Legislature(2001 - 2002)

04/10/2002 09:44 AM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                          April 10, 2002                                                                                      
                              9:44 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-02 # 52, Side A                                                                                                             
SFC 02 # 52, Side B                                                                                                             
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Pete  Kelly convened the meeting at approximately  9:44 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Loren Leman                                                                                                             
Senator Gary Wilken                                                                                                             
Senator Donald Olson                                                                                                            
Senator Lyman Hoffman                                                                                                           
Senator Alan Austerman                                                                                                          
                                                                                                                                
Also  Attending:     SENATOR   GENE  THERRIAULT;   DENNIS   POSHARD,                                                          
Legislative Liaison/Special  Assistant, Department of Transportation                                                            
and Public  Facilities; RON SOMERVILLE,  Resource Consultant,  House                                                            
and Senate Majority;                                                                                                            
                                                                                                                                
Attending  via  Teleconference:    From  Anchorage:   FRANK  DILLON,                                                          
Executive Vice President,  Alaska Trucking Association; KEITH BAYHA,                                                            
Alaska Public Waters Commission                                                                                                 
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB 226-HIGHWAY DESIGN & CONSTRUCTION                                                                                            
                                                                                                                                
The  Committee   heard   from  the   sponsor,   the  Department   of                                                            
Transportation  and  Public  Facilities   and  the  Alaska  Trucking                                                            
Association. A  committee substitute was adopted and  the bill moved                                                            
from Committee.                                                                                                                 
                                                                                                                                
SB 219-FED/STATE NAVIGABLE WATERS COMMISSION                                                                                    
                                                                                                                                
The  Committee  heard from  a  resource consultant  and  the  Alaska                                                            
Public Waters Commission. The bill was held in Committee.                                                                       
                                                                                                                                
SB 280-WATER/SEWER/WASTE GRANTS TO UTILITIES                                                                                    
                                                                                                                                
The Committee heard from  the sponsor. A new fiscal note was adopted                                                            
and the bill moved from Committee.                                                                                              
                                                                                                                                
SB 185-PCE AMOUNT & ELIGIBILITY                                                                                                 
                                                                                                                                
The  Committee  adopted an  amendment  and  the bill  reported  from                                                            
Committee.                                                                                                                      
                                                                                                                                
                                                                                                                                
      CS FOR SPONSOR SUBSTITUTE FOR SENATE BILL NO. 226(TRA)                                                                    
     "An Act requiring  certain highway projects to  be designed and                                                            
     constructed   so  that  the  highways  will  adequately   serve                                                            
     anticipated traffic  levels for at least the next 30 years; and                                                            
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
Co-Chair  Donley, sponsor,  testified that  the bill relates  to the                                                            
"design life"  of a planned road in urban areas, defined  by traffic                                                            
engineers as  the length of time the  schematics of the road  should                                                            
last. He explained  this does not apply to the asphalt  construction                                                            
but rather,  for  example, how  long a  left turn  lane is  operable                                                            
before increased traffic  blocks the regular lanes. He expressed his                                                            
observations  of roads in  Anchorage and  in other communities  that                                                            
are no longer adequate  for the amount of traffic traveling on them.                                                            
                                                                                                                                
Co-Chair Donley indicated  that federal law requires the geometry of                                                            
a  major  road  project  built  utilizing   federal  funds  must  be                                                            
sufficient  for "at least  20 years". He  also learned that  federal                                                            
law  requires a  50-year  design life  for  bridges.  He added  that                                                            
federal  requirements  for overall  planning in  metropolitan  areas                                                            
request a design life of up to 23 years.                                                                                        
                                                                                                                                
Co-Chair  Donley, in  describing  the current  situation,  suggested                                                            
traffic  counts   could  be  incorrect  and  that   the  method  for                                                            
determining  the counts  should  be reassessed.  He  shared that  he                                                            
questioned  the Department of Transportation  and Public  Facilities                                                            
on this matter and was  first told that a designed road might not be                                                            
built for up to eight years  and thus the actual design life is only                                                            
12 years,  despite initially  being  designed to  last 20 years.  He                                                            
pointed out however,  that once he introduced this  legislation, the                                                            
Department  informed him  this was  not the case.  He surmised  that                                                            
once construction  begins, such issues  as right-of-way or  problems                                                            
with  contractors  cause  the  projects  to be  delayed  beyond  the                                                            
completion date  estimated in the design life. He  stated the intent                                                            
of this legislation  is to avoid repeated  reconstruction  caused by                                                            
outdated designs. He spoke  of the consequences of three-year delays                                                            
on smaller projects costing  less than $1 million with a design life                                                            
of only ten years.                                                                                                              
                                                                                                                                
Co-Chair  Donley  referenced  a  letter  from  the  Federal  Highway                                                            
Administration [copy on  file] indicating the agency does not oppose                                                            
this  legislation  and  that it  would  have  no impact  on  federal                                                            
funding.                                                                                                                        
                                                                                                                                
Co-Chair Donley shared  that he originally considered legislation to                                                            
require the  design life of road projects  to be 30 years,  which he                                                            
pointed out  is the maximum  allowed in federal  law.  He  indicated                                                            
the   committee   substitute   proposes    different   design   life                                                            
requirements  dependant upon  the cost of  the project. He  detailed                                                            
that a ten-year  design life would  be required for projects  with a                                                            
cost  of less  than  $1 million,  a  20-year  design life  would  be                                                            
required for project costing  between $1 million and $5 million, and                                                            
a 25-year design life would  be required for projects with a cost of                                                            
over $5 million.                                                                                                                
                                                                                                                                
Co-Chair Donley  suggested extending the design life  requirement to                                                            
20  years  for  the  projects  costing  less  than  $1  million.  He                                                            
justified this  due to constant road  construction occurring  during                                                            
the  short construction  season  in  Anchorage for  smaller  upgrade                                                            
projects.  He  remarked that fewer road projects would  be possible,                                                            
but that the public  would benefit because there would  be less need                                                            
for  upgrades  and  roads would  be  fully  operational  for  longer                                                            
periods of time.                                                                                                                
                                                                                                                                
