Legislature(1993 - 1994)

02/24/1994 09:20 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
                                                                               
                                                                               
                             MINUTES                                           
                    SENATE FINANCE COMMITTEE                                   
                        February 24, 1994                                      
                            9:20 a.m.                                          
  TAPES                                                                        
                                                                               
  SFC-94, #18, Side 1 (000-end)                                                
  SFC-94, #18, Side 2 (575-end)                                                
  SFC-94, #20, Side 1 (000-028)                                                
                                                                               
  CALL TO ORDER                                                                
                                                                               
  Co-chair Drue Pearce  convened the meeting  at approximately                 
  9:20 a.m.                                                                    
                                                                               
  PRESENT                                                                      
                                                                               
  In addition to  Co-chairs Pearce and Frank,  Senators Rieger                 
  and Jacko were present.  Senators Sharp and Kerttula arrived                 
  as  the  meeting was  in progress.    Senator Kelly  did not                 
  attend.                                                                      
                                                                               
  ALSO ATTENDING:  Senator Mike Miller;  Former Representative                 
  Walt  Furnace,  General  Manager,  Alaska  Support  Industry                 
  Alliance;  Harry A.  Noah,  Commissioner, Dept.  of  Natural                 
  Resources; Paul  Fuhs, Commissioner,  Dept. of  Commerce and                 
  Economic Development; James Eason, Director, Division of Oil                 
  and Gas, Dept.  of Natural Resources; Russell  Heath, Alaska                 
  Environmental  Lobby;  Mike  Greany,  Director,  Legislative                 
  Finance Division; and  aides to committee members  and other                 
  members of the legislature.                                                  
                                                                               
  ALSO PARTICIPATING VIA TELECONFERENCE:                                       
                                                                               
       Barbara Fullmer, Assistant Attorney General  -                          
  Anchorage                                                                    
       Douglas Yates, P.O. Box 221, Ester, Alaska   -                          
  Fairbanks                                                                    
       Tom Lohman, North Slope Borough              - Barrow                   
       Larry Smith, Research Institute              - Homer                    
       Alice Ruby, Chair, Bristol Bay CRSA Bd.      -                          
  Dillingham                                                                   
       Theo Matthews, United Cook Inlet Drift Assoc.- Kenai                    
       Loren Flagg, Kenai Peninsula Fishermen       - Soldotna                 
       Gary Hinkle                                  - Soldotna                 
       Anthony Whitworth                            -                          
  Fairbanks                                                                    
       Tom Armour, City Administrator               - Pelican                  
                                                                               
  SUMMARY INFORMATION                                                          
                                                                               
  SB 240    -    MUNICIPAL TAX CREDIT/HABITAT PROTECTION                       
                                                                               
                 Brief   testimony   was  presented   by  Theo                 
                                                                               
                                                                               
                 Matthews and  Gary Hinkle.   Amendment No.  1                 
                 was proposed  by Senator Rieger  and adopted.                 
                 It was then incorporated  into CSSB 240 (Fin)                 
                 which was  REPORTED OUT of  committee with  a                 
                 "do  pass"  recommendation  and  zero  fiscal                 
                 notes from the Dept. of Natural Resources and                 
                 Dept. of Fish and Game.                                       
                                                                               
  SB 308    -    ADMIN ACTION RE LAND/RESOURCES/PROPERTY                       
                                                                               
                 Testimony was  presented  by  Jim  Eason  and                 
  individuals              at the  above-listed teleconference                 
                           sites.  The  bill was  subsequently                 
                           HELD  in   committee  for   further                 
                           hearing, Monday, February 28, 1994.                 
                                                                               
  SB 322    -    DELAYS OF OIL AND GAS LEASE SALES                             
                                                                               
                 Testimony was presented  in conjunction  with                 
                 SB 308 (see above.)                                           
                                                                               
                                                                               
  SB 240 - MUNICIPAL TAX CREDIT/HABITAT PROTECTION                             
                                                                               
  Co-chair  Pearce directed  that  SB 240  be  brought on  for                 
  discussion.   She  explained that  it  would provide  for an                 
  optional  municipal  tax credit  for  certain  river habitat                 
  protection improvements.  It pertains to the Kenai River and                 
  will allow local governments to provide a habitat protection                 
  credit that could offset  a portion of property taxes  if an                 
  improvement has been  constructed that aids in  fish habitat                 
  along  the  river.    The Co-chair  pointed  to  the  Senate                 
  Resources Committee  Substitute for  the bill,  accompanying                 
  zero fiscal notes, Dept. of Fish  and Game position paper in                 
  support, Kenai  Borough statement  in support, a  resolution                 
  from the Kenai River Special Management Area Advisory Board,                 
  and correspondence from the Alaska Sportfishing  Association                 
  in support of the bill.                                                      
                                                                               
