Legislature(1999 - 2000)

04/23/1999 08:07 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
MINUTES                                                                                                                         
SENATE FINANCE COMMITTEE                                                                                                        
April 23, 1999                                                                                                                  
8:07 A.M.                                                                                                                       
                                                                                                                                
TAPES                                                                                                                           
                                                                                                                                
SFC-99 #108, Side A & B                                                                                                         
SFC-99 #109, Side A & B                                                                                                         
                                                                                                                                
CALL TO ORDER                                                                                                                   
                                                                                                                                
Co-Chair John Torgerson convened the meeting at                                                                                 
approximately 8:07 A.M.                                                                                                         
                                                                                                                                
PRESENT                                                                                                                         
                                                                                                                                
Co-Chair John Torgerson, Senator Randy Phillips, Senator                                                                        
Dave Donley, Senator Loren Leman, Senator Gary Wilken,                                                                          
Senator Al Adams, and Senator Pete Kelly.                                                                                       
                                                                                                                                
Also Attending:                                                                                                                 
                                                                                                                                
SENATOR ROBIN TAYLOR; MEL KROGSENG, Staff, Senator Robin                                                                        
Taylor; PAT CARTER, Staff, Senator Drue Pearce; SENATOR DRUE                                                                    
PEARCE; MARY JACKSON, Staff, Senator John Torgerson; LAMAR                                                                      
COTTON, Deputy Commissioner, Department of Community and                                                                        
Regional Affairs; ERIC YOULD, Executive Director, Alaska                                                                        
Rural Electric Association (ARECA), Anchorage; BRETT HUBER,                                                                     
Staff, Senator Rick Halford; DICK BISHOP, Vice-President,                                                                       
Alaska Outdoor Council (AOC), Juneau; GERON BRUCE,                                                                              
Legislative Liaison, Office of the Commissioner, Department                                                                     
of Fish and Game.                                                                                                               
                                                                                                                                
Teleconferenced:                                                                                                                
                                                                                                                                
DICK MYLIUS, Resource Assessment & Development, Division of                                                                     
Lands, Department of Natural Resources, Anchorage; JUDY                                                                         
BRADY, Executive Director, Alaska Oil and Gas Commission,                                                                       
Anchorage; CHARLES WALLS, President & CEO, Alaska Village                                                                       
Electric Coop (AVEC), Anchorage; BRUCE KOVARIK, Executive                                                                       
Director, Association of Alaska Housing Authority (AAHA),                                                                       
Anchorage; DICK ENERMAN, Planner, Division of Energy,                                                                           
Anchorage; BRAD REEVE, General Manager, Kotzebue Electric                                                                       
Association (KEA), Kotzebue; WALTER SAMPSON, NANA                                                                               
Corporation, Kotzebue; MIKE SALLEE, Commercial Fisherman,                                                                       
Ketchikan; LANCE NELSON, Assistance Attorney General,                                                                           
Natural Resources Section, Civil Division, Department of                                                                        
Law, Anchorage.                                                                                                                 
                                                                                                                                
SUMMARY INFORMATION                                                                                                             
                                                                                                                                
                                                                                                                                
SB   7-INCREASE LAND GRANT TO UNIV. OF ALASKA                                                                                   
                                                                                                                                
CSSB 7(FIN) was reported out of Committee with a "do pass"                                                                      
recommendation and with fiscal notes by the Department of                                                                       
Natural Resources dated 3/5/99, the University of Alaska                                                                        
dated 1/22/99 and the Department of Fish and Game dated                                                                         
1/29/99.                                                                                                                        
                                                                                                                                
SB  68-COOPERATION WITH FEDERAL AGENCIES                                                                                        
                                                                                                                                
SB 68 was HEARD and HELD in Committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
SB 134-OIL & GAS CONS. COMN./CONSERV. TAX                                                                                       
                                                                                                                                
CSSB 134(FIN) was reported out of Committee with a "do                                                                          
pass" recommendation and with fiscal notes by the                                                                               
Department of Revenue dated 4/14/99 and the Department of                                                                       
Administration dated 4/12/99.                                                                                                   
                                                                                                                                
