exemption from
gambling laws for gambling conducted by
cruise ships for their ticketed
passengers in the offshore water of the
state outside of ports; defining `cruise
ship'; and providing for the licensing
of certain cruise ships before they can
conduct gambling in the offshore water
of the state.
Tom Dow, Vice President of Hotels,
Princess Cruises, testified in support
of SB 370. SB 370 was HELD in
committee.
CSHB 199(O&G) am: An Act relating to the exploration and
production of oil and gas and related
hydrocarbons, to oil and gas exploration
licenses, and to oil and gas leases in
certain areas of the state; and
providing for an effective date.
SCSCSHB 199(FIN) work draft "Q" was
ADOPTED. David Rogers, legal consultant
to Senate Finance Committee; Jim Eason,
Director, Division of Oil and Gas,
Department of Natural Resources; and Ken
Boyd, Deputy Director, Division of Oil &
Gas, Department of Natural Resources,
spoke to the work draft. Amendments 1
and 2 were withdrawn. Amendments 3, 4,
5, and 6 were ADOPTED. SCSCSHB 199(FIN)
was REPORTED OUT of committee with
individual recommendations, and a zero
fiscal note for the Department of
Natural Resources.
CS FOR SENATE BILL NO. 308(RES):
An Act modifying administrative procedures and
decisions by state agencies that relate to uses and
dispositions of state land, property, and resources,
and to the interests within them, and that relate to
uses and activities involving land, property, and
resources, and to the interests within them, that are
subject to the coastal management program when the use
or activity is to be authorized or developed in phases;
and providing for an effective date.
(This portion of the meeting was transcribed by Alaska-
Juneau Court Reporting & Secretarial Services due to a
request for a verbatim transcript by Senator Kerttula.)
The following is verbatim:
EXCERPT OF PROCEEDINGS
CO-CHAIR PEARCE: Call Senate Finance Committee to
order. It's Tuesday, April 12th, about seven minutes after
9:00 in the morning. Present at the table are Senators
Rieger, Kerttula, Sharp, and Pearce. Senator Jacko has just
joined us. This morning, we're going to bring Senate Bill
308 back before the committee. We do have proposed
amendments. I'd like to move (it) this morning. We also
want to bring House Bill 199 back. I believe Senator
Kerttula has some proposed amendments. I'd like to move
that today. The Department of Natural Resources is ready to
give us an update on Senate Bill 67, the Mental Health Trust
amendments. And then we have noticed Senate Bill 370,
allowing gambling on cruise ships. It's not my intention
for 370 to move today; however, I would like to do the
overview. And I noted that Mr. Dow is in the audience.
Tom, are you just here for the day?
MR. DOW: Yes.
CO-CHAIR PEARCE: You hope. Okay. Well, we will try
to -- what we'll maybe do is do that overview before we go
to mental health, and that way you can go on back.
SENATOR KERTTULA: I've got my files. My calendar said
one group of bills. [Indisc.] a couple of minutes ago said
some other bills. I have to go downstairs and get my file
on 308. That's where ...
CO-CHAIR PEARCE: Okay.
SENATOR KERTTULA: ... my amendments are.
CO-CHAIR PEARCE: That's fine. Okay. We'll bring 308
first. We have David Rogers and Jim Eason at the table, and
we do have proposed amendments in your packet that have been
logged in. There have been no changes to the CS that we
adopted. We adopted version (u); isn't that correct Billy.
MR. BILLY: Yes.
CO-CHAIR PEARCE: We adopted version (u) and there was
an errata, as we noted, and it was a major one, on page 7,
lines 30 and 31. The drafter deleted the language shown and
the Department's responses to those comments. It was never
the committee's intent that that be deleted. And so the
first amendment is to actually reinsert that language that
went out as the errata. Any questions about that? Could we
have a motion on that one?
SENATOR RIEGER: Is it number [indisc.]?
CO-CHAIR PEARCE: It's number 1; that's correct.
They're actually logged in, Steve, on the lower right-hand
corner. See?
SENATOR RIEGER: Oh, Amendment Number 1, there it is.
CO-CHAIR PEARCE: Correct.
SENATOR RIEGER: I'll move Amendment Number 1 as
[indisc.--simult. speech].
CO-CHAIR PEARCE: Okay. There's a motion on Amendment
Number 1. Hearing no objection, Amendment Number 1 has been
adopted. Amendment Number 2, Mr. Rogers, Mr. Eason.
MR. ROGERS: Thank you, Madam Chair. Just a general
statement. These amendments are sort of a response to a
number of concerns that have been raised at the last hearing
and since. Number 2 basically says that the final best
interest finding for an oil and gas lease sale has to be
issued at least 90 days before the sale, instead of the
current 21-day minimum requirement.
CO-CHAIR PEARCE: That was Mr. -- the man from Tanana
Chiefs, Walleri ...
MR. ROGERS: I believe that was the request of Mr.
Walleri, Madam Chair.
CO-CHAIR PEARCE: Yeah.
MR. ROGERS: Mike Walleri.
CO-CHAIR PEARCE: Right. It was Mr. Walleri's request.
And, Mr. Eason, does that work for the department?
MR. EASON: That does work, Madam Chair. It was a
valid concern that was pointed out under the law. We've
always been able to issue our final findings as late as 21
days before the action. But in this case, by proposing new
language in SB 308 that addresses appeal rights, there was
the potential for a conflict between having your full
opportunity to pursue appeals if a department or if a
division issued a decision late, so that there was less than
30 days to proceed. And so to avoid that problem, an
amendment to make it clear that we will issue those
decisions at least 90 days early before the disposal, is, I
think, appropriate.
CO-CHAIR PEARCE: Okay.
SENATOR JACKO: Question.
CO-CHAIR PEARCE: Senator Jacko. Did you move the
amendment? Nobody's moved it. We need a motion for the
amendment, then we'll call the question.
SENATOR JACKO: I move the amendment, Madam Chair.
CO-CHAIR PEARCE: Okay. Amendment Number 2 has been
moved. Is there any objection? Okay. Two has been
adopted.
MR. EASON: Shall I proceed, Madam Chair?
CO-CHAIR PEARCE: Yes.
SENATOR KERTTULA: Which amendment was that?
CO-CHAIR PEARCE: Number 3. Amendment Number 3 to 308
to have ...
UNIDENTIFIED SPEAKER: [Indisc.].
CO-CHAIR PEARCE: Okay. There's a motion on Amendment
Number 3. Could we please have an explanation?
MR. ROGERS: Yeah. Madam Chair, under the work draft
version before you, only an agreed person submits written
comments during the public review process can request
reconsideration of a director's decision. This amendment
expands this to include oral comments and oral or written
comments incorporate by reference somebody else's comments,
and this response to a concern expressed, I believe, by
trustees at the last hearing.
