Legislature(2007 - 2008)SENATE FINANCE 532
05/08/2007 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| SB104 | |
| HB109 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 104 | TELECONFERENCED | |
| + | HB 109 | TELECONFERENCED | |
| + | HB 121 | TELECONFERENCED | |
| + | HB 229 | TELECONFERENCED | |
| + | TELECONFERENCED |
MINUTES
SENATE FINANCE COMMITTEE
May 8, 2007
1:39 p.m.
CALL TO ORDER
Co-Chair Bert Stedman convened the meeting at approximately
1:39:58 PM.
PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Kim Elton
Senator Joe Thomas
Senator Fred Dyson
Senator Donny Olson
Also Attending: WILLIAM MOGEL, Saul Ewing LLP; PAT GALVIN,
Commissioner, Department of Revenue; MARCIA DAVIS, Deputy
Commissioner, Department of Revenue; DAVID JONES, Senior
Assistant Attorney General, Opinions, Appeals, and Ethics
Section, Civil Division, Department of Law;
Attending via Teleconference: From Anchorage: JOYCE ANDERSON,
Administrator, Select Committee on Legislative Ethics; From an
offnet location: BROOK MILES, Executive Director, Alaska Public
Offices Commission, Department of Administration.
SUMMARY INFORMATION
SB 104-NATURAL GAS PIPELINE PROJECT
The Committee heard from a Legislative Budget and Audit
Committee consultant and the Department of Revenue. A draft
committee substitute was reviewed. The bill was held in
Committee.
HB 109- DISCLOSURES & ETHICS/BRIBERY/RETIREMENT
The Committee heard from the Department of Law, the Legislative
Select Committee on Ethics and the Alaska Public Offices
Commission. Two amendments were adopted and one was withdrawn
from consideration. The bill was held in Committee.
1:41:18 PM
CS FOR SENATE BILL NO. 104(JUD)
"An Act relating to the Alaska Gasline Inducement Act;
establishing the Alaska Gasline Inducement Act matching
contribution fund; providing for an Alaska Gasline
Inducement Act coordinator; making conforming amendments;
and providing for an effective date."
This was the eighteenth hearing for this bill in the Senate
Finance Committee.
1:42:10 PM
WILLIAM MOGEL, Saul Ewing LLP, utilized a presentation titled,
"FERC's Regulation of Interstate Natural Gas Pipelines" [copy on
file]. He relayed his instruction to address how the Federal
Energy Regulatory Commission (FERC) process governs interstate
natural gas pipelines.
1:43:21 PM
Mr. Mogel "recognized the credibility of saying I'm here from
Washington [D.C.]; I've come to help you." He emphasized that
the regulation of interstate natural gas pipelines could be
"slightly unfamiliar" to several members of the Committee in
many respects because it was "significantly different" than the
regulation of oil pipelines by the FERC. Most distinctly in that
the primary objective of the federal Natural Gas Act of 1938 was
to protect consumers. The "Oil Pipeline Act" did not include
such statutory obligation.
1:43:36 PM
Page 2
THE FERC'S REGULATORY REGIME, WHICH IS DESIGNED TO PROTECT
CONSUMERS, PROHIBITS AN INTERSTATE NATURAL GAS PIPELINE
FROM ACTING IN AN ANTI-COMPETITIVE, DISCRIMINATORY OR
PREFERENTIAL MANNER TO ANY SHIPPER.
Mr. Mogel overviewed this statement, clarifying that all
shippers, whether or not affiliated with the natural gas
pipeline, were subject to this prohibition.
Mr. Mogel indicated his presentation would "follow the various
mechanisms" the FERC employed through statute and regulation to
ensure open access and non-preferential treatment.
Page 3
QUALIFICATIONS
· 30 years as a FERC practitioner.
· Author/Editor of 17 books on energy law.
· Writings cited as authority by the US Supreme Court.
· Adjunct lecturer at law school on energy law.
· Regulatory practice includes energy projects in
foreign countries.
Mr. Mogel explained his ability to write books amidst his other
activities was accomplished "one page at a time."
1:44:44 PM
Page 4
CERTIFICATES OF PUBLIC CONVENIENCE AND NECESSITY
· Unlike oil pipelines, before a natural gas pipeline
can commence construction and operation it must first
obtain a certificate after making a showing of public
benefit.
· FERC can condition the certificate on numerous
matters, including when construction must be
completed.
· A pipeline cannot expand, terminate or "abandon"
service without prior approval of FERC.
Mr. Mogel reviewed this information and qualified that it was
not intended to be all inclusive. In considering a project for
certification, FERC examined "a multitude of issues", which were
"set forth in extensive detail" in regulation and "a body of
case law." A determination of whether the pipeline would have a
public benefit included several factors including environmental.
Mr. Mogel defined "condition" as a requirement or requirements
that were not "intended by the applicant". A condition that
required the project to be completed by a date certain stressed
that an applicant could not receive a certificate and "sit on it
for a duration of many years and then decide to commence."
1:46:42 PM
Mr. Mogel informed that an applicant requested a certificate and
"all the provisions the applicant thinks is appropriate in terms
of rates, terms and service location, design, etc." Upon
consideration of the application the FERC had "three choices",
which he described as follows.
They can grant the certificate as sought by the applicant.
They can grant the certificate and then condition the
certificate, i.e. imposing conditions upon the applicant.
If that occurs the applicant is not required to accept the
certificate and can challenge the FERC administratively and
then in the Court of Appeals. The last alternative, of
course, of FERC is they can deny the certificate in its
entirety.
1:47:03 PM
Mr. Mogel spoke to the prohibition on a certificate holder to
expand or "abandon" service without prior FERC approval.
Mr. Mogel summarized "the very pervasive, extensive regulatory
oversight of interstate gas pipelines prior to construction and
during operations."
1:47:38 PM
Page 5
RATES AND TERMS AND CONDITIONS OF SERVICE
· FERC must approve all rates, rate changes and terms
and conditions in a natural gas pipeline's tariff.
· FERC has authority to investigate existing rates of a
natural gas pipeline.
· Rates that are not "just and reasonable" may be
rejected and refunds can be ordered.
Mr. Mogel noted that the FERC also had this oversight.
1:48:08 PM
Mr. Mogel reported that under the provisions of the Natural Gas
Act, "if a rate goes into effect it goes into effect subject to
refund if FERC hasn't acted on the rate and then the FERC can
order refunds." In addition to "waiting for the applicant to
make rate proposals", he stated that the FERC could investigate
current rates on either its initiative, "on motion of certain
parties". The refund authority existed in these instances as
well.
1:48:42 PM
Page 6
INTERSTATE NATURAL GAS PIPELINES ARE REQUIRED TO BE "OPEN
ACCESS"
· Capacity must be allocated on a non-discriminatory
basis to affiliated and non-affiliated shippers.
· Rates charged and terms and conditions for capacity
must be just and reasonable and may not discriminate
or grant a preference to shippers similarly situated.
· Capacity release programs must be non-discriminatory
and transparent.
Mr. Mogel reported on a "major step to restructure or deregulate
the natural gas industry" that occurred in 1985. This was during
the time that the interstate gas pipeline companies "shifted
their business model from being merchants, meaning they bought
gas at the wellhead, they transported the gas and then resold
the gas at a bundled form to consumers without separating out
the cost of transportation or the cost of commodity." The
interstate gas pipeline companies transitioned from merchants to
common carriers. As a result of the change in the business
operations, the FERC "had to apply a regulatory tool to ensure
that these pipelines essentially operate with all the guarantees
of a common carrier."
Mr. Mogel characterized the "hallmark" of a common carrier as
"the pipeline - no matter who the owner is and who it's
affiliated with, has to open up the capacity on a not fair, non-
discriminatory basis and if there're equal claims for capacity
it has to make allocations that are equitable and that cannot
give a preference for an affiliated company or for any company
and it cannot discriminate against a company whether that
company is affiliated or not." All activities the FERC
undertakes in these matters must be transparent involving
"electronic bulletin boards" in which all parties could follow
all capacity transactions.
1:50:34 PM
Mr. Mogel qualified that natural gas pipelines, similar to a
railroad or bus system, was "essentially a common carrier" that
must allow for competitive use. The FERC assures this for the
pipelines through capacity regulation and oversight.
1:50:49 PM
Page 7
INTERSTATE PIPELINES ARE REQUIRED TO ADHERE TO
COMPREHENSIVE STANDARDS OF CONDUCT
· No preference in sharing of information, setting
rates, and terms and conditions between the pipeline
and its affiliated marketing company.
Mr. Mogel remarked that in addition to the obligation to be a
common carrier, FERC imposed standards of conduct on natural gas
pipeline companies. The standards were "very detailed rules
affecting transactions between the pipeline and its affiliated
marketing company" and "required that there be no preferences to
an affiliate, that there be no information sharing to an
affiliate or discrimination based upon knowledge of
information." In the event information was provided to an
affiliate of the pipeline company by the pipeline company, the
same information must also be "provided to the world".
1:51:35 PM
Mr. Mogel explained the intent of the standards of conduct was
"directed to many pipelines that are integrated companies with
marketing affiliates."
Mr. Mogel exampled that FERC prohibited "such things as idle
chatter around the water cooler" in which an employee of the
pipeline company said "hey, did you hear someone's going to move
some gas on this pipeline" was heard by an employee of the
marketing company and subsequent action was taken by the
marketing company on that information. This was "somewhat of an
extreme example" of the "relatively new tool of FERC" to impose
the standards of conduct to ensure that the pipelines were
operated in a fair non-discriminatory open and transparent
manner that did not provide preferences for its own companies.
Mr. Mogel stressed that this ability was "extremely important"
with regard to the regulatory oversight of the FERC.
1:52:34 PM
Page 8
FERC HAS BEEN GRANTED ADDITIONAL PUNITIVE AUTHORITY BY THE
EPAct of 2005
· To punish violations of its statutes and regulations
by:
o Fines of up to $1 million per violation per day.
o Disgorgement of unjust profits.
o Referrals to the Justice Department for criminal
prosecution.
Mr. Mogel pointed out that the federal Energy Policy Act passed
two years prior granted the FERC significant authority to punish
violations. The ability to levy the substantial fines had
"gotten everyone's attention". Authority to disgorge unjust
profits was in addition to FERC's authority to impose refunds.
Mr. Mogel contended the punitive authority provided "serious
regulatory tools to ensure adherence to regulations and the
statutory obligations that interstate gas pipelines have."
1:53:51 PM
Mr. Mogel reported that "in the relatively short time" since the
passage of the Energy Policy Act, FERC had imposed fines in
amounts ranging from $1 million to $10 million. He stressed that
the FERC was "not afraid to use this authority" as it was an
"attempt" to regulate interstate gas pipelines and to ensure the
pipelines met the obligation of compliance with statute.
1:54:24 PM
Page 9
The FERC's regulatory regime for interstate natural gas
pipelines is significantly different from oil pipelines and
changes since 1985 insure that pipeline's will not act
unlawfully or discriminate against shippers.
Mr. Mogel reiterated that the Natural Gas Act and the FERC's
regulatory regime was a "consumer protection statute". He
further commented as follows.
The regulatory oversight that FERC has had since 1938 and
how it has metamorphosed in more recent years to reflect
the change in the operations of interstate gas pipelines is
a significant protection against shippers who really in
this way are a proxy for consumers. Again I think in this
case there should be some comfort that Washington [D.C.]
really can help in the oversight of these very large
enterprises. Hopefully this will be helpful in thinking
about some of the issues that have come up under AGIA
[Alaska Gasline Inducement Act].
1:55:25 PM
Co-Chair Stedman requested a review of the differences between
the regulation of oil pipelines and the regulation of natural
gas pipelines.
Mr. Mogel informed that oil pipelines had been regulated since
1912 under the Hepburn Act. The regulatory oversight was
initially granted to the Interstate Commerce Commission and
transferred to the FERC in 1977 and 1978. The intent of that
statute was "not the protection of consumers because the nature
of that business was not a consumer business." Rather "it was
largely pipelines that were operated by producers of oil and
crude and some other products like ammonia and moved to
terminals and refineries, which they also owned." Therefore,
"the impedance to intensely regulate those or look at consumer
concerns was vastly diminished because the nature of that
business is very different from the business of interstate
natural gas pipelines, which [was] ultimately serving
consumers." As an example, "you don't have to get a certificate
for an oil pipeline."
Mr. Mogel summarized that FERC regulated oil pipelines "in a
very different way" because oil pipelines entailed "a very
different kind of business." Initial oil pipelines were intended
"just to be vehicles so producers of the crude [oil] could move
it closer to the market, have it refined and then distributed."
1:57:20 PM
Co-Chair Stedman mentioned the non-preferential and non-
discriminatory requirements relating to access to natural gas
pipelines. He recalled other testimony before the Committee that
inferred that an entity which owned a natural gas pipeline could
control "to a fairly high degree" the parties that had access to
the pipeline.
1:57:47 PM
Mr. Mogel relayed his understanding that an owner of a regulated
interstate natural gas pipeline must comply with "the broad
umbrella of rules" discussed in this presentation. Those rules
precluded discrimination against any shipper including a non-
affiliated shipper. Capacity could become available through
several scenarios, one of which was through an open season. The
FERC established rules governing open seasons to ensure that all
parties intending to "bid and sign contracts" had an opportunity
to commit to an open season. In the event bids exceeded the
capacity of the line, the operator of the pipeline was required
to allocate based on a ratio of the capacity available to the
bids for capacity. Once a pipeline was operating, the operator
must electronically post the available capacity to notify all
interested parties of the option to bid on the capacity. Through
its enforcement division, the FERC monitored these activities.
1:59:17 PM
Senator Elton, referencing Page 6 and the bullet point
pertaining to "just and reasonable" rates, terms and conditions,
assumed the provision applied to a pipeline owner. He asked if,
as part of an agreement in which the State paid $500 million
toward a natural gas pipeline and in return took "an equity
position in the pipeline", whether the State would be precluded
from offering any inducements to parties that participated in
the first open season.
2:00:25 PM
Mr. Mogel affirmed that the provision applied to the pipeline
owner. However, the State in the described scenario would not be
considered the operator of the pipeline and therefore
inducements offered by the State would not affect the operation
of the pipeline.
2:00:58 PM
Senator Elton surmised that "operator" was defined elsewhere in
the regulations and statutes governing natural gas pipelines as
the entity "making the day to day decisions" and that the
definition was "not expansive enough to include those who have
an equity stake that hire the operator."
2:01:21 PM
Mr. Mogel clarified that "natural gas company" and not
"operator" was the term utilized in the Natural Gas Act.
Regardless, many of the companies that operated natural gas
pipelines had "thousands of shareholders" and presumably, those
shareholders did not have direct operation authority. The
licensee, or FERC certificate holder, was typically the natural
gas company and was obligated to comply with the requirements.