  Senator Rieger directed attention to page 1, line 5, of CSSB
  240  (Res) and  asked  if Co-chair  Pearce  would object  to                 
  addition of Unless prohibited  by municipal charter,  before                 
  language in subsection (a).  Co-chair Pearce noted  that the                 
  legislation is limited  to local  governments on the  Kenai.                 
  She added that, to her knowledge, none of the local charters                 
  would prohibit the credit.  Senator Rieger stressed that, as                 
  a general rule, the legislature  should not pass state  laws                 
  that override local charters.  Co-chair Pearce said she  had                 
  no objection  to the amendment.   Senator Rieger  then MOVED                 
  for adoption of the new language.   No objection having been                 
  raised, the language was ADOPTED  for incorporation within a                 
  draft Senate Finance Committee Substitute for the bill.                      
                                                                               
                                                                               
  Co-chair Pearce called for additional testimony on the bill.                 
  None was  forthcoming.   Senator Jacko  MOVED that  CSSB 240                 
  (Fin) pass from committee with individual recommendations.                   
                                                                               
  (At this  point in  the meeting  the teleconference  monitor                 
  advised of an individual in Soldotna who wished to testify.)                 
                                                                               
  Senator Jacko  WITHDREW his motion  for passage of  CSSB 240                 
  (Fin).                                                                       
                                                                               
  THEO MATTHEWS,  administrative assistant, United  Cook Inlet                 
  Drift Association, testified  via teleconference from Kenai.                 
  He said that the Association  supports habitat protection in                 
  all state rivers.   He expressed concern, however, that  the                 
  proposed bill does not  provide a tax credit for  those "who                 
  do  the  best for  habitat protection,  and  that is  to not                 
  develop their land  and stay off of it."   The Kenai Borough                 
  recently formed a task force to  discuss these issues.  Many                 
  land owners are requesting consideration  for doing the best                 
  thing and not developing  their land.  Those issues  will be                 
  discussed on the  Kenai at  the local level.   Mr.  Matthews                 
  acknowledged that  he did not know whether  this issue would                 
  fit within the proposed legislation.                                         
                                                                               
  In his closing remarks, Mr. Matthews applauded the effort to                 
  improve habitat on  the Kenai.   Co-chair Pearce  referenced                 
  the "no development option" and explained that under present                 
  statutes,  conservation  easements  are   allowed  to  local                 
  municipalities.  She then voiced  her understanding that the                 
  task  force  would  examine  whether  opportunity   for  the                 
  easements should be provided  at the local level.   For that                 
  reason, the option was not added to the current bill.                        
                                                                               
  Senator Jacko again MOVED for passage  of CSSB 240 (Fin) and                 
  requested  unanimous  consent.    No objection  having  been                 
  raised,  CSSB 240 (Fin)  was REPORTED OUT  of committee with                 
  zero fiscal notes  from the Dept.  of Natural Resources  and                 
  the Dept. of Fish  and Game.  All members present signed the                 
  committee report with a "do  pass" recommendation.  Senators                 
  Kerttula and Kelly were  not in attendance and did  not sign                 
  the report.                                                                  
                                                                               
  Later in the  meeting, GARY HINKLE  testified in support  of                 
  the bill via teleconference from Kenai.  He noted that there                 
  would be no cost to the state.  Granting of the credit is at                 
  the discretion of the borough and cities involved.  Net gain                 
  to habitat through this  effort will far exceed any  risk of                 
  the bill being pro development.                                              
                                                                               
                                                                               
  SB 308 - ADMIN ACTION RE LAND/RESOURCES/PROPERTY                             
                                                                               
  Co-chair Pearce  directed  that SB  308  be brought  on  for                 
                                                                               
                                                                               
  discussion and noted  that it was  introduced by the  Senate                 
  Resources Committee at the request of the administration.                    
                                                                               