Senator Ward commented  that before this legislation was introduced,                                                            
he was  unsure why  roads did not  last longer,  because he  assumed                                                            
such a process  already was in place. He opined that  roads in other                                                            
states operate longer.                                                                                                          
                                                                                                                                
Senator  Ward  assumed  there  would be  some  "strain"  on  smaller                                                            
projects and suggested further discussion on the matter.                                                                        
                                                                                                                                
Co-Chair   Donley  clarified   this  bill   only  applies   to  road                                                            
construction projects  located in federally recognized  metropolitan                                                            
planning  areas, which  are larger  communities.  He furthered  this                                                            
legislation would not apply  to locally funded projects, which would                                                            
allow communities  the option to undertake smaller  projects without                                                            
these  requirements.  He informed  the Anchorage  Metropolitan  Area                                                            
Transportation  Study (AMATS) does not generally undertake  projects                                                            
of less than $1 million.                                                                                                        
                                                                                                                                
Senator Austerman  commented that  the "economy of scale"  must also                                                            
be considered. He explained  that when spending less than $1 million                                                            
on a project, an extensive design time might not be prudent.                                                                    
                                                                                                                                
Co-Chair  Donley   replied  that   Federal  Highway  Administration                                                             
authorities  "seem  to pretty  confident about  their  20 year  plan                                                            
process."  He admitted that  25-year design  time projects  have not                                                            
been implemented  to date and that it does become  more difficult to                                                            
accurately  predict traffic patterns  and traffic load. However,  he                                                            
pointed out that federally  funded bridge construction projects must                                                            
have a 50-year design life.  He noted that right of way acquisition,                                                            
particularly in urban areas,  "have become a real major inhibitor to                                                            
getting these projects done."                                                                                                   
                                                                                                                                
Senator Olson  predicted that longer design life stipulations  would                                                            
require  increased consulting  efforts  and would  incur  additional                                                            
expenses. He also noted  that with the construction of a natural gas                                                            
pipeline,  the population  of the State and  the subsequent  traffic                                                            
loads would increase. He  asked the anticipated increased design and                                                            
planning costs this legislation would impose.                                                                                   
                                                                                                                                
Co-Chair  Donley  was unsure  that design  expenses  would  increase                                                            
because the same  design life process would occur.  He admitted that                                                            
project costs  would increase because the roads must  be designed to                                                            
last longer.  He reiterated that fewer  projects would be  possible,                                                            
but that  the finished  roads would  last longer.  He addressed  the                                                            
impact of  the natural gas  pipeline, stating  that it is  uncertain                                                            
whether it  would generate a significant  influx of people  into the                                                            
State.  He  hoped the  pipeline  construction  would  be  undertaken                                                            
utilizing  local labor  and corporations  and  benefit the  existing                                                            
economy.                                                                                                                        
                                                                                                                                
Senator Hoffman  asked if this legislation  would apply to  the City                                                            
and Borough of Juneau.                                                                                                          
                                                                                                                                
DENNIS POSHARD,  Legislative Liaison/Special  Assistant,  Department                                                            
of Transportation and Public  Facilities, answered that Anchorage is                                                            
the  only   community  in   Alaska  with   a  federally   recognized                                                            
metropolitan  planning area.  He qualified  that although  Fairbanks                                                            
and the Mat-Su  areas are close to receiving a designation,  neither                                                            
community has 50,000 residents  "within an urbanized area", which is                                                            
one criterion.                                                                                                                  
                                                                                                                                
FRANK   DILLON,   Executive   Vice   President,    Alaska   Trucking                                                            
Association,  testified via teleconference  from Anchorage  to thank                                                            
Co-Chair Donley  for his efforts on this bill. He  stressed the need                                                            
to address  road infrastructure. He  intended the road design  to be                                                            
feasible as long as possible.                                                                                                   
                                                                                                                                
Co-Chair  Donley proposed  an amendment  to the  proposed  committee                                                            
substitute   to  stipulate   that   all  major   upgrades  and   new                                                            
construction  projects with a cost  of under $5 million must  have a                                                            
design life of 20 years.                                                                                                        
                                                                                                                                
Senator  Leman  objected  to the  proposed  amendment  because  many                                                            
seemingly  small  projects  have  a significant   cost. He  gave  as                                                            
example of  the installation of a  stoplight on a secondary  road in                                                            
Anchorage at a  cost of one-half million dollars.  Therefore, he was                                                            
unsure "we want to tie  the hands of planning" for projects in areas                                                            
where a 20-year design life is unnecessarily.                                                                                   
                                                                                                                                
Co-Chair Donley  stated it is "a close  call" and he would  defer to                                                            
Senator Leman.                                                                                                                  
                                                                                                                                
Co-Chair Donley  moved for adoption of CS SS SB 226,  22-LS0993/B as                                                            
a working draft.                                                                                                                
                                                                                                                                
Without objection the committee  substitute was ADOPTED as a working                                                            
draft.                                                                                                                          
                                                                                                                                
Co-Chair  Donley   moved  "the  committee  substitute   for  sponsor                                                            
substitute  for Senate Bill 226, the  Utermohle 4/9/02 version  from                                                            
Committee with  forthcoming zero fiscal  notes I believe  … with the                                                            
fiscal notes that are advanced."                                                                                                
                                                                                                                                
There was  no objection and  CS SB 226 (FIN)  with forthcoming  zero                                                            
fiscal  note  from  the  Department  of  Transportation  and  Public                                                            
Facilities 4/17/02, MOVED from Committee.                                                                                       
                                                                                                                                