2:01:53 PM
Senator Thomas utilized for comparison purposes the Trans
Alaskan Pipeline System (TAPS) in which Alyeska was the operator
and several oil companies owned the pipeline. He asked if in
this situation, Alyeska would be the entity subject to the
regulations.
2:02:13 PM
Mr. Mogel responded that because the TAPS was an oil pipeline it
was subject to a different federal statute.
2:02:30 PM
Senator Thomas clarified he utilized the TAPS as an example and
asked if it were a natural gas pipeline operated by a company
such as Alyeska that was "based on three or four" of the major
lease holders at Prudhoe Bay whether Alyeska would be the sole
entity over which the FERC had authority.
2:03:09 PM
Mr. Mogel affirmed the scenario was correct if Alyeska was the
FERC certificate holder. However, FERC oversight had broader
authority in that it governed the terms and conditions of the
company's operations.
2:03:22 PM
Senator Thomas asked if the Alaska natural gas pipeline
traversed to states through Canada, whether FERC would oversee
operations occurring in the U.S. states but not operations
occurring outside the country.
2:03:46 PM
Mr. Mogel affirmed that the FERC had no authority in Canada.
2:03:52 PM
Senator Olson asked the number of times natural gas pipeline
operators had been prosecuted or had penalties levied against
them.
2:04:28 PM
Mr. Mogel replied that the FERC and its predecessor, the Federal
Power Commission, had always had the ability to levy fines and
refer offenses to the U.S. Department of Justice for criminal
prosecution if it determined that behavior was anti-competitive
or violated the terms of the certificate. He was uncertain of
the frequency such actions had been taken in years prior to
2005. Since August 2005, with the expanded authority granted to
FERC, the agency had imposed fines in six instances. The amount
of the first levy was $10 million against NRG Energy. Other
fines had been in lesser amounts with $1 million being the
lowest. The FERC always had the ability investigate matters and
issue refunds. An enforcement office exists within the agency to
ensure compliance.
2:05:51 PM
Senator Huggins asked the preponderance of rolled in rates, and
ultimately "subsidizing subsequent shippers", experienced by
FERC and whether any precedence was established regarding this
matter.
2:06:17 PM
Mr. Mogel responded that rolled in rates was "not a new subject
for companies appearing before FERC." Recent policy has
generally been supportive of rolled in rates as compared to
incremental rates. He explained, "What they really look at and
whether or not they would approve a rolled in rate, 'is there a
benefit to the system in its entirety." FERC had often concluded
"that is appropriate, it encourages more through put; there are
benefits in that regard." FERC had determined that rolled in
rates were not deemed to be a subsidy because they provided
benefits to the customers "already on the system".
Mr. Mogel gave an example of an incremental rate approved by the
FERC as a large interstate gas pipeline and a fertilizer plant.
Fertilizer plants were large consumers of natural gas. In this
example, the fertilizer plant intended to locate 25 miles off of
the main pipeline and sought a spur pipeline to connect the two.
In this instance FERC would likely conclude that the rate
applied should be an incremental rate because it would not
benefit the system as a whole or benefit other consumers.
2:07:47 PM
Senator Huggins concluded that the FERC was a federal agency and
that the State should recognize that the FERC "generally
operates off precedence" imposed "clearly defined rules" and "by
and large" FERC determinations were predictable. Therefore,
"FERC is not an agency that we as a State should be concerned
about because they're gonna do what they're gonna do and they
have a history of that."
2:08:49 PM
Mr. Mogel disagreed. The State should be concerned about the
FERC because the agency was "here to help in the administration
of how these pipelines operate." FERC was bound by statute and
by precedence and would operate within those perimeters. The
FERC was "a very professional agency", which was "independent"
with five of the commissioners appointed by the President of the
United States and representing both major political parties. The
agency also had a "strong staff and a strong history". The State
should be "concerned in a positive way" because the agency would
be able to assist in addressing some of the concerns raised.
2:10:07 PM
Co-Chair Hoffman recalled consideration given the previous
legislative session to rolled-in rates versus incremental rates.
Page 5 of Mr. Mogel's presentation indicated that this should
not be a concern to the State because the FERC would make rate
decisions based on the best interest of consumers and shippers.
2:10:52 PM
Mr. Mogel stated that the establishment of rates was under the
jurisdiction of the FERC. The State could express its preference
of rate structure to the FERC for consideration.
2:11:47 PM
Senator Dyson asked of any detriment if the State proclaimed its
preference for rolled in rates through this enabling
legislation.
2:12:13 PM
Mr. Mogel answered that such action would result in no
detriment. The State should express its preference because the
FERC had a large constituency including municipal and state
governments, applicants, interveners and shippers, which also
express preferences. The FERC was obligated to consider all
parties' requests. Therefore, "there would be value to at least
express what the State of Alaska thought was appropriate for a
gas pipeline of this incredible magnitude."
2:12:54 PM
Co-Chair Stedman announced that the presentation was concluded.
2:13:10 PM
Mr. Mogel, citing his considerable experience, predicted that
the Alaska natural gas pipeline would "probably be the largest …
energy infrastructure project in North America."
AT EASE 2:13:24 PM / 2:15:30 PM
2:15:43 PM
Co-Chair Stedman directed attention to a document dated 4/20/07
that consisted of the text and annotated changes to CS SB 104
(JUD) [copy on file]. Page numbers were reflected and generally
coincided with the page numbers on the original committee
substitute, however, line numbers were not shown.
2:16:58 PM
PAT GALVIN, Commissioner, Department of Revenue, announced that
a proposed committee substitute was being drafted primarily in
response to testimony heard in legislative committees as well as
to incorporate suggestions made by the Division of Legal and
Research Services. The aforementioned document reflected the
changes that would be incorporated into the committee
substitute.
2:18:09 PM
MARCIA DAVIS, Deputy Commissioner, Department of Revenue,
detailed the changes proposed for the committee substitute in
the document. The first change would "correct" the title of the
bill by inserting, "providing inducements for the construction
of a natural gas pipeline and shippers that commit to use that
pipeline;".
2:18:36 PM
Chapter 90. Alaska Gasline Inducement Act
Article 1. Inducement to Construction of a Natural Gas
Pipeline in this State.
Section 43.90.010. Purpose. (page 1)
Ms. Davis characterized as "editorial changes", the proposed
amendments to the language of paragraph (3) of Section
43.900.010. These changes had also been incorporated into the
companion bill under consideration in the House of
Representatives, HB 177, and were recommended by the Division of
Legal and Research Services. The amended language reads as
follows.
(3) maximizes benefits to the people of the state from
the development of oil and gas resources in the state; and
2:18:52 PM
Ms. Davis stated that the proposed changes to paragraph (4) on
page 2 would provide clarification and would read as follows.
(4) encourages oil and gas leases and other persons to
commit to ship natural gas from the North Slope to a gas
pipeline system for transportation to markets in this state
or elsewhere.
2:19:07 PM
Article 2. Alaska Gasline Inducement Act License
Section 43.90.100. Gas Project (page 2)
Ms. Davis informed that corrections to subsection (b) of Section
43.90.100., had been made in the House of Representatives
companion legislation and were also recommended by the Division
of Legal and Research Services. The amended language reads as
follows.
(b) Nothing in this chapter precludes a person from
pursuing a gas pipeline independently from this chapter.
2:19:19 PM
Section 43.90.110. Natural gas pipeline project
construction inducement. (pages 2 and 3)
Ms. Davis noted changes made to subparagraph (a)(1) of Section
43.90.110., of HB 177 were also recommended for the Senate
version before the Committee.
2:20:15 PM
Ms. Davis directed attention to the inserted language reading,
"or satisfying any other requirement of an agency with
jurisdiction over", to subsection (a)(1)(C) on page 3. This
change was intended to recognize the numerous "permitting
agencies that get engaged and involved in the permitting of a
project". Inclusion of this language was requested by
TransCanada but would also benefit other producers or license
applicants.
The amended language of Section 43.90.110(a) on pages 2 and 3
would read as follows.
(1) subject to appropriation, state matching
contributions in a total amount not to exceed $500,000,000,
paid to the licensee during the five-year period
immediately following the date the license is awarded; the
payment period may be extended by the commissioners under
an amendment or modification of the project plan under AS
43.90.210; a payment under this paragraph shall be made
according to the following:
(A) on or before the close of the first
binding open season, the state shall match the
licensee's qualified expenditures at the level
specified in the license; however, the state's
matching contribution may not exceed 50 percent of the
qualified expenditures incurred before the close of
the first binding open season;
(B) after the close of the first binding
open season, the state shall match the licensee's
qualified expenditures at the level specified in the
license; however, the state's matching contribution
may not exceed 80 percent of the qualified
expenditures incurred after the close of the first
binding open season;
(C) a qualified expenditure is a cost that
is incurred after the license is issued under this
chapter by the licensee or the licensee's designated
affiliate, and is directly and reasonably related to
obtaining a certificate or amended certificate of
public convenience and necessity from the Federal
Energy Commission or the Regulatory Commission of
Alaska, as appropriate, or satisfying any other
requirement of an agency with jurisdiction over the
project; in this subparagraph, "qualified
expenditures" does not include overhead costs,
litigation costs, the cost of an asset, or work
product acquired or developed by the licensee before
the licensee is issued, civil or criminal penalties or
fines; and
2:20:55 PM
Ms. Davis stated that the insertion of a subsection (b) to
Section 43.90.110 on page 3 would provide clarification to
"emphasize the regulatory requirements; the need for regulations
to flush out the qualified expenditures". The new subsection was
added to HB 177 and reads as follows.
(b) The commissioner of revenue in consultation with
the commissioner of natural resources shall adopt
regulations for determining whether an expenditure is a
qualified expenditure for the purposes of (a) of this
section.
2:21:13 PM
Section 43.90.120. Request for applications for the
license. (page 3)
Ms. Davis characterized the language changes to subsection (b)
of Section 43.90.120., as "minor edits carried over by" the
Division of Legal and Research Services and would read as
follows.
(b) The commissioners may use independent contractors to
assist them in developing the request for applications and
in evaluating applications received under this chapter.
2:21:24 PM
Section 43.90.130. Application requirements. (pages 3
through 10)
Ms. Davis relayed testimony of producers over the current
language of "detailed complete" of Section 43.90.130(2). Concern
had been expressed that this verbiage required "a certain level
of detail under FERC terminology", which would be "impossible
given the preliminary stage of submitting an application. An
effort was made with the following proposed changes to assure
that this was not the intent.
(2) provide a thorough description of a proposed
natural gas pipeline project for transporting natural gas
from the North Slope of this state to market, and which may
include multiple design proposals, including different
design proposals for pipe diameter, wall thickness and
transportation capacity, and which shall include …
Ms. Davis acknowledged that the usage of "thorough" rather than
"complete" could be debated, but that the intent was to
eliminate "detailed".
2:22:07 PM
Ms. Davis explained that the proposed amendments to the
subsections of Section 43.90.130(2) would address concerns
expressed by producers that an application could be denied
because "they were suggesting a specific proposal of a certain
pipe size, and that in fact they may end up with a different
pipe size based on other criteria." The amended language would
"create the opportunity to provide multiple scenarios within a
proposal so that that way they can cover different potential
fact patterns. These changes had been incorporated into the
companion legislation under consideration in the House of
Representatives.
2:22:43 PM
Ms. Davis then detailed the proposed changes to the
subparagraphs of paragraph (2). Statutory reference to the "over
the top pipeline route" would be inserted to AS 49.90.130(2)(A)
and the provision would read as follows.
(A) the route proposed for the natural gas
pipeline which may not be the route described in AS
39.35.170(b);
Co-Chair Stedman identified the over the top pipeline route as
north of Latitude 68.
Ms. Davis affirmed.
2:23:20 PM
Ms. Davis informed that "clean up" changes had been made to
subparagraphs (B) (C) and (D) in the House of Representatives;
specifically, the addition to (C) of "including a description of
all pipeline access and tariff terms the applicant plans to
offer". This "callout of tariff and access terms had been
embedded in" the language of subparagraph (D), which related to
the Canadian and marine sections of the pipeline but should be
applied to all applications. The amended language would require
all applications to provide a description of their pipeline
access and tariff terms. The references could subsequently be
eliminated from subparagraph (D).
2:24:12 PM
Ms. Davis also pointed out that the deletion of "demonstrating"
following "analysis" in subparagraph (C) was recommended after
the voicing of concerns by producers that it represented a
"threshold of how much proof and how much certainty needed to be
had in hand at the time of making the application as opposed to
later." The Department did not intend to impose "such a high
standard that it would be difficult to file an application."
2:24:47 PM
Ms. Davis noted conforming changes to the amendment of paragraph
(2) with the replacement of "detailed complete" with "thorough"
would be made to paragraph (2)(D)(i).
2:25:03 PM
Ms. Davis spoke to "grammar and style changes" proposed by the
Division of Legal and Research Services for paragraph
(2)(D)(ii).
2:25:15 PM
Ms. Davis directed attention to the reference to "amended
certificate" inserted to the language of (ii). This addition was
recommended because TransCanada, a likely AGIA applicant, held
an existing certificate and if granted the license would apply
for an amendment to that certificate.
The amended language of Section 43.90.130(2)(B), (C) and (D) on
pages 4 and 5 would read as follows.
(B) the location of receipt and delivery points
and the size and design capacity of the proposed natural
gas pipeline at the proposed receipt and delivery points,
except that this information is not required for in-state
delivery points unless the application proposes specific
in-state delivery points;
(C) an analysis of the project's economic and
technical viability, including a description of all
pipeline access and tariff terms the applicant plans to
offer;
(D) an economically and technically viable work
plan, timeline, and associated budget for developing and
performing the proposed project, including field work,
environmental studies, design, and engineering, implanting
practices for controlling carbon emissions from natural gas
systems as established by the United States Environmental
Protection Agency, and complying with all applicable state,
federal, and international regulatory requirements that
affect the proposed project; the applicant shall address
the following:
(i) if the proposed project involves a
pipeline into or through Canada, a thorough
description of the applicant's plan to obtain
necessary rights-of-way and authorizations in Canada,
a description of the transportation services to be
provided and a description of rate making
methodologies the applicant will proposed to the
regulatory agencies, and an estimate of rates and
charges for all services;
(ii) if the proposed project involves marine
transportation of liquefied natural gas, a description
of the marine transportation services to be provided
and a description of proposed rate-making
methodologies; an estimate of rates and charges for
all services by third parties; a detailed description
of all proposed access and tariff terms for
liquefaction services or, if third parties would
perform liquefaction services, identification of the
third parties and the terms applicable to the
liquefaction services; a complete description of the
marine segment of the project, including the proposed
ownership, control, and cost of liquefied natural gas
tankers, the management of shipping services,
liquefied natural gas export, destination, re-
gasification facilities, and pipeline facilities
needed for transport to market destinations, and the
entity or entities that would be required to obtain
necessary export permits and licenses or a certificate
or amended certificate of public convenience and
necessity from the Federal Energy Regulatory
Commission for the transportation of liquefied natural
gas in interstate commerce if United States markets
are proposed; and all rights-of-way or authorizations
required from a foreign country;
2:25:49 PM
Ms. Davis next addressed the requested insertion of language to
Section 43.90.130(3)(B) to accommodate the existing FERC
certificate held by TransCanada and to exempt that company from
repeating the pre-filing procedures. The amended subparagraph
would read as follows.