CO-CHAIR PEARCE: Questions? The motion on Amendment
Number 3 has been made. Senator Rieger.
SENATOR RIEGER: One more time, what does ...
MR. ROGERS: It -- 308 says you have to submit written
comments in order to qualify for -- to request
reconsideration. The trustees thought that was a little
narrow. So this expands it to allow the individual to
submit written or oral comments, or incorporate by reference
comments of another, so it sort of broadens the
qualifications for filing a request of reconsideration.
CO-CHAIR PEARCE: Senator Sharp.
SENATOR SHARP: That last part of your explanation ...
MR. ROGERS: Yes.
SENATOR SHARP: ... or incorporate the comments of
others, which would mean that they were never involved
before, they just [indisc.--simult. speech].
MR. ROGERS: Well, you'd have to do it during the
public comment process, so I could go in, Senator, and
incorporate your comments by reference, as long as I either
got that on the record during the public hearing or
submitted a written comment incorporating your comments by
reference during a public comment process, I'd be eligible
to request reconsideration.
SENATOR SHARP: But, you would have had to have been an
active participant.
MR. ROGERS: You'd to be there or submit the comment
during the comment period. Yeah, so it doesn't change that
basic requirement of participation. It just expands the way
you can participate to make it easier for folks to get their
points across.
SENATOR SHARP: I could go in and say I agree with so
and so on ...
MR. ROGERS: Yes.
SENATOR SHARP: Okay.
MR. ROGERS: Yeah. As long as you did it within that
time frame.
CO-CHAIR PEARCE: Senator Rieger.
SENATOR RIEGER: [Indisc.] first not to -- if he's
going to [indisc.] this article from this person in
California is something I agree with. That doesn't give the
person in California the ability to come in there; it's only
the person who actually showed up here. Adopting comments
by reference only applies to the person. You, the adoptee,
not the ...
MR. ROGERS: Correct. That's the intent.
SENATOR RIEGER: Okay.
CO-CHAIR PEARCE: Okay. The motion has been made on
Amendment Number 3. Is anyone opposed to Amendment Number
3? Okay. Amendment Number 3 is adopted. Amendment Number
4.
SENATOR JACKO: Madam Chair, make a motion to offer
Amendment Number 4.
CO-CHAIR PEARCE: Okay. Amendment Number 4 has been
offered. Mr. Rogers.
MR. ROGERS: Madam Chair. This amendment requires the
director to discuss the reasons for a decision that a
particular fact or issue was not material to the best
interest determination. Under the current proposal, the
director has to discuss his decisions regarding materiality.
This would require the director to also explain why he
determined that a factor issue wasn't material to the
determination.
CO-CHAIR PEARCE: And whose request was that?
MR. EASON: That, I think, could best be described as a
request of a lot of people. [Indisc.--simult. speech]
generic request.
CO-CHAIR PEARCE: Generic request.
MR. EASON: We've heard this concern from literally the
first hearing and continuing through, and we've really
struggled with how to put it in words that that's what we
really intend all along. We expect to be held to a standard
of addressing what we think is material, as well as
providing a written explanation when we don't think things
are material to the particular phase that we are issuing a
decision for.
CO-CHAIR PEARCE: The question has been called. All
those in favor? Senator Rieger, did you have a question?
SENATOR RIEGER: Yeah, I did [indisc.].
CO-CHAIR PEARCE: Okay. Senator Rieger.
MR. EASON: I [indisc.] understand it.
SENATOR RIEGER: I'm trying to understand it.
MR. EASON: It's not easy.
SENATOR RIEGER: [Indisc.] look at the subparagraph
(a). It says, basically, facts other than those that the
director finds material are the ones that shall be discussed
as to why they are not material, is that ...
MR. EASON: It's -- go ahead. Sorry, Senator.
SENATOR RIEGER: Does that mean you have to -- I mean,
I can think of a fact that there is a twig [indisc.] on this
branch in the lease sale area. I mean, that's a fact, but
it's not material. Do you have to think of every twig? How
does this work?
MR. ROGERS: I'll let Mr. Eason respond, but yes, I
think you probably would have to deal with a twig in that
manner.
MR. EASON: Madam Chair, members of the committee. If
someone raises that fact to me, I have to acknowledge that
that fact has been entered as part of the administrative
process, and I would also have to provide a written
explanation, from what I believe, that is immaterial or non-
material to the decision.
SENATOR RIEGER: Well, if [indisc.] facts which were
raised during the hearing, where is facts defined as facts
which were raised during the hearing?
MR. EASON: You would have to read this, Senator
Rieger, in context of the entire bill, so that -- with the
protection that you must raise issues timely for appeal
rights as well as the timing for when preliminary, best
interest findings, and final best interest findings are
conducted. And taken as a whole, I think that that issue
isn't a problem, but you have to consider it in the context
of the other requirements of this legislation as well as
existing law that define when we have to hold the hearings
and when the administrative process begins and ends.
SENATOR RIEGER: You're convinced that this -- in
context that this clearly does not include facts which were
[indisc.]?
MR. EASON: I believe I have convinced myself. I will
be the first to agree with the committee and say that this
is a difficult passage to understand. I originally drafted
some language that, to me, appeared very simple and straight
forward, and I think appeared simple and straight forward to
everyone else working on this. And this is not a
condemnation of the drafting, but it has been expanded to
what you see today that makes it a little bit more difficult
to understand. It's fathomable, but it takes some effort.
CO-CHAIR PEARCE: Our drafters don't seem to be the
most straight forward folks. Other questions on Amendment
Number 4? The question has been called. All those in
favor, signify by raising your right hand. We're back to
that. Is anyone opposed? Okay. Amendment Number 4 has
passed. Senator Kelly, by the way, has joined the
committee. Amendment Number 5.
MR. ROGERS: Madam Chair, there are a series of ...
CO-CHAIR PEARCE: We do have a motion on Amendment ...
MR. ROGERS: Oh. Sorry.
CO-CHAIR PEARCE: ... Number 5 from Senator Jacko. Mr.
Rogers.
MR. ROGERS: There are a series of clarification
amendments to the findings. Five is one of them. It
essentially clarifies that the determinations of the state's
best interest of those rendered under Title 38, actually
Title 38.05.
CO-CHAIR PEARCE: Any questions about that? That, I
believe, the coastal districts had requested for
clarification sake. Does anyone object to Amendment Number
5? Okay. Amendment Number 5 has been adopted. Number 6,
Senator Jacko.
SENATOR JACKO: Madam Chair, I move [indisc.].