AT EASE 10:08 AM / 10:15 AM                                                                                                     
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 219(RES)                                                                                            
     "An Act establishing and relating to the Joint Federal and                                                                 
     State Navigable Waters Commission for Alaska; and providing                                                                
     for an effective date."                                                                                                    
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
RON SOMERVILLE,  Resource  Consultant,  House and  Senate  Majority,                                                            
testified  to  the bill.  He  referenced  the  supporting  documents                                                            
before the members, specifically  information from the Department of                                                            
Law [copies on file].                                                                                                           
                                                                                                                                
Mr. Somerville  gave history of the issue beginning  at statehood in                                                            
1959, when  Alaska acquired  title to the  approximately 60  million                                                            
acres  of submerged  lands  in the  State.  He informed  that  court                                                            
decisions  have affirmed  this acquisition;  however there  has been                                                            
difficulty in determining what constitutes as navigable waters.                                                                 
                                                                                                                                
Mr. Somerville listed three  issues involved in the determination of                                                            
navigable  waters,  the first  being a  federal "quiet  title  Act",                                                            
which provides  a mechanism by which a state could  acquire title to                                                            
navigable  waters. He  stated that  the courts have  ruled that  the                                                            
federal   defendants  in   these  matters   could  be  involved   in                                                            
adjudicating  a  disputed  title in  which  the  federal  government                                                            
claims an interest.  However, he qualified  that in instances  where                                                            
the federal  government "refuses"  to claim  an interest, the  court                                                            
has ruled  that the federal  government has  no jurisdiction  in the                                                            
matter. He characterized  this situation as a "catch-22" because the                                                            
State could  file a  180-day notice  for quiet  title to  particular                                                            
submerged  lands and if the  federal authorities  do no contest  the                                                            
claim, the courts could refuse to rule on the claim.                                                                            
                                                                                                                                
Mr. Somerville  spoke to the next  issue as the navigable  criteria.                                                            
He  explained  that  in  Alaska,  as  in  most  states,  the  courts                                                            
primarily  determine  the  navigability   on  a case-by-case   basis                                                            
utilizing established criteria.  He detailed a case that established                                                            
precedent  involving  an  area  near  Gulkana  where  the  lands  in                                                            
question are submerged  part of the year, but exposed other parts of                                                            
the  year. He  informed  that it  was determined  that  the land  is                                                            
navigable because  the waters were used for purposes  of commerce at                                                            
the time of statehood, whether by raft, canoe or other means.                                                                   
                                                                                                                                
Mr. Somerville  shared that the Alaska  Department of Law  submitted                                                            
to the US Department  of the Interior,  a list of approximately  200                                                            
identified rivers or areas  that met the criteria established in the                                                            
Gulkana  court  decision  and  that  should  be  declared  navigable                                                            
waters. He  stated that it was decided  the State would litigate  to                                                            
obtain  the status  of navigable  waters  for three  rivers:  Black,                                                            
Kandig and Nation. After  nine years and approximately $1 million in                                                            
                                   th                                                                                           
expenses, he  stated the federal 9   Circuit Court  of Appeals ruled                                                            
that two of the rivers  are navigable because the federal government                                                            
had  claimed  an  interest.  However,  he  pointed  out,  the  court                                                            
determined it did not have  jurisdiction over making a determination                                                            
with regards to  the Black River because the federal  government had                                                            
not claimed an interest in that area.                                                                                           
                                                                                                                                
Mr. Somerville continued  with the third issue, which he pointed out                                                            
is unique to  Alaska, and relates  to the obligation of the  federal                                                            
Bureau of Land  Management to "meander" the boundaries  of bodies of                                                            
water of a certain size  and to make navigability determinations. He                                                            
stated that prior to 1983,  this did not occur and that as a result,                                                            
a significant  amount of land was conveyed, which  the State asserts                                                            
are navigable  waters and  should not have  been conveyed.  He noted                                                            
that a 1983  administrative agreement  ordered that a manual  survey                                                            
by conducted, which was affirmed by the US Congress in 1988.                                                                    
                                                                                                                                
Mr. Somerville  continued that since statehood, 13  rivers have been                                                            
affirmed as navigable by  federal courts. He noted the approximately                                                            
22,000  rivers   in  the   State,  which   could  be  disputed   for                                                            
navigability,  and approximately one million lakes  and other bodies                                                            
of water of  a significant size. He  calculated the current  rate of                                                            
determination of navigability is too slow and too expensive.                                                                    
                                                                                                                                
Mr.  Somerville  asserted  the  State must  hold  title  over  these                                                            
navigable  waters in the  event the State  decides to use,  lease or                                                            
claim management jurisdiction over the areas.                                                                                   
                                                                                                                                
Mr. Somerville stated the  intent of this legislation is to expedite                                                            
the identification  of navigable and  non-navigable water  bodies to                                                            
allow a certification  process by  the US Secretary of the  Interior                                                            
or Congress.                                                                                                                    
                                                                                                                                
Mr. Somerville  addressed  the  proposed committee  substitute,  22-                                                            
LS0965\J. He relayed a  conversation between Senator Halford and the                                                            
US Secretary  of the Interior  relating  to possible administrative                                                             
processes  that could expedite  the identification.  As a result  of                                                            
this  information,   Mr.  Somerville  informed  that   the  proposed                                                            
committee substitute  provides for  a joint commission comprised  of                                                            
State and  federal agencies,  although it  specifies the  commission                                                            
would  exist   even  if   the  federal  government   chose   not  to                                                            
participate.  He noted  the original  version of  the bill  provides                                                            
that the commission  would not exist without federal  participation.                                                            
He surmised  the inclusion  of  federal agencies  on the  commission                                                            
would give  the body  a higher status  and would  allow the  federal                                                            
agencies more input into the determination of navigability.                                                                     
                                                                                                                                
Senator Austerman  asked if a unilateral  commission would  have the                                                            
same authority  as a joint commission  that included federal  agency                                                            
participation.                                                                                                                  
                                                                                                                                
