Legislature(2013 - 2014)SENATE FINANCE 532

03/28/2014 09:00 AM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ SB 168 PETROLEUM ENGINEERING RESEARCH PROGRAM TELECONFERENCED
Heard & Held
+ HB 266 APPROP: OPERATING BUDGET/LOANS/FUNDS TELECONFERENCED
Moved SCS CSHB 266(FIN) Out of Committee
+ HB 267 APPROP: MENTAL HEALTH BUDGET TELECONFERENCED
Moved SCS CSHB 267(FIN) Out of Committee
+ Bills Previously Heard/Scheduled TELECONFERENCED
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 28, 2014                                                                                            
                         9:17 a.m.                                                                                              
                                                                                                                                
9:17:20 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Kelly  called the Senate Finance  Committee meeting                                                                    
to order at 9:17 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Anna Fairclough, Vice-Chair                                                                                             
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman (via teleconference)                                                                                      
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
None                                                                                                                            
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Robert Hall, Self, Wasilla.                                                                                                     
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
John Cheshire,  Undergraduate Research  Assistant, Petroleum                                                                    
Development  Laboratory,  University  of  Alaska  Fairbanks;                                                                    
Thomas Polasek, Undergraduate  Research Assistant, Petroleum                                                                    
Development  Laboratory,  University  of  Alaska  Fairbanks;                                                                    
Shirish Patil,  Director, Petroleum  Development Laboratory,                                                                    
University  of  Alaska  Fairbanks; James  Armstrong,  Staff,                                                                    
Senator Pete Kelly.                                                                                                             
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 168    PETROLEUM ENGINEERING RESEARCH PROGRAM                                                                                
                                                                                                                                
          SB 168 was HEARD and HELD in committee for                                                                            
          further consideration.                                                                                                
                                                                                                                                
CSHB 266(FIN)                                                                                                                   
          APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          SCS CSHB 266(FIN) was REPORTED out of committee                                                                       
          with a "do pass" recommendation.                                                                                      
                                                                                                                                
CSHB 267(FIN)                                                                                                                   
          APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          SCS CSHB 267(FIN) was REPORTED out of committee                                                                       
          with a "do pass" recommendation.                                                                                      
                                                                                                                                
CS FOR HOUSE BILL NO. 266(FIN)                                                                                                
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan  program  expenses  of state  government  and  for                                                                    
     certain  programs,   capitalizing  funds,   and  making                                                                    
     reappropriations;  and   providing  for   an  effective                                                                    
     date."                                                                                                                     
                                                                                                                                
CS FOR HOUSE BILL NO. 267(FIN)                                                                                                
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
9:18:38 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:24:52 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
9:25:17 AM                                                                                                                    
                                                                                                                                
Senator Olson MOVED to ADOPT AMENDMENT 2 (copy on file):                                                                        
                                                                                                                                
     DEPARTMENT: Fund Capitalization                                                                                            
     APPROPRIATION:  Fund  Capitalization  (No  approp  out)                                                                    
     ALLOCATION: Trauma Care Fund                                                                                               
     ADD:   $1,000,000  UOF   (1004)  as   a  new   language                                                                    
     subsection under FUND CAPITALIZATION                                                                                       
                                                                                                                                
          (xx)  The sum  of$1,000,000  is appropriated  from                                                                    
          the  general  fund to  the  Trauma  Care Fund  (AS                                                                    
          18.0S.0S5(a)).   It   is   the   intent   of   the                                                                    
          legislature that the Department of Health and                                                                         
          Social Services develop a trauma care fund grant                                                                      
          application process that includes a list of pre-                                                                      
          approved uses in the application for trauma care                                                                      
          funding.                                                                                                              
                                                                                                                                
Co-Chair Meyer OBJECTED for discussion.                                                                                         
                                                                                                                                
Senator Olson explained AMENDMENT 2.                                                                                            
                                                                                                                                
Co-Chair Kelly asked for a description of the fund.                                                                             
                                                                                                                                
JAMES ARMSTRONG, STAFF, SENATOR  PETE KELLY, stated that the                                                                    
fund was capitalized when needed.                                                                                               
                                                                                                                                
Co-Chair  Meyer  REMOVED  his   objection.  There  being  NO                                                                    
OBJECTION, AMENDMENT 2 was adopted.                                                                                             
                                                                                                                                
Senator Dunleavy MOVED to ADOPT  AMENDMENT 3 (copy on file).                                                                    
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
Senator Dunleavy  explained AMENDMENT 3. He  stated that the                                                                    
amendment  would  reduce  unrestricted  general  fund  (UGF)                                                                    
spending  by $3.381  million across  all agencies  including                                                                    
the governor's  office, legislature, and courts.  The amount                                                                    
of the  unallocated reduction was  equal to 12.5  percent of                                                                    
agencies  (UGF) portion  of travel.  Departments would  have                                                                    
the  flexibility   to  reduce   their  budgets   where  most                                                                    
appropriate.                                                                                                                    
                                                                                                                                
Co-Chair Kelly  asked why  the documentation  was necessary.                                                                    
Mr. Armstrong explained that the  document outlined the most                                                                    
appropriate  way  to  equally   distribute  a  12.5  percent                                                                    
reduction.  He noted  that the  second column  to the  right                                                                    
showed  some funds  that were  added since  the subcommittee                                                                    
process.                                                                                                                        
                                                                                                                                