  JIM EASON, Director, Oil and Gas Division, Dept. of  Natural                 
  Resources, came before committee and provided an overview of                 
  CSSB 308 (Res).   He explained that changes are  intended to                 
  respond to concerns  raised by public  and agency review  of                 
  the original bill.                                                           
                                                                               
                                                                               
  As  background   information,  Mr.  Eason   said  that   the                 
  legislation  is intended to  respond to  "a string  of court                 
  cases."  He pointed to the  recent supreme court order which                 
  declined to accept review of the state's appeal of the "sale                 
  78 injunction."  The injunction thus stands and sale 78 will                 
  not proceed.  Based on sale 50 and 55 litigation, it will be                 
  four to  six years  before the  state knows  whether it  can                 
  lease sale  78  tracts in  Cook Inlet.   Every  sale on  the                 
  schedule today is in similar jeopardy.                                       
                                                                               
  The  proposed  bill  is designed  to  attempt  to accomplish                 
  something the court has  been unwilling to allow.   It would                 
  apply common sense to standards to which the department will                 
  be held in  making best- interest findings  for disposals or                 
  lease sales.  The  courts, through a sequence  of decisions,                 
  have  told  the department  that in  order  to have  a best-                 
  interest finding in a coastal zone consistency determination                 
  upheld for  a lease  sale, the  department must  be able  to                 
  demonstrate what events  are going  to happen following  the                 
  sale.    That  is impossible.    Events  may  range from  no                 
  activity to  multiple activities  resulting in  discovery of                 
  many  oil fields.    The  department  does  not  know  where                 
  conflict may occur until a proposal with a specific location                 
  is made.                                                                     
                                                                               
  The department has,  in the past, in  best-interest findings                 
  and  consistency  determinations,  attempted   to  recognize                 
  common sense human limitations  but also provide protections                 
  so that  future activities  are properly  conditioned.   The                 
  only known at the  time of issue of a lease  is that nothing                 
  will happen until a permit is issued.  And a permit will not                 
  be issued until agencies and  the public have an opportunity                 
  to review the permit proposal.   The department also has the                 
  ability  to  further   condition  the  permit  to   make  it                 
  consistent  with the Coastal  Zone Management Act.   That is                 
  the only way the state lease program can work.  The proposed                 
  legislation is designed to achieve that end.                                 
                                                                               
  Mr.  Eason  next  advised  of   the  following,  significant                 
  provisions of the legislation:                                               
                                                                               
       Page  2  amendments  to AS  38.05.035(e)  require  that                 
  written                                                                      
       findings  be  subject  to   certain  conditions.    The                 
                                                                               
                                                                               
       department, in making a written  finding, will have the                 
       discretion to establish the scope of the administrative                 
       review  on  which  the determination  is  to  be based.                 
       Courts have indicated that the department must consider                 
       all  future events.    The  subject amendments  require                 
       consideration  only of what can reasonably be foreseen.                 
       Review and best  interest findings  must address  "only                 
       the  reasonably  foreseeable,  significant  and  direct                 
       effects  of the  sale  . .  .  ."   Use  of "reasonably                 
       foreseeable, significant  and direct" is a  change from                 
       the original  bill in  reaction to  prior use  of "non-                 
       speculative."  The new language  is lifted from federal                 
       regulations dealing  with Coastal  Zone Management  Act                 
       consistency determinations.                                             
                                                                               
       Amending language also allows the department discretion                 
       in  sorting through  all  matters  brought forward,  in                 
       order to focus  on facts that are material  to decision                 
       making.                                                                 
                                                                               
  (Senator Sharp arrived at this time.)                                        
                                                                               
       Further, the department should only be held responsible                 
       for "those  things we  know" or  issues that  are "made                 
       known  to   us."    The   department  should   consider                 
       everything that is raised and address it in  writing as                 
       long  as  it is  raised during  the  period when  it is                 
       timely to do so.                                                        
                                                                               
       Paragraph  (C)  contains  explicit   acknowledgment  of                 
       legislative intent that the department have the ability                 
       to approve lease sales  as parts of phased projects  in                 
       the future.                                                             
                                                                               
       Page 3 contains housekeeping changes as a result of the                 
       preceding substantive amendments.                                       
                                                                               