Mr. Somerville  replied it would be beneficial to  have both federal                                                            
and  state  government  involved.   He noted   this  legislation  is                                                            
patterned after the Federal  State Land and Planning Commission that                                                            
was created under  the Alaska Native Claims Settlement  Act (ANCSA).                                                            
He stated  that even  without  federal participation,  the  proposed                                                            
commission would  compile a list of identified navigable  waters for                                                            
submission to the US Secretary of the Interior.                                                                                 
                                                                                                                                
Senator  Austerman  referenced  a  statement  issued by  the  Alaska                                                            
Public Waters  Commission  on SB 219, Establishing  and Relating  to                                                            
the  Navigable Waters  Commission  for Alaska,  [copy  on file]  and                                                            
distributed  by  Senator  Wilken.  He  noted  the  statement  offers                                                            
recommendations and asked the witness to address these.                                                                         
                                                                                                                                
Mr. Somerville  responded that  the costs of  the Land Use  Planning                                                            
Commission are considerably  higher than the proposed commission, in                                                            
part  because  the  mandate  of the  proposed  commission  is  "much                                                            
narrower" than the original commission.                                                                                         
                                                                                                                                
Mr. Somerville  spoke to  the opportunities  to review the  proposed                                                            
commission's  activities  and expenses  in the  future. He  surmised                                                            
that the cost  would be more expensive  than the amount proposed  in                                                            
the  accompanying fiscal  note.  However,  he asserted  that if  the                                                            
navigability  of  only  ten  rivers  were  resolved,  the  financial                                                            
benefit would be greater than the current method.                                                                               
                                                                                                                                
KEITH  BAYHA,  Alaska   Public  Waters  Commission,   testified  via                                                            
teleconference  from Anchorage, to  reference the written  testimony                                                            
he submitted.                                                                                                                   
                                                                                                                                
Senator  Hoffman  referenced  the  first paragraph  of  the  sponsor                                                            
statement, which  states that the commission would  become a reality                                                            
only if  Congress  could provide  authorization in  federal law.  He                                                            
asked where this language is contained in the legislation.                                                                      
                                                                                                                                
Mr. Somerville  corrected  that  the proposed  committee  substitute                                                            
does  not  contain   this  language  and  that  such  congressional                                                             
authorization would not be necessary.                                                                                           
                                                                                                                                
Senator  Hoffman next  asked if  the proposed  committee  substitute                                                            
would  only designate  those  navigable waters  that  were used  for                                                            
commercial efforts at the time of statehood.                                                                                    
                                                                                                                                
Mr.  Somerville   affirmed   this  is  one   of  the  criteria   for                                                            
establishing navigability.                                                                                                      
                                                                                                                                
Senator  Hoffman  asked where  this  language  is contained  in  the                                                            
committee substitute.                                                                                                           
                                                                                                                                
Mr. Somerville  replied  this criterion  is established  in  federal                                                            
law.                                                                                                                            
                                                                                                                                
Senator Hoffman requested the language of the federal law.                                                                      
                                                                                                                                
Senator  Leman  clarified  that an  act  of Congress  would  not  be                                                            
required for  the commission to take  affect, although such  and act                                                            
would be necessary  if the commission  were to be jointly  comprised                                                            
of federal and state agencies.                                                                                                  
                                                                                                                                
Mr. Somerville affirmed.                                                                                                        
                                                                                                                                
Senator Leman  asked if Mr. Bayha had advice as to  how the governor                                                            
should appoint  members to  the commission,  noting that the  Alaska                                                            
Public Waters  Commission written testimony states  that the members                                                            
should possess a technical  background rather than be appointed only                                                            
for political reasons.                                                                                                          
                                                                                                                                
Mr.  Bayha replied  the  organization  has not  identified  specific                                                            
individuals   to  nominate  for  the   positions  on  the   proposed                                                            
commission.   However,  he   qualified  that   the  commission   had                                                            
speculated on whom the  governor might appoint. He expressed concern                                                            
that if  all members  were "previous  political  personalities"  the                                                            
proposed   commission  might   not  contain   sufficient   technical                                                            
knowledge necessary to  be effective. Therefore, he relayed that the                                                            
commission  recommends  a combination  of  political  and  technical                                                            
perspectives.                                                                                                                   
                                                                                                                                
Senator Leman attempted  to ascertain whether the legislation should                                                            
contain provisions  requiring that  appointees must possess  certain                                                            
technical knowledge on the matter.                                                                                              
                                                                                                                                
Mr.  Bayha  replied  that  if legislative   intent  were  clarified,                                                            
changes to the bill would not be necessary.                                                                                     
                                                                                                                                
Senator Leman  expressed his  intent that  only those with  adequate                                                            
technical ability served on the commission.                                                                                     
                                                                                                                                
Mr. Somerville  reminded that the  proposed commission is  patterned                                                            
after  an  existing  commission,  which  does  follow  criteria  for                                                            
technical expertise of appointees.                                                                                              
                                                                                                                                
Senator Wilken asked the  influence Governor Tony Knowles' action of                                                            
not appealing  Katie  John vs.  State of  Alaska to  the US  Supreme                                                          
Court has had on this legislation.                                                                                              
                                                                                                                                
Mr.  Somerville  stressed  this legislation  "does  not  in any  way                                                            
overturn,  or in  any way  interfere,  with the  federal  government                                                            
claiming its Federal Reserve water rights."                                                                                     
                                                                                                                                
Senator Leman directed  attention to page 3, line 11 of the proposed                                                            
committee substitute pointing  out the requirement that at least one                                                            
member  of the commission  must be  an Alaskan  Native. He asked  if                                                            
this legislation applies  state statute defining Alaskan Native as a                                                            
person  with at  least  one-quarter-blood  quantum,  or "the  looser                                                            
definition"  utilized  for  qualification  of medical  benefits  and                                                            
other governmental services.                                                                                                    
                                                                                                                                