(B) apply for Federal Energy Regulatory
Commission approval to use the pre-filing procedures set
out in 18 C.F.R. 157.21 by a date certain, and use those
procedures before filing an application for a certificate
or amended certificate of public convenience and necessity,
except where the producers are not required as a result of
section 5 of the President's Decision issued pursuant to
the Alaska Natural Gas Transportation Act of 1976; and
2:26:55 PM
Ms. Davis stated that the "editing change" proposed to Section
43.90.130(7)(E) on page 7 was recommended by the Division of
Legal and Research Services and would read as follows.
(E) will not enter into a negotiated rate
agreement that would preclude the applicant from collecting
from any shipper, including a shipper with a negotiated
rate agreement, the rolled-in rates that are required to be
proposed and supported by the applicant under (B) of this
paragraph or the partial rolled-in rates that are required
to be proposed and supported by the applicant under (C) of
this paragraph.
2:27:07 PM
Ms. Davis informed that the changes shown to AS 43.90.130(8) and
(10) through (12) on page 8 reflected Division of Legal and
Research Services edits integrated into the House Resources
committee substitute for HB 177. The amended language reads as
follows.
(8) state how the applicant proposes to deal with a
North Slope gas treatment plan, regardless of whether that
plant is part of the applicant's proposal, and, to the
extent that the plant will be owned entirely or in part by
the applicant, commit to seek certificate authority from
the Federal Energy Regulatory Commission if the proposed
project is engaged in interstate commerce, or from the
Regulatory Commission of Alaska if the project is not
engaged in interstate commerce; for a North Slope gas
treatment plant that will be owned entirely or in part by
the applicant, for rate-making purposes, commit to value
previously used assets that are part of the gas treatment
plant at net book value; describe the gas treatment plant,
including its design, engineering, construction, ownership,
and plan of operation; the identity of any third party that
will participate in the ownership or operation of the gas
treatment plant; and the means by which the applicant will
work to minimize the effect of the costs of the facility on
the tariff;
(9) …
(10) commit to propose and support rates for the
proposed project and for any North Slope gas treatment
plant that the applicant may own, in whole or in part, that
are based on a capital structure for rate-making that
consists of not less than 70 percent debt;
(11) describe the means for preventing and managing
overruns in costs of the proposed project, and the measures
for minimizing the effects on tariffs from any overruns;
(12) commit to provide a minimum of five delivery points of
natural gas in this state;
2:27:18 PM
Ms. Davis addressed language changes proposed to paragraph (16)
on page 9. The committee substitute passed by the Senate
Judiciary committee, contained a provision to require an
applicant to waive its right to appeal either the issuance of a
license or the determination that no application merits award of
the license. This provision had initially been determined
adequate to "cover all of the things that could come about as a
result of receipt and consideration of application. Upon further
review "absolute clarity around the issue of rejection of an
application" was determined necessary. The proposed amendment
would stipulate that by participation as an applicant, a party
would waive its legal right to object to the legal process of
consideration of its application, including the issuance or non-
issuance of a license.
Ms. Davis qualified that "constitutional claims would lay where
they lay, but this takes out the procedural and substantive type
claims." The proposed language reads as follows.
(16) waive the right to appeal the rejection of an
application is incomplete, the issuance of a license to
another applicant or the determination under AS
43.90.180(b) that no application merits the issuance of a
license;
2:28:31 PM
Ms. Davis stated that deletion of "the affiliates of the
applicant, all partners, members of a joint venture," following
"description of the applicant" from paragraph (19) was intended
for "clean up" because "all entities" was sufficient.
(19)provide a detailed description of the applicant
and all entities participating with the applicant in the
application and the project proposed by the applicant, and
persons the applicant intends to involve in the
construction and operation of the proposed project; the
description must include the nature of the affiliation for
each person, the commitments by the person to the
applicant, and other information relevant to the
commissioners' evaluation of the readiness and ability of
the applicant to complete the project presented in the
application;
2:28:54 PM
Ms. Davis continued that amendments to paragraph (20) on page 10
were recommended as a result of testimony from producers
stressing the need for a reference in the evaluation criteria of
an applicant's prior history and current abilities. The intent
was to not require extensive detail, as additional information
would be discovered during the application process. This would
allow "side by side" comparison of all applications. The
paragraph as amended would read as follows.
(20) demonstrate the readiness, and financial and
technical ability to perform the activities specified in
the application, including the applicant's history in
safety, health and environmental compliance and in
following a detailed work plan, timeline, and operation
within an associated budget.
2:30:22 PM
Section 43.90.140. Initial application review;
additional information requests; complete applications.
(page 10)
Ms. Davis relayed contentions by legislators that the process
must be "unassailable" in its fairness. Commissioners should
therefore not review any applications received prior to the
deadline to prevent allegations that information from these
applications were "filtered back to" other applicants that had
not yet submitted applications. To accomplish this, the
following language was recommended for subsection (a).
(a) Upon expiration of the deadline for the filing of
applications under AS 43.90.130, the commissioners shall
open all applications and review each application to
determine whether it is consistent with the terms of the
request for applications and meets the requirements of AS
43.90.130. The commissioners shall reject as incomplete an
application that does not meet the requirements of AS
43.90.130.
2:31:10 PM
Ms. Davis also spoke to applications deemed incomplete because
they failed to meet the requirements of Section 43.90.130 as
well as satisfied the material terms of the request for
applications (RFA). Concern had been expressed by producers that
"somehow if they're disfavored by the Administration … there
would be a technicality or some basis upon which their
application would be kicked out." Because the RFA would be a
specific request for information, a situation should not occur
in which an applicant "missed some of the details" and the
application denied on that basis. Proposed amended language to
ensure this reads as follows.
(b) To evaluate whether an application should be
rejected under (a) of this section, the commissioners may
request additional information relating to the application.
(c) If, within the time specified by the
commissioners, the applicant fails to provide the
additional information requested under (b) of this section,
or submits additional information that is not responsive,
the application shall be rejected.
(d) For an application not rejected under this
section, the commissioners shall make a determination that
the application, including any requested additional
information is complete.
2:32:43 PM
Ms. Davis stated that subsection (e) should be amended to
address concerns of legislators and producers that once the
application process was complete, confidential information must
be made immediately available to the legislature. The amended
language reads as follows.
(e) Except as provided under AS 43.90.150, and after
determining which applications are complete, the
commissioners shall make all applications available to the
legislature.
2:33:36 PM
Section 43.90.150. Proprietary information and trade
secrets. (page 10)
Ms. Davis recommended amendments to this section based on
concerns raised by producers that a winning applicant under the
current language would be required to "basically open themselves
up to complete scrutiny including their proprietary and trade
secret information." Criticism was received that this would
place an applicant in "a bad position" if it had propriety
information about certain technologies. Recognizing that the
best possible and most thorough applications should be received,
the following language was proposed.
(a) At the request of the applicant, information
submitted under this chapter that the applicant identifies
and demonstrates is proprietary or is a trade secret is
confidential and not subject to public disclosure under AS
43.25, unless the applicant is granted a license under this
chapter. After a license is awarded, all information
submitted by the licensee retained under this chapter and
not determined by the commissioners to be proprietary or a
trade secret, shall be made public.
(b) if the commissioners determine that the
information submitted by the applicant is not proprietary
or is not a trade secret, the commissioners shall notify
the applicant and return the information at the request of
the applicant.
2:34:25 PM
Senator Dyson recalled other concerns that the applications of
unsuccessful applicants would be made public and the financial
status, relationships and other information could provide an
advantage to its competitors in other situations.
2:35:14 PM
Ms. Davis affirmed that the original version of this section
included a subsection (c) that provided that an applicant that
challenged the process and the issuance of the license must
release its application for public availability. With the
removal of the right of appeal provisions, this subsection was
deleted from the proposed amended committee substitute. The
amended language would provide that "all the information that
the commissioners agree with the applicant that is proprietary,
commercially sensitive or trade secret, will remain protected
both for the unsuccessful applicants as well as the successful
applicants." This would "recognize the commercial realities"
that entities would have "sensitive information". However, the
legislators, their agents, and contractors would have the
ability to review the confidential information from the moment
the applications were deemed complete. This would allow for a
"body" in addition to the commissioners to review the
applications and "confirming that all is right".
Senator Dyson was assured by this language change.
2:36:39 PM
Section 43.90.160. Notice, review, and comment. (page
11)
Ms. Davis characterized this section as a reaffirmation that
except as provided under the previous section pertaining to
proprietary information and trade secrets, all applications
would be made public regardless of whether they were deemed
incomplete. In addition to legislative access to incomplete
applications the public would also have access. The changes
proposed to this section were in response to concerns raised by
producers.
2:37:21 PM
Ms. Davis stated that the provision of subsection (c) 160 would
"open" the process for legislative participation and review of
all application material. This process must be "completely fair
and above reproach". This section would establish a time period
after the application deadline in which the commissioners would
unseal and review all applications and request additional
information on any applications deemed incomplete. During this
time period, the applications would remain confidential. Once
the commissioners had concluded their efforts to secure the
additional information, they would make final determinations on
which applications were complete and which would be rejected as
incomplete. At this point, the legislature's right to view the
applications would commence and legislators would sign a
confidentiality agreement to access to the confidential
information. The legislative process should not begin before the
previous steps had been completed to avoid a challenge that
information contained in applications was released to other
applicants, which could render the process unfair.
2:39:10 PM
Ms. Davis pointed out the proposed language change to subsection
(c) to clarify that the legislature could retain agents and
contractors to perform evaluations of the applications.
2:39:34 PM
Section 43.90.170. Application evaluations and
ranking. (page 11)
Ms. Davis highlighted a proposed change to subsection (b) to
delete "six" as an allowable discount rate and insert "five".
Five percent would be the preference of the Administration as
that is the amount "actually used". The amended language would
read as follows.
(b) When evaluating the net present value of
anticipated cash flow to the state from the applicant's
project proposal, the commissioners shall use an
undiscounted value and, at a minimum, discount rates of
two, five and eight percent, and consider…
2:40:05 PM
Ms. Davis recommended the addition of a subparagraph to
subsection (b), stressing the need to "explicitly reference"
that the amount of the matching contribution would be considered
part of the net present value. This change was adopted in the
House of Representatives version of AGIA. The inserted language
would read as follows.
(5) the amount of the matching contribution by
the state under AS 43.90.110(a)(1)(A) and (B) proposed by
the applicant under AS 43.90.130)9); and
Ms. Davis also pointed out that subsection (d), which provided
the definition of "net present value" as "the discounted value
of a future stream of cash flow", should be deleted from this
section.
2:40:26 PM
Section 43.90.180. Notice to the legislature of intent
to issue license; denial of license. (page 13)
Ms. Davis stated that technical changes to this section had been
adopted into a committee substitute for HB 177 at the
recommendation of the Division of Legal and Research Services.
The amended language of subsection (a) replaced "would" with
"will". The amended language of subsection (a)(1) deleted "in
accordance with" and inserted "on the effective date of the
legislative approval under". The full text as amended, reads as
follows.
(a) If, after consideration of public comments
received under AS 43.90.160(a) and evaluation of complete
applications under AS 43.90.170, the commissioners
determined that an application proposes a project that will
sufficiently maximize the benefits to the people of this
state and merits issuance of a license under this chapter,
the commissioners shall
(1) issue a determination, with written findings
addressing the basis for the determination; the
determination becomes a final agency action on the
effective date of the legislative approval under AS
43.90.190(b);
2:40:40 PM
Section 43.90.200. Certification by regulatory
authority and project sanction. (Page 13)
Ms. Davis explained this section would establish the legal
requirements for the licensee to proceed with the project once
it obtained a FERC certificate. Language changes to this section
were recommended following testimony of producers regarding
their rights to negotiate with FERC. This section, as amended,
would read as follows.
(a) A licensee that is awarded a certificate or
amended certificate of public convenience and necessity
from a regulatory agency with jurisdiction over the
project, shall accept the certificate or amended
certificate when the order granting the certificate is no
longer subject to judicial review or earlier at the
licensee's discretion.
(b) If the licensee does not have credit support
sufficient to finance construction of the project through
ownership of rights to produce and market gas resources,
firm transportation commitments, or government financing,
the licensee shall sanction the project within one year
after the effective date of the certificate or amended
certificate of public convenience and necessity issued by
the regulatory agency with jurisdiction over the project.
(c) If the licensee does not have credit support
sufficient to finance construction of the project through
ownership of rights to produce and market gas resources,
firm transportation commitments, or government financing,
the licensee shall sanction the project by the later of
(1) two years after the effective date of the
certificate or amended certificate of public convenience
and necessity issued by the regulatory agency with
jurisdiction over the project; or
(2) five years after the conclusion of the first
open season of the project.
(d) If the licensee fails to sanction the project as
required under this section, the licensee shall, upon
request by the state
(1) seek approval from the Federal Energy
Regulatory Commission or the Regulatory Commission of
Alaska, as applicable, to abandon and transfer the
certificate or amended certificate to the state or the
state's designee; and
(2) assign to the state or the state's designee
all engineering designs, contracts, permits, and other data
related to the project that are acquired by the licensee
during the term of the licensee before the date of the
abandonment or transfer.
(e) The transfer and assignments under (d) of this
section as a result of failure to comply with (a) or (b) of
this section is at no cost to the state or the state's
designee. A transfer under (c) of this section is at the
licensee's net cost.
(f) In this section, "effective date of the
certificate or amended certificate" means the date the
order granting the certificate is no longer subject to
judicial review or earlier at the licensee's discretion.
2:41:47 PM
Senator Elton noted that the amount of time allowed for judicial
appeal would be increased under the proposed language of
subsections (a) and (b).
2:42:00 PM
Ms. Davis responded that "it could be … but it might not". She
relayed a concern of producers to acknowledge the negotiation
process between the applicant and the FERC that occurs as the
certificate was "being finalized prior to being issued". The
length of time involved partly depended upon the "power of the
two negotiating parties". The applicant's power was the right to
seek appeal of a decision it deems inappropriate or unfair. FERC
held the rights and powers "because they're ultimately the law
of the land except as otherwise ordered by a court of appeal."
Under the original provision of this section that limited
negotiations to administrative appeals in which FERC issued the
final judgment, the applicant would have no negotiating
leverage. Therefore, the applicant could extend negotiations for
a longer period "knowing that that was the end of the road".