       Page  4  incorporates  substantive  amendments  of   AS                 
       38.05.035(g).   That  statute  provides for  additional                 
       considerations  that  must   be  thought  through   and                 
       rationalized  in a written best-interest finding for an                 
       oil and gas lease sale, that  are not required of other                 
       disposals and  findings.   Amending language would  tie                 
       these  considerations to facts  known to the department                 
       at the time  of preparation and material  issues raised                 
       during  the  period of  public  comment.   Inclusion of                 
       these  material  facts places  a  higher burden  on the                 
       department in  that it  must comply  with the  existing                 
       statutory  check  list  as  well  as  these  additional                 
       material issues.                                                        
                                                                               
       Replacement of the word  "in" with "within" at  page 4,                 
       line 21, is in response to statutory language requiring                 
       consideration of  fiscal impacts  "in and  adjacent" to                 
                                                                               
                                                                               
       the area.   That indicates  a broader consideration  of                 
       habitat  impacts.    Mr.  Eason  further elaborated  on                 
       challenges surrounding lease of sales 55 and 57.                        
                                                                               
       The last amendment  relates to  Title 46 provisions  of                 
       the Coastal  Zone Management  Act.   It is  designed to                 
       parallel  best-interest  amendments in  Title 38.   Mr.                 
       Eason pointed  specifically to subsection  (a) language                 
       relating to phased  development.  He stressed  that the                 
       department will  not allow actual development  to occur                 
       without   appropriate   permits  that   are  requested,                 
       reviewed, conditioned and approved.                                     
                                                                               
  Senator Rieger directed  attention to  page 2,  subparagraph                 
  (C), and requested an explanation.   Mr. Eason said that the                 
  intent is to ensure that the department may "consider and do                 
  findings  on phased projects" for which  the first action is                 
  the lease sale conditioned by  proper stipulations and terms                 
  making  clear that  the successful  bidder has  no  right to                 
  proceed with any action without first obtaining a permit for                 
  that  specific activity.   That is  intended to  ensure that                 
  each  activity  is  in  compliance  with  the  Coastal  Zone                 
  Management  Act.    Mr.  Eason  briefly  spoke  to  what  he                 
  described as the ultimate condition  of a lease--the state's                 
  ability to disallow all  activity following a lease  sale if                 
  an extraordinary environmental conflict arises.                              
                                                                               
  (Senator Kerttula arrived at this time.)                                     
                                                                               
  Senator Rieger next asked that  Mr. Eason reconcile language                 
  at page 4, lines 11 through 16, with new language at page 2,                 
  line 9.  Mr. Eason said  that at the time the final  finding                 
  is made in writing, the department will consider and discuss                 
  facts that are material  to issues raised during  the public                 
  comment period.  In most cases  that will include periods up                 
  to  four years.  There are numerous opportunities for people                 
  to comment during  that process.   The most heavily  focused                 
  upon are  comment periods following issuance  of preliminary                 
  findings  and consistency  determinations.   The  department                 
  will consider comments as long as  they are within the scope                 
  of  the  administrative review  established  in the  written                 
  finding.   The scope  of that  review will  follow statutory                 
  requirements plus  other relevant issues that are reasonably                 
  foreseeable and direct and significant.  The intent  is that                 
  all public comments be addressed.                                            
                                                                               
  Further discussion  followed between Senator Rieger  and Mr.                 
  Eason  regarding the scope  of written findings.   Mr. Eason                 
  stressed that under  the proposed bill, the  department will                 
  have to acknowledge  "any suggested indirect effects  or any                 
  that are  brought to  our attention."   The  focus, however,                 
  will be upon reasonably  foreseeable, direct and significant                 
  effects.    The  department  is   not  attempting  to  avoid                 
  consideration  of  issues.    It   is  attempting  to  avoid                 
                                                                               
                                                                               
  litigation  over  issues   regarding  direct  and   indirect                 
  effects.                                                                     
                                                                               
  Discussion  followed between  Senator  Rieger and  Mr. Eason                 
  concerning  the difference  between  a  direct and  indirect                 
  effect.   Mr.  Eason stressed  that his  authority is  "much                 
  greater to provide  protections."  He acknowledged  that the                 
  line  between  direct  and  indirect  effects may  often  be                 
  blurred.                                                                     
                                                                               
  Additional discussion followed concerning division review of                 
  its policies in light of court decisions.                                    
                                                                               
  End, SFC-94, #18, Side 1                                                     
  Begin, SFC-94, #18, Side 2                                                   
                                                                               