Co-Chair  Kelly stressed  that,  without  the document,  the                                                                    
legislation  would  not  provide an  equal  distribution  of                                                                    
travel reduction.                                                                                                               
                                                                                                                                
Co-Chair  Kelly  REMOVED  his   objection.  There  being  NO                                                                    
further OBJECTION, AMENDMENT 3 was adopted.                                                                                     
                                                                                                                                
Co-Chair Meyer MOVED to ADOPT AMENDMENT 4.                                                                                      
                                                                                                                                
     Amend the SALARY AND BENEFIT ADJUSTMENTS subsections                                                                       
     (a) and (b) as follows:                                                                                                    
                                                                                                                                
          SALARY AND BENEFIT  ADJUSTMENTS. (a) The operating                                                                    
          budget appropriations  made in sec. 1  of this Act                                                                    
          include   amounts    for   salary    and   benefit                                                                    
          adjustments  for public  officials, officers,  and                                                                    
          employees  of the  executive branch,  Alaska Court                                                                    
          System  employees, employees  of the  legislature,                                                                    
          and  legislators and  to implement  the terms  for                                                                    
          the  fiscal  year ending  June  30,  2015, of  the                                                                    
          following     ongoing    collective     bargaining                                                                    
          agreements:                                                                                                           
                                                                                                                                
               (1)  Public  Employees   Local  71,  for  the                                                                    
              labor, trades and crafts unit;                                                                                    
               (2)  Teachers' Education  Association of  Mt.                                                                    
               Edgecumbe;                                                                                                       
               (3)     Alaska      Correctional     Officers                                                                    
               Association,  representing  the  correctional                                                                    
               officers unit;                                                                                                   
               (4)  Confidential Employees  Association, for                                                                    
               the confidential unit;                                                                                           
               (5) Alaska Public  Employees Association, for                                                                    
               the supervisory unit;                                                                                            
               (6) Alaska  State Employees  Association, for                                                                    
               the general government unit;                                                                                     
               (7) Public Safety Employees Association;                                                                         
               (8)   Alaska   Vocational  Technical   Center                                                                    
               Teacher's Unit.                                                                                                  
                                                                                                                                
          (b)  The operating  budget appropriations  made to                                                                    
          the University  of Alaska  in sec.  1 of  this Act                                                                    
          include   amounts    for   salary    and   benefit                                                                    
          adjustments for  the fiscal  year ending  June 30,                                                                    
          2015,  for   university  employees  who   are  not                                                                    
          members  of a  collective bargaining  unit and  to                                                                    
          implement  the terms  for the  fiscal year  ending                                                                    
          June  30,   2015,  of  the   following  collective                                                                    
          bargaining agreements:                                                                                                
                                                                                                                                
               (1)  University   of  Alaska   Federation  of                                                                    
               Teachers;                                                                                                        
               (2) Fairbanks Firefighters  Union, IAFF Local                                                                    
               1324;                                                                                                            
               (3) United Academics -American Association                                                                       
               of     University    Professors,     American                                                                    
               Federation of Teachers;                                                                                          
               (4) United Academic -Adjuncts -American                                                                          
               Association of University Professors,                                                                            
               American Federation of Teachers;                                                                                 
               (5) Alaska Higher Education Crafts and                                                                           
               Trades Employees, Local 6070.                                                                                    
     EXPLANATION:                                                                                                               
                                                                                                                                
     F our collective bargaining  union agreements have been                                                                    
     reached  that  are  not  yet  included  in  the  Senate                                                                    
     operating budget.                                                                                                          
                                                                                                                                
     Alaska Vocational Technical Center Teacher's Unit                                                                          
                                                                                                                                
     DEPARTMENT:    Labor    and    Workforce    Development                                                                    
     APPROPRIATION:   Alaska  Vocational   Technical  Center                                                                    
     ALLOCATION: Alaska Vocational Technical Center                                                                             
     ADD:  $26,100 General  Fund  (1004) $1,700  Interagency                                                                    
     Receipts  (1007)  $2,800 Statutory  Designated  Program                                                                    
     Receipts (1108)                                                                                                            
     Public Safety Employees Association                                                                                        
                                                                                                                                
     DEPARTMENT:   Public   Safety  APPROPRIATION:   Various                                                                    
     ALLOCATION: Various                                                                                                        
     ADD: $510,500 General Fund (1004)                                                                                          
     $3,500 General Fund Program Receipts (1005)                                                                                
    $9,700 Capital Improvement Project Receipts (1061)                                                                          
     600 Interagency Receipts (1007)                                                                                            
     $3,400 Federal Receipts (1002)                                                                                             
                                                                                                                                
     DEPARTMENT:   Transportation   and  Public   Facilities                                                                    
     APPROPRIATION: Various ALLOCATION: Various                                                                                 
     ADD: $73,100 International  Airport Revenue Fund (1027)                                                                    
     $4,800 Federal Receipts (1002)                                                                                             
     University of  Alaska and  United Academic  -Adjuncts -                                                                    
     American   Association    of   University   Professors,                                                                    
     American Federation of Teachers                                                                                            
                                                                                                                                
     DEPARTMENT: University of Alaska                                                                                           
     APPROPRIATION: University of Alaska                                                                                        
     ALLOCATION: Budget Reductions/Additions -System wide                                                                       
     ADD: $174,800  General Fund (1004)  $174,800 University                                                                    
     Receipts (1048)                                                                                                            
     Alaska  Higher Education  Crafts and  Trades Employees,                                                                    
     Local 6070                                                                                                                 
                                                                                                                                