MR. ROGERS: Number 6, Madam Chair, clarifies that
we're talking about the scope of review. It was just an
inadvertent deletion of the phrase "of review." Any
questions? Anyone opposed to Amendment Number 6? Six is
passed. Number 7, Senator Jacko.
SENATOR JACKO: Madam Chair, I move Amendment Number 7.
CO-CHAIR PEARCE: Okay. Amendment Number 7 has been
moved. Mr. Rogers.
MR. ROGERS: Seven, Madam Chair, simply adds economic
effects to the environmental and sociological effects in
finding number 11. What is an economic effect, in your
opinion, Mr. Eason?
MR. EASON: Economic effects, Madam Chair, members of
the committee, include a number of potential effects, the
most direct and immediate would be the receipt of bonus bids
in the case of an oil and gas lease sale, for example.
Potential effects from that include additional investment to
explore with geophysical tools and drilling, and if you find
something, the potential effects that arise from the
royalties and taxes as well as private sector income that
would result from that.
CO-CHAIR PEARCE: The private sector economics would
also come into play; is that correct?
MR. EASON: That's correct. That is an economic effect
that we would presume.
CO-CHAIR PEARCE: Senator Kerttula.
SENATOR KERTTULA: Potential downside economic effects,
too, from a spill within the middle of the region that the
affected [indisc.].
MR. EASON: Madam Chair.
SENATOR KERTTULA: [Indisc.] economic effect.
MR. EASON: Senator Kerttula, that is a potential but
speculative effect, and it would not be our intent to
estimate the under -- the context of this legislation.
SENATOR KERTTULA: The other potential, too? Some of
it's measurable.
MR. EASON: That's correct. That's correct.
SENATOR KERTTULA: [Indisc.] potential.
MR. EASON: We would not count -- we would not total
potential economic benefits nor potential economic deficits
that we cannot reasonably foresee.
SENATOR KERTTULA: What could you reasonably foresee in
advance of nothing actually having been produced?
MR. EASON: As far as financial impacts?
SENATOR KERTTULA: [Indisc.].
MR. EASON: Very little, Senator Kerttula.
CO-CHAIR PEARCE: I'm sorry, Senator Kerttula. I
didn't hear your question. I heard the answer.
SENATOR KERTTULA: Oh. All I said was that, what could
you reasonably foresee as economic impact based on the
answer that he made about potential for [indisc.] on the
impact. And his answer was, very little. He couldn't see
very much, which I think is an honest answer, but it might
still lead to a good PR.
CO-CHAIR PEARCE: Okay. Number 7 has been offered. Is
anyone opposed to Amendment Number 7? Okay. Adopted.
Amendment Number 8. Senator Jacko.
SENATOR JACKO: Madam Chair, I move Amendment Number 8.
CO-CHAIR PEARCE: Thank you.
MR. ROGERS: Madam Chair, this language is designed to
reinforce legislative intent, that a director should not
divide or segment proposed projects simply to avoid a
thorough review of the project. Page 3, line 4, Senator. I
could read this, ...
CO-CHAIR PEARCE: [Indisc.--simult. speech].
MR. ROGERS: ...if you'd like me to read the sentence
in context. It's a little confusing; let's see if I can do
it. Let's see. Eleven would read as amended - this is page
3, line 3 - consideration of a disposal as a phase of a
development project is not intended to artificially divide
or segment a proposed development project to avoid thorough
review of the project, or to avoid consideration of
potential future environmental, economical, of sociological
effects, but rather is intended to allow for consideration
of those issues when sufficient data are available upon
which to make reasoned decisions.
CO-CHAIR PEARCE: Which means what?
MR. ROGERS: Jim.
MR. EASON: It's -- as David said, the intent is to
reinforce that we are not trying to set up a process, either
in Title 38 or Title 46, where decisions about projects that
are known, projects of which the parameters of that project
are known well enough that you can issue one conclusive
consistency determination will be avoided. It's for those
situations only that we're proposing to segment the
consideration for best interest findings and consistency
determinations, in which you don't know all the potential
pieces of that project. But, again, as we mentioned in
earlier testimony on version (u), there are safeguards in
that process that require that in order to segment, you have
to make a determination that it is a project in which you do
not know all the potential pieces, and you have to make sure
that in that uncertainty you retain the right to condition
future permits to make sure they're consistent with the
Coastal Zone Management Act.
SENATOR KERTTULA: Chairperson, that ...
CO-CHAIR PEARCE: Senator Kerttula.
SENATOR KERTTULA: ... two titles, or what? Mineral
and oil and gas, that discussed? I understand Title 38 is
everything in lands, but that's what you're talking about in
both segments.
MR. EASON: It would not be restricted -- Senator
Kerttula, it would not be restricted to oil and gas and
minerals.
SENATOR KERTTULA: Okay. But includes both [indisc.],
correct?
CO-CHAIR PEARCE: Questions?
MR. EASON: Lawyer's dream to me.
CO-CHAIR PEARCE: Anyone -- well, at least it's in the
finding. Anyone opposed to Amendment Number 8? Senator
Sharp is. Anyone else? Okay. Amendment Number 8 is passed.
Number 9.
SENATOR JACKO: [Indisc.] move Amendment Number 9.
CO-CHAIR PEARCE: Senator Jacko's moved Number 9. Mr.
Rogers.
MR. ROGERS: Madam Chair. This amendment requires the
director to summarize and respond to all public and agency
comments regarding all types of disposals in both the
preliminary, if there is a preliminary, finding and the
final determination. Now, this requirement only applies to
final findings for oil and gas lease sales.
CO-CHAIR PEARCE: Questions? Senator Rieger.
SENATOR RIEGER: What is [indisc.] line 8? I don't see
-- could you explain what that [indisc.--simult. speech]
insertion is there, the one after [indisc.--simult. speech]?
MR. ROGERS: Well, it's technical to get rid of -- what
we've done, in fact -- by adopting Amendment Number 1, we're
now repealing it, because this replaces those provisions in
current oil and gas law. So it's now -- this requirement to
respond to public -- to summarize and respond to public and
agency comments, applies across the board to disposals of
interest in land, not just oil and gas. So that's why you
see the deletes as they're written in the bottom of this
amendment.
SENATOR RIEGER: Well, we just be missing something,
but generally when you see a bill where the requirement of
the bill is that there is bold faced material added and
capitalized, bracketed material being deleted, it means it's
existing law that you're amending. And when you look at
page 8, line 8, you're still in that part of the language --
part of the statutes which is existing law and you're
inserting deletion of material that doesn't appear to be
there in the first place.