Mr. Somerville  was  unsure and again  noted the  bill is  patterned                                                            
after the  Federal State  Land Planning  Commission, which  contains                                                            
the requirement  that at least one  member be an Alaskan  Native. He                                                            
stated the qualification  of Alaskan Native under  the provisions in                                                            
ANCSA, is one-quarter blood quantum.                                                                                            
                                                                                                                                
Co-Chair Kelly  commented it is inappropriate to appoint  members to                                                            
a  panel on  the basis  of  race. He  indicated  he would  offer  an                                                            
amendment  to remove this  restriction from  the proposed  committee                                                            
substitute.                                                                                                                     
                                                                                                                                
Co-Chair Kelly  also voiced concern with inclusion  of Governor Tony                                                            
Knowles  in the appointment  process. Co-Chair  Kelly remarked,  "We                                                            
have  found  over a  period  of time  in  his  actions and  him  not                                                            
pursuing court, Supreme Court cases and other actions that are…"                                                                
                                                                                                                                
                                                                                                                                
SFC 02 # 52, Side B 10:37 AM                                                                                                    
                                                                                                                                
                                                                                                                                
Co-Chair Kelly continued,  "… designed to protect the sovereignty of                                                            
Alaska  is  not  there."  Co-Chair   Kelly  expressed  he  would  be                                                            
concerned about  a commission appointed by the current  governor. He                                                            
furthered,  "We've not seen  a lot of results  from the task  forces                                                            
and  commissions that  he's  appointed in  the past  actually  solve                                                            
problems, but they're usually  used as public relations vehicles and                                                            
they become  very contentious and  they rarely solve anything.  They                                                            
just create  new problems." Co-Chair  Kelly indicated he  would hold                                                            
the bill  in Committee  to restructure the  appointment process  and                                                            
also to address the effective date.                                                                                             
                                                                                                                                
Senator  Hoffman requested  a  fiscal note  from  the Department  of                                                            
Natural Resources, as the Department would be impacted.                                                                         
                                                                                                                                
Co-Chair Kelly ordered the bill HELD in Committee.                                                                              
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 280(RES)                                                                                            
     "An Act permitting grants to certain regulated public                                                                      
     utilities for water quality enhancement projects and water                                                                 
     supply and wastewater systems."                                                                                            
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
SENATOR  GENE  THERRIAULT,  sponsor, reminded  that  questions  were                                                            
raised  during  the   previous  hearing  regarding  whether   grants                                                            
received could  be "charged off" to  rate-paying customers,  as well                                                            
whether  stockholders   of a  utility  would   benefit  from  grants                                                            
received in the event of the sale of that facility.                                                                             
                                                                                                                                
Senator  Therriault informed  the  Regulatory Commission  of  Alaska                                                            
(RCA) submitted  a letter  dated April 8,  2002 [copy on file]  that                                                            
clarifies  the matters  in that it  essentially  answers no to  both                                                            
questions.  He indicated  an  enclosed  graph further  explains  the                                                            
method in which rates are set.                                                                                                  
                                                                                                                                
Senator Hoffman asked if  36 communities participate in this program                                                            
                                                                                                                                
Senator  Therriault   stated  he  would  provide  a  list  of  those                                                            
communities.                                                                                                                    
                                                                                                                                
Senator   Austerman   referenced   the   first  paragraph   of   the                                                            
aforementioned letter that  states that the grant funds could not be                                                            
used  to  assess  the  new  value  through  the  utility;   however,                                                            
elsewhere the  letter states that  the value is set based  upon cash                                                            
flow. He suggested  this is a contradiction because  if the facility                                                            
were doubled  utilizing the  grant funds, the  cash flow would  also                                                            
double.                                                                                                                         
                                                                                                                                
Senator Therriault clarified  the cash flow is the rates the utility                                                            
is allowed  to charge and  that the RCA only  allows rates  based on                                                            
the private  capital contributed.  Therefore,  he explained  if more                                                            
customers   were  served,  but  the   private  investment   was  not                                                            
increased,  the  RCA would  require  the  rates  to be  lowered.  He                                                            
furthered  that the  purchaser,  in the  event  of the  sale of  the                                                            
utility, would  examine the cash flow, which would  be based only on                                                            
the private investment.  He pointed out that the purchaser would not                                                            
pay for the "transparent  assets" because those assets  could not be                                                            
recouped.  He emphasized  that the  RCA is directed  to require  the                                                            
utility to charge  rates only to cover the actual  debt and to allow                                                            
for "an ongoing economic enterprise".                                                                                           
                                                                                                                                
Co-Chair  Kelly  understood  that  a  purchaser  would  establish  a                                                            
capitalization  rate, which would "ultimately be tied  to the dollar                                                            
amount" customers  could be charged. He explained  that if the grant                                                            
revenues  could not  be charged  back to  the customers,  the  grant                                                            
funds invested  in the expansion  of the  utility would never  "flow                                                            
back"  and be  available  for reinvestment  in  the  business or  as                                                            
profit.                                                                                                                         
                                                                                                                                
Senator  Therriault affirmed  and  reiterated that  the transparent                                                             
asset,  which is  the "product  of the  grant" could  not be  "built                                                            
into" the rates.                                                                                                                
                                                                                                                                
Co-Chair  Kelly furthered  this is  despite an  increased number  of                                                            
customers.                                                                                                                      
                                                                                                                                
Senator  Austerman  understood  the  utility  could double  in  size                                                            
although  the rate  structure could  not be  increased. However,  he                                                            
asserted that because the  facility has doubled, the cash flow would                                                            
increase  because of the  increased number  of customers paying  the                                                            
existing rate structure.                                                                                                        
                                                                                                                                
Senator Therriault  responded the  RCA would require the  utility to                                                            
reduce  the   rates  so  individual   ratepayers  rather   than  the                                                            
shareholders who  have not increased their investment  would realize                                                            
the benefit of the grant.                                                                                                       
                                                                                                                                