     DEPARTMENT: University of Alaska                                                                                           
     APPROPRIATION: University of Alaska                                                                                        
     ALLOCATION: Budget Reductions/ Additions -System wide                                                                      
     ADD: $279,900 General Fund (1004) $279,900 University                                                                      
     Receipts (1048)                                                                                                            
                                                                                                                                
     Further explanation of agreements:                                                                                         
                                                                                                                                
     The following collective bargaining unions have                                                                            
     reached agreements for FY2015 through FY2017:                                                                              
                                                                                                                                
    Alaska Vocational Technical Center Teacher's Unit:                                                                          
                                                                                                                                
          FY2015  -1  percent   Cost  of  living  Adjustment                                                                    
          FY2016  -1  percent   Cost  of  living  Adjustment                                                                    
          FY2017 -1 percent Cost of living Adjustment                                                                           
                                                                                                                                
          Health insurance will be  provided for the economy                                                                    
          plan   which  is   $1,371/month   for  FY2015,   a                                                                    
          reduction  of $18  per employee  per month.  These                                                                    
          reductions  off-sets  the  FY2015 cost  of  living                                                                    
          adjustment costs.                                                                                                     
                                                                                                                                
     Public Safety Employees Association:                                                                                       
                                                                                                                                
          FY2015 -1 percent Cost of living Adjustment                                                                           
          FY2016 -1 percent Cost of living Adjustment                                                                           
          FY2017 -2 percent Cost of living Adjustment                                                                           
                                                                                                                                
          Health insurance will be  provided for the economy                                                                    
          plan   which  is   $1,371/month   for  FY2015,   a                                                                    
          reduction  of$18  per  employee per  month.  These                                                                    
          reduction  off-sets  the  FY2015  cost  of  living                                                                    
          adjustment costs.                                                                                                     
                                                                                                                                
     University of Alaska and United Academic -Adjuncts -                                                                       
     American   Association    of   University   Professors,                                                                    
     American Federation of Teachers:                                                                                           
                                                                                                                                
          A  tentative  agreement  between  was  reached  on                                                                    
          February  18, 2014  and includes  a rate  increase                                                                    
          based  on the  number of  semesters taught  at the                                                                    
          University of Alaska:                                                                                                 
                                                                                                                                
               0-5 years 1 percent                                                                                              
               6-11 years 2 percent                                                                                             
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
Mr. Armstrong explained the amendment.                                                                                          
                                                                                                                                
Vice-Chair Fairclough spoke to  the contracts that were just                                                                    
adopted.  She appreciated  those that  had entered  into the                                                                    
bargaining agreements,  and understood that the  state could                                                                    
not sustain continued increases.                                                                                                
                                                                                                                                
9:30:34 AM                                                                                                                    
                                                                                                                                
Senator Olson MOVED to ADOPT AMENDMENT 5.                                                                                       
                                                                                                                                
     DEPARTMENT: Health and Social Services                                                                                     
     APPROPRIATION: Public Health                                                                                               
    ALLOCATION: Health Planning and Systems Development                                                                         
     ADD: $370,000 UOF (1004)                                                                                                   
                                                                                                                                
          EXPLANATION:                                                                                                          
                                                                                                                                
          The  Senate Subcommittee  reduced $1.2  million of                                                                    
          UGF  for  the SHARP  Program  in  FY15. Since  the                                                                    
          closeout,  updated information  has been  received                                                                    
          indicating  that   this  cut  will  result   in  a                                                                    
          reduction of  funding needed  to pay  for existing                                                                    
          contracts. The  CS version "E"  restored $615,500,                                                                    
          but  the program  is  still  short $584,500.  This                                                                    
          amendment when  combined with the increase  in the                                                                    
          Finance CS  version "E"  restores $985,500  of the                                                                    
          reduction  and   ensures  that  the   state  funds                                                                    
          existing contracts. With the  change in the CS and                                                                    
          this amendment,  the net reduction to  the program                                                                    
          in FY15 is $214,500.                                                                                                  
                                                                                                                                
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
Senator Olson explained the amendment.                                                                                          
                                                                                                                                
Co-Chair Kelly felt that the amendment was a positive                                                                           
response to public testimony.                                                                                                   
                                                                                                                                
Senator Olson remarked that the program was extremely                                                                           
important.                                                                                                                      
                                                                                                                                
Co-Chair Kelly REMOVED his objection. There being NO                                                                            
further OBJECTION, AMENDMENT 5 was adopted.                                                                                     
                                                                                                                                
9:32:33 AM                                                                                                                    
                                                                                                                                
Senator Olson MOVED to ADOPT AMENDMENT 6.                                                                                       
                                                                                                                                
     DEPARTMENT: Health and Social Services                                                                                     
     APPROPRIATION: Behavioral Health                                                                                           
     ALLOCATION: Community Action Prevention & Intervention                                                                     
     Grants                                                                                                                     
     ADD: $370,000 UGF (1004), One-time funding                                                                                 
                                                                                                                                