Resolution could occur in a shorter period of time if the FERC
understood that the applicant had the right of appeal to a court
of appeals. She predicted, however, that the time period
involved would likely be greater under the proposed provisions.
2:43:21 PM
Mr. Galvin disclosed that the Department of Revenue had
"struggled" with the issue of the potential extension of the
time period. Two factors influenced the decision to allow for
judicial appeal. At the stage that such an appeal would be
considered, the applicant would likely have invested "hundreds
of millions of dollars" into the project and would have a
financial "imperative" that would "drive them" to reach
consensus with the FERC and to proceed with the project.
Therefore, subjecting the applicant to "the license termination
hanging over their head" would be a lesser incentive than the
financial investment.
Mr. Galvin continued with the second factor influencing the
decision to eliminate the restriction against judicial appeal of
the FERC ruling. In the event a licensee determined that a
condition that FERC imposed on the certificate, he argued "what
value would there be at that point to the State in saying 'well
we're going to move ahead and we're going to take over' if we
end up basically going then counter to the party that got us
there and would that really be something that's going to drive
us closer to getting a gasline going."
Mr. Galvin surmised that these factors were interrelated and the
Department recognized that the State would likely not exercise
its ability to revoke the AGIA license. Given the extent of the
concern expressed by the producers, it was determined that the
amendment to this section to allow for judicial appeal would be
appropriate.
2:45:16 PM
Ms. Davis reminded that the current language of subsection (c)
would have allowed the applicant five years from the date of
issuance of the FERC certificate to obtain sufficient credit
support. However, legislators had expressed concern that the
length of time was too long and that events could occur during
that time period to make the wait "unreasonable from the
perspective of the State". Upon further review, the Department
developed the proposed solution.
2:46:16 PM
Mr. Galvin spoke to the matter as follows.
What we recognize is a couple different things associated
with this. One is that when had originally envisioned the
five years after certification, we were kind of looking at
the time frame as the primary time if they didn't have
primarily firm transportation commitments that there would
be an effort - a serious effort being made to try to secure
those through various means that would be available to them
both here or in D.C. or through getting transportation
commitments from the market. Those efforts we felt we
needed to ensure that our licensee would have enough time
to pursue all those.
What we recognize after the testimony and further
discussions with potential participants is that effort will
likely start immediately upon the initial open season
complet[ion] if the transportation commitments are not
obtained at that particular time.
So making the five year period tied to the end of that
initial open season secured what we felt was the necessary
time to ensure that that effort could reach its full
opportunity to succeed.
Secondly, when you get to the point where you're getting
your certificate and you still don't have the credit
support, if you've already taken the time to begin to build
up to try to obtain that credit support, you've already
probably used two or three years, maybe even four to make
that effort. And then you get the certificate and bring
that down to two years still secured enough time in our
view that they will have exhausted their opportunity to do
so and we will feel that we've given them enough time to be
able to succeed. And ultimately, as I've testified before,
we want to provide a structure that the parties that we're
trying to attract to this process recognize that they are
given the opportunity to succeed. And in the analysis of
when the effort [is] going to kick in - when they're going
to feel pressed in terms of this deadline approaching - we
feel that making this sort of two-pronged opportunity two
years from the certificate, recognizing also that we have
potential outside deadlines, we've got two years on the
federal loan guarantee, that if they've obtained their
Canadian certificate prior to their FERC certificate, may
expire at this two years as well.
So there's some symmetry there as well that will I think
drive each aspect of this project towards this common date
that seems to reflect both our desire to have a timeframe
that's as short as possible so that we're not tied into
something beyond its expectation of success, but also that
provides our potential participants the recognition that
they will have an opportunity to succeed regardless of the
contingencies that take place in the meantime.
2:49:43 PM
Co-Chair Hoffman indicated that he had expressed concern over
the five-year deadline. The proposed language reflected "that
we've come a long way in providing for what you've said".
However, Co-Chair Hoffman noted the absence of a provision to
revoke the AGIA license if the licensee failed to meet the
requirements.
2:50:11 PM
Mr. Galvin directed attention to Section 43.90.230. License
violations; damages., on page 16, which would allow the
commissioners to terminate the license under certain
circumstances.
2:51:06 PM
Senator Huggins identified "another trigger mechanism" as the
provision requiring sufficient credit support within five years
of the conclusion of the first open season. The time "scale" was
different but "gets you to about the same end".
2:51:34 PM
Mr. Galvin affirmed the inclusion of two deadlines the applicant
must meet and that "the applicant would know that they had five
years from the end of the initial open season to try to reach a
successful conclusion of getting the credit support [and] also
the two years from the certificate." Additionally, "the fact
that whichever [was] later means that both of those time periods
are secure for applicant whichever sequence they come in because
we don't know where they're going to fit in depending upon the
proposals."
2:52:11 PM
Ms. Davis spoke to the "correction" to Section 43.90.200(f) to
ensure that whether or not the licensee had credit support, a
specific timeframe would be in effect upon the date that the
FERC certificate was no longer subject to judicial review.
2:52:47 PM
Section 43.90.210. Amendment or modification to the
project plan. (page 15)
Ms. Davis deemed this section as "important" and noted
significant changes made during its consideration by the
legislature. Additional changes were recommended to provide for
a project amendment necessitated by requirements of a regulatory
agency with jurisdiction over the project. Existing language
provided for orders issued by the AOGCC; however, it was
discovered that the AOGCC only had jurisdiction over the "gas
off take" and did not have jurisdiction over the project. The
language changes were requested by the producers to ensure that
the project could be amended and that the licensee could respond
to regulatory agency requirements.
2:53:52 PM
Ms. Davis also noted an amendment to this section to limit the
modification process. The intent was to avoid "hamstringing
ourselves". The existing language stipulated that a change to
the project could not diminish the net present value of the
project and "technically that could be five dollars; that could
be $100." Clarification must be made to establish a "threshold
of materiality" with the insertion of "substantially" and the
deletion of "net present".
2:54:35 PM
Section 43.90.220. Records, reports, conditions, and
audit requirements. (page 16)
Ms. Davis informed that this provision would allow the State
access to the licensee's records to monitor that the incentive
payments were properly expended and that the project plan was
being adhered to and deadlines met. The following edits were
proposed to subsection (d) ensure that the State would obtain
the information necessary.
(d) After a license has been issued and until
commencement of commercial operations, the licensee shall
allow the commissioners to
(1) have a representative present at all meetings
of the licensee's governing body or bodies and equity
holders that relate to the project;
(2) receive all relevant notices when and as
issued and information sent to the governing body and
equity holders;
(3) enjoy the same access to information about
the licensee as the governing body members and equity
owners receive; and
(4) receive relevant reports or information from
the licensee that the commissioners reasonably request.
Ms. Davis highlighted the insertion of an additional subsection
to clarify that proprietary or privileged information would not
be made public. Otherwise, the ability of the licensee "to have
meaningful meetings in its organizational structure" would be
defeated. The inserted subsection would read as follows.
(e) All propriety or privileged information or trade
secrets received by the state under this subsection shall
not be subject to public disclosure under AS 40.25.
2:55:39 PM
Section 43.90.230. License violations; damages. (page
16)
Ms. Davis pointed out that this section contained a list of
actions or conduct of a licensee that would constitute a
violation of the AGIA licensee and would authorize the State to
"activate its various remedies listed". The language of
subparagraph (a)(1) should be modified to clarify that the
request and receipt of funding from the State for nonqualified
expenditures would be considered a violation. Additionally,
subparagraph (a)(2) should be "qualified as a result of producer
testimony" to address the concern that a licensee should not be
held in violation because it was required to make a change to
the project by a regulatory body. The proposed language reads as
follows.
(a) A licensee is in violation of the license if the
commissioners determine that the licensee has
(1) requested and received money from the state
under this chapter for an expenditure that is not a
qualified expenditure under AS 43.90.110;
(2) except as required to conform with a
requirement of a regulatory agency with jurisdiction over
the project, substantially departed from the specifications
set out in the application without state approval of a
project plan amendment or modification under AS 43.90.210;
2:56:41 PM
Senator Elton, referencing the proposed insertion of
"substantially" to the language of Section 43.90.210., surmised
that the same concern would arise with regard to the provision
of Section 43.90.220(a)(1). An invoice listing a "series of
expenditures" could be provided that included an item of an
insignificant amount that was not authorized. He asked the
latitude the State and the commissioners would have in this
instance.
2:57:28 PM
Mr. Galvin responded that the remainder of the violation
discovery process would allow for "notice and an opportunity to
cure" any oversights. A clerical or technical error would be
resolved before potential termination of the license would be
considered.
2:58:27 PM
Ms. Davis continued recommending the addition of a subparagraph,
which would address Co-Chair Hoffman's concerns about
enforcement, to read as follows.
(4)failed to accept a certificate as required by
AS 43.90.200(a) or failed to sanction the project as
required by AS 43.90.200(b); or
2:58:48 PM
Ms. Davis stated that the Division of Legal and Research
Services suggested the following "technical corrections" to
subsection (d).
(d) If the commissioners and the licensee are unable
to resolve the violation within the time specified in (b)
of this section, the commissioners shall provide the
licensee with notice that the violation has not been cured
and provide the opportunity for the licensee to be heard.
If, after notice and hearing, the commissioners determine
that the violation has not been cured, the commissioners
shall issue a written decision that is a final
administrative action for purposed of appeal to the
superior court in the state.
2:59:09 PM
Section 43.90.240. Abandonment of project. (page 18)
Ms. Davis spoke to proposed changes to subsection(c)(1) as a
result of testimony of producers expressing concerns that under
the current language "there would be absolutely no way they
could qualify for proving that a project was uneconomic." If a
producer held the AGIA license, it would be unable to
demonstrate an inability to finance the project because of the
relative size of the producer's operations. The insertion of
"external" was therefore recommended to allow the producer to
"not take into consideration their own financial capabilities as
large organizations" The amended subsection reads as follows.
(1) project does not have credit support
sufficient to finance construction of the project through
firm transportation commitments, government assistance, or
other external sources of financing; and
2:59:54 PM
Ms. Davis mentioned that several technical corrections were
suggested for this section.
Ms. Davis pointed out the recommended insertion of "upon the
state's request" to the language of subsection (e). This would
allow "the right of the State to receive an assignment of the
license along with all the data and materials is subject to the
State's request" in the even of abandonment of the project. The
Department could "envision" a circumstance in which the State
would not want to incur the cost to acquire the material if the
State had contended the project was uneconomic and therefore
would not have "a hope of being economic, we wouldn't want to
through good money after bad.
3:01:09 PM
Section 43.90.260. Expedited review and action by
state agencies. (page 19)
Ms. Davis informed that the proposed changes to the language of
this section were technical corrections.
Article 3. Resource Inducement
Section 43.90.300. Qualification for resource
inducement. (page 21)
Section 43.90.310. Royalty inducement. (page 20)
Ms. Davis stated that the proposed changes to the language of
these sections were recommended by the Division of Legal and
Research Services with the exception of the insertion of
language to Section 43.90.310(a)(2)(C). The term "gas
processing" did not exist in the same context elsewhere in this
legislation and therefore would be specifically defined in this
subsection as follows.
(C) reasonable and actual costs for gas
processing; for purposes of this subsection, "gas
processing" means post-production treatment of gas to
be extract natural gas liquids; and
3:01:42 PM
Senator Dyson asked if this change would address the concern
raised by Mr. Dickenson in earlier testimony.
3:01:53 PM
Ms. Davis assured that this plus other proposed changes would
address the concern.
3:02:03 PM
Co-Chair Stedman made the following statement.
The issue is is there a potential for whoever builds the
gasline in particular who builds the gas treatment plant to
access the 20 percent credits. And we want to make sure
that that door is closed tight; that they cannot access the
20 percent credits.
3:02:36 PM
Ms. Davis informed that insertion of language to the provision
of subsection (b)(2) was intended to ensure that sufficient
detail from the legislature would be provided to the
commissioner of the Department of Natural Resources to "direct
how the contract, the lease, would be amended to reflect the
right that was set up in subsection (a)(3)." That subsection
"was the mandate from the legislature that the commissioner of
[the Department of] Natural Resources not only make a change to
ensure that the transportation costs were handled fairly, but
also the time period in which a switching could take place."
Both concerns would be addressed in the language change to
subsection (b), which would entitle the licensee qualified to
receive inducements from the State to the following.
(2) to enter into a contract with the state that
amends the existing lease terms by providing a mechanism
that ensures that when the state exercises its right to
switch between taking its royalty in value or in kind for
gas committed for firm transportation in the first binding
open season of the project, the lessee or other person
shall not bear disproportionate transportation costs with
respect to the state's royalty gas; and modifying the
required period of notice that the state must provide
before exercising the state's right to switch between
taking its royalty in value or in kind for gas committed
for firm transportation in the first binding open season of
the project;
3:03:45 PM
Section 43.90.320. Gas production tax exemption. (page
23)
Ms. Davis reminded that Mr. Dickenson had recommended that a
definition of "gas production tax" be provided. The following
amendment to the language of subsection (b) would accomplish
this and read as follows.
(b) The exemption under this section may be applied
within 10 years immediately following commencement of
commercial operations, and only applied to production taxes
that are levied on North Slope gas shipped through firm
transportation capacity the person acquired during the
first binding open season or shipped in the firm
transportation capacity described in a voucher received by
the gas producer under AS 43.90.330.
3:04:15 PM
Section 43.90.330. Inducement vouchers. (page 23)
Ms. Davis acknowledged that the current version failed to
reflect the "parallel structure" in which the royalty owner
receiving an inducement voucher would be obligated to commit to
the rolled in rate treatment and to not protest the treatment
"put forth" by the pipeline company. An additional subsection,
reading as followed, would provide for this.
(d) The person that receives a voucher under this
section, and a gas producer that receives resource
inducements under a voucher, shall agree that the person or
gas producer, and their respective affiliates, successors,
assigns or agents will not protest or appeal a filing by
the licensee to roll in mainline expansion costs up to the
level that the licensee is required to propose and support
under AS 43.90.130(7). The agreement required under this
subsection may not preclude the person or gas producer or
their respective affiliates, successors, assigns or agents,
from protesting a filing to roll in mainline expansion
costs that the licensee is not required to propose and
support under AS 43.90.130(7).
3:04:52 PM
Article 4. Miscellaneous Provisions.
Section 43.90.400. Alaska Gasline Inducement Act
matching contribution fund; disbursements; audits. (page
24)
Ms. Davis stated that the Division of Legal and Research
Services recommended the insertion of language to subsection (a)
to clarify that no additional appropriation of disbursements
would be required and that the fund would not be dedicated. This
change had been adopted in a committee substitute for HB 177 and
reads as follows.