  Senator Jacko attested to concern from constituents that the                 
  propose bill  might circumvent the  Coastal Zone  Management                 
  process.  Mr.  Eason said it  would not.  Projects  proposed                 
  after  a lease  sale  would generally  require  two or  more                 
  permits prior to  proceeding.  The division  of governmental                 
  coordination  would  be  the coordinator  on  the permitting                 
  process  and   the   decision  maker   on  the   consistency                 
  determination.  The input process for permits would continue                 
  as it exists today.   The intent  is not to diminish  public                 
  participation.  The bill focuses on the lease sale stage.                    
                                                                               
  Senator  Jacko  voiced his  understanding that  Coastal Zone                 
  Management laws  result from  federal guidelines.   He  then                 
  asked if the proposed bill would  usurp that authority.  Mr.                 
  Eason expressed his belief that the legislation would not.                   
                                                                               
  Senator  Rieger  asked  if  a  material  effect  includes  a                 
  material risk.   Mr. Eason  responded that  a material  risk                 
  would be different from a material effect.                                   
                                                                               
  Teleconference discussion followed between  Senator Kerttula                 
  and BARBARA  FULLMER, Assistant  Attorney General,  Dept. of                 
  Law, concerning  the  total number  of lease  sales and  the                 
  number challenged  in court.    Ms. Fullmer  noted that  the                 
  courts have never invalidated a lease sale.  They have found                 
  fault with DNR best interest findings.   The current risk is                 
  the stay presently  in place regarding  lease sale 78.   The                 
  supreme court has declined to review the state's petition to                 
  lift the stay.  Mr. Eason added that for sale 78,  the court                 
  found that the best-interest finding was likely to prevail a                 
  challenge   but   that   the   Coastal   Zone    consistency                 
  determination  was   inadequate.     That   was  not   DNR's                 
  determination alone.   While DNR is  the agency that  issues                 
  the  documentation,   the  documentation  is   reviewed  and                 
  concurred  in by the  division of governmental coordination,                 
  Dept. of Fish, and Dept. of  Environmental Conservation.  It                 
  is  also  compared with  the local  plan  and passed  by all                 
  review entities for compliance with laws and regulations.                    
                                                                               
                                                                               
  Responding to a  question from  Senator Kerttula, Mr.  Eason                 
  advised  of six sales  that were  the subject  of litigation                 
  since the 1979 joint state-federal sale.                                     
                                                                               
  In answer to  a question  by Senator Sharp,  Mr. Eason  said                 
  that the  consistency report  was available  for review  for                 
  substantial periods of  time in  both preliminary and  final                 
  form.    Issuance  of  the  final consistency  determination                 
  starts a 30-day time period during which appeal may be made.                 
  Litigants did not appeal the determination for more than two                 
  months.  While appeal  was made more than 30 days  after the                 
  time   limit  had   run,  the  courts   nonetheless  allowed                 
  plaintiffs to raise issues.                                                  
                                                                               
  Co-chair Pearce called for public testimony on the bill.                     
                                                                               
  TELECONFERENCE -                                                             
                                                                               
  FAIRBANKS:                                                                   
                                                                               
  DOUGLAS YATES spoke  in opposition to  the bill.  He  termed                 
  amendments to Title  38 a  "nasty assault on  the future  of                 
  Alaska's  public interest  and  disposition  of its  natural                 
  resources."  He suggested  that alteration of Title  38 will                 
  cost Alaska time, money,  and loss of faith in  its leaders.                 
  It will not  resolve competency  problems at DNR.   It  will                 
  push development policy from the  legislature and place more                 
  of Alaska's future in the hands of attorneys and the courts.                 
  The bill is  moving too quickly.   It should be  returned to                 
  Senate Resources and adequately addressed.                                   
                                                                               
  BARROW:                                                                      
                                                                               
  TOM LOHMAN, North Slope Borough, spoke in opposition  to the                 
  bill, saying that the  state would be more rather  than less                 
  likely to end  up in court  under the proposed  legislation.                 
  Litigation is  filed when  citizens become  frustrated, feel                 
  uninformed,  or  become  distrustful of  the  process.   DNR                 
  failed  to consult  the state's  coastal management  program                 
  working  group prior  to  introduction of  the  bill.   And,                 
  following introduction, it  failed to  notify working  group                 
  members,  the  coastal  districts, or  state  policy council                 
  members  in  order  to  allow  them  to  participate in  the                 
  process.  Many individuals in the districts, state agencies,                 
  and  industry  have   a  good  working  knowledge   of  ACMP                 
  implementations.    Mr. Lohman  attested to need  for better                 
  coordination of efforts.  He referenced the federal offshore                 
  leasing  agency and  advised that it  has taken  a different                 
  approach in engaging in consensus building.                                  
                                                                               