          ADD INTENT:  It is  the intent of  the legislature                                                                    
          that  the  appropriation  to the  Municipality  of                                                                    
          Anchorage   for  the   Alaska  Domestic   Violence                                                                    
          Intervention  Project  is one-time  funding  which                                                                    
          will  provide the  resources  necessary to  bridge                                                                    
          program  operations  until   January  1,2015  when                                                                    
          funding is  expected to  become available  to them                                                                    
          through  other funding  sources.  It  is also  the                                                                    
          intent   of  the   legislature  that   the  Alaska                                                                    
          Domestic  Violence   Intervention  Project  secure                                                                    
          other  funding  for  ongoing operations,  with  no                                                                    
          additional   funding  to   be   provided  by   the                                                                    
          legislature.                                                                                                          
                                                                                                                                
          EXPLANATION:                                                                                                          
          This amendment  adds one-time funding for  a grant                                                                    
          to the  Municipality of  Anchorage for  the Alaska                                                                    
          Domestic Violence Intervention Project.                                                                               
                                                                                                                                
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
Senator Olson explained the amendment.                                                                                          
                                                                                                                                
Co-Chair Kelly REMOVED his objection. There being NO                                                                            
further OBJECTION, AMENDMENT 6 was adopted.                                                                                     
                                                                                                                                
Senator Bishop MOVED to ADOPT AMENDMENT 7.                                                                                      
                                                                                                                                
     AMEND THE FOLLOWING LANGUAGE SECTION:                                                                                      
                                                                                                                                
         Sec. IS. DEPARTMENT OF NATURAL RESOURCES.                                                                              
          (e)  If  any  portion   of  the  federal  receipts                                                                    
          appropriated   to   the  Department   of   Natural                                                                    
          Resources  for  division  of  forestry  wild  land                                                                    
          firefighting  crews is  not received,  that amount                                                                    
          is  appropriated  from  the general  fund  to  the                                                                    
          Department of Natural  Resources, fire suppression                                                                    
          preparedness  [ACTIVITY],   for  the   purpose  of                                                                    
          paying  costs of  the  division  of forestry  wild                                                                    
          land  firefighting  crews   for  the  fiscal  year                                                                    
          ending June 30, 2015.                                                                                                 
                                                                                                                                
          EXPLANATION:    This   amendment    corrects   the                                                                    
          allocation name in the above language section.                                                                        
                                                                                                                                
Co-Chair Kelly OBJECTED for discussion.                                                                                         
                                                                                                                                
Senator Bishop explained the amendment.                                                                                         
                                                                                                                                
Co-Chair Kelly REMOVED his objection. There being NO                                                                            
further OBJECTION, AMENDMENT 8 was adopted.                                                                                     
                                                                                                                                
9:34:20 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:44:31 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
9:44:41 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly MOVED to ADOPT AMENDMENT 8.                                                                                      
                                                                                                                                
     Page 61, line 3, following "DEVELOPMENT.":                                                                                 
                                                                                                                                
          Insert "(a)"                                                                                                          
                                                                                                                                
     Page 61, line 4:                                                                                                           
                                                                                                                                
          Delete "$24,999,999"                                                                                                  
          Insert "$100,000,000"                                                                                                 
                                                                                                                                
     Page 61, following line 7:                                                                                                 
                                                                                                                                
          Insert new subsections to read:                                                                                       
                                                                                                                                
               "(b) The sum  of $100,000,000 is appropriated                                                                    
               from the  general fund  to the  Department of                                                                    
               Education   and  Early   Development  to   be                                                                    
               distributed  as state  aid  to districts  for                                                                    
               the  fiscal   year  ending  June   30,  2016,                                                                    
               according  to  the average  daily  membership                                                                    
               for   each   district   adjusted   under   AS                                                                    
               14.l7.41O(b)(l )(A)-(d)  for the  fiscal year                                                                    
               ending June 30, 2016.                                                                                            
                                                                                                                                
               (c) It is the intent  of the legislature that                                                                    
               the  appropriations made  in subsections  (a)                                                                    
               And (b)  will allow the Alaska  public school                                                                    
               system  to  maintain  operations at  a  level                                                                    
               sufficient  to  educate   children  and  will                                                                    
               provide  time for  all  stakeholders to  work                                                                    
               with the  legislature to  identify innovative                                                                    
               approaches  and   possible  consolidation  of                                                                    
               services  that will,  over time,  lower costs                                                                    
               while   maintaining   a   quality   education                                                                    
               system.  It   is  also  the  intent   of  the                                                                    
               legislature that this  increased funding will                                                                    
               serve  as  a bridge  to  develop  a plan  and                                                                    
               identify   solutions   to   implement   these                                                                    
               changes   in   an   effort   to   recalibrate                                                                    
               individual  district  budget spending  levels                                                                    
               to the 2014 fiscal year spending levels.                                                                         
                                                                                                                                
Co-Chair Meyer OBJECTED for discussion.                                                                                         
                                                                                                                                
Co-Chair Kelly explained the amendment.                                                                                         
                                                                                                                                
Co-Chair Meyer REMOVED his objection. There being NO                                                                            
further OBJECTION, AMENDMENT 8 was adopted.                                                                                     
                                                                                                                                
Co-Chair Kelly told Senator Hoffman that he was added as a                                                                      
sponsor of the amendment.                                                                                                       
                                                                                                                                
Senator Hoffman expressed support of the amendment, and                                                                         
remarked that many Alaskans were concerned with education.                                                                      
                                                                                                                                
Co-Chair Kelly thanked the individuals who had helped with                                                                      
the operating budget development process.                                                                                       
                                                                                                                                
Mr. Armstrong stated that the technical motions would be                                                                        
available on the Legislative Finance Division website.                                                                          
                                                                                                                                