(a) There is established in the general fund an Alaska
Gasline Inducement Act matching contribution fund. The fund
consists of money appropriated to it by the legislature for
disbursement to pay the state's matching contributions
under AS 43.90.110. Money appropriated to the fund may be
spent for the purposes of the fund without further
appropriation. Appropriations to the fund do not lapse
under AS 37.25.010, but remain in the fund for future
disbursements. Nothing in this subsection creates a
dedicated fund.
Section 43.90.410. Regulations. (page 25)
Ms. Davis relayed Division of Legal and Research Services and
the Department of Law recommendations for the language of this
section to read as follows.
The commissioners may jointly adopt or amend regulations
for the purpose of implementing the provisions of this
chapter. The commissioner of revenue and the commissioner
of natural resources may adopt or amend regulations adopted
under authority outside of this chapter as necessary to
implement the provisions of this chapter.
Section 43.90.420. Statute of limitations. (page 25)
Ms. Davis noted the following language would establish
clarification that only constitutionality challenges would be
subject to this provision.
A person may not bring a judicial action challenging the
constitutionality of this chapter, of the constitutionality
of a license issued under this chapter unless the action is
commended in a court of the state of competent jurisdiction
within 90 days after the date that a license is issued.
Section 43.90.430. Interest (page 25)
Ms. Davis characterized the following proposed language as a
"clean up" suggested by the Division of Legal and Research
Services to reflect the language of HB 177 and to specify the
statutory reference to AS 43.05.22 rather than a quotation of
the existing language of that statute.
When a payment due to the state under this chapter becomes
delinquent, the payment bears interest at the rate
applicable to a delinquent tax under AS 43.05.225.
Section 43.90.440. Licensed project assurances. (page
25)
Ms. Davis reminded of a question raised during a previous
Committee meeting that in the event the State extended
preferential treatment to a different project and subsequently
made payment to the AGIA licensee of three times the amount of
expenses for the AGIA project, whether the licensee would
additionally have claims for damages from a breach of contract
or other grounds. To demonstrate that the payment would reflect
the "sum total" of the State's obligation in the event the State
provided support to a competing project, the following sentence
was recommended for inclusion in subsection (a), which provided
for the payment.
The payment under this subsection is in full satisfaction
of all claims the licensee may bring in contract, tort or
other law, related to the events that gave rise to the
payment.
3:07:35 PM
Ms. Davis also spoke of clarification needed to the provision of
subsection (b) relating to the potential benefit to a competing
pipeline project provided by the large project coordinator
position that currently existed within the Department of Natural
Resources to assist developers of large projects. "Permitting
support" was not "tax or royalty" and therefore not subject to
compensation to the AGIA licensee if provided to a competing
project. To establish this, a new subparagraph to subsection (b)
was proposed to read as follows.
(3) the review, processing and facilitation of
permits, rights of ways and authorizations by state
agencies in connection with a competing natural gas
pipeline project shall not create any obligation on the
part of the state under this section.
3:08:38 PM
Senator Dyson voiced concern about a pipeline facilitator
position assisting a competing pipeline project.
Ms. Davis replied that the pipeline coordinator position that
would be added through this legislation would be "exclusive" in
assisting the AGIA licensed project. However, existing statute
granted the Department of Natural Resources the right to appoint
a coordinator for a large project to facilitate and coordinate
with other agencies. The individual coordinators would not be
the same person.
Mr. Galvin furthered that no provision of this bill would
prevent the legislature from creating a coordinator position to
assist a competing project with the permitting process.
3:10:14 PM
Article 5. General Provisions.
Section 43.90.900. Definitions. (page 27 and 28)
Ms. Davis told of the following recommended addition of a
definition of "amended certificate" to exclude "simply a
certificate that's been subsequently amended after the passage
of AGIA" to avoid "a situation where deadlines start to get
extended because of amendments to certificates that got issued
after the effective date of the Act."
(3) "amended certificate" means a certificate of
public convenience and necessity issued by the Federal
Energy Regulatory Commission under authority of the Alaska
Natural Gas Transportation Act of 1976 that is amended to
comply with the terms of the license;
Ms. Davis also noted proposed definitions of "applicant" and
"gas treatment plant" to read as follows.
(4) "applicant" means a person, or group of persons
that files an application under this chapter;
…
(9) "gas treatment plan" means a facility downstream
of the point of production that contains gas and removes
non-hydrocarbon substances from the gas for the purpose of
rendering the gas acceptable for tender and acceptance into
a gas pipeline system;
3:11:00 PM
Ms. Davis continued pointing out proposed definitions for "net
present value", "open season", "point of production",
"proprietary" and "trade secret", explaining the technical
reasons for their necessity in this section. The inserted
language would read as follows.
(17) "open season" means the process that complies
with 18 C.F.R. Part 157, Subpart B (Open Seasons for Alaska
Natural Gas Transportation Projects);
(18) "point of production" has meaning set forth in AS
43.55.900(20);
…
(20) "proprietary" means that the information is
treated by the applicant as confidential and the public
disclosure of that information would adversely affect the
competitive position of the applicant or materially
diminish the commercial value of the information to the
applicant;
…
(23) "trade secret" has the meaning set forth in AS
45.50.940(3);
3:12:04 PM
Ms. Davis stated that the insertion of a subparagraph to AS
40.25.120(a), pertaining to exemptions to access to public
records and amended by Section 4 of the bill on page 32, would
"amplify the provision for what are accepted as public records".
The subparagraph would reference AS 43.90.150, which pertained
to application review and determination of constitutionality, as
well as AS 43.90.220(d), which pertained to documents obtained
in the course of participation in the licensee's business
operation meetings, and reads as follows.
(12) records that are
(A) proprietary, privileged or a trade
secret in accordance with AS 43.90.150 or AS
43.90.220(d);
(B) applications that are received under AS
43.90 until notice is published under AS 43.90.160.
3:12:54 PM
Ms. Davis noted the recommended addition of a new Section 8 to
the bill on page 33 to ensure that the Department of Natural
Resources would have authority to adopt and amend regulations
pertaining to Title 38, which otherwise related to "the tax
code". The language would read as follows.
Section 8. AS 38.05.020(b) is amended by adding a new
paragraph to read:
(10) exercise the powers and do the acts necessary to
carry out the provisions and objectives of AS 43.90 that
relate to this chapter;
3:13:17 PM
Co-Chair Stedman ordered the bill HELD in Committee.
AT EASE 3:13:43 PM / 4:11:11 PM
4:11:19 PM
SENATE CS FOR CS FOR HOUSE BILL NO. 109(JUD)
"An Act relating to bribery, receiving unlawful gratuities,
and campaign contributions; denying public employee
retirement pension benefits to certain legislators,
legislative directors, and public officers who commit
certain offenses, and adding to the duties of the Alaska
Retirement Management Board and to the list of matters
governed by the Administrative Procedure Act concerning
that denial; relating to campaign financing and ethics,
including disclosures, in state and municipal government,
to lobbying, and to employment, service on boards, and
disclosures by certain public officers and employees who
leave state or municipal service or leave certain positions
in state or municipal government; restricting
representation of others by legislators; relating to blind
trusts approved by the Alaska Public Offices Commission;
and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
4:12:03 PM
DAVID JONES, Senior Assistant Attorney General, Opinions,
Appeals, and Ethics Section, Civil Division, Department of Law,
testified that this ethics bill would place additional
restrictions on members of the Legislative Branch, the Executive
Branch and lobbyists. In addition to requiring more detailed
reporting from public officials and members of the Executive
Branch, it would require electronic filing of campaign,
legislative, and public official disclosures. Disclosures would
also be required from former members of the Executive Branch and
the Legislative Branch.
4:13:14 PM
Mr. Jones stated that AS 11.56.130 as amended by Section 1
paragraph (1) page 2 lines 2 through 10 of the Senate Judiciary
committee substitute "would change the definition of 'benefit'
in the criminal bribery statutes to prohibit agreements to
exchange campaign contributions for elected officials or
candidates changing their votes or positions on matters."
4:13:33 PM
Mr. Jones stated that the term "official action" is also defined
in Section 1(1) as follows.
…"official action" means advice, participation, or
assistance, including, for example, a recommendation,
decision, approval, disapproval, vote, or other similar
action, including inaction.
Mr. Jones stated that this definition is also reflected in AS
39.52.960(14), as amended by Section 70 of the bill, page 41,
lines 28 through 31. Section 70 addresses actions taken by a
public officer.
4:13:45 PM
Mr. Jones noted that Sections 2, 3, and 4 of the bill "refer" to
language in new subsection (a) of Section 37.10.310. Pension
forfeiture to preserve public trust in government., added to AS
37.10 by Section 48, page 28, lines 20 through 28. Section 48(a)
would "provide for forfeiture of the State's contributions
toward public officials' pensions under certain circumstances."
Mr. Jones specified that the new section, Section 14.25.212.
Pension forfeiture., added to AS 14.25 by Section 2, page 2
lines 15 through 17, "would apply the pension forfeiture
provision [in Section 48] to the defined benefit plan under the
Teachers Retirement System (TRS)."
Mr. Jones stated that changes to AS 14.25.040(c), as amended by
Section 3 page 2 lines 18 through 31, "would deny certain
service credit under" TRS under the pension forfeiture
provisions of Section 48.
4:14:20 PM
Mr. Jones communicated that the new section, Section 14.25.532.
Pension forfeiture, added to AS 14.25 by Section 4, page 3 lines
1 through 3, "would apply that pension forfeiture to the defined
contribution plan" of the TRS.
4:14:39 PM
Mr. Jones advised that Sections 5, 6, 7, and 8 pertain to
campaign and campaign disclosures. Language in AS 15.13.040(g),
as amended by Section 5, page 3 lines 4 through 15, "would
eliminate for most campaigns the current disclosure exemption
for campaigns raising and spending less than $5,000."
4:14:58 PM
Mr. Jones noted that AS 15.13.040(m) is repealed and reenacted
under Section 6, page 3 lines 16 through 30. Thereby subsection
(m) "would require electronic filing of most campaign
disclosures. It would except municipal campaigns and campaigns
raising and expending less than $5,000. It would delay
application of the electronic filing requirement to Legislative
candidates until January 1 of 2009. It would also allow the
Alaska Public Offices Commission (APOC) to grant exceptions to
the mandatory electronic filing requirement when circumstances
warrant."
4:15:31 PM
Mr. Jones stated that Section 7 would amend AS 15.13.040(m) as
amended by Section 6, to specify that, as of January 1, 2009,
"candidates for municipal office" in a municipality with a
minimum population of 15,000, would be subject to the electronic
filing requirement.
4:15:52 PM
Mr. Jones stated that Section 8, page 4 lines 22 through 26,
would add a new section to AS 15.13.040 which would require APOC
"to scan campaign disclosures", submitted on paper as opposed to
being electronically filed, and post them on the internet within
two working days.
Mr. Jones understood that APOC would be submitting a fiscal note
to reflect the cost associated with this provision.
4:16:13 PM
Mr. Jones stated that Section 9, page 4 lines 27 through 29,
would add a new section to AS 22.25 regarding the pension
forfeiture provision specified in Section 48. "It would apply
that provision to the judicial retirement system."
4:16:28 PM
Mr. Jones explained that Sections 10, 11, and 12 pertain to
lobbyists. AS 24.45.031(a) is amended by Section 10, page 4
lines 30 through page 5 line 16, to "require APOC to provide
annually updated ethics training courses for lobbyists and their
employers."
4:16:50 PM
Mr. Jones continued. AS 24.45.041(b) is amended by Section 11,
page 5 lines 17 through page 6, line 16. It would "require
lobbyists to file annual affirmations that they've attended the
ethics training course."
4:16:53 PM
Mr. Jones informed that a new subsection is added to AS
24.45.051 by Section 12, page 6 lines 17 through 26. It would
require lobbyists to report gifts of food and beverages provided
for immediate consumption to Legislators, Legislative employees
or members of the Legislator's or Legislative employee's
immediate family" ,except when "the food or beverage cost $10 or
less or was provided as part of an event that is open to all
Legislators and Legislative employees." This language was added
to the bill by the Senate Judiciary Committee.
In response to a question from Co-Chair Hoffman, Co-Chair
Stedman and Mr. Jones communicated that this information is
located in Section 12(b) page 6 lines 17 through 26.
4:18:46 PM
Senator Elton asked the definition of "open"; specifically
whether it meant that "all Legislative employees could be
invited" or whether it meant "all Legislative employees who may
be able to attend". To that point, he asked whether a luncheon
occurring in Juneau to which Legislative employees in Anchorage
were invited, would be considered open or closed since people in
Anchorage would be unlikely to attend.
4:19:19 PM
Mr. Jones guessed it "would be considered open" because the
Legislator or the Legislative employee could elect to attend.
The cost of traveling to Juneau might be a factor in their
decision.
Mr. Jones surmised that the provision was intended to
distinguish between "something that was open as opposed to
invitation-only to a select group of Legislators or Legislative
employees."
4:20:00 PM
Senator Elton understood the intent. The concern however is that
in order to qualify as an open event, Legislative employees, in
addition to Legislators, must be invited to the event. Thus, "in
Juneau, for example, we're essentially saying you can't have a
lunch because there is no place big enough to handle" both
Legislators and Legislative employees. This would be
problematic. He would discuss this concern with the bill's
sponsor.
4:20:39 PM
Senator Olson asked for further clarification of the provision;
specifically whether it would require a report to be filed if he
and his family had dinner at the home of a high school fiend who
happened to be a lobbyist.
4:21:08 PM
Mr. Jones believed a report would be required.
4:21:18 PM
Senator Dyson thought that the provision would only apply to a
situation "when that person has active business before the
State."
Senator Huggins and Co-Chair Hoffman stated that the language
did not indicate that.
4:21:34 PM
Mr. Jones agreed.
4:21:41 PM
Co-Chair Stedman asked whether the bill would require a lobbyist
to disclose that status to a Legislator or Legislative employee.
This would prevent a Legislator from inadvertently having a meal
with a lobbyist.
4:22:04 PM
Mr. Jones was unaware of any such provision. He concurred that
each lobbyist is required to file with APOC, a Legislator might
be unaware of a person's status.
4:22:20 PM
Co-Chair Stedman understood therefore that lobbyists are not
required to disclose their occupation to a Legislator.
4:22:26 PM
Mr. Jones affirmed.
4:22:28 PM
Co-Chair Stedman considered this to be a "huge loophole".
4:22:34 PM
Senator Huggins asked whether the City of Unalaska would be
considered a lobbying organization if it hosted a crab feed in
Juneau.
4:23:02 PM
Mr. Jones deferred to APOC, but assumed "that the city itself
would not be considered a lobbyist."
4:23:23 PM
Senator Huggins asked whether that determination would change if
the city's lobbyist was in attendance. He also wondered if the
provision would curtail legislators' meetings with their local
school board or borough assembly members over breakfast to
discuss things. He asked that these things be addressed in the
discussion.