MR. ROGERS: We went through this with the drafter. It
does work. Trust me, Senator. The intent -- the drafter's
intent - and we ought to put this on the record so it's
clear - is to eliminate that language in existing law. The
amendment, page 6, line 16, is designed to replace that and
also apply to other disposals other than oil and gas. So
the drafter contends that this does the trick, Senator ...
SENATOR RIEGER: So is it -- the bill, misdrafted as it
is now, is there existing language such as what's in the
brackets that should have been written in on page 8, line 8,
that's not there?
MR. EASON: If you look at the existing bill and also
consider Amendment Number 1, which added back the language
under the department's [indisc.--simult. speech].
MR. ROGERS: It's there now, in any event.
MR. EASON: By adopting Amendment 1, it's there in the
bill. And now, by adopting Amendment Number 9, you will
remove it and replace it with Amendment Number 9, the
principal part of Amendment Number 9 which then will provide
that the safeguards that were there before - in other words,
that in oil and gas lease sales you have to respond to the
public comments and respond to -- the department's response
to them. You will be certifying that we not only do that
for final best interest findings in oil and gas leasing, but
we will do it for preliminary best interest findings and
final best interest findings for oil and gas leasing, and
we'll do it for all other findings for other disposals.
MR. ROGERS: For other disposals. Which is why this
section now appears in (e), which generally applies to all
disposals as opposed to (g) which only applies to oil and
gas disposals.
CO-CHAIR PEARCE: Senator Rieger's question now, on
page 8, line 8, the language that Mr. Chenoweth is deleting
isn't. I see it up on page 6, line 16, he's adding it, but
I don't see where he's taking it from. Was he working off a
different draft?
MR. ROGERS: No, he was working off this draft. He may
have been in a hurry. I think he -- perhaps the way to deal
with this is to simply move to delete the language in
Amendment 1 and replace it with the language that's supposed
to be on page 6, line 16, Madam Chair.
CO-CHAIR PEARCE: Well, page 8, line 8, the language is
already deleted after subsection.
UNIDENTIFIED SPEAKER: What is Amendment 1, put it back
in.
SENATOR JACKO: Or move this [indisc.].
CO-CHAIR PEARCE: I don't -- [Indisc.] Title 38,
please?
MR. ROGERS: Madam Chair, I'm not going to -- I don't
know, maybe we need Chenoweth. I don't want to redraft Mr.
Chenoweth's amendment without his involvement.
CO-CHAIR PEARCE: Okay. Why don't we do this. Senator
Jacko, why don't you remove your motion on Number 9. Let's
call Mr. Chenoweth. We'll go on to 10, and then we do have
Senator Kerttula's amendment also.
SENATOR JACKO: Okay. I would remove my motion ...
CO-CHAIR PEARCE: Call Jack.
SENATOR JACKO: [Indisc.] my motion on Number 9, and
move Amendment Number 10.
CO-CHAIR PEARCE: Okay. Number 10 has been ...
SENATOR KERTTULA: Ten and eleven sort of tie together,
but I think 11 stands apart from 10 all right. [Indisc.]
looking at it. Same area.
CO-CHAIR PEARCE: Okay. Ten has been moved. Mr.
Rogers.
MR. ROGERS: Madam Chair. If an agent -- basically,
this amendment says that if an agency decides to phase a
consistency determination, it has to describe its reasons
for that phasing decision. This responds to a concern
expressed by a number of folks over the last couple of
weeks. But there, at a minimum, needs to be some discussion
of phasing decision and justification for it.
CO-CHAIR PEARCE: Questions? Is anyone opposed to
Amendment Number 10? Okay. That has been adopted. Senator
Kerttula, we'll call your amendment that you had
distributed, Amendment Number 11.
SENATOR KERTTULA: Yes.
CO-CHAIR PEARCE: Okay.
SENATOR KERTTULA: I move the amendment.
CO-CHAIR PEARCE: Okay. There's a motion, Amendment
Number 11. I'll object for discussion purposes.
SENATOR KERTTULA: Chairperson. I still represents
Sharp's copy [indisc.] back. Well, it just seems like we
should be able to avoid phasing if review from start to
finish is possible. Why get started and then stop the
project? It could be costly, and if it's -- you know, if
it's a reasonably foreseeable problem, why not review the
project from start to finish rather than phasing. Phasing
is the potential problem, and certainly you don't want to
impose it when you can, pretty well, with knowledge,
experience, and comparison, get the project authorized from
beginning to end.
MR. ROGERS: That's my amendment.
CO-CHAIR PEARCE: And so you're going back -- that
effectively would go back [indisc.--simult. speech] phasing?
SENATOR KERTTULA: [Indisc.--simult. speech] I think 8,
but as the testimony [indisc.] completely with 8.
CO-CHAIR PEARCE: Senator Rieger.
SENATOR RIEGER: Question for Mr. Eason and [indisc.].
When there is a phased project, is the lessee proceeding at
-- you know, at his own risk and [indisc.] phases or is
there an obligation by the state to proceed with the future
phases? Does each phase stand alone with no assurance or
guarantee that the next phase will happen?
MR. EASON: Madam Chair. Senator Rieger. The language
would require, before you can approve a phased project, the
language of this bill would require that the state retain
the authority to condition future uses. And we believe that
that retained authority does send a signal to the lessee
that he is proceeding at his own risk. In the case of oil
and gas leases, we, for example, for a number of years, had
a term that -- in the lease that explicitly addresses the
outcome if the state ultimately makes a decision on some
future activity that it is for environmental reasons or
other unacceptable -- that it would result in unacceptable
impacts. There is the authority that's explicit there to
now allow those things to happen. But, of course, the down
side of that is that you, because of the risk of takings of
property, you are -- the state is exposure to some damages
to those decisions. But that has been in law now for a
number of years and that is the way it's handled. So the
courts ultimately would determine if there is any damage and
what that damage would be under, in the case of oil and gas
leases, under those lease terms themselves, if there is a
dispute.
CO-CHAIR PEARCE: Excuse me. Further questions,
Senator Rieger? Senator Salo, any time you have a question,
feel free to jump in. Any other questions? Any other
discussion? All those in favor of the amendment, raise your
right hand. Anyone opposed? Motion fails. Senator
Kerttula, do you have more amendments for 308?
SENATOR KERTTULA: I don't have any more amendments
until I hit the floor.
CO-CHAIR PEARCE: Okay. Any other amendments?
MR. ROGERS: We could cook a few up, Madam Chair.
CO-CHAIR PEARCE: Pardon me?
MR. ROGERS: I'm sure we could come up with a few more.
CO-CHAIR PEARCE: In the absence of Mr. Chenoweth --
Senator Salo.