Co-Chair Kelly felt that the budget acknowledged that                                                                           
education was important to the state.                                                                                           
                                                                                                                                
9:50:58 AM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
9:51:42 AM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
Co-Chair Kelly  announced that the  reduction in  the budget                                                                    
related to day-to-day agency operations.                                                                                        
                                                                                                                                
Co-Chair Meyer  thanked the  committee for  the work  on the                                                                    
operating budget.                                                                                                               
                                                                                                                                
Co-Chair Meyer MOVED to REPORT  SCS CSHB 266(FIN) as amended                                                                    
out  of  committee   with  individual  recommendations,  and                                                                    
instructed  legislative  legal  and legislative  finance  to                                                                    
make the  necessary technical  and conforming  changes There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
Co-Chair Meyer MOVED to REPORT  SCS CSHB 267(FIN) as amended                                                                    
out  of  committee   with  individual  recommendations,  and                                                                    
instructed  legislative  legal  and legislative  finance  to                                                                    
make the  necessary technical and conforming  changes. There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
Co-Chair  Kelly  expressed gratitude  for  the  work of  the                                                                    
committee.                                                                                                                      
                                                                                                                                
SCS CSHB 266(FIN)  was REPORTED out of committee  with a "do                                                                    
pass" recommendation.                                                                                                           
                                                                                                                                
SCS CSHB 267(FIN)  was REPORTED out of committee  with a "do                                                                    
pass" recommendation.                                                                                                           
                                                                                                                                
9:55:11 AM                                                                                                                    
RECESS                                                                                                                          
                                                                                                                                
2:41:14 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SENATE BILL NO. 168                                                                                                           
                                                                                                                                
     "An Act establishing the petroleum engineering                                                                             
     research for hydrocarbon optimization grant program                                                                        
     and fund in the University of Alaska."                                                                                     
                                                                                                                                
2:42:25 PM                                                                                                                    
                                                                                                                                
JOHN CHESHIRE,  UNDERGRADUATE RESEARCH  ASSISTANT, PETROLEUM                                                                    
DEVOLOPMENT  LABORATORY,  UNIVERSITY  OF  ALASKA  FAIRBANKS,                                                                    
(UAF) discussed  the PowerPoint,  "Alaska North  Slope (ANS)                                                                    
Conventional  and  Unconventional   Oil  and  Gas  (Resource                                                                    
Characterization and Development" (copy on file).                                                                               
                                                                                                                                
Mr.  Cheshire  highlighted  slide 23,  "Alaska's  Heavy  Oil                                                                    
Resources."                                                                                                                     
                                                                                                                                
     What is heavy oil?                                                                                                         
                                                                                                                                
          •Flows like syrup                                                                                                     
          •More dense than conventional oil                                                                                     
          Where is it found in Alaska?                                                                                          
          •On North Slope near conventional deposits                                                                            
          •Shallower depth than conventional oil                                                                                
          How much is there?                                                                                                    
          •24 - 33 billion barrels                                                                                              
          What's the challenge?                                                                                                 
          •High viscosity makes the oil difficult to                                                                            
          produce economically                                                                                                  
                                                                                                                                
Mr. Cheshire discussed slide 24,  "Enhanced Recover of Heavy                                                                    
Oil."                                                                                                                           
                                                                                                                                
     Methods:                                                                                                                   
                                                                                                                                
          •Water Flood                                                                                                          
          •Low cost                                                                                                             
          •Implemented on the Alaska North Slope (ANS)                                                                          
          •Poor recovery efficiency                                                                                             
          •Thermal                                                                                                              
          •Injection of steam heats oil, helping it flow                                                                        
          more easily                                                                                                           
          •Arctic environment makes steam injection on ANS                                                                      
          difficult                                                                                                             
          •Solvents                                                                                                             
          •Mix with oil causing it to flow more easily                                                                          
          •Carbon dioxide and light hydrocarbons are                                                                            
          typical solvents                                                                                                      
         •Could be available on ANS with gas sales                                                                              
          •Research ongoing                                                                                                     
                                                                                                                                
Mr. Cheshire  highlighted slide 25, "Carbon  Dioxide Content                                                                    
of  ANS  Gas." He  stated  that  the slide  represented  the                                                                    
structure of typical  ANS gas. He stated that  12 percent of                                                                    
the gas was  carbon dioxide, which must be  removed from the                                                                    
gas before it could be sold.                                                                                                    
                                                                                                                                
Mr. Cheshire looked at slide 26, "Research Background."                                                                         
                                                                                                                                
Co-Chair Kelly  asked for  a description  of the  slide. Mr.                                                                    
Cheshire replied  that the slide  was related to  the phased                                                                    
behavior. When carbon  dioxide was injected into  the gas it                                                                    
could form a  second liquid phase. The  oil reservoir mostly                                                                    
held oil,  water, and  gas. If  carbon dioxide  was injected                                                                    
the  heavy crude  oil  would  be pushed  to  the bottom.  He                                                                    
stressed that  the research was intended  to showcase actual                                                                    
experiments rather than simulators  to determine how the oil                                                                    
behaved underground.                                                                                                            
                                                                                                                                
Mr.  Cheshire   highlighted  slide  27,   "Conclusions."  He                                                                    
stressed that  it was an  ongoing research project,  but the                                                                    
process was moving  the state closer to  putting a different                                                                    
kind of oil in the  Trans Alaska Pipeline System (TAPS), and                                                                    
recovering other types of gas from ANS.                                                                                         
                                                                                                                                