4:23:46 PM
Senator Thomas asked the definition of "immediate consumption"
as specified in Section 12(b) page 6, line 19.
4:23:58 PM
Mr. Jones expressed that the term "immediate consumption" was
included in the provision "to distinguish between gifts of a
whole ham, for example," and eating a meal at the time.
4:24:21 PM
Senator Thomas concluded therefore that "gifts of food," such as
the whole ham that was not immediately consumed, would be
exempted.
4:24:32 PM
Mr. Jones again deferred to APOC. He surmised that the language
was intended to require reporting of gifts of food and beverages
for immediate consumption, which are currently excepted under
lobbying gift statutes. The language would not prohibit such
gifts, but would "tighten regulations a bit by requiring
disclosure of those gifts."
4:25:12 PM
Co-Chair Stedman, seeking further clarification of the
provision, stated that he had recently been invited to the City
of Ketchikan's lobbyist's home for brunch and a visit with his
family before he caught a plane home. The question was whether
the lobbyist would be required to report that meal.
4:25:53 PM
Mr. Jones affirmed that, under the provisions of this bill, the
meal should be reported if its value exceeded ten dollars.
4:25:55 PM
Co-Chair Hoffman asked whether the provision distinguished
between a lobbyist earning $100,000 a year and an unpaid
lobbyist.
4:26:20 PM
Mr. Jones specified that the provision did not apply to
volunteer lobbyists. They are not required to report to APOC as
specified under current Alaska Statute (AS) 24.45.051(a).
4:26:33 PM
Co-Chair Hoffman thus asked which lobbyists Section 12(b) would
apply to.
4:26:40 PM
Mr. Jones responded that Section 12(b) "would apply to those
lobbyists that are required to report, which would include the
professional lobbyists, employee lobbyists who spend more than
ten hours and are paid for their lobbying services … it would
also apply to the representational lobbyist."
4:26:59 PM
Co-Chair Hoffman deduced that a person who lobbied for ten hours
but made no money might be required to report under the terms of
this provision.
4:27:14 PM
Mr. Jones stated that might be true in the case of a
representational lobbyist. He noted that they are only
reimbursed for travel expenses.
4:27:22 PM
Co-Chair Hoffman asked to the logic in this case.
Mr. Jones could not explain the logic. This amendment was
developed by the Senate Judiciary Committee, not the Department
of Law.
4:27:38 PM
Co-Chair Hoffman asked whether the Administration supports the
language.
4:27:44 PM
Mr. Jones replied that "the Administration has no objection to
this provision."
4:27:52 PM
Co-Chair Hoffman deduced therefore that the Administration had
"no objection to the inclusion or exclusion of it".
Mr. Jones replied "correct".
4:28:09 PM
Mr. Jones directed attention to Section 13, which would amend AS
24.45.121(a) to "prohibit lobbyist from making or offering gifts
that the Executive Ethics Act would bar the recipients from
accepting. It would also make conforming changes for changes to
the Legislative Gift provisions that appear in Section 25 of the
bill."
4:28:33 PM
Senator Dyson asked whether subsection (a)(5) of Section 13,
page 7 lines 7 through 9, would prohibit a lobbyist from sending
a Legislator information from a magazine article or another
source unless they had received permission from the original
author to do so.
4:29:37 PM
Mr. Jones thought that the intent of the language was to prevent
a letter being sent in the name of someone else without their
permission. He did not believe that attaching something that
originated somewhere else would violate the provision.
4:30:09 PM
Senator Dyson opined therefore that the provision is "precluding
any duplicity about that."
4:30:16 PM
Mr. Jones affirmed.
4:30:19 PM
Senator Elton asked whether the reference to "a real human" in
that same paragraph could include a corporation.
4:30:40 PM
Mr. Jones stated that he would have to review the definition
language before he could respond. He suspected that the term
referred "to a real human being".
4:30:47 PM
Mr. Jones informed the Committee that the provisions included in
the original bill, as proposed by Governor Sarah Palin,
specifically dealt with disclosures by the Legislative and the
Judicial Branch. They dealt "substantively on disclosure for the
Executive branch". Other provisions have been added during the
Legislative hearing process. He apologized that individuals
familiar with the Legislative actions were not available to
answer Committee questions.
Co-Chair Stedman appreciated Mr. Jones' remarks.
4:31:29 PM
Mr. Jones stated that new subsection (d), added to AS 24.45.121
by Section 14, page 8 lines 4 through 8, would "prohibit former
Executive branch members from lobbying or registering as
lobbyist when the Executive Branch Ethics Act bars them from
lobbying." This language would provide "APOC the authority to
refuse to accept registration from someone that could not, under
the Ethics Act, lobby."
4:32:00 PM
Mr. Jones remarked that Section 14 also added new subsection
(e), page 8 lines 9 through 12, to that same Statute. This
language would "bar Legislator's spouses and domestic partners
from lobbying."
Mr. Jones shared that the new paragraph added to AS 24.45.171 by
Section 15, page 8 lines 13 and 14, defined "domestic partner".
4:32:24 PM
Senator Elton, directing his question to Section 14, recalled
that in past years, legislation had been introduced that
attempted to bar spouses and domestic partners from lobbying. It
was argued that the State's Constitution prevented that from
occurring, as it was "an infringement of some sort".
4:33:05 PM
Mr. Jones was familiar with the argument. Concern was raised
about the constitutionally of this provision during the bill's
hearings in both Legislative bodies. There is awareness that the
provision might be subjected "to a constitutional challenge" and
the finding might be that it is. Nonetheless, the determination
was that having a spouse or a domestic partner lobby "would
present such a great practical problem, that despite the
possibility of a constitutional challenge, folks were willing to
create such logistical problem willing to include it in the
bill."
4:34:01 PM
Mr. Jones stated that Sections 16, 17, and 18 pertain to
Legislative ethics. AS 24.60.020(a) is amended by Section 16 to
include "language cleanup regarding provisions that apply to
former Legislators and Legislative employees." This language
mirrors that of Section 1 in SB 20-LEGISLATIVE DISCLOSURES
legislation which the Committee had previously considered.
4:34:20 PM
Mr. Jones stated that AS 24.60.030(a) is amended by Section 17
to include "conforming language for changes to the Legislative
Gift Provision that appears in Section 25."
4:34:28 PM
Mr. Jones specified that AS 24.60.060(c) as amended by Section
18 would "reduce from 90 to 60 days the length of the pre-
election blackout period for use of State funds for Legislative
communications with constituents. The reason for that change is
to account for recent experience with numerous special sessions
that might bump up against the 90 day pre-election blackout."
4:34:53 PM
Mr. Jones advised that AS 24.60.030(f) as amended by "Section 19
would require Legislators and Legislative employees to disclose
all board memberships. Currently it's required only that they
disclose those memberships of boards that have substantial
interest in legislative activities."
4:35:10 PM
Mr. Jones noted that AS 24.60.040(a) as amended by "Section 20
would require publication of Legislators and Legislative
employees' disclosures of interest to State contracts and
leases."
4:35:19 PM
Mr. Jones cited that AS 24.60.050(c) as amended by "Section 21
would address the timing of the publication of Legislators and
Legislative employees' disclosure of participation in State
programs and loans, and also would provide procedures for
exemption from the disclosure requirement."
4:35:39 PM
Mr. Jones explained that AS 24.60.070(a) as amended by Section
22 "would eliminate the existing exception for reporting
Legislators and Legislative employees' close economic
associations with municipal offices."
4:35:53 PM
Mr. Jones expressed that AS 24.60.070(c) as amended by "Section
23 includes conforming language for the bar on lobbying by
Legislator's spouses and domestic partners, which occurs in
Section 14."
4:36:02 PM
Mr. Jones stated that a new section, Section 24.60.075.
Compassionate gift exemptions. is added to AS 24.60 by Section
24. "It would allow an exception to the gift restrictions for
gifts to Legislators and Legislative employees of up to $250 in
cases of medical or other emergencies, but disclosure would be
required and written approval from the chair of the Legislative
Council and the chair or vice-chair of the Select Committee on
Legislative Ethics."
4:36:33 PM
Mr. Jones remarked that AS 24.60.080(a) is amended by Section 25
to "include further restrictions on gifts to Legislators and
Legislative employees."
4:36:44 PM
Mr. Jones commented that AS 24.60.080(c) is amended by Section
26 to include "conforming language for those restrictions on
gifts. It also defines immediate family. You'll notice that this
is very broad definition of immediate family. It's important to
bear in mind that that very broad definition applies only to
determining who may make gifts to Legislators and Legislative
employees, without violating the Legislative Ethics
restrictions."
Mr. Jones stated that Section 26 "would also bar the Office of
Victim Rights from receiving Session discounts and would allow
Legislators and Legislative employees to give each other rides
in their own planes, boats, and other vehicles."
Mr. Jones, understanding that there was some concern about this
provision, deferred to Joyce Anderson with the Select Committee
on Legislative Ethics.
4:37:36 PM
Co-Chair Stedman affirmed there were questions about this
provision; specifically in regards to how it would affect
Legislators traveling from one point to another, by boat or air,
in the road-less regions of Western and Southeast Alaska.
4:38:05 PM
JOYCE ANDERSON, Administrator, Select Committee on Legislative
Ethics, testified via teleconference from Anchorage and informed
the Committee that Legislators are currently allowed to provide
transportation to another Legislator without having to disclose
it. Section 26 would simply include Legislative employees in
"the exemption as well" because it is not uncommon for a
Legislative employee to travel with a Legislator in rural areas.
"Otherwise the Legislative employee would have to file" that
travel arrangement "as a gift for a legislative purpose …even
though there is no reason to do that" due to the limited travel
options in Rural Alaska.
4:39:00 PM
Co-Chair Stedman, who represents "an island-bound Legislative
district", stated that he often travels the district by boat in
the summer. To that point, he asked what would be required of
him or a Senate Finance Committee employee who works on the
Capital budget were that employee to travel with him on his boat
to look at harbors and roads in the district.
4:39:44 PM
Ms. Anderson stated that no disclosure would be required under
this bill because the travel would involve a Legislator and a
Legislative employee.
4:40:04 PM
Senator Olson thought that language in paragraph (4) of Section
26 would negate the Legislator to Legislator or Legislative
employee travel exemption scenario exampled by Co-Chair Stedman
because it specifically excludes travel conducted "for the
purpose of obtaining information on matters of legislative
concern."
4:41:01 PM
Ms. Anderson assured the Committee that such travel would be
exempt from the disclosure requirement. While the majority of
the bill's sections pertain to things that would require
disclosure, Section 26 depicts things that would not require
disclosure.
4:41:25 PM
Senator Olson appreciated the clarification.
4:41:29 PM
Senator Elton inquired to the definition of travel. For example,
he wondered if it be considered travel if he got on an airplane,
flew over the Taku River, and then landed back at the same
airport.
4:41:52 PM
Ms. Anderson responded that it would depend on such things as
whether the travel involved a commercial airline, whether there
was a cost involved, or whether someone other than a Legislator
or Legislative employee was flying the plane. If it involved the
latter case, disclosure would be required.
Senator Elton understood therefore that disclosure would be
required even in the instance of traveling from "point 'a' to
point 'a'."
Ms. Anderson affirmed.
4:42:14 PM
Senator Huggins asked whether it would be permissible under the
Legislator to Legislator or Legislative employee travel
exemption specified in Section 26(c)(9), page 18 lines 5 through
9, for him to fly one of his Legislative staffers out to a
moose-hunting camp and drop him off.
4:42:44 PM
Ms. Anderson stated that because the travel was not related to a
legislative purpose, it would not be prohibited under the
Legislative Ethics Code.
4:42:58 PM
Senator Huggins understood therefore that taking that individual
fishing would also be permissible under the Legislative Ethics
Code.
Ms. Anderson affirmed.
4:43:06 PM
Co-Chair Stedman, noting that several Committee members were
pilots and had private aircraft, asked the type of disclosure
that would be required if he visited them on official Senate
business and they flew him around their district to look at
remote communities.
Ms. Anderson stated that no disclosure would be required in this
instance under the language in Section 26.
4:43:32 PM
Senator Olson recalled that legislation had been introduced
several years prior that specifically addressed the scenario
exampled by Co-Chair Stedman.
4:43:53 PM
Ms. Anderson thought Senator Olson was referring to legislation
approved several years prior that allowed legislators to provide
transportation to other legislators. She was unsure why
Legislative employees had not been included in that legislation.
4:44:17 PM
Mr. Jones stated that AS 24.60.080(d) as amended by "Section 27
would require disclosure of gifts of legal services to
Legislators and Legislative employees" and gifts to their
immediate family members that might be "received because of
their connections to the Legislators and Legislative employees."
The language would also require that gifts valued at $250 or
more that are unrelated to a Legislator or Legislative
employee's status must be reported within 30 days of receipt.
[NOTE: Mr. Jones inadvertently omitted identifying Section 28,
which amends AS 24.60.080(i), as the Section pertaining to the
reporting of gifts to immediate family members. ]
4:44:50 PM
Co-Chair Hoffman, observing that the term "immediate family" has
different definitions depending on the bill section, asked the
definition of this term as it relates to this provision.
4:45:04 PM
Mr. Jones affirmed that Co-Chair Hoffman was correct. He
deferred to Ms. Anderson to provide the definition of the term
immediate family member in this instance.
4:45:32 PM
Ms. Anderson defined an immediate family member relating to
Section 28 as "only the spouse, a domestic partner, or dependent
children."
4:45:46 PM
Mr. Jones stated that the new subsection added to AS 24.60.085
by "Section 29 would bar Legislators from accepting outside
compensation for work associated with legislative,
administrative, or political action."
4:46:08 PM
Mr. Jones explained that AS 24.60.105(a) as amended by "Section
30 would require filing of Legislative disclosures within 30
days after commencement of the matters or the interests
disclosed."
4:46:15 PM
Co-Chair Hoffman directed attention back to Section 29. He asked
whether the compensation prohibition would pertain to gifts
presented to a retiring Legislator.
4:46:57 PM
Mr. Jones clarified that Section 29 pertained to compensation as
opposed to gifts. The prohibition of compensation would apply
only during the term in which the Legislator was elected or
appointed.
4:47:25 PM
Senator Elton asked for a response to Co-Chair Hoffman's
question as it relates to Section 27. He assumed that giving a
seated but retiring Legislator a retirement gift exceeding a
specified amount would be prohibited under this bill.
4:47:56 PM
Mr. Jones deferred to Ms. Anderson.
4:48:08 PM
Ms. Anderson stated that a seated Legislator is "prohibited from
receiving a gift because of your Legislative status that's over
$250 which would be cumulative from the same person within a
calendar year." A Legislator is "allowed to receive gifts
unrelated to Legislative status over the $250 limit."