SENATOR SALO: Thank you, Madam Chairman. I have a
question to go back to one of the amendments that dealt with
limiting later repeals if you hadn't been involved earlier
in the process. And the Kenai [indisc.] attorney has listed
some concerns about, and I have a communication from him.
One of his concerns relates to that provision by saying that
he's not sure it would be constitutional to limit the right
of a person, any citizen in the State of Alaska, to appeal a
decision about the assets of the State of Alaska, even if
they hadn't been involved earlier in the process, especially
if the final decision were particular egregious or, in fact,
violated civil statute in some way. And I was wondering if
you had a general response to that concern.
MR. EASON: Madam Chair. Senator Salo. We do. I
think -- I believe we have Mary Lundquist, an assistant
attorney general, on line, and I think she has been the
person that has been looking at that issue as it was raised
by the Kenai Peninsula Borough last week. And I believe
she's on line.
CO-CHAIR PEARCE: We'll see.
MS. LUNDQUIST: Madam Chairman, I am on line.
CO-CHAIR PEARCE: Good.
MS. LUNDQUIST: I'm Mary Ann Lundquist.
CO-CHAIR PEARCE: Hi, Mary. Did you hear Senator
Salo's question?
MS. LUNDQUIST: It's regarding the Kenai Peninsula
Borough letter?
SENATOR SALO: Yes.
MS. LUNDQUIST: We've been looking into that question,
and if an exhaustion of administrative remedies is favored
under law and this Senate Bill 308 doesn't include port
review, no limits of questions to those that were addressed
by the -- raised by the [indisc.] and addressed in the
request for reconsideration, if there is a constitutional
statement made said Senate Bill 308 was unconstitutional.
If it was solely a constitutional question, then it would
not fall under the exhaustion of administrative remedies,
and such a claim could be brought separately before the
Superior Court. If it's a question where the appellate
would raise constitutional issues as well as factual issues,
then they would have to exhaust these administrative
remedies. But in the case where the Kenai Peninsula
Borough's concern seems to be that a party would not be able
to challenge constitutionality of the language of Senate
Bill 308 itself or else challenge the action of the
Department of Natural Resources solely on legal issues. And
I think that action would still be open without the
requirements of exhaustion of administrative remedies.
CO-CHAIR PEARCE: Senator Salo.
SENATOR SALO: Okay. I think -- well, I guess a
further question is, though, as to whether -- as to who that
appellant could be. I mean, does it have to be somebody --
I mean, the way the new bill, it couldn't be somebody who
had not been involved earlier in the process.
MS. EASON: Again, Madam Chair and Senator Salo, and
Mary Lundquist, please jump in if I'm misstating, but my
understanding is that that is the preferred course in the
courts today. That you have to have some connection to the
process. You have to have been a participant in the
administrative process in order to have standing generally.
And that the courts would tend to not favor allowing someone
who had not demonstrated that standing.
One of the things that we have found is that the courts
have traditionally not applied that rule very carefully and
very consistently in cases of oil and gas leasing. One of
the reasons that this appeal process is proposed to be
clarified is an incident that we had in Sale 57, a North
Slope sale, where someone raised an issue, as I recall two
to three years before the sale was held, it was actually, as
I recall, a federal agency that expressed concerns about the
effect of a sale on the gates of the Arctic National
Preserve which was not far from that sale area. We
completed the administrative process on that sale, did a
final finding, which we presumed to have met the concerns of
that federal agency since there was no further commenting by
them nor any appeal, only to find afterwards, that a third
party litigant who had not participated, who had not raised
that issue, whom we had no idea was concerned about that
issue, subsequently went to court without an appeal to the
commissioner and raised it as an original action.
And, really, this is the primary thrust of what we are
trying to accomplish with this amendment is to -- actually a
couple of things. One, to assure that everyone has an
opportunity to raise any issue they want, but also to
balance that by assuring that they do it in the proper
context, within the administrative process, within the
period allowed for comments so that the department can
respond to an effective way to their concerns. And then if
they're still aggrieved by a final decision to assure that
they have an appeal right to the commissioner, and that they
have plenty of time with the amendment to allow 90 days
before the final decision, that if they're still concerned
or believe that the final decision is unfair from the
commissioner, they can then go to Superior Court. But then
again, we're saying that if you go to Superior Court, you
can't raise new issues there that you haven't raised before
either the department before you went to the commissioner or
before the commissioner, that you have to talk about only
the issues that you've raised. And we believe that's a fair
balancing for all the parties so that people have some
predictability and some opportunity on our side to respond
to concerns in a timely way.
MS. LUNDQUIST: Madam Chairman?
CO-CHAIR PEARCE: Yes, Mary.
MS. LUNDQUIST: I would just like to add [indisc.]
comments of Director Eason, that currently the courts have
held that under the APA, there's no definition of who can
raise an administrative appeal. The courts have held their
party can bring an appeal, and a party is considered a
person who is actually aggrieved by the decision of the
agency and who participates in the proceedings for the
purpose -- and is directly interested in the proceedings.
And I think that the requirements of participation at the
administrative level encourages public participation and it
also enforces the purposes of the exhaustion of
administrative remedy which is to allow the administrative
agency to perform the functions that are within its special
[indisc.]. And it allows them to develop a factual record
[indisc.] expertise and correct its own errors so that
judicial controversies are [indisc.].
CO-CHAIR PEARCE: Any other questions, Senator Salo?
SENATOR SALO: No. I think ...
CO-CHAIR PEARCE: Okay. Mr. Eason, on the phasing
question, it's my understanding that the language we have in
this bill closely conforms to, or mirrors inasmuch as Mr.
Chenoweth ever mirrors anything, mirrors the federal coastal
management regs; is that correct?
MR. EASON: That is correct.
CO-CHAIR PEARCE: On phasing?
MR. EASON: That is correct, Senator ...
MR. ROGERS: In Title 46.
MR. EASON: For Title 46, which is, of course, where
the federal interest lies with the Coastal Zone Management
Act. For the members of the committee, you probably all
have seen a letter from Mr. Clement Lucey [ph] of the Office
of Coastal Resource Development, and Mr. Lucey was asked by,
I believe Ricky Ott [ph] [tape ends mid-speech] ...
End SFC-93 #67, Side 1
Begin SFC-93 #67, Side 2
MR. EASON: [Tape starts mid-speech] ... in a letter
earlier about whether or not there was the risk that the
state's program -- Coastal Zone Consistency Program may be
decertification or some way affected negatively by the
provisions of SB 308. And that letter asks for review of
version (k) of SB 308 to determine that. And Mr. Lucey's
letter didn't draw any firm conclusions. It never arrived
at a conclusion that, in fact, if the bill, as drafted in
version (k), were adopted that it would somehow lead to
decertification, but he suggested that there were two areas
that were different in his view, or could potentially be
viewed as having different standards for federal projects
and state projects if 308 was adopted as version (k). And
the two things he noted were the use -- or limiting the
effects you consider to significant direct effects. So in
response to that letter, we deleted direct to address his
concern.