Mr.  Cheshire  displayed  slide 28,  "Future  Research."  He                                                                    
shared that the continuation of  the research would move the                                                                    
state  closer to  properly characterize  and understand  the                                                                    
oil in order to economically produce the oil                                                                                    
                                                                                                                                
2:47:01 PM                                                                                                                    
                                                                                                                                
Co-Chair Kelly  understood that there  was 12 to  13 percent                                                                    
carbon dioxide in  ANS gas. He shared that there  would be a                                                                    
gas  treatment  plant  to  remove  the  carbon  dioxide.  He                                                                    
wondered if the use of  the carbon dioxide produced value to                                                                    
the  state. Mr.  Cheshire responded  that producers  must be                                                                    
near  a carbon  dioxide source.  He felt  that there  may be                                                                    
synergy among the products.                                                                                                     
                                                                                                                                
Senator   Bishop  wondered   if  the   carbon  dioxide   was                                                                    
considered  a  carbon.  Mr. Cheshire  replied  that  it  was                                                                    
carbon dioxide.                                                                                                                 
                                                                                                                                
Senator  Bishop wondered  if Alaska  would be  available for                                                                    
carbon  credits from  the federal  government. Mr.  Cheshire                                                                    
replied that he did not know the details of that program.                                                                       
                                                                                                                                
Senator  Dunleavy  wondered  if carbon  credits  for  taking                                                                    
carbon out  of the  atmosphere. Senator Bishop  indicated in                                                                    
the affirmative.                                                                                                                
                                                                                                                                
Co-Chair  Kelly stated  that he  did not  think the  program                                                                    
would  qualify  for carbon  credits,  because  there was  no                                                                    
removal of carbon from the atmosphere.                                                                                          
                                                                                                                                
2:50:25 PM                                                                                                                    
                                                                                                                                
THOMAS POLASEK, UNDERGRADUATE  RESEARCH ASSISTANT, PETROLEUM                                                                    
DEVOLOPMENT  LABORATORY,  UNIVERSITY  OF  ALASKA  FAIRBANKS,                                                                    
discussed slide 29, "Alaska Heavy Oil Resource."                                                                                
                                                                                                                                
          Heavy oil resource overlies existing fields                                                                           
                                                                                                                                
          Oil is present in multiple reservoir zones                                                                            
                                                                                                                                
          Total: 24 - 33 Bbbls oil in place                                                                                     
                                                                                                                                
Mr.  Polasek  highlighted  slide 30,  "Permafrost  Thaw  and                                                                    
Subsidence."  As hot  fluids or  steam are  put through  the                                                                    
wells, it would increase the  rate of thaw. Normal oil wells                                                                    
produce  oil at  approximately 150  degrees Fahrenheit.  The                                                                    
heat that would be applied would be at 600 Fahrenheit.                                                                          
                                                                                                                                
Mr.  Polasek  discussed  slide   31,  "Permafrost  Thaw  and                                                                    
Subsidence."  Depending  on  the  soil, the  soil  would  be                                                                    
greatly disrupted by  the thawing. The friction  of the soil                                                                    
on the  well could cause the  wells to bend a  small amount.                                                                    
The uneven  settling could  also destroy  the infrastructure                                                                    
at the surface.                                                                                                                 
                                                                                                                                
Mr.  Polasek looked  at  slide 32,  "Ice  Content and  Upper                                                                    
Permafrost Soils." The  picture on the left  showed the dark                                                                    
areas as  ice, so there  would be great shifting.  The right                                                                    
hand side showed  ice pout, so there may not  be shifting in                                                                    
that area.                                                                                                                      
                                                                                                                                
Mr.  Polasek   discussed  slide   33,  "Ice   Content  Upper                                                                    
Permafrost Soils." The pictures  showed how the strength and                                                                    
integrity of the soil could degrade if melted.                                                                                  
                                                                                                                                
Mr. Polasek highlighted  slide 34, "Experimental Equipment."                                                                    
The focus of  his research was to determine how  to keep the                                                                    
heat inside the wells. The slide outlined their work.                                                                           
                                                                                                                                
Mr. Polasek discussed slide 35, "Project Objectives."                                                                           
                                                                                                                                
     •Collect data to analyze how best to protect current                                                                       
     and future wells                                                                                                           
     •Acquire empirical data for tuning permafrost thaw                                                                         
     computer simulations                                                                                                       
     •Gain lessons learned for future research using frost                                                                      
     cell equipment                                                                                                             
                                                                                                                                
2:55:05 PM                                                                                                                    
                                                                                                                                
Mr.  Polasek   looked  at   slide  36,   "Project's  Current                                                                    
Progress." He  stated that the  slide showed the  frost cell                                                                    
inside of a refrigerated  room; the students collecting silt                                                                    
from  the  Army's  Cold   Regions  Research  Lab  permafrost                                                                    
tunnel; and installing the miniature  casings into the cell,                                                                    
which demonstrates  the size  of the block  of soil  for the                                                                    
research.                                                                                                                       
                                                                                                                                