SB 157-POWER COST EQUALIZATION                                                                                                  
                                                                                                                                
SB 157 was HEARD and HELD in Committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
Co-Chair Torgerson called the Senate Finance Committee                                                                          
meeting to order at approximately 8:08 A.M.                                                                                     
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 7                                                                                                               
"An Act relating to the University of Alaska and                                                                                
university land, and authorizing the University of                                                                              
Alaska to select additional state land."                                                                                        
                                                                                                                                
CS FOR SENATE BILL NO. 7(RES)                                                                                                   
"An Act relating to the University of Alaska and                                                                                
university land, and authorizing the University of                                                                              
Alaska to select additional state land."                                                                                        
                                                                                                                                
Senator Robin Taylor spoke to work draft version #1-                                                                            
LS0072\K, Luckhaupt, 3/24/99.  [Copy on File].  He                                                                              
explained the changes between that version and the one                                                                          
previously adopted in the Resources Committee.  Senator                                                                         
Taylor advised that the proposed version would be clearer                                                                       
and easier for everyone to follow.                                                                                              
                                                                                                                                
MEL KROGSENG, Staff, Senator Robin Taylor, commented that                                                                       
Legal Counsel, Jerry Luckhaupt, had recommended the above                                                                       
mentioned changes.                                                                                                              
                                                                                                                                
Senator Leman MOVED to adopt the "K" version as the                                                                             
working document before the Committee.  There being NO                                                                          
OBJECTION,  it was adopted.                                                                                                     
                                                                                                                                
Co-Chair Torgerson advised that Amendments #1 and #2 had                                                                        
been incorporated into the new committee substitute.                                                                            
[Copies on File].                                                                                                               
                                                                                                                                
Following discussion between Senator Donley and Co-Chair                                                                        
Torgerson, it was decided that only the bottom portion of                                                                       
Amendment #3 would be offered.  [Copy on File].  That                                                                           
language would insert: "Must be managed in a manner that                                                                        
permits the continuation of subsistence, sport hunting and                                                                      
sport fishing" to the maximum extent possible.                                                                                  
                                                                                                                                
Senator Donley MOVED to adopt that language.  Senator Taylor                                                                    
explained the language had not been inserted because by                                                                         
listing specific activities, then others are then precluded.                                                                    
He recommended that rather than listing every conceivable                                                                       
match, it was the intent to remove specific designations and                                                                    
merely use;  "Continuation of traditional uses of the                                                                           
land", leaving the category broader.  He reiterated that                                                                        
the language had been intentionally left generic.                                                                               
                                                                                                                                
Senator Donley agreed with Senator Taylor and suggested that                                                                    
the concern could be addressed by adding the language:                                                                          
"Including, but not limited to".                                                                                                
                                                                                                                                
Senator Donley MOVED to WITHDRAW Amendment #3.  There being                                                                     
NO OBJECTION, Amendment #3 was withdrawn.                                                                                       
                                                                                                                                
Senator Adams MOVED to adopt Amendment #4, 1-LS0072\I.2,                                                                        
Luckhaupt, 3/3/99.  [Copy on File].  He stated that there                                                                       
are statewide municipalities which have not completely                                                                          
selected their lands.                                                                                                           
                                                                                                                                
Senator Taylor countered that there are municipalities                                                                          
around the State, which over the years have been precluded                                                                      
from making certain selections either by the Mental Health                                                                      
Trust Fund litigation or other factors.  He recognized that                                                                     
it is a problem.  He added that he was willing to work on a                                                                     
viable solution to address the concern.  Senator Taylor                                                                         
pointed out that Line #8 of the amendment, stipulates that                                                                      
the "guts" of the bill would only take effect if each                                                                           
municipality of the State was in existence on the effective                                                                     
date of that section. He recommended that a percentage                                                                          
number be added in order to make the selection process.  He                                                                     
reiterated that he was willing to work on that concern,                                                                         
however, he felt that the proposed language "went too                                                                           
far".                                                                                                                           
                                                                                                                                