And he also said that he believed that there needed to
be some guidance as to when phasing would be allowed. And
so we went right to the federal regulations, and the federal
regulations specifies, as I said earlier, that if you know
enough about a proposed project and its pieces to issue one
conclusive consistency determination so that the applicant
never has to come back again for another, then you can't
phase. But if you don't know enough, you do phase. And so
we've adopted the same standard that exists right now in
federal law.
CO-CHAIR PEARCE: Okay. Mr. Chenoweth is back, but
let's take a recess while we get Senator Rieger back to the
table since the question about Amendment Number 9 was his
question.
[In Recess]
CO-CHAIR PEARCE: [Tape starts mid-speech] ... we do
have Mr. Chenoweth. Senator Frank, would you please make
the motion on Amendment Number 9 again? Amendment Number 9?
SENATOR FRANK: Madam Chair, I move that we adopt
Amendment Number 9 and ask unanimous consent.
CO-CHAIR PEARCE: And Number 9 is back before us.
Senator Rieger had a question, Mr. Chenoweth. We couldn't
figure out your deletion on page 8, line 8, because it's not
in the bill, so we're trying to understand exactly what
you're doing.
MR. CHENOWETH: The amendment, Madam Chair, is to take
the requirement of the department's responding to comments
received, which now appears in the oil and gas -- in the
subsection that's applicable only to oil and gas, and move
it so that it becomes applicable in all instances, whether
the [indisc.] finding applicable for oil and gas or for any
other proposed disposal. The first insertion, page 6, line
16, does that. It takes and puts in as new language in the
general law, applicable to all the proposed disposals, the
requirement that there be a preliminary finding with a
[indisc.] response and [indisc.--noise] final finding
requirement for the department affirmatively respond to
agency and public comments received.
Now I thought that was -- putting it there would make
it duplicative of materials that were already in a later
portion of the bill. So what I'm proposing you do with page
7, line 29, is to remove the language as proposed to be
amended from that point and then in order to get it out of
the statute at that point altogether, page 8, line 8,
brackets all of that language. And the only reason that
there is a difference between page 7, line 29, and the later
showing -- and having that language show up later on page 8,
line 8, is that there's intervening new underlined language,
and any deletion is typically -- any bracketed language
typically follows underlined [indisc.]. It's just a matter
of placing it in the proper order.
CO-CHAIR PEARCE: So, Senator Rieger, if you turn to
page -- of the bill, if you turn back to page 7, lines 29
through 31, there's the language he's actually removing.
It's just to get a [indisc.] new stuff in between.
SENATOR RIEGER: [Indisc.].
CO-CHAIR PEARCE: Well, maybe not. That's where
subsection is.
SENATOR RIEGER: Okay. Madam Chair?
CO-CHAIR PEARCE: Senator Rieger.
SENATOR RIEGER: I think I see that we need to add the
bracketed language as Mr. Chenoweth suggests. I still don't
understand why that bracketed language doesn't occur on page
7, line 29, instead of what was there before because the
next phrase, the phrase that follows paragraph 2 will be
underlined material in a preliminary written finding, facts
-- and I'm reading from the top of page 8, facts that are
known to the director at the time of preparations of finding
[indisc.] that are, and then (a) and (b) will follow. And
then following that last underlined word, subsection on line
8, it'll immediately be followed by the bracketed words, a
summary of agency and public comments received and the
department's responses to those comments. In other words,
the bracketing is brought down behind the underlined
material. Now I understand.
CO-CHAIR PEARCE: Good. You can explain that.
SENATOR RIEGER: No. I'm not going to explain it
[indisc.]. Okay. Good enough. On 6(b), the very first
one, that word [indisc.] is probably redundant, Jack.
MR. CHENOWETH: That's correct.
SENATOR RIEGER: Okay. Okay. I don't have an
objection to Number 9.
CO-CHAIR PEARCE: Okay. Any other questions about
Amendment Number 9? Any objections to Amendment Number 9?
Okay. Number 9 has been adopted. Are there any other
amendments to be offered today on Senate Bill 308, which
will now become a Finance CS 308? Will of the committee on
Senate Bill 308?
SENATOR FRANK: Madam Chair?
CO-CHAIR PEARCE: Senator Frank.
SENATOR FRANK: I move that we pass out the CS for
Senate Bill 308 with individual recommendations.
UNIDENTIFIED SPEAKER: Objection.
CO-CHAIR PEARCE: The motion to move Senate Bill 308.
There is an objection. All of those favor of moving the
bill, please signify by raising your right hand. Anyone
opposed? Okay, on a one, two, three, four, five to one
vote, Senate Bill 308 moves. Mr. Eason, we will need a new
fiscal note. I don't think it's changed dramatically, but
[indisc.] updated fiscal note from the department, please.
[End of requested portion]
CSSB 308(RES) was REPORTED OUT of committee with a "do
pass," and zero fiscal notes for the Department of Fish &
Game, Office of the Governor, and Department of
Environmental Conservation, and a fiscal note for the
Department of Natural Resources for $34.2. Co-chairs Pearce
and Frank, Senators Kelly and Sharp signed "do pass."
Senator Kerttula signed "no recommendation." Senator Rieger
signed "do not pass."
(The minutes from this point on are not verbatim.)
CS FOR SENATE BILL NO. 370(JUD):
An Act providing an exemption from gambling laws for
gambling conducted by cruise ships for their ticketed
passengers in the offshore water of the state outside
of ports; requiring certain disclosures in connection
with promotions on board cruise ships and making
violation of that provision an unfair trade practice;
defining `cruise ship'; and providing for exemption
fees for certain cruise ships before they can conduct
gambling in the offshore water of the state.
Co-chair Pearce announced that SB 370 would be heard in
committee strictly as an overview. She invited Tom Dow,
Vice President of Hotels, Princess Cruises, to join the
members at the table. She also said Donald Stolworthy,
Director, Charitable Gaming Division, Department of Revenue,
was in the audience and available for questions from the
committee.
Co-chair Pearce asked Senator Sharp if he would like to make
a statement regarding the bill since it was introduced by
the Transportation Committee. Senator Sharp said there was
a short sponsor statement but he would give the floor to Mr.
Dow in consideration of limited time in the meeting this
morning.