Mr.  Polasek   highlighted  slide  37,   "Project's  Current                                                                    
Progress." The slide shows photos  of the process of loading                                                                    
the cell.  The wires  were the  different heat  sensors that                                                                    
were inserted in the soil with  another layer of silt on top                                                                    
of the wires. The  miniaturized tubing represented the rings                                                                    
in the  oil wells.  Each one  of the  tubes was  now sitting                                                                    
inside the  casing, so the  fluids would be  flooded between                                                                    
the  two  tubes.  The  wires  were  intended  to  accurately                                                                    
monitor the heat traveling through  the wells. The two wells                                                                    
on  the  right were  vacuum-insulated  tubes,  to mimic  the                                                                    
vacuum-insulating  tubing  that  could  be  put  inside  the                                                                    
wells.                                                                                                                          
                                                                                                                                
Mr. Polasek  discussed slide 38,  "Impacts on  Future Alaska                                                                    
North Slope Oil Production."                                                                                                    
                                                                                                                                
     1. Estimated 24 - 33 billion barrels of heavy oil,                                                                         
     much of it is inaccessible without thermal EOR                                                                             
                                                                                                                                
     2. One step closer to unlocking access to heavy oil on                                                                     
     Alaska's North Slope                                                                                                       
                                                                                                                                
Co-Chair Kelly wondered  surmised that the 24  to 33 billion                                                                    
barrels  of  oil  was   under  current  infrastructure.  Mr.                                                                    
Polasek agreed.                                                                                                                 
                                                                                                                                
Mr. Polasek looked at slide 39, "Future Work."                                                                                  
                                                                                                                                
     1. More complex/multilayered models. UAF is the first                                                                      
     to do this type of physical modeling.                                                                                      
                                                                                                                                
     2. Further research into geomechanical forces on                                                                           
     scaled down wells                                                                                                          
                                                                                                                                
     3. Collaboration with Alaska's energy industry                                                                             
                                                                                                                                
Co-Chair Kelly shared that there  were hundreds of thousands                                                                    
of trillions of  cubic feet of natural gas in  the earth. He                                                                    
asked  that   Mr.  Patil  discuss  the   existing  potential                                                                    
resource on ANS,  and the resource that  would be underneath                                                                    
existing infrastructure.                                                                                                        
                                                                                                                                
SHIRISH PATIL,  DIRECTOR, PETROLEUM  DEVELOPMENT LABORATORY,                                                                    
UNIVERSITY  OF ALASKA  FAIRBANKS,  looked at  slide 3,  "ANS                                                                    
Heavy  Oil  and  Gas  Hydrate Resources."  He  testified  in                                                                    
support of SB 168. He stated  that the slide showed a cross-                                                                    
section of the  ANS measured oil fields. The  two blue areas                                                                    
were the  methane hydrate resource  that sits under  or near                                                                    
the  existing infrastructure.  The  red color  was the  free                                                                    
conventional  gas, which  was where  the potential  pipeline                                                                    
would bring the gas to market.                                                                                                  
                                                                                                                                
Co-Chair  Kelly asked  for information  regarding timing  of                                                                    
the  project, because  Alaska was  currently only  producing                                                                    
light  oil.  Mr.  Patil  replied  that  there  was  research                                                                    
regarding  throughput for  TAPS at  roughly 550,000  barrels                                                                    
per  day, and  was  rapidly declining.  While other  methods                                                                    
were considered for extracting more  oil from ANS, the light                                                                    
oil production  was declining.  He felt  that the  heavy oil                                                                    
production  would  not go  as  quickly  as desired.  If  the                                                                    
carbon  dioxide from  measure gas  sales was  not available,                                                                    
the gas  must be sequestered.  The development of  heavy oil                                                                    
was critical to move the  oil through TAPS. Heavy oil, light                                                                    
oil, and  natural gas development was  an optimization issue                                                                    
that one must see as timing crucial.                                                                                            
                                                                                                                                
3:02:50 PM                                                                                                                    
                                                                                                                                
Co-Chair Kelly  stated that this  was the first time  he had                                                                    
heard  that  gas production  must  occur  to assist  in  the                                                                    
development  of heavy  oil. Mr.  Patil  stated that,  though                                                                    
there will  be gas  sales, the  gas must  be used  to inject                                                                    
into  Prudhoe  Bay to  maintain  the  reservoir pressure  to                                                                    
extract more oil.                                                                                                               
                                                                                                                                
Senator  Bishop wondered  if the  bottom  right picture  was                                                                    
from  BP's  heavy oil  project.  Mr.  Patil replied  in  the                                                                    
affirmative.                                                                                                                    
                                                                                                                                
Senator  Bishop asked  if  BP had  stopped  their heavy  oil                                                                    
project.  Mr.  Patil responded  that  there  was still  some                                                                    
production from  that project. He  stressed that  there were                                                                    
some limitations  in how much  production could be  from the                                                                    
heavy oil.                                                                                                                      
                                                                                                                                
Mr.  Patil looked  at slide  18, "The  Gas Hydrate  Resource                                                                    
Pyramid."  He noted  the  different,  important layers  that                                                                    
must be permeated  in order to reach  the resource including                                                                    
arctic  sandstones,   deep-water  sandstones,  non-sandstone                                                                    
marine  reservoirs  with   permeability,  massive  surficial                                                                    
nodular   hydrate,  and   marine  reservoirs   with  limited                                                                    
permeability.                                                                                                                   
                                                                                                                                
Mr.  Patil  spoke  to  slide  19,  "Gas  Hydrate  Production                                                                    
Modeling." He stated that the  research used many tools that                                                                    
represented the different aspects of ANS.                                                                                       
                                                                                                                                
Mr.    discusses   slide    20,    "Barrow   Gas    Hydrates                                                                    
(Opportunity?)"                                                                                                                 
                                                                                                                                