  Mr. Lohman next directed attention to mischaracterization of                 
  concerns  expressed  in sale  50,  specifically in  terms of                 
  impact  on caribou and  bowhead whales.   Bill provisions at                 
                                                                               
                                                                               
  page  4, lines  20 through  21, would  prevent  citizens and                 
  organizations from raising those kinds of issues.                            
                                                                               
  Mr. Lohman  questioned the  urgency of  moving the  proposed                 
  bill at this  time.  He urged  that it be held  in committee                 
  and suggested that DNR be encouraged to become more involved                 
  in the working  group and to  communicate with those in  the                 
  districts who will be implementing the program.                              
                                                                               
  HOMER                                                                        
                                                                               
  LARRY  SMITH, Kachemak  Resource Institute,  next spoke  via                 
  teleconference from Homer.  He explained that he and  others                 
  on the Kenai  worked together for  ten years to establish  a                 
  coastal district.   Implementation has occurred only  in the                 
  last several years.   He suggested that the issue  is likely                 
  to  be  moved from  state  to  federal court  and  become an                 
  inherent problem  with all the  intricacies of  subsistence.                 
  He  voiced  his belief  that  offshore development,  in some                 
  places,  is incompatible  with the economic  activities upon                 
  which residents depend.                                                      
                                                                               
  DILLINGHAM                                                                   
                                                                               
  ALICE   RUBY,   Chairperson,   Bristol   Bay   CRSA   Board,                 
  Councilperson,   City   of    Dillingham,   and    alternate                 
  representative,   Alaska   Coastal   Policy  Council,   next                 
  testified.  She  explained that the  City of Dillingham  has                 
  developed a  good relationship with  DNR over the  years and                 
  hopes to foster that relationship by continuing to work with                 
  the state to help develop policy and support for legislation                 
  that solves real problems.  Speaking directly to SB 308, Ms.                 
  Ruby  acknowledged need  for certainty  in the  oil and  gas                 
  leasing process.  Having  the courts make decisions  for the                 
  state is  a major  problem.   Amendments in  CSSB 308  (Res)                 
  appear to  address  some of  the  concerns raised  at  early                 
  hearings.  They  are, however, confusing since the basis for                 
  some  substitute language  is  unclear.   As  a result,  the                 
  fiscal implications of  the bill could  be great.  CSSB  308                 
  (Res) limits the scope of review under Title 38 and the ACMP                 
  to reasonably foreseeable  significant direct effects.   The                 
  substitution  of "significant"  for  "non-speculative" is  a                 
  step in the  right direction and appears to be an attempt to                 
  meet the  congressional  mandate under  the federal  Coastal                 
  Management  Act.    The  mandate  is likewise  reflected  in                 
  definitions for direct and significant  impact in the Alaska                 
  Coastal Management Program.  It is, however, unclear whether                 
  the  term "significant"  encompasses the broader  intent and                 
  whether  it will  meet  federal  guidelines.   Part  of  the                 
  problem is that there is no sectional analysis for SB 308 to                 
  clarify  the  intent  of  changes.   Unless  the  intent  of                 
  proposed changes is made explicit in  the bill and through a                 
  detailed sectional analysis, the state will find itself once                 
  again  facing  lawsuits  over  interpretation  of  statutory                 
                                                                               
                                                                               
  changes.  The  bill is moving  at a "lightening fast  pace."                 
  In  the  interest of  addressing  problems with  the leasing                 
  process and  public concerns  regarding the  bill, immediate                 
  action should be delayed to allow time for better resolution                 
  of problems.                                                                 
                                                                               
  KENAI                                                                        
                                                                               
  THEO MATTHEWS,  United  Cook Inlet  Drift Association,  next                 
  testified from Kenai, voicing opposition  to CSSB 308 (Res).                 
  Changes therein do not address  public concerns.  Of primary                 
  concern is  the attempt  to insulate  DNR from  any and  all                 
  public comment and  concern at the  lease sale stage.   That                 
  turns  the process  into a  paper transaction that  does not                 
  address  or  attempt  to  resolve   even  the  most  obvious                 
  potential  conflicts.     That  will  place  the   state  in                 
  financially  untenable  buy-back situations  regarding these                 
  leases.   CSSB 308  (Res) turns the  public interest finding                 
  into an "industry  interest finding."   Leases will  proceed                 
  without   resolution  of  potential  conflicts.    The  bill                 
  contains a  radical  change in  public  policy.   Under  its                 
  provisions, the  public may voice all the  comments it cares                 
  to at the  lease sale stage, but they will not be germane to                 
  the leasing decision.                                                        
                                                                               