TOM DOW said that SB 370 would provide for an exemption for
the state's gambling laws for cruise ships and in effect
would allow cruise ships to operate casinos on board when
sailing within Alaskan waters with the exception of three
miles off any port of call. This bill would restore rights
to cruise ship operators which have been common practice
within the industry for about 20 years. He said a letter in
support of SB 370 had been sent to Senator Taylor and would
be presented to the committee if it was not on file. The
bill would require a fee for the exemption. An estimate
said that this bill would raise approximately $300,000 per
year from cruise ship companies. He felt that revenues
would grow in consideration of new ship construction plans.
Mr. Dow went on to say that in the last 20 years Alaska had
become one of the premier cruising destinations in the
world, currently ranking number 2. During this period of
growth and development, there was no evidence that the on-
board entertainment activities had any impact on any Alaskan
resident or community because of the way casinos operated.
The casinos were open only when the ship was underway and
closed when in port. Access was limited to passengers who
had paid for a trip. He felt the public policy concerns
related to gambling would not be compromised. He knew
Alaskans appreciated the importance of tourism to the state,
they recognized the significant role that cruise ship
companies played, and Alaskans did not favor prohibiting
casinos. He pointed out that all world class cruises
offered gambling and passengers now expected it. He felt
there was no public policy opposing gambling on cruise ships
and the state could gain some revenues from those ships that
wished to continue gambling on its cruises. He said that
this bill effected a small portion of time when the ships
were in Alaskan waters.
In answer to Co-chair Pearce, Mr. Dow said that the time the
casinos were open varied depending upon the ship. For
Princess cruises, normal operating time would be from about
10 am to 2 am in the morning excepting when in port or
during a special glacier viewing or other sightseeing
opportunity when the casino would be closed.
In answer to Senator Rieger, Mr. Dow said that passenger
participation depended on the cruise company, space
available and demographics. He estimated 50-60 percent of
Princess cruise ship passengers participated at some point
to some extent.
In answer to Co-chair Pearce, Mr. Dow said that Princess ran
its own gambling casino.
In answer to Senator Kelly, Mr. Dow said that a preliminary
plan for one of his ships said that casinos would operate
the first two days, the evening the first day and the second
day from 9am to 2am, the third would be closed after 2am.
The next two days would be closed entirely, day five would
be open from 9:30am to 2am, and day six, 2pm to 2am. He
said there was some ability to adjust the time schedule
depending on the situation but no one had ever measured the
increment of activity that would be prohibited so it was
hard to estimate use.
In answer to Senator Sharp, Mr. Dow said that it took about
two days to reach Alaska waters from Vancouver.
In answer to Senator Kerttula, fees were not paid to other
states since Alaska was unique in that the cruise ship
hugged the coast for a substantial part of the cruise. Out
of Los Angeles or Miami, by the time passengers were
settled, the ship was out three miles and gambling was not
an issue. He said that there was one similar situation in
Chesapeake Bay in Maryland and exempted ships from gambling
so they could call in Baltimore. (In a later meeting, Mr.
Dow said that Maryland charged the cruise ships a $25 fee.)
Senator Sharp noted that item 2 on lines 1 and 2, and
Section 3 and 4 on page 2 which required that any promotion
done on board a ship had to state clearly that it was a paid
advertisement had been added to CSSB 370(JUD). This had
been requested by vendors up and down the coast.
In answer to Senator Kerttula regarding enforcement costs,
Senator Sharp said that in Judiciary Committee the word
exemption was changed from the word licensing thus reducing
the fiscal notes. It was also noted that the new fiscal
note for the Department of Revenue was for $43.6.
Co-chair Pearce announced that SB 370 would be HELD in
committee.
CS FOR HOUSE BILL NO. 199(O&G) am:
An Act relating to the exploration and production of
oil and gas and related hydrocarbons, to oil and gas
exploration licenses, and to oil and gas leases in
certain areas of the state; and providing for an
effective date.
Co-chair Pearce announced that HB 199 was before the
committee. She invited Jim Eason, Director, Division of Oil
and Gas, Department of Natural Resources, and Ken Boyd,
Deputy Director, Division of Oil & Gas, Department of
Natural Resources, to join the members at the table.
Senator Kerttula MOVED amendment 1. Co-chair Pearce
OBJECTED for discussion purposes. Senator Kerttula WITHDREW
amendment 1 because it contained a drafting error.
Senator Kerttula MOVED amendment 2. Co-chair Pearce
OBJECTED for discussion purposes and asked Ken Boyd to
comment.
KEN BOYD said that amendment 2 was a policy call of the
legislature. As a practical matter, the Commissioner was
hired by the Governor, and, potential lease/sale programs
were reviewed in discussions and cabinet meetings. He felt
that amendment 2 would slow the process but again reiterated
it was a legislative policy call. Senator Kerttula felt
that important things could occur without enough input from
the Governor.
Discussion was had by Senators Kelly, Sharp, Kerttula, and
Rieger regarding the implication of amendment 2. Senator
Salo commented that the intent would be that the Governor
would be another approval rather than another person to
lobby.
Mr. Boyd reminded the committee that the entire best
interest finding and public process was a part of the
legislation and believed a large part of the public process
would have taken place before this point. Senator Kelly
felt that there would be more exploration licensing without
the amendment.
Co-chair Frank said that SB 310 had a provision asking for
the Attorney General for sign-off. He suggested that the
Attorney General could give a second look at approval. Mr.
Boyd was opposed to adding another formalized step in the
process. After more discussion with Co-chair Frank, Mr.
Boyd reiterated his position.
End SFC-93 #67, Side 2
Begin SFC-93 #69, Side 1
Co-chair Kerttula MOVED a conceptual amendment to amendment
2 as suggested by Co-chair Frank by changing the words
"approved by the governor" to "review by Attorney General in
writing 30 days of time received". Senator Rieger OBJECTED
saying he felt it was not a matter of legal discretion but
was more a policy call. Discussion followed by Senator
Kerttula and Co-chair Pearce regarding exploration
decisions.
Co-chair Pearce called for a show of hands and the motion
amending amendment 2 FAILED. Senator Kerttula WITHDREW
amendment 2.
Senator Sharp MOVED amendment 3. Senator Kelly OBJECTED.
Senator Sharp felt that a 20,000 acre threshold was too
severe, that being twice the size of the largest state lease
currently available for exploration and four times the
standard federal lease size. He went on to list reasons to
reduce the size to 10,000 acres.
Mr. Boyd understood the concern of Senator Sharp that the
"little guy" would be able to play and felt that had been
addressed throughout HB 199. He also felt that 10,000 acres
in a remote acre was not reasonable. Even though he had no
objection, he pointed out 10,000 acres would be quite
limiting for this program. Senator Sharp noted that the
source of fuel for Barrow was on an even smaller piece of
land. Mr. Boyd said that in the beginning a much larger
area must have been explored before the area under
development was confined to that small of an area which was
characteristic of most developments.