     Research Objective                                                                                                         
                                                                                                                                
          - To simulate natural gas production from gas                                                                         
          hydrate reservoir accounting for gas hydrate                                                                          
          dissociation phenomena.                                                                                               
                                                                                                                                
          - To forecast and optimize natural gas production                                                                     
          with precise reservoir management                                                                                     
                                                                                                                                
     Goals                                                                                                                      
                                                                                                                                
          - Perform a study on production variance                                                                              
         depending on different wellbore designs.                                                                               
                                                                                                                                
          - Predict production behavior in planned wells.                                                                       
                                                                                                                                
3:08:54 PM                                                                                                                    
                                                                                                                                
Mr.  Patil  highlighted slide  21,  "GTL:  The Gel  Strength                                                                    
Problem." The slide showed a  simulation that related to gas                                                                    
to  liquids   transportation,  but   also  applied   to  the                                                                    
throughput in  TAPS. He stressed  that the flow  would stop,                                                                    
if the outside temperature drops.                                                                                               
                                                                                                                                
Mr. Patil discussed slide 40, "Oil  & Gas Related R&D at UAF                                                                    
Synergies,  Partnerships (University,  State Govt.,  Federal                                                                    
Govt., and Industry)."                                                                                                          
                                                                                                                                
     •Phase Behavior, Asphaltene Precipitation- Viscous/                                                                        
     Heavy Oil                                                                                                                  
     •Chemical Flooding and Conventional EOR                                                                                    
     •Wettability and Improved Oil Recovery                                                                                     
    •Chemical & Microbial Characterization- Viscous Oil                                                                         
     •Methane Hydrates                                                                                                          
     •CBM- Rural Energy Applications- Ft. Yukon                                                                                 
     •Novel Ceramicrete Technology for the Arctic                                                                               
     •Carbon Sequestration                                                                                                      
     •GTL Transportation                                                                                                        
                                                                                                                                
          Workforce Development                                                                                                 
          New Reserves to Declining Production                                                                                  
          Economic Development                                                                                                  
                                                                                                                                
Mr. Patil  highlighted slide  44, "Partnership  for Economic                                                                    
Development." He stressed that all  of the graduates had 100                                                                    
percent placement success.                                                                                                      
                                                                                                                                
Mr.  Patil looked  at  slide  55, "PDL-Established  Research                                                                    
Partnerships."  The chart  showed the  placement success  in                                                                    
the various partners in the industry.                                                                                           
                                                                                                                                
Mr. Patil displayed slide 56,  "Recent NETL-DOE Funded Oil &                                                                    
Gas Related R&D at  UAF Synergies, Partnerships (University-                                                                    
Federal  Govt., State  Govt.,  Industry,  Non Profits)."  He                                                                    
stated that  the federal  funding for  oil and  gas research                                                                    
was recently  zeroed out, so  the state needed to  invest in                                                                    
research in the  universities.  He restated  his support for                                                                    
SB 168.                                                                                                                         
                                                                                                                                
3:13:31 PM                                                                                                                    
                                                                                                                                
ROBERT HALL,  SELF, WASILLA (via  teleconference), testified                                                                    
in support  of SB  168. He stated  that creating  a targeted                                                                    
department was beneficial to Alaska's  economy. He felt that                                                                    
recent oil and  gas legislation had created  benefits to oil                                                                    
and  gas development.  He remarked  that the  challenges for                                                                    
oil  and  gas  development  on the  North  Slope  were  very                                                                    
unique, and unlike other oil and gas fields.                                                                                    
                                                                                                                                
3:15:54 PM                                                                                                                    
AT EASE                                                                                                                         
                                                                                                                                
3:16:04 PM                                                                                                                    
RECONVENED                                                                                                                      
                                                                                                                                
SB 168 was HEARD and HELD in committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
ADJOURNMENT                                                                                                                   
3:16:53 PM                                                                                                                    
                                                                                                                                
The meeting was adjourned at 3:16 p.m.                                                                                          

Document Name Date/Time Subjects
SB 168 - 28-LS1343 U.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - ConocoPhillips Alaska Files Permits for 1H NEWS at Kuparuk (News Release).pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - PDL ASP Flooding Chemical Oil Recovery.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - PDL CO2 Injection for Heavy Oil Recovery.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - PDL Thermal Oil Recovery and Subsidence Challenges.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - Sectional Analysis.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - Sponsor Statement.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 - STARR Program Overview.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB168 Petroleum Development Laboratory March 2014.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB 168 Petroleum Development Laboratory March 2014.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB168 BioPresentersPatilCheshirePolasek.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
HB266 Amendment #2 Olson.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #3 Dunleavy.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #4 Kelly.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #5 Olson-Kelly-Meyer-Fairclough-Dunleavy-Bishop-Hoffman.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #6 Kelly-Olson-Hoffman-Fairclough-Bishop-Meyer-Dunleavy.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #7 - Kelly - Bishop.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
HB266 Amendment #8 Kelly-Olson-Fairclough-Bishop-Dunleavy-Hoffman-Meyer.pdf SFIN 3/28/2014 9:00:00 AM
HB 266
SB168-UA-SYSBRA-3-27-14.pdf SFIN 3/28/2014 9:00:00 AM
SB 168
SB168 Possible Questions - Senator Kelly.pdf SFIN 3/28/2014 9:00:00 AM
SB 168