Ms. Anderson stated that a retirement gift could be viewed two
ways. It could be viewed as a gift relating to legislative
status or it could be considered a gift "not because of their
Legislative status" but because of friendship. She thought that
the Legislative Ethics Committee might consider a retirement
gift to be one resulting from friendship. In that case, the
gift's value could exceed $250.
4:49:13s PM
Mr. Jones returned to Section 30. It "would require filing of
disclosures within 30 days after the matter or interest arises."
4:49:23 PM
Mr. Jones remarked that the new subsection added to AS 24.60.105
by "Section 31 would also require annual disclosures."
4:49:29 PM
Mr. Jones noted that the new section added to article 2 of AS
24.60 by "Section 32 would require a final Legislative
disclosure within 90 days of leaving service."
4:49:44 PM
Mr. Jones stated that AS 24.60.130(n) as amended by "Section 33
would establish procedures for using alternates when regular
Legislative members of the Select Committee on Legislative
Ethics are unavailable."
4:49:56 PM
Mr. Jones cited that AS 24.60.130(o) as amended by "Section 34
would define majority organizational caucus for purposes of the
provisions dealing with the select committee."
4:50:06 PM
Mr. Jones stated that the new subsection added to AS 24.60.130
by "Section 35 would establish procedures for disqualification
of Legislative members of the Select Committee and for
appointment of alternatives."
4:50:19 PM
Mr. Jones remarked that AS 24.60.150(a) as amended by "Section
36 would require the Select Committee to publish legislative
ethics materials and administer introductory and refresher
courses on Legislative ethics so that experienced legislators
and legislative employees would not have to take the same course
as brand new folks."
4:50:33 PM
Mr. Jones announced that the new section added to AS 24.60 by
"Section 37 would require Legislators, Legislative employees and
public members of the Select Committee to take the Legislative
ethics course, usually within ten days of the first day of the
first regular session of each Legislature."
4:50:52 PM
Mr. Jones advised that AS 24.60.160 as amended by "Section 38
would authorize the Select Committee and the APOC to request
opinions from the Select Committee. Currently they are unable to
do that."
Mr. Jones continued. Section 38 would require publication of the
Select Committee's opinions with deletions to protect identities
and would make the Select Committee's discussions and
deliberations on opinions confidential unless waived by
requestors and make final votes public."
4:51:22 PM
Co-Chair Stedman asked whether a person could simply take the
course specified in Section 37 or whether they must take it and
pass a test.
4:51:34 PM
Mr. Jones understood that an individual would just be required
to take the course. He was uncertain whether a testing
measurement was required.
4:51:43 PM
Co-Chair Stedman was curious about this because, as part of his
professional training in the security business, he is required
to take ethics training annually. That training includes both
assignments and testing.
4:52:08 PM
Ms. Anderson replied that, while examinations have not been
required, the issue could be presented to the full Ethics
Committee for consideration. Suggestions on this matter would be
welcome.
4:52:48 PM
Co-Chair Stedman expressed that a combination of ethics classes
and computer examinations of the issues would be more effective
than the manner in which Legislative ethics classes were
conducted at the beginning of this Session.
4:53:35 PM
Ms. Anderson stated that the suggestion "would be taken into
consideration."
4:53:41 PM
Mr. Jones continued with the bill overview. AS 24.60.070(j) as
amended by Section 39, "would address the procedures for hearing
formal charges before the Select Committee."
4:53:53 PM
Mr. Jones specified that AS 24.60.176(b) as amended by "Section
40 would identify the appointing authority for the Office of
Victims Rights for purposes of administering the remedies for
violations of the Legislative Ethics provisions."
4:54:05 PM
Mr. Jones communicated that AS 24.60.200 as amended by Section
41 "would require many more details about income and deferred
income in Legislative financial disclosures."
4:54:19 PM
Mr. Jones specified that AS 24.60.210(a) as amended by "Section
42 would require final Legislative financial disclosures within
90 days of leaving service and for public members of the Select
Committee, Legislative directors, and Legislators appointed to
fill vacant seats, would require financial disclosures within 30
days of their appointment."
4:54:46 PM
Mr. Jones noted that the new subsection added to AS 24.60.210 by
Section 43 "would require electronic filing of Legislative
financial disclosures."
4:54:56 PM
Mr. Jones pointed out that provisions in Section 75 would
specify that the electronic filing required in Section 43 would
not be required until January 1, 2009.
4:55:06 PM
Mr. Jones remarked that AS 24.60.250(c) as amended by "Section
44 would require the APOC to notify the Legislative Council if
the Victims Advocate failed to file a timely financial
disclosure."
4:55:24 PM
Mr. Jones commented that AS 24.60.990(a)(2) as amended by
"Section 45 would include conforming language for changes to the
Legislative gift provision in Section 25."
4:55:26 PM
Mr. Jones remarked that AS 24.60.990(a)(7) as amended by Section
46 would change the "definition of 'income' in the Legislative
Ethics statutes to clarify the fact that it includes 'deferred
income'."
4:55:39 PM
Mr. Jones stated that Sections 47 through 51 pertain to the
pension forfeiture provision discussed earlier. The new
paragraph added to AS 37.10.220(a) by Section 47 would provide
the Alaska Retirement Management Board (ARM Board) "the
authority to administer the pension forfeiture provision in
Section 48."
4:55:57 PM
Mr. Jones reminded the Committee that Section 48, as explained
earlier, is the provision pertaining to pension forfeitures. It
provides for "forfeiture, upon conviction, of the State's
retirement contributions made on behalf of a public officer, a
Legislator, or Legislative director, after commission of one of
the listed felonies such as bribery" and perjury "if that felony
is committed in connection with official duties."
4:56:31 PM
Co-Chair Stedman asked whether the pension forfeiture provision
would also include a revocation of any health care benefits "the
individual may be entitled to."
Mr. Jones replied no. Language in Section 48(c) page 29, lines 1
through 4 specifies that the pension forfeiture would not
include health benefits.
4:56:58 PM
Mr. Jones continued. Section 48 also specifies that the ARM
Board "may award some or all of the forfeited amounts to a
spouse, dependent, or former spouse of the convicted person
based on the factors" listed in Section 48(d)(1) and (2), page
29, lines 13 through 17.
4:57:21 PM
Mr. Jones noted that AS 39.35.300(a) as amended by "Section 49
applies the pension forfeiture provision" specified in Section
48, "to deny certain service credit under the Public Employees
Retirement System (PERS)."
4:57:32 PM
Mr. Jones communicated that the new sections added to AS 39.35
by Sections 50 and 51 would apply the pension forfeiture
provision to the PERS defined benefit and defined contribution
plans.
4:57:46 PM
Co-Chair Stedman asked whether the bill contained "a retroactive
clause".
4:57:52 PM
Mr. Jones clarified that the pension forfeiture provision would
only apply to "offenses committed after the effective date" of
the bill.
4:58:04 PM
Mr. Jones expressed that Sections 52 through 55 would "apply to
public officials under Title 39 Chapter 50."
4:58:16 PM
Mr. Jones stated that AS 39.50.020 as amended by "Section 52
would require final financial disclosures from public officials
within 90 days of leaving service." This would "include high
ranking executive branch officials, municipal officers, and
judicial officers."
4:58:33 PM
Mr. Jones stated that AS 39.50.060(b) as amended by "Section 53
would require more detail in public officials' financial
disclosures."
4:58:46 PM
Co-Chair Stedman asked for further information about the meaning
of "more detail".
4:58:55 PM
Mr. Jones stated that this provision would require individuals
"to identify the source of any gift" received by them or their
immediate family members that exceeds $250 in value in a
calendar year or the source of any income exceeding $1,000. In
addition, "a brief statement describing, in respect to income,
whether it was earned by commission, by the job, by the hour,"
or by another method would be required to provide "some hint
about whether the payment is proportional to the work being
done." The report should also include "the approximate hours
worked to earn the income and a description of what was done to
earn the income unless by law that information is required to be
kept confidential."
Mr. Jones stated that this section "would reduce from $5,000 to
$1,000 the reporting threshold for various financial interests".
Mr. Jones reiterated that this section pertained to public
officials and not to the Legislative branch.
5:00:19 PM
Co-Chair Stedman spoke to the requirement that a public official
list the sources of income exceeding $1,000 and a description of
what was done to earn that income. He asked how this would be
managed in the case where the individual had several hundred
clients.
5:00:39 PM
Mr. Jones deferred to APOC. While people such as doctors,
lawyers, or dentists could have numerous clients, he believed
that existing confidentiality provisions would exempt reporting
the details associated with the services provided to those
clients.
5:01:04 PM
BROOK MILES, Executive Director, Alaska Public Offices
Commission, Department of Administration, testified via
teleconference from an offnet location and affirmed a client
list would be required if the service cost $1,000 or more.
5:01:34 PM
Co-Chair Stedman asked for further information about the income
description requirement. It could be quite burdensome for a
public official who was also a charter boat operator with more
than 300 clients if he was required to provide detailed
information on the services provided to each client.
5:01:54 PM
Ms. Miles contended that "the majority of people … who are
filing statements under AS 39.50 have very serious fulltime
State jobs. And, for the most part, I don't believe" that in
addition to those jobs, they would undertake doing such things
as being a charter boat operator. Furthermore, as State
employees, it might be impossible for them to receive approval
to do such things.
Ms. Miles advised, however, that there were people on numerous
State boards and commissions who would be subject to filing this
disclosure statement on an annual basis. "Those would be the
individuals that may find the clients' list burdensome."
Ms. Miles qualified that because filing such information had not
previously been required by law, "the Commission has not yet
considered the amount of detail" that would be required nor
"what kind of guidance regulations" might be "promulgated".
Ms. Miles stated that since APOC board members would be subject
to this provision, its three attorneys "would be very sensitive
to applying the law in a practical way that's not overly
burdensome."
5:03:43 PM
In response to a question from Co-Chair Stedman, Ms. Miles
clarified that the provision would apply to "Executive Branch
officials, not Legislators."
5:03:50 PM
Co-Chair Stedman asked who would be subject to the provision
depicted in Section 53(b)(1) page 31 lines 3 through 19.
5:04:02 PM
Ms. Miles stated that it would apply to the Governor and the
Lieutenant Governor.
5:04:11 PM
Senator Dyson asserted that elected officials are also required
to "jump through same hoops. For instance, he is required to
report all the names of individuals that charter his boat. He is
also required to inform clients that their name would appear in
the public record. A few prospective clients have opted not to
charter with him for that reason. "It's a hassle."
5:04:52 PM
Co-Chair Stedman understood that in addition to logging client's
names, Senator Dyson is required to report the amount of time
spent on the boat and the activities that took place.
5:05:08 PM
Ms. Miles could not "imagine the Commission going into that kind
of detail." Detailing the mechanics of a fishing trip would not
be necessary. The required information would simply be a list of
those clients who paid more than $5,000. There is no confusion
about the activities that a charter boat captain provides to his
clients. "It's not broad term like analyst or consultant."
5:05:43 PM
Co-Chair Stedman understood that Legislators would be required
to report compensations of $1,000 or more not the $5,000
threshold amount stated by Ms. Miles.
5:05:53 PM
Ms. Miles acknowledged that the current threshold for
Legislators is $1,000. Section 53(b) would make Executive Branch
officials subject to a $1,000 threshold.
5:06:06 PM
Co-Chair Stedman revisited the ethics training proposed in this
bill. He has observed through his private business experience
that sometimes when an individual thinks they have complied with
regulations, they find out "after the fact" that they had not
"because the interpretation was different." He asked how elected
officials could "avoid that scenario".
5:06:45 PM
Ms. Miles stated that "elected officials could best assist that
[disclosure law] process by writing very clear legislation." The
language should clearly identify what must be reported and when.
While APOC manages the disclosure law process, the Department of
Law and the Select Committee on Legislative Ethics address
"areas of behavior with respect to ethics issues" in addition to
disclosure requirements.
5:07:36 PM
Co-Chair Stedman, using Senator Dyson's charter business as an
example, asked the process that would be undertaken if another
charter operator made a formal complaint because" Senator Dyson
had not provided the depth of detail required by the provision
under another's APOC commissioner's interpretation.
5:08:13 PM
Ms. Miles stated that in that hypothetical situation "the
complainant would have to convince the Commission that they had
misinterpreted the law and a much narrower definition is
required."
5:08:32 PM
Senator Dyson furthered Co-Chair Stedman's point, by stating
that, when preparing to file his recent closed financial
interest statement, he had sought information from his financial
brokers. He was advised that due to the nature of his
investments and how frequently their values' fluctuate, it was
difficult to provide accurate information.
Senator Dyson submitted a letter to that affect with his APOC
filing and requested they notify him as to whether his effort
"was adequate" or, if not, what he would be required to do. Two
months have passed and he still has not received a reply. This
"illustrates" Co-Chair Stedman's point, as Senator Dyson had
made "a good faith effort" to provide what was required, but now
months later was still uncertain as to whether it was
satisfactory.
5:10:15 PM
Senator Elton asked for further clarification regarding the
requirement that gifts with a cumulative value of $250 from a
single source must be declared, as specified in Section 53(b)(1)
page 31 lines 5 through 7. He was specifically interested in
whether another State Statute addressed the process regarding a
single gift valued at, for instance, $500.
5:11:07 PM
Mr. Jones thought that such a gift would meet the qualifying
criteria in Section 53(b)(1).
Senator Elton cited the plurality of the word "gifts" to have
prompted his question.
5:11:38 PM
Mr. Jones expressed that the intent of the language was to
disclose any gifting from a single source that exceeds a value
of $250 in a calendar year, regardless of whether it was a
single gift or the cumulative value of several.
5:12:17 PM
Ms. Miles agreed with Mr. Jones' interpretation of the
provision.
5:12:26 PM
Mr. Jones resumed his overview of the bill. AS 39.50.030(h) as
amended by Section 54 contained "clean-up language to cover
limited liability companies (LLC) because they are relatively
new origin."
Mr. Jones noted that AS 39.50.040 as amended by Section 55
"would expand the requirements for blind trusts that public
official may choose to use to avoid conflicts of interest."
Mr. Jones communicated that the new subsections added to AS
39.50.040 by "Section 56 also applies to blind trusts." A
Department of Law attorney with expertise in this field,
"assisted the House Judiciary Committee" with the drafting of
this language.
Mr. Jones pointed out that "using a blind trust is voluntary for
public officials." The use of such a vehicle must be approved by
the APOC "before it would be considered an effective trust under
this provision."
AT EASE 5:13:37 PM /5:13:56 PM
5:14:02 PM
Co-Chair Stedman asked that the discussion on the remainder of
the bill be abbreviated in consideration of the Committee's
agenda.
Mr. Jones advised that AS 39.50.050(a) as amended by "Section 57
would require electronic filing of public officials' financial
disclosures" effective July 1 of this year."