At this time Co-chair Pearce asked the committee to adopt
the new version before them. Senator Sharp MOVED for
adoption of SCSCSHB 199(FIN) version "Q". Hearing no
objection, it was ADOPTED.
Senator Sharp again MOVED amendment 3. Hearing no further
objection, it was ADOPTED for incorporation within the
Finance Committee Substitute for the bill.
Senator Kerttula MOVED amendment 4. Co-chair Pearce asked
for clarification of amendment 4. Mr. Boyd said that the 5
percent statute, other than the royalty provisions, was
added to the laws in 1959. In 1964, it was repeated but
renumbered. In 1967, the provision on page 9, line 12
beginning "In unproven areas..." was added to law and that
became the basis for the discovery loyalty provisions which
were used for awhile but later removed from law. Mr. Boyd
said he had no objection to deleting that section.
Co-chair Frank asked Mr. Boyd to restate that he did not
object to amendment 4.
JIM EASON said he did not recall the exact time of the
repeal, but for a number of years, discovery royalty
provisions were in the statutes and a number of wells did
qualify for discovery royalty. The most recent incident of
a qualifying discovery royalty lease was the discovery well
for Point McIntyre. It was an old lease, had the discovery
royalty provision, and allowed a reduction in royalty to 5
percent for the first ten years beginning at the time of the
certification of eligibility. In most cases, the discovery
royalty period was considerable less than 10 years.
In answer to Co-chair Pearce, Mr. Eason said this new law
would have no effect on existing leases. In answer to Co-
chair Frank, Mr. Eason confirmed that the department did not
oppose amendment 4 and viewed it as a policy call.
No further objection being heard, amendment 4 was ADOPTED.
Senator Kelly MOVED amendment 5 which deleted the words "in
an amount determined by the commissioner, not to exceed" and
insertion of the word "of" on page 4, line 23 and 24. Mr.
Boyd felt there would be no objection to amendment 5.
Hearing no objection, amendment 5 was ADOPTED.
In answer to Co-chair Frank, Mr. Boyd said the geology and
proposed work commitment would determine the size of acreage
granted to prospective licensee. In answer to Co-chair
Frank, Mr. Boyd felt that science determined and preferred
not to limit artificially the input and consideration that
the Commissioner and Division might have in reaching its
decision regarding acreage.
Senator Rieger MOVED amendment 6. Co-chair Pearce OBJECTED
for discussion purposes. Senator Rieger spoke to the
amendment. No further objection being heard, amendment 6
was ADOPTED.
Senator Rieger asked for an explanation of language on page
5, lines 24 through 26. Mr. Boyd said that if less than 25
percent of the work commitment was done, the license was
lost. If more than 50 percent of work commitment was done
by the fourth year, there was no relinquishment of land. If
between 26 and 49 percent of the work was completed, 25
percent of the acreage, but no more than 50 percent, would
be relinquished. He agreed that if no work had been done by
the fourth year, the license would be relinquished. If the
company did not outline what property it wanted to
relinquish, the Commissioner would decide. He pointed out
that if the work was not done, a lease could not be issued.
He also said that if work ceased, the bond would be
continually increased. Senator Sharp pointed out that the
company could lose everything if the work was not done by
the tenth year.
Senator Kerttula read from a statement by Donald Harris,
"the major oil companies decide the direction of this
legislation. (Senator Kerttula commented that Mr. Harris
was worried Alaska was treating its oil and gas like Mexico
did and it could become a concession causing much conflict.)
HB 199 effectively created the ability for the state to
allow concessions regarding oil and gas leasing. The
history of concessions is the monetary rape of the state and
its resources and lands. This has been overcome in the
past. Most instances has been after the passage of
considerable time and blood shed. Initial awarding of
concessions should be done by competition, that is, through
competitive bids under HB 199. The actual production phase,
the original exploration tract granted, can be rolled into a
lease with as little as 5 percent royalty. In HB 199, this
is done at the Commissioner's discretion and frankly gives
too much discretionary authority for the values involved.
There are 10 hydro provinces with the possible of 2 million
acres for exploration, production, concessions. Under this
bill, tracts range from 20,000 acres (and now it's 10,000)
to 500,000, thus a few major oil companies could take up all
the valuable leases on state lands and waters and hold up
all state production including that in existing leases
citing economic concerns as the reason. Competition, to be
fair, should come into play at the time of leasing, not
later on. The rollover provision in HB 199 is especially
harmful because it effectively creates a concession. This
year, the summer of 1994, the state can know the boundaries
of all carbon and hydro-carbon deposits. This information,
in turn, could be marketed by the state in competitive
leasing basis. Knowing the boundaries of carbon and hydro-
carbon provinces creates large cost efficiencies for the
major oil producers because they don't have to pay to
conduct magnetic gravity seismic tests outside the province
boundaries. Knowing the boundaries could also eliminate the
disturbance on land and waters unnecessarily. HB 199 is a
dangerous piece of legislation because it creates the
potential for the greatest giveaway on public resource in
state history." Senator Kerttula said this statement was
given to him without his solicitation.
Co-chair Pearce remarked, that in the world scheme, in the
frontier areas (she included Alaska here), the leasing or
the licensing for oil and gas exploration was done by
exploration licenses. Perhaps Alaska was the only one that
did not use exploration licensing. All of those countries
and every country in North and South America, with the
exception of the United State and Canada, have oil and gas
reserves owned by the state or federal government. In every
one of those frontiers, exploration licensing was used very
successfully. She felt that Alaska would have to offer this
exploration license. Senator Kerttula said Alaska did not
have to compete with any warlike activities found in other
countries. Co-chair Pearce said that Britain had a very
stable country and exploration licenses was working in the
world.
Senator Rieger MOVED for passage of SCSCSHB 199(FIN) as
amended from committee with individual recommendations. No
objection being heard, it was REPORTED OUT of committee with
"individual recommendations," and a zero fiscal note for the
Department of Natural Resources. Co-chair Pearce and
Senators Rieger and Kelly signed "do pass." Co-chair Frank
and Senator Sharp signed "no recommendation." Senator
Kerttula signed "do not pass."
BILLS SCHEDULED BUT NOT HEARD:
CS FOR SENATE BILL NO. 67(FIN):
An Act amending provisions of ch. 66, SLA 1991, that
relate to reconstitution of the corpus of the mental
health trust and to the manner of enforcement of the
obligation to compensate the trust; and providing for
an effective date.
ADJOURNMENT
The meeting was adjourned at approximately 11:08 a.m.
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