Senator Therriault  again referenced  the letter, pointing  out that                                                            
if a utility  is sold, at  the time of the  facility's overall  rate                                                            
review,  the RCA  is directed  by statute  to establish  a new  rate                                                            
based  on the  purchase  price or  the  "book value",  whichever  is                                                            
lower. He  defined book value  as that portion  of the capital  that                                                            
was contributed  by private  industry. Therefore,  he noted,  if the                                                            
purchaser buys the facility  at an amount lower than the book value,                                                            
the RCA  would  require rates  based on  the "good  deal"  obtained;                                                            
however,  he noted if the  purchase overpaid  for the facility,  the                                                            
RCA would only  allow a rate structure based on the  private capital                                                            
investment.  He suggested  that an overpayment of a utility could be                                                            
rejected  by  the RCA  if it  determines  the  utility  would be  an                                                            
"unworkable business operation."                                                                                                
                                                                                                                                
Senator Leman  clarified that operation  expenses resulting  from an                                                            
expansion are  recoverable, although  capital expansion costs  could                                                            
not be recuperated.                                                                                                             
                                                                                                                                
Co-Chair  Donley asked what  would happen if  a utility went  out of                                                            
business and the assets were liquidated.                                                                                        
                                                                                                                                
Senator  Therriault  replied  that most  assets  are "pipes  in  the                                                            
ground",  and that only a  utility operator  would be interested  in                                                            
purchasing them.                                                                                                                
                                                                                                                                
Senator Hoffman asked about property owned by the utility.                                                                      
                                                                                                                                
Senator Therriault answered  that the utility does not generally own                                                            
the  land where  pipes  are  located.  He doubted  grants  would  be                                                            
awarded  for  the   construction  of  office  buildings   and  other                                                            
facilities not directly related to actual utility delivery.                                                                     
                                                                                                                                
Senator Ward  and Senator Therriault  next discussed privatization,                                                             
competition and a monopoly.                                                                                                     
                                                                                                                                
Senator  Therriault  stated  the  utilities  are  regulated  service                                                            
providers.                                                                                                                      
                                                                                                                                
Senator Ward  suggested that if established  utilities were  awarded                                                            
these  grants, there  would be  no possibility  of another  operator                                                            
entering the market and competing to provide the services.                                                                      
                                                                                                                                
Senator   Therriault   informed  there   is  no   prohibition   from                                                            
undertaking  the  process to  start  competition and  qualifying  to                                                            
receive the grants.  He predicted this would not occur  because this                                                            
legislation only  applies to water and sewer utilities  and the rate                                                            
base could only "support so much".                                                                                              
                                                                                                                                
Senator  Hoffman asked  if other  utility providers  benefit from  a                                                            
similar grant program.                                                                                                          
                                                                                                                                
Senator  Therriault answered  that some  electric utility  providers                                                            
participate in a grant program.                                                                                                 
                                                                                                                                
Senator Leman clarified these are cooperative utility companies.                                                                
                                                                                                                                
Senator Hoffman specified privately owned utility companies.                                                                    
                                                                                                                                
Senator Austerman commented  he would not oppose reporting this bill                                                            
from  Committee  although  he was  not  convinced  to vote  for  its                                                            
passage from the Senate.                                                                                                        
                                                                                                                                
Senator  Leman   moved  to  "report  SB  280  from  Committee   with                                                            
individual recommendations  and I don't agree with the fiscal notes,                                                            
I'll read them, move them  along and recommend appropriate action be                                                            
taken at the time when fiscal notes are passed."                                                                                
                                                                                                                                
Senator Ward  objected to comment  on separate legislation  that was                                                            
passed from a  different committee with "an understanding  that when                                                            
they bought it they knew  what they were getting. And I allowed that                                                            
one to go back. I certainly  am going to remove my objection and let                                                            
this one go out at this  time, but I just want the Committee to know                                                            
when people  buy stuff, and they know  what they're buying,  I think                                                            
that's a pretty  fair indication as to they're sophisticated  buyers                                                            
and then  to come back  in either  case and ask  the public  to then                                                            
change the  agreement to  purchase I  think that  there has to  be a                                                            
clear public purpose  in there. And I'm not saying  that there isn't                                                            
in this case and  the previous one, but I'm not quite  there where I                                                            
see it yet."                                                                                                                    
                                                                                                                                
Senator Ward removed his  objection to the motion to report the bill                                                            
from Committee.                                                                                                                 
                                                                                                                                
Senator Leman WITHDREW  his motion to report the bill from Committee                                                            
at the request  of Co-Chair Kelly for the purpose  of addressing the                                                            
fiscal note.                                                                                                                    
                                                                                                                                
Co-Chair  Kelly moved to  adopt a forthcoming  zero fiscal  note for                                                            
the Department of Environmental Conservation.                                                                                   
                                                                                                                                
There was no objection and a new fiscal note was ADOPTED.                                                                       
                                                                                                                                
Senator Leman re-offered  his motion "with the revised fiscal note."                                                            
                                                                                                                                
Senator  Wilken informed  that he  owns ten percent  of the  utility                                                            
this  legislation   specifically  would  impact.     He  stated  the                                                            
ratepayers  would benefit  from  this bill,  as savings  from  lower                                                            
operating  costs would  be passed  along to the  customers. He  also                                                            
noted that  Fairbanks Water  and Sewer is  one of the first  private                                                            
utility operators in the  United States, and therefore the processes                                                            
are new. He supported this legislation.                                                                                         
                                                                                                                                
Senator Hoffman  agreed with Senator  Wilken's assessment,  which is                                                            
why he asked about the  possibility of privatized electric utilities                                                            
participating in a grant  program. He surmised if all utilities were                                                            
funded with grants,  operating costs would be reduced,  resulting in                                                            
less dependence on the Power Cost Equalization (PCE) program.                                                                   
                                                                                                                                
Co-Chair  Donley  commented  that to  be  successful rates  must  be                                                            
reduced. He spoke  of the Anchorage Water and Sewer  utility and the                                                            
lower percentage of per  capita financial assistance it has received                                                            
over ten years compared to other areas of the State.                                                                            
                                                                                                                                