  Mr. Matthews  voiced his belief  that the  bill is  "totally                 
  fiscally     irresponsible"     since     it     essentially                 
  institutionalizes buy-backs for  leases similar to those  in                 
  Kachemak Bay.                                                                
                                                                               
  Mr.  Matthews   said  that   nothing  could   fine-tune  the                 
  legislation.  He reiterated that the public would be allowed                 
  to  express  concerns,  but  those  concerns  would  not  be                 
  considered at the  lease sale stage.   The sale will  become                 
  the paper transaction DNR desires.                                           
                                                                               
  Mr. Matthews next  quoted from Judge Cranston's  decision on                 
  the Cook Inlet  lease sale  and noted that  once a lease  is                 
  issued,  the state is  under tremendous pressure  to let the                 
  lease  proceed to  exploration  and  extraction.   Directing                 
  attention to statements  on the DNR public  relations sheet,                 
  Mr. Matthews reiterated that the  proposed bill will lead to                 
  need  for  partial or  full buy-backs  at  major costs.   He                 
  voiced his objection  to the  zero fiscal note  accompanying                 
  the bill.   Buy-back was the  issue of concern expressed  by                 
  commercial fishermen in Cook Inlet  regarding lease sale 78.                 
                                                                               
                                                                               
  Mr.  Matthews  next  attested  to  six  recommendations  for                 
  improvement of the  bill and advised  that he would fax  the                 
  material to committee.                                                       
                                                                               
  Senator Kerttula asked why the drift association opposed the                 
  lease sale.  Mr. Matthews said  that the association did not                 
                                                                               
                                                                               
  oppose  the  sale.   It  asked  that  a  mitigation term  be                 
  included  in   the  sale   document  disallowing   permanent                 
  production  platforms  in  front  of  tanker  docks  and  in                 
  intensively used waters south of  Kasilof.  Concerns covered                 
  approximately  25% of  the  tracts in  the  lease.   Senator                 
  Kerttula asked that  the foregoing statement be  provided in                 
  writing.                                                                     
                                                                               
  LOREN FLAGG, Executive Director, Kenai Peninsula Fishermen's                 
  Association, voiced opposition to CSSB 308 (Res), terming it                 
  "bad legislation, from  a state  planning and public  policy                 
  standpoint."   At  a time  when  the Coast  Zone  Management                 
  Council and  Senator  Little  are  working  toward  improved                 
  public notification and involvement in coastal planning, the                 
  administration has  introduced legislation that  would limit                 
  public and local government  input.  State planning  for oil                 
  lease sales  should be conducted up  front.  At the  time of                 
  lease, the state must address  potential problems and impact                 
  of activities that could result from  the lease.  Failure to                 
  do so will invite  more court action rather than  less.  The                 
  general public and the industry need to  know and understand                 
  the rules at the lease sale stage.                                           
                                                                               
  Mr.  Flagg  pointed   to  property  rights  gained   by  the                 
  successful lessee  and costs  to the  state associated  with                 
  mitigation or buy-back of those rights.                                      
                                                                               
  There are substantial legal issues inherent in SB 308.  Full                 
  review by the Dept.  of Law should be undertaken  before the                 
  bill is advanced.                                                            
                                                                               
  Mr. Flagg  took exception to  earlier comments by  Mr. Eason                 
  and said that issues and conflicts  in the most heavily used                 
  commercial  fishing ground and recreational area were timely                 
  raised.   They are not  spurious issues.   Obvious conflicts                 
  must be addressed.  They were totally ignored by DNR.  There                 
  was no  detail in  the final  findings that addressed  those                 
  issues.   That is the reason the sale  is in court.  DNR did                 
  not  do  an  adequate  job  of  preparing  the  sale.    The                 
  department ignored the advice of the Dept. of Fish and Game,                 
  commercial  fishermen,  native   groups,  and   recreational                 
  fishermen.   The problem is  not with the  law but with  the                 
  department.                                                                  
                                                                               