Senator Adams MOVED to WITHDRAW Amendment #4.  There being                                                                      
NO OBJECTION, Amendment #4 was withdrawn.                                                                                       
                                                                                                                                
Senator Adams MOVED to adopt Amendment #5.  [Copy on File].                                                                     
Co-Chair Torgerson OBJECTED for the purpose of discussion.                                                                      
                                                                                                                                
Senator Adams stated that the amendment would clarify that                                                                      
if the University did not reimburse the Department for                                                                          
reasonable costs incurred in the selection, platting and                                                                        
surveying of the land, the Department could not convey the                                                                      
land to the University of Alaska.                                                                                               
                                                                                                                                
Senator Taylor commented that the situation should be worked                                                                    
out between the University and the Department of Natural                                                                        
Resources. Senator Adams argued that the land would not be                                                                      
available if that portion of the Department of Natural                                                                          
Resources budget was not addressed for the current year                                                                         
budget.  He stressed the concerns of adequately funding the                                                                     
Lands Division in FY00.                                                                                                         
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR:  Adams, Phillips, Donley                                                                                              
OPPOSED:  Leman, Wilken, P. Kelly, Torgerson                                                                                    
                                                                                                                                
Senator Green and Senator Parnel were not present for the                                                                       
vote.                                                                                                                           
                                                                                                                                
The MOTION FAILED (3-4).                                                                                                        
                                                                                                                                
DICK MYLIUS, Resource Assessment & Development, Division of                                                                     
Lands, Department of Natural Resources, Anchorage,                                                                              
(Testified via Teleconference) offered to answer questions                                                                      
of the Committee.  He pointed out that the Department had                                                                       
previously testified in opposition to SB 7.                                                                                     
                                                                                                                                
Mr. Mylius testified the Department's concerns are that the                                                                     
process for identifying the 250,000 acres would be time                                                                         
consuming, expensive and a contentious process.  He pointed                                                                     
out that the Department had difficulty in identifying land                                                                      
to constitute the Mental Health Trust and that there was                                                                        
much public opposition.  The Department estimates that it                                                                       
would cost over $1 million dollars per year to survey and                                                                       
transfer that land.  He reiterated that the Senate Finance                                                                      
Committee in this year's proposed budget had basically                                                                          
"gutted" the Division of Lands, the agency responsible to                                                                       
take the lead in providing this transfer.                                                                                       
                                                                                                                                
Senator Phillips interjected that he "took exception" to                                                                        
this testimony.  Co-Chair Torgerson requested that Mr.                                                                          
Mylius restrict his testimony to the bill and not the                                                                           
budgetary actions.                                                                                                              
                                                                                                                                
Mr. Mylius continued, the Department has concerned regarding                                                                    
the impact the proposed bill would have on the                                                                                  
municipalities because over 600,000 acres are currently owed                                                                    
to the municipalities.  The same lands that the University                                                                      
wants are the ones which municipalities also request.  Mr.                                                                      
Mylius concluded that this bill would create an uncertainty                                                                     
regarding land ownership in the State of Alaska.                                                                                
                                                                                                                                
Senator Phillips questioned if zero dollars had been given                                                                      
to the Division of Lands.  Mr. Mylius replied that cuts to                                                                      
the Division of Lands were approximately at 17%.                                                                                
                                                                                                                                
Senator Leman MOVED to report CSSB 7(FIN) out of Committee                                                                      
with individual recommendation and with the accompanying                                                                        
fiscal notes.  There being NO OBJECTION, it was so ordered.                                                                     
                                                                                                                                
CSSB 7(FIN) was reported out of Committee with a "do pass"                                                                      
recommendation and with fiscal notes by the Department of                                                                       
Natural Resources dated 3/5/99, the University of Alaska                                                                        
dated 1/22/99 and the Department of Fish and Game dated                                                                         
1/29/99.                                                                                                                        
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 134                                                                                                             
"An Act authorizing the Alaska Oil and Gas                                                                                      
Conservation Commission to determine the amount of and                                                                          
to collect a charge for operating wells subject to the                                                                          
commission's jurisdiction, and to allocate expenses of                                                                          
investigation and hearing, and repealing the oil and                                                                            
gas conservation tax; and providing for an effective                                                                            
date."                                                                                                                          
                                                                                                                                
CS FOR SENATE BILL NO. 134(RES)                                                                                                 
"An Act authorizing the Alaska Oil and Gas                                                                                      
Conservation Commission to determine the amount of and                                                                          
to collect a charge for operating wells subject to the                                                                          
commission's jurisdiction, and to allocate expenses of                                                                          
investigation and hearing; repealing the oil and gas                                                                            
conservation tax; and providing for an effective                                                                                
date."                                                                                                                          
                                                                                                                                
PAT CARTER, Staff, Senator Drue Pearce, explained that the                                                                      
Alaska Oil and Gas Conservation (AOGCG) had been created to                                                                     
protect the public interest through enforcement of the                                                                          
Alaska Oil and Gas Conservation Act.  The goal of the                                                                           
Commission is to ensure that no hydrocarbons are wasted and                                                                     
that operations are conducted in a manner that provides                                                                         
maximum recovery of the resources.  SB 134 repeals the                                                                          
existing Oil and Gas Conservation Tax and institutes a                                                                          
stable funding source to assure that the Commission is                                                                          
capable of carrying out their objectives.                                                                                       
                                                                                                                                
Mr. Carter continued, the original intent of the legislation                                                                    
was to have the oil and gas industry pay for the function of                                                                    
the Commission through the Oil and Gas Conservation Tax.                                                                        
While this system may have been adequate in the past, it no                                                                     
longer is sufficient to cover the costs associated with the                                                                     
operation of that Commission.  The conservation tax is                                                                          
directly proportional to production with a four mils per                                                                        
barrel fee rate.  The work of the Commission, however, is                                                                       
not proportional to the production of oil and gas.                                                                              
Production is declining but the work of the Commission is                                                                       
not.                                                                                                                            
                                                                                                                                
Mr. Carter pointed out that SB 134 would create a program                                                                       
receipt system in which the regulatory cost charge is                                                                           
directly associated with the total volume of fluids produced                                                                    
or injected.  This type of system more accurately reflects                                                                      
with the factors directly associated with the workload of                                                                       
the Commission.  He advised that the Commission had                                                                             
experienced budget difficulties in the past, even when the                                                                      
tax proceeds exceeded annual appropriations. He testified                                                                       
that AOGCC is currently encountering budget difficulties                                                                        
that are directly related to the decline in oil production.                                                                     
SB 134 would create a stable funding source that will enable                                                                    
the AOGCC to provide the monitoring services necessary to                                                                       
protect the future of Alaskan interests.                                                                                        
                                                                                                                                
Senator Adams inquired if the oil industry supported the                                                                        
bill.    Mr. Carter responded that the oil industry had not                                                                     
yet spoken with Senator Pearce's office.                                                                                        
                                                                                                                                
Senator Adams requested clarification of changes made in the                                                                    
Senate Resources Committee.  Mr. Carter stated that changes                                                                     
had been made to the cost allocations.  He added that there                                                                     
had been concerns regarding the past unitization agreements,                                                                    
which are unforeseen costs that occur throughout the                                                                            
budgetary year.                                                                                                                 
                                                                                                                                
Co-Chair Torgerson questioned if any municipal government                                                                       
would be exempted through Section #5.  Mr. Carter did not                                                                       
know of any exemptions other than those directly related to                                                                     
SB 134.                                                                                                                         
                                                                                                                                
Co-Chair Torgerson referenced Page #1, Lines 11-12, which                                                                       
refers to regulatory charges, paid by the permittee.  He                                                                        
questioned the inclusion of that language:  "The ability to                                                                     
pay".  Mr. Carter commented that he did not know why that                                                                       
language had been included, which had been brought forward                                                                      
from the AOGCC document.   Co-Chair Torgerson asked if the                                                                      
sponsor would object to removing that language.  Mr. Carter                                                                     
replied that there would be no objection.                                                                                       
                                                                                                                                
Senator Donley MOVED a conceptual Amendment #1, to delete                                                                       
the above mentioned language on Page #1, Line 12, "ability                                                                      
to pay".                                                                                                                        
                                                                                                                                
Mr. Carter noted that there was a committee substitute                                                                          
available containing the technical corrections made by the                                                                      
legal department at AOGCC, the "Z" version of the proposed                                                                      
legislation.  Co-Chair Torgerson requested that version be                                                                      
copied for Committee members.                                                                                                   
                                                                                                                                
Senator Donley MOVED to WITHDRAW Amendment #1.  There being                                                                     
NO OBJECTION, Amendment #1 was withdrawn.                                                                                       
                                                                                                                                
JUDY BRADY, Executive Director, Alaska Oil and Gas                                                                              
Commission, Anchorage, (Testified via Teleconference),                                                                          
stated that the Commission has reviewed SB 134 and that                                                                         
comments and concerns were voiced.  She emphasized that the                                                                     
Commission does not support SB 134 because they believe that                                                                    
the bill would weaken oversight and control over State                                                                          
taxation and spending.  She added that it is critical that                                                                      
AOGCC maintains its ability to issue permits and decisions                                                                      
that are required for on-going oil field operations.  To                                                                        
that end, AOGCC recommends that they remain appropriately                                                                       
funded so to be a fully functional and independent entity.                                                                      
Ms. Brady informed members that there are concerns with the                                                                     
funding source and the funding mechanism embodied in SB 134.                                                                    
All these concerns were conveyed to both the Administration                                                                     
and the Legislature.                                                                                                            
                                                                                                                                
Ms. Brady continued, AOGCC members have concerns with moving                                                                    
funding from AOGCC general fund appropriation to a non-                                                                         
general fund category since it would lessen legislative                                                                         
oversight of the Commission's budget.  This legislation                                                                         
would create a virtually unfunded taxing mechanism.  It is                                                                      
the combination of how the tax would be established to a                                                                        
regulatory process plus moving to the non-general fund                                                                          
combination which will be of great concern to the                                                                               
Commission.  She noting that AOGCC was willing and committed                                                                    
to work with the Legislature during the interim to develop                                                                      
an appropriate and accountable way to fund AOGCC in the                                                                         
future.                                                                                                                         
                                                                                                                                
Senator Phillips viewed the above testimony as inconsistent                                                                     
with previous recommendations of that Commission.  Ms. Brady                                                                    
replied that there has been a struggle in the State in how                                                                      
to address non-general funds.  She emphasized that moving a                                                                     
budget would require a different accounting system.  The                                                                        
concern for AOGCC is how the bill proposes to tax so that                                                                       
the regulatory group can establish the taxes. She pointed                                                                       
out that AOGCC already pays tax and regulation fees.  The                                                                       
Legislature did not always appropriate the money as it was                                                                      
competing with other needs.  The amount of funds that were                                                                      
paid to that tax now has declined as the needs have risen.                                                                      
                                                                                                                                
SENATOR PEARCE explained the change in the funding                                                                              
mechanism.  She noted that there were no complaints from the                                                                    
industry when that was added; they did not want to pay for                                                                      
other utilities.  The mechanism does charge a portion of the                                                                    
fees to re-inject the liquids, which definitely differs from                                                                    
other oil producing states.  She indicated that the re-                                                                         
injection process is a portion of the AOGCC's                                                                                   
responsibility.                                                                                                                 
                                                                                                                                
Mr. Carter explained the changes made to the Senate                                                                             
Resources version of the legislation.                                                                                           
                                                                                                                                
                                                                                                                                
TAPE SFC-99 #108 Side B                                                                                                         
                                                                                                                                
                                                                                                                                
Senator Leman pointed out that language on Page 2, Lines 15-                                                                    
22, was very confusing.  Mr. Carter replied that the total                                                                      
volume of liquid would be approximately 3.3 billion.  He                                                                        
further explained the mathematical procedure involved in                                                                        
determining that number.  Senator Leman recognized that it                                                                      
was intended to be the volumetric procedure of the volume                                                                       
and he recommended that language be rewritten.                                                                                  
                                                                                                                                
Senator Pearce agreed that section needed further work.                                                                         
Senator Leman voiced concerns for future litigation with the                                                                    
current proposed language.                                                                                                      
                                                                                                                                
Senator Donley MOVED to adopt work draft version 1-LS0259\V,                                                                    
Chenoweth, 4/20/99, as the version before the Committee.                                                                        
There being NO OBJECTION, it was adopted.                                                                                       
                                                                                                                                
Senator Donley MOVED a change to Page 1, Lines 11 and 12,                                                                       
delete "ability to pay".  There being NO OBJECTION, the                                                                         
change was made to Amendment #1.                                                                                                
                                                                                                                                
Senator Phillips requested that the Department of Revenue                                                                       
address the proposed fiscal note.  Co-Chair Torgerson asked                                                                     
if Senator Pearce understood the positions for requesting                                                                       
funds listed in the fiscal note.  Senator Pearce stated that                                                                    
she did not endorse the use of designated receipts.  She                                                                        
emphasized that the bill before the Committee does not                                                                          
address the supplemental request currently being made.                                                                          
Senator Pearce added that SB 133 and SB 134 had been                                                                            
introduced together and that SB 133 would add new funding to                                                                    
AOGCC.  She stated that the bill before the Committee would                                                                     
staff AOGCC as they currently are.                                                                                              
                                                                                                                                
Senator Phillips voiced his concern regarding the proposed                                                                      
funding for computer enhancement. Senator Pearce explained                                                                      
that AOGCC currently resides in an unsafe office in                                                                             
Anchorage.  The employees are concerned about the darkness                                                                      
that surrounds the building because it is located in an                                                                         
unsafe neighborhood.  If SB 133 passes, the office will be                                                                      
moving to a different facility.  If SB 133 does not pass,                                                                       
that fiscal note will "fall out" as will the moving costs                                                                       
associated with the above-mentioned concerns.                                                                                   
                                                                                                                                
Co-Chair Torgerson asked if the capital costs would be added                                                                    
into the regulatory costs.  Senator Pearce believed they                                                                        
would.                                                                                                                          
                                                                                                                                
Senator Wilken MOVED to adopt the amended CSSB 134 (FIN).                                                                       
Senator Adams OBJECTED.                                                                                                         
                                                                                                                                
Senator Adams noted that he would not vote for any tax                                                                          
unless he was presented with a long-range plan.                                                                                 
                                                                                                                                
Co-Chair Torgerson pointed out that the bill would repeal                                                                       
the tax.  Senator Adams stated that was not his                                                                                 
interpretation of the way the bill was written.  Co-Chair                                                                       
Torgerson pointed out the repealler section, AS 43.57 &                                                                         
10(a) are the tax.                                                                                                              
                                                                                                                                
Senator Adams WITHDREW his OBJECTION.  There being NO                                                                           
further OBJECTION, it was so ordered and the bill was moved                                                                     
from Committee.                                                                                                                 
                                                                                                                                
CSSB 134(FIN) was reported out of Committee with a "do                                                                          
pass" recommendation and with fiscal notes by the                                                                               
Department of Revenue dated 4/14/99 and the Department of                                                                       
Administration dated 4/12/99.                                                                                                   
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 157                                                                                                             
"An Act relating to power cost equalization; and                                                                                
providing for an effective date."                                                                                               
                                                                                                                                
MARY JACKSON, Staff, Senator John Torgerson, reviewed the                                                                       
bill.  She noted that the working group who addressed                                                                           
concerns of this bill included Senator P. Kelly and Senator                                                                     
Adams.                                                                                                                          
                                                                                                                                
Ms. Jackson spoke to the importance of the Power Cost                                                                           
Equalization (PCE) program to areas of Alaska that are                                                                          
reliant upon diesel generated power.  It is recognized and                                                                      
that the bill is intended to extend the life of the program                                                                     
by restructuring some of its components.                                                                                        
                                                                                                                                
The bill would:                                                                                                                 
                                                                                                                                
* Reduce the current 700 kWh to 350 kWh per month.                                                                              
                                                                                                                                
* Expand the method of establishing the base rate by                                                                            
including Kenai and Palmer in the weighted average                                                                              
retail residential rate which currently only                                                                                    
included Anchorage, Fairbanks and Juneau.                                                                                       
                                                                                                                                
? Restructure the program so that the equalization                                                                              
rate applies only to residential customers, as                                                                                  
opposed to the current residential and commercial                                                                               
structure.                                                                                                                      
                                                                                                                                
? Add new language to the program to ensure that the                                                                            
rate charged by a PCE utility is not lower than a                                                                               
rate charged by a non-PCE utility, so to ensure                                                                                 
that a customer who does not receive PCE pays a                                                                                 
higher rate than a customer who does receive a                                                                                  
PCE.                                                                                                                            
                                                                                                                                
Ms. Jackson provided a sectional analysis of the bill.                                                                          
Section 1 adds Kenai and Palmer into the statewide average,                                                                     
which would expand the base of the statewide average.                                                                           
Section 2 decreases the kilowatt-hours from 700 to 350 for                                                                      
consumptive use.  Section 3 adds Kenai and Palmer into the                                                                      
statewide average as does Section 1.  Section 4 decreases                                                                       
the kWh from 700 to 350 kWh and restricts it to residential                                                                     
use.  Sections 5 & 6 are housekeeping references to the new                                                                     
sub Section (j).  Section 7 establishes the effective date                                                                      
of the legislation.                                                                                                             
                                                                                                                                
Ms. Jackson referenced the April 22, 1999, Power Cost                                                                           
Equalization (PCE) spread sheet contained in members                                                                            
packets.  The sheet provides the most recent findings of the                                                                    
working group.  [Copy on File].                                                                                                 
                                                                                                                                
Co-Chair Torgerson pointed out that the State has been                                                                          
funding the current rate, however, the hoped for is 85%                                                                         
funding.  Senator Adams stated that the last supplemental                                                                       
decreased that number to 78%.                                                                                                   
                                                                                                                                
Co-Chair Torgerson asked if the working group had any                                                                           
recommendations which the full Committee should consider.                                                                       
[Copy on File].  Ms. Jackson replied that the analysis of                                                                       
that group was currently before the Committee.  She                                                                             
suggested that it could be approached either from the floor                                                                     
(9.9 to 10.9 cents/kWh) or raising the ceiling.  The working                                                                    
group approached the situation from both places and the                                                                         
premise was to have less of an impact on the small Bush                                                                         
Communities.                                                                                                                    
                                                                                                                                
Senator Kelly referenced the handout.  He explained how the                                                                     
floor was established including the calculations for Pelican                                                                    
and Skagway.  The group is waiting to determine the actual                                                                      
cost to the residential consumer.  The formula used to                                                                          
increase the floor and the impact of combining the ceiling                                                                      
from dropping down would establish the impact on the actual                                                                     
consumer.  He advised that new spreadsheets would be                                                                            
forthcoming in the following week.                                                                                              
                                                                                                                                
Senator Phillips asked the average residential use per month                                                                    
in Alaska.                                                                                                                      
                                                                                                                                
ERIC YOULD, Executive Director, Alaska Rural Electric                                                                           
Cooperative Association (ARECA), Anchorage, replied that the                                                                    
average in rural Alaska was 326 kWh.  The average kWh usage                                                                     
in the Railbelt area is 688 kWh.  He accessed that rural                                                                        
Alaska is roughly half of the other areas.                                                                                      
                                                                                                                                
Senator Phillips asked the basic differences between the                                                                        
rural area and the Railbelt regarding use of electricity.                                                                       
Mr. Yould pointed out that the Blue Ribbon Commission                                                                           
gathered profiles as to what the