Senator Hoffman  again requested the  list of utilities.  He pointed                                                            
out his  water and sewer  expenses in Bethel  of approximately  $270                                                            
per month are  considerably higher than that of any  other Committee                                                            
member.                                                                                                                         
                                                                                                                                
There was  no objection  and CS  SB 280 (RES)  MOVED from  Committee                                                            
with a  zero fiscal  note written  by the Senate  Finance  Committee                                                            
4/10/02 for the Department of Environmental Conservation.                                                                       
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 185                                                                                                        
     "An Act relating  to the basis for determining  eligibility for                                                            
     and  the  amount  of  power  cost  equalization  payments;  and                                                            
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was the third hearing for this bill in the Senate Finance                                                                  
Committee. CS SB 185, 22-LS0465\U, was drafted to incorporate                                                                   
amendments adopted at the previous hearing.                                                                                     
                                                                                                                                
AT EASE 11:05 AM / 11:06 AM                                                                                                     
                                                                                                                                
Amendment #2: This amendment inserts a new bill section on page 1,                                                              
following line 11 of the committee substitute to read as follows.                                                               
                                                                                                                                
     Sec. 2. AS 42.45.100(a) is amended to read:                                                                                
          (a) The power cost equalization and rural electric                                                                    
     capitalization  fund is established as a separate  fund for the                                                            
     purpose of                                                                                                                 
                (1) equalizing power cost per kilowatt-hour                                                                     
     statewide  at a cost close to or equal to the  mean of the cost                                                          
     per  kilowatt-hour  in  Anchorage,  Fairbanks,  and  Juneau  by                                                            
     paying  money from the fund to  eligible electric utilities  in                                                            
     the state; and                                                                                                             
                (2) making grants to eligible utilities under AS                                                                
     42.45.180 to improve the performance of the utility.                                                                       
                                                                                                                                
This amendment also inserts a new bill section on page 2, following                                                             
line 10 of the committee substitute to read as follows.                                                                         
                                                                                                                                
     Sec. 4. AS 42.45.110(b) is amended to read:                                                                                
          (b) An eligible electric utility is entitled to receive                                                               
     power cost equalization                                                                                                    
                (1) for sales of power to local community                                                                       
     facilities,  calculated  in the  aggregate  for each  community                                                            
     served by  the electric utility, for actual consumption  of not                                                            
     more than 70 kilowatt-hours  per month for each resident of the                                                            
     community;   the  number   of  community   resident  shall   be                                                            
     determined under AS 29.60.020; and                                                                                         
                (2) for actual consumption of not more than 500                                                               
     kilowatt-hours per  month sold to each residential customer [OF                                                          
     NOT MORE THAN                                                                                                              
                     (A) 450 KILOWATT-HOURS PER MONTH FOR THE MONTHS                                                            
          OF OCTOBER THROUGH MARCH, AND                                                                                         
                     (B) 350 KILOWATT-HOURS PER MONTH FOR THE MONTHS                                                            
          OF APRIL THROUGH SEPTEMBER].                                                                                          
                                                                                                                                
This amendment also inserts a new bill section on page 3, following                                                             
line 4 of the committee substitute to read as follows.                                                                          
                                                                                                                                
     Sec. 6. AS 42.45.110(c) is amended to read:                                                                                
          (c) The amount of power cost equalization provided per                                                                
     kilowatt-hour  under  (b) of  this section  may  not exceed  95                                                            
     percent  of the power costs,  or the average rate per  eligible                                                            
     kilowatt-hour  sold, whichever  is less,  as determined  by the                                                            
     commission. However,                                                                                                       
                (1) during the state fiscal year that began July 1,                                                             
     1999,  the power cost  for which power  cost equalization  were                                                            
     paid  to an  electric  utility were  limited  to minimum  power                                                            
     costs  of more than  12 cents per kilowatt-hour  and less  than                                                            
     52.2 cents per kilowatt-hour;                                                                                              
                (2) during the state fiscal years beginning July 1,                                                           
     2007, and  each following state fiscal year [JULY  1, 2000, AND                                                          
     JULY 1, 2001], the  commission shall adjust the power costs for                                                            
     which  power  cost equalization  may  be  paid to  an  electric                                                            
     utility based  on the weighted average retail  residential rate                                                            
     in Anchorage,  Fairbanks, and  Juneau; however, the  commission                                                            
     may not adjust  the power costs under this paragraph  to reduce                                                            
     the  amount  below the  lower  limit  set out  in  (1) of  this                                                            
     subsection; and                                                                                                          
                (3) DURING EACH FOLLOWING STATE FISCAL YEAR, THE                                                                
     COMMISSION  SHALL ADJUST THE  POWER COSTS FOR WHICH  POWER COST                                                            
     EQUALIZATION  MAY BE PAID TO AND ELECTRIC UTILITY  BASED ON THE                                                            
     WEIGHTED   AVERAGE  RETAIL  RESIDENTIAL   RATE  IN   ANCHORAGE,                                                            
     FAIRBANKS,   AND  JUNEAU,  PER   KILOWATT-HOUR  FOR   SALES  TO                                                            
     RESIDENTIAL  CUSTOMERS  OF 400  KILOWATT-HOURS  PER MONTH;  THE                                                            
     COMMISSION MAY NOT  ADJUST THE POWER COSTS UNDER THIS PARAGRAPH                                                            
     TO REDUCE  THE AMOUNT BELOW 16.75 CENTS PER KILOWATT-HOUR;  AND                                                            
                (4)] the power cost equalization per kilowatt-hour                                                              
     may be  determined for a utility  without historical  kilowatt-                                                            
     hour sales data by using kilowatt-hours generated.                                                                         
                                                                                                                                
This amendment also inserts a new bill section on page 3, following                                                             
line 16 of the committee substitute to read as follows.                                                                         
                                                                                                                                
     Sec. 8. AS 42.45.110(d) is amended to read:                                                                                
          (d) An electric utility whose customers receive power                                                                 
     cost equalization  under AS 42.45.100 - 42.45.150 shall set out                                                            
     in its  tariff the  rates without the  power cost equalization                                                             
     and  the amount of  power cost equalization  per kilowatt-hour                                                             
     sold. The rate charged  to the customer shall be the difference                                                            
     between the two amounts.  Power cost equalization paid under AS                                                            
     42.45.100  - 42.45.150 shall be used to reduce  the cost of all                                                            
     power sold to local  community facilities, in the aggregate, to                                                            
     the extent  of 70 kilowatt-hours per month per  resident of the                                                            
     community,   and to  reduce   the cost   [TO EACH  RESIDENTIAL                                                             
     CUSTOMER]  of the first 500 [NOT MORE THAN 450]  kilowatt-hours                                                          
     per residential  customer per month [FOR THE  MONTHS OF OCTOBER                                                            
     THROUGH MARCH,  AND NOT MORE THAN 350 KILOWATT-HOURS  PER MONTH                                                            
     FOR THE MONTHS OF APRIL THROUGH SEPTEMBER].                                                                                
                                                                                                                                
     New Text Underlined [DELETED TEXT BRACKETED]                                                                             
                                                                                                                                
Co-Chair Donley moved for adoption.                                                                                             
                                                                                                                                
The amendment was ADOPTED without objection.                                                                                    
                                                                                                                                
Co-Chair  Donley moved  "the Finance  Committee version  for SB  185                                                            
from Committee  with accompanying  Senate  Finance Committee  fiscal                                                            
note."                                                                                                                          
                                                                                                                                
Senator  Wilken objected  to make  a comment  regarding discussions                                                             
held on  the matter  of funding  the Power  Cost Equalization  (PCE)                                                            
program  in  the  Committee  during  the years  1999  and  2000.  He                                                            
referenced  Senate Finance  Committee  minutes from  April 13,  2000                                                            
[copy on  file], whereby  former Committee  member Senator  Al Adams                                                            
indicated  intent that  National  Petroleum  Reserve-Alaska  (NPR-A)                                                            
funds  would be  divided  between  the permanent  fund,  the  school                                                            
public trust fund  and the PCE fund. Senator Wilken  remembered that                                                            
Senator  Adams promised  to  convince villages  in  the North  Slope                                                            
Borough  to  "relinquish"  claim to  the  NPR-A  funds in  order  to                                                            
benefit PCE.                                                                                                                    
                                                                                                                                
Senator Wilken  reminded that at the previous hearing  on this bill,                                                            
he  had asserted  that  the projects  funded  with NPR-A  funds  are                                                            
"essentially  fluff  projects".   He  referenced  a  list  of  eight                                                            
projects  funded with $1.79  million of NPR-A  funds [copy  on file]                                                            
and  surmised they  were  not necessitated  by  the  impacts of  oil                                                            
development.                                                                                                                    
                                                                                                                                
Senator  Wilken noted  that  in other  boroughs in  Alaska,  similar                                                            
projects are instead funded  with borough funds. He predicted if the                                                            
communities  that currently receive  NPR-A funds for these  projects                                                            
were to  forgo receiving  the funds,  that the  North Slope  Borough                                                            
would provide funds to undertake the projects.                                                                                  
                                                                                                                                
Senator Wilken  asserted that the  promise made in the year  2000 is                                                            
still pertinent  and the Committee should attempt  to convince those                                                            
villages to  authorize use of the  NPR-A funds for the PCE  program.                                                            
                                                                                                                                
Senator Hoffman countered  that the statements made during the April                                                            
2000 meeting related  to an amendment containing standard  budgetary                                                            
language.  This language,  he explained,  clarified  that the  NPR-A                                                            
funds would  be divided  to the  permanent fund,  the public  school                                                            
trust fund  and the  PCE fund according  to a  formula. He  stressed                                                            
there is a priority for  the allocation of the funds, which has been                                                            
practiced accordingly.                                                                                                          
                                                                                                                                
Senator  Wilken removed  his objection  to reporting  the bill  from                                                            
Committee.                                                                                                                      
                                                                                                                                
Senator Austerman  understood the NPR-A funds are  federal funds and                                                            
that established criteria  in federal law provides how they could be                                                            
spent. He was  unsure how state statutes could overrule  the federal                                                            
law on this matter.                                                                                                             
                                                                                                                                
Senator  Wilken described  how the  federal government  collects  50                                                            
percent  of NPR-A  production funds  with the  remaining 50  percent                                                            
"for the benefit of the  people of Alaska." He continued that of the                                                            
50 percent  allocated  for  Alaska, one-half  is  guaranteed to  the                                                            
North Slope Borough. He  detailed the State's ability to appropriate                                                            
the remaining 25 percent.                                                                                                       
                                                                                                                                
Co-Chair Kelly ruled the  discussion about the impact of NPR-A funds                                                            
is out of order due to the motion on the table.                                                                                 
                                                                                                                                
Without objection  CS SB 185 (FIN)  with a zero fiscal note  for the                                                            
Department  of Community and Economic  Development, authored  by the                                                            
Senate Finance Committee 4/2/02, MOVED from Committee.                                                                          
                                                                                                                                
Senator Austerman realized  the issue of NPR-A fund appropriation is                                                            
"a thorn in  the side" of some Committee  members. He predicted  the                                                            
discussion  would continue  as to Senator  Adam's assertions  unless                                                            
the statute  is changed. He listed  other issues instituted  by past                                                            
legislatures,  including grain  elevators  in the Matanuska-Susitna                                                             
Valley  and the  rocket  launch  facility  in Kodiak.  He  suggested                                                            
reaching a resolution on the PCE matter.                                                                                        
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                                
Co-Chair Pete Kelly adjourned the meeting at 11:17 AM                                                                           

Document Name Date/Time Subjects