  JUNEAU                                                                       
                                                                               
  WALT  FURNACE,  General  Manager,  Alaska  Support  Industry                 
  Alliance, came before committee in support  of the bill.  He                 
  explained  that  the  Alliance  has   a  membership  of  320                 
  individuals and companies  throughout the state.   The Kenai                 
  chapter has been  extremely active  in supporting the  state                 
  oil and gas lease program and provided positive testimony on                 
  past lease sales.                                                            
                                                                               
                                                                               
  Mr.  Furnace  stressed need  to  maximize return  on natural                 
  resources for state citizens.   The legislature thus enacted                 
  statutes  and  regulations   supporting  positive   resource                 
  development.  The oil and gas lease program on the Kenai and                 
  in Cook Inlet has  progressed well.  Although the  state has                 
  followed applicable statutes and regulations, the courts, in                 
  some  cases,  have  indicated  that  is  not  enough.    The                 
  administration  thus developed  legislation  to clarify  the                 
  responsibility of the  commissioner of the Dept.  of Natural                 
  Resources.                                                                   
                                                                               
  Mr.  Furnace acknowledged  that  problems surrounding  lease                 
  sale 78  relate to  the fact  that many  fishermen were  out                 
  fishing when notices  were issued.  He  further acknowledged                 
  conflicts between industry  and fishermen on the  Kenai, but                 
  he stressed that Mr.  Eason and Commissioner Noah  have made                 
  every  effort  to  duly  record   concerns  of  the  fishing                 
  community.    Mr.  Furnace  voiced  need  to  "look  at  the                 
  consistency  determination"  and  "tighten   up  the  public                 
  interest findings" to put the program back on target.                        
                                                                               
  Mr. Furnace next referenced timber  industry impact on local                 
  economies in Sitka and  Ketchikan.  He cautioned that  delay                 
  in bringing new oil  and gas leases on line  would seriously                 
  impact the economy on the Kenai  since developed oil and gas                 
  resources are  50% depleted.   Delay will also  impact state                 
  revenues from the  petroleum industry.  He urged  passage of                 
  the  bill  to address  concerns  identified by  recent court                 
  decisions.                                                                   
                                                                               
  FAIRBANKS                                                                    
                                                                               
  ANTHONY WHITWORTH, spoke  in opposition  to CSSB 308  (Res).                 
  He attested to poor quality,  almost unreadable faxed copies                 
  of the  bill available  in LIOs  and suggested  that it  has                 
  progressed  too fast.   Mr. Whitworth said  that the present                 
  version of  the bill  goes too  far in placing  "all of  the                 
  cards"  in  DNR  directors while  leaving  nothing  to state                 
  voters.    Division  directors  should   not  be  placed  in                 
  positions where they determine which issues and criteria are                 
  important to the public.  Public input is one of  the checks                 
  and  balances  that  makes  the  system  work.    Successful                 
  resource   allocations   must   be    arrived   at   through                 
  collaborative  effort  of  all  stakeholders.   Contrary  to                 
  recent supreme court  decisions that  DNR must consider  the                 
  probable  cumulative  impact  of  all  activities,  the bill                 
  unreasonably narrows the scope of the best interest finding.                 
  Mr. Whitworth urged that the bill not progress.                              
                                                                               
  PELICAN                                                                      
                                                                               
  TOM  ARMOUR,  City  Administrator,  Pelican, Alaska,  voiced                 
  concern over the rapid progress of the bill.  He expressed a                 
  preference for  CSSB 308  (Res) over the  original bill  but                 
                                                                               
                                                                               
  concurred with  earlier comments regarding need for thorough                 
  review by the Dept. of Law.                                                  
                                                                               
  End, SFC-94, #18, Side 2                                                     
  Begin, SFC-94, #20, Side 1                                                   
                                                                               
  Co-chair Pearce announced that  teleconference discussion of                 
  SB 308  would continue at  the February  28, 1994,  meeting.                 
  She encouraged those participating or wishing to participate                 
  by  teleconference to  fax  written  testimony and  proposed                 
  amendments to committee for inclusion in members' files.                     
                                                                               
  Senator Jacko  requested a  detailed  sectional analysis  of                 
  CSSB 308 (Res).                                                              
                                                                               
  ADJOURNMENT                                                                  
                                                                               
  The meeting was adjourned at approximately 11:00 a.m.                        
                                                                               

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