Mr. Jones expressed that AS 39.50.050(a) as amended by Section
57 would be amended by Section 58 "to extend that electronic
filing requirement to municipal officers in large municipalities
as of January 1, 2009."
Mr. Jones noted that AS 39.50.200(a)(10) as amended by "Section
59 includes clean-up language, again, to cover limited liability
companies."
5:14:30 PM
Mr. Jones explained that the new paragraphs added to AS
39.50.200(b) by "Section 60 would add to the list of Executive
branch boards whose members must file financial disclosures."
Mr. Jones qualified that Sections 61 through 70 pertain to the
Executive Branch Ethics Act. The new subsection added to AS
39.52.110 by Section 61 defines "insignificant financial
interests in a business" under the Act. As 39.52.120(b) as
amended by Section 62 and the new subsection added to AS
39.52.120 by Section 63 "address the use of State aircraft for
partisan political purposes and would essentially prohibit that
use except for a limit of ten percent of the total use of the
aircraft on a single trip."
Mr. Jones continued. AS 39.52.130(a) as amended by Section 64,
would bar "most gifts from lobbyists to Executive Branch members
and their immediate family members. AS 39.52.180(a) as amended
by Section 65 "would eliminate the current exception for work on
legislation and regulations under the existing restrictions that
apply to former Executive Branch members' employment. Those last
for two years after leaving State service."
5:15:38 PM
Mr. Jones stated that AS 39.52.180(d) as amended by "Section 66
would extend the current lobbying ban, which applies for one
year after leaving State service" to such people as deputy
commissioners, division directors, legislative liaisons and
others in addition to the current prohibition on the Governor,
Lieutenant Governor and heads of departments.
Mr. Jones advised that the new subsection added to AS 39.52.180
by Section 67 "would bar for one year after leaving State
service, former heads of principle departments and former
Governor's Office employees in policy making positions from
serving on boards of organizations that they either regulated or
worked with during their State service."
5:16:19 PM
Mr. Jones noted that the new section added to AS 39.52 by
"Section 68 would require the Governor to disclose any personal
or financial interest before granting executive clemency and
require the attorney general to issue a public determination on
whether granting clemency would violate the Ethics Act."
5:16:36 PM
Mr. Jones specified that the new subsection added to AS
39.52.910 by "Section 69 would clarify the Executive Branch
Ethics Act to address employment of immediate family members
within the same administrative unit or agency."
5:16:51 PM
Mr. Jones noted that AS 39.52.960(14) as amended by "Section 70
changes the definition of 'official action' under the Executive
Branch Ethics Act."
5:17:05 PM
Mr. Jones communicated that the final sections of the bill,
Sections 71 through 77 reflect the bill's applicability and
effective date provisions.
AT EASE 5:17:11 PM / 5:17:54 PM
Senator Olson asked regarding the decision to specify a minimum
population of 15,000 as the line of demarcation for the
provision that would require municipal and borough officials to
file information with APOC electronically, as specified in
Section 7(m)(1)(B), page 4, lines 10 through 12 and Section
58(a) page 37 lines 14 and 15.
5:18:15 PM
Mr. Jones stated that that determination was made by the House
Judiciary Committee. He did not possess any information on that
decision.
5:18:29 PM
Senator Olson asked the number of boroughs that would be subject
to the electronic reporting requirement.
Mr. Jones understood that it would apply to the Matanuska-
Susitna Borough (Mat-Su), the Kenai Peninsula Borough, the
Fairbanks North Star Borough, the City & Borough of Juneau, and
the Municipality of Anchorage.
5:18:53 PM
Senator Thomas asked whether the pension forfeiture provision
specified in Section 48(a) page 28 lines 21 through 31
contemplated a situation in which a person charged with one of
the specified offenses might return to work.
5:19:33 PM
Mr. Jones did not believe that it "contemplates someone
returning to work, although that's theoretically possible."
Mr. Jones surmised that the provision was "designed to deal with
the fact that you may not discover the offense until later and
then it takes a while for the conviction to occur. The
forfeiture applies to contributions made by the State after the
offense is committed and then, of course, is dependent on the
later conviction."
5:20:16 PM
Conceptual Amendment #1: This amendment inserts a new section on
page 1 following line 12 as follows.
Section 1. AS 11.56 is amended by adding a new section to
read:
Sec. 11.56.124. Failure to report bribery or receiving
a bribe. (a) A public servant commits the crime of failure
to report bribery or receiving a bribe if the public
servant
(1) witnesses what the public servant knows or
reasonable should know is
(A) bribery of a public servant by another
person; or
(B) receiving a bribe by another public
servant; and
(2) does not as soon as reasonably practicable
report that crime to a peace officer or law enforcement
agency.
(b) Failure to report bribery or receiving a bribe is
a class A misdemeanor.
In addition to conforming changes resulting from the addition of
new Section 1, the amendment deletes the entirety of subsection
(a) of Section 65, page 38 lines 26 through 27, and replaces it
with the following.
(a) AS 11.56.124, added by sec. 1 of this Act, and the
amendment of AS 11.56.130(1) made by sec. 2 of this Act
apply to offenses occurring on or after the effective date
of secs. 1 and 2 of this Act.
[Note: Amendment #1 was drafted to CS HB 109(JUD) am, Version
25-GH1059\N.A.Therefore, conforming changes must be made.]
Senator Dyson moved Amendment #1 and objected for purposes of
explanation.
Senator Dyson pointed out that the amendment was drafted to the
previous version of the bill, CS HB 109(JUD)am, and thus the
amendment must be conformed to the version of the bill before
the Committee.
Senator Dyson noted that the amendment was offered by request of
a [unspecified] House member and had been reviewed and
"wholehearted supported" by the chair of the Senate Judiciary
Committee.
Senator Dyson stated that the amendment would add the crimes of
failure to report bribery or receiving a bribe to the bill.
While the Chair of the Senate Judiciary Committee fully
supported the amendment, he had communicated that some might
take exception to it.
5:21:34 PM
Co-Chair Stedman repeated the action proposed by the amendment.
5:21:46 PM
Senator Dyson noted that the reporting requirement would also
apply to a person witnessing either of these events.
5:22:29 PM
Co-Chair Hoffman asked the reason the amendment was specific to
public servants as opposed to the general public.
5:22:42 PM
Neither Senator Dyson nor Mr. Jones could provide any additional
information.
5:22:51 PM
Senator Dyson expressed however, that, over the past few years,
the State has "stepped gently into" the issue of failure to
report crimes. This is just another step in that direction. The
drafter and perhaps the Chair of the Senate Judiciary Committee
might consider imposing this duty on a public official to be
appropriate as doing so "is part of their oath and part of their
public trust responsibilities." Thus, he is comfortable with
imposing this requirement on public officials. The discussion on
the general public is a separate issue.
5:23:56 PM
Senator Elton asked Mr. Jones to provide the definition of a
public servant and whether that definition would uniformly apply
to individuals in the Legislative, Judicial, or Executive
Branch.
5:24:16 PM
Mr. Jones could not provide the requested information as his
expertise was not in the criminal law area. The terms his
Division utilizes under Title 39 are public officer and public
official. He was unsure of how those would relate to a public
servant.
5:24:39 PM
Co-Chair Hoffman asked whether the reporting duty would apply to
assembly members.
5:24:46 PM
Senator Dyson stated that a response could be provided by the
following day.
Co-Chair Hoffman asked therefore whether action on the amendment
would be delayed.
5:25:02 PM
Co-Chair Stedman declared that this significant issue might be
better addressed as "a standalone bill; much broader than just
the public officials."
5:25:14 PM
Senator Dyson deemed that a "worthy consideration". The
reporting obligation should be required of public officials,
members of the Executive Branch and other entities identified in
the bill, elected officials on the State level, people working
for the State, and perhaps municipal officials.
Senator Dyson removed his objection.
5:26:02 PM
Senator Elton did not take issue with the intent of the
amendment; however, he was uncomfortable voting on the amendment
without knowing the definition of public servant.
5:26:32 PM
Co-Chair Stedman suggested that Senator Dyson withdraw his
amendment in order to clarify issues raised during the
discussion.
5:26:45 PM
Without objection, Senator Dyson WITHDREW Conceptual Amendment
#1.
5:26:51 PM
Amendment #2: This amendment inserts a new subparagraph
following "commission" on page 6, line 15 of AS 24.45.041(b) as
amended by Section 11, as follows.
;
(9) A sworn affirmation by the lobbyist that the
lobbyist has not been previously convicted of a felony
involving moral turpitude; in this paragraph "felony
involving moral turpitude" has the meaning given in AS
15.60.010, and includes convictions for a violation of the
law of this state or a violation of the law of another
jurisdiction with similar elements to a felony involving
moral turpitude in this state.
The amendment also inserts a new bill section on page 6,
following line 16, as follows.
Section 12. AS 24.45.041 is amended by adding new
subsections to read:
(i) A person may not register if the person has been
previously convicted of a felony involving moral turpitude
in violation of a law of this state or the law of another
jurisdiction with elements similar to a felony involving
moral turpitude in this state.
(j) In this section,
(1) "felony involving moral turpitude" has the
meaning given in AS 15.60.010;
(2) "previously convicted" means the defendant
entered a plea of guilty, no contest, or nolo contendere,
or has been found guilty by a court or jury; "previously
convicted" does not include a conviction that has been set
aside under AS 12.55.085 or a similar procedure in another
jurisdiction, or that has been reversed or vacated by a
court.
Co-Chair Stedman moved Amendment #2 and objected for purposes of
discussion.
Co-Chair Stedman stated that this amendment would bar people
convicted of a felony involving moral turpitude from lobbying.
5:27:42 PM
MILES BAKER, Staff to Co-Chair Stedman, stated that the first
part of the amendment would add a new requirement to the
registration process lobbyists must undergo each year. That
being that the lobbyist must submit a sworn affirmation that
they had not previously been convicted of a felony involving
moral turpitude. The definition of moral turpitude already
exists in AS 15.60.010.
5:29:55 PM
Mr. Baker read the second part of the amendment and added that
under AS 12.55.085, a person whose sentence was suspended,
vacated, or reversed by court would not be precluded from
registering as a lobbyist.
5:30:18 PM
Co-Chair Stedman stated that a felony involving moral turpitude
pertains to "crimes that are immoral or wrong". This would
include such crimes as "murder, manslaughter, assault, sexual
assault, sexual abuse of a minor, unlawful exploitation of a
minor, robbery, extortion, coercion, kidnapping, incest, arson,
burglary, thief," and forgery. People guilty of such crimes are
"not exactly the folks that are in the highest esteem of
society."
5:31:21 PM
Senator Elton hypothesized a situation in which the sentence
given to a 16-year minor found guilty of selling marijuana at a
school, specified that if he or she stayed out of trouble until
they turned 18, the conviction would be removed from their
record. His interpretation of the language in the amendment was
that this person would be able to register as a lobbyist later
on in life.
5:32:17 PM
Mr. Baker responded that he was not qualified to answer the
question.
5:32:27 PM
Senator Olson concluded that the adoption of this amendment
would prohibit a person convicted of a felony from lobbying.
Co-Chair Stedman affirmed.
Senator Olson objected to the amendment and spoke to his
objection.
Senator Olson, who had a law background, professed that people
go to prison "to pay their debt to society." Once that
retribution has been made, they should be able to go on with
their lives.
Co-Chair Stedman removed his objection to the amendment.
Senator Olson maintained his objection, but clarified that he
was "not condoning" misconduct. He believes "in law and order,
but also believes "there are felons out there that have paid
their debt to society…"
5:34:05 PM
Senator Elton viewed this in a different light. An adult should
know better where the line is drawn and therefore, it would not
bother him if they were precluded from lobbying. However, a
young person is different. It would bother him if a mistake made
by a young person was held against them indefinitely. To that
point, he requested that the amendment be held until he could
clarify how the amendment would affect a young person.
5:35:06 PM
Co-Chair Stedman communicated that there are long-term
consequences for committing a felon. For instance, convicted
felons are prevented from holding a variety of licenses and
jobs.
Co-Chair Stedman pointed out that another consideration is that
lobbyists work on issues that involve the public's money. This
is not the environment in which to have lobbyists working who
have been convicted of moral turpitude.
Co-Chair Stedman agreed to hold the amendment in order to allow
Senator Elton's concern to be addressed.
Senator Elton wondered whether a convicted felon could run for a
public office.
Discussion ensued amongst Committee Members.
5:36:33 PM
Co-Chair Hoffman noted it being unlikely that the military would
enlist a felon.
5:36:51 PM
Senator Huggins expressed that, while lobbyists might be "a
small group of people", they are very involved in working with
those "setting public policy, spending people's money…." The
recommendation would be to err on the side of caution;
particularly as "whether rightly or wrongly" the public has
strong feelings about lobbyists.
5:37:42 PM
Senator Thomas thought APOC might be able to address whether a
person convicted of a felon could run for office.
5:37:52 PM
Ms. Miles could not address the issue as that "is not a rule"
under APOC's purview. It might be addressed in the State's
Constitution or a law administered by the Division of Elections.
Co-Chair Stedman stated that he would seek a definitive answer
on the issue.
Without objection, Co-Chair Stedman WITHDREW Amendment #2.
5:38:37 PM
Mr. Baker advised that the definition of a felony involving
moral turpitude is from Division of Elections statutes.
5:39:04 PM
Senator Olson announced he would not be offering Amendment #3.
Amendment #4: This amendment changes language in new subsection
(b) paragraph (1), page 6 line 24, added to AS 24.45.051 by
Section 12 to read as follows.
(1) cost $50 or less; or
Co-Chair Stedman moved Amendment #4 and objected for purposes of
explanation. This amendment would increase the reporting
requirement threshold for food or beverages provided to a
legislator, legislative employee, or immediate family member by
a lobbyist for immediate consumption from ten dollars to $50.
5:40:01 PM
Senator Olson asked how the reporting requirement would apply to
food served in a group setting.
Mr. Jones expressed that language in Section 12(b) page 6 line
22, specified a per person cost.
5:40:23 PM
Co-Chair Stedman stated that $50 would allow for a "reasonable
meal" to be provided.
Co-Chair Stedman removed his objection.
5:40:54 PM
Senator Elton objected. While he was unsure of the appropriate
level, $50 was too high. He thought that one intent of
specifying ten dollars as the reporting threshold was an effort
to control costs.
5:41:45 PM
Senator Olson opined that few meals cost below ten dollars.
A roll call was taken on the motion.
IN FAVOR: Senator Olson, Senator Thomas, Senator Huggins, Co-
Chair Hoffman, and Co-Chair Stedman
OPPOSED: Senator Elton
ABSENT: Senator Dyson
The motion PASSED (5-1-1)
Amendment #4 was ADOPTED
Co-Chair Stedman ordered the bill HELD in Committee.
ADJOURNMENT
Co-Chair Bert Stedman adjourned the meeting at 5:42:52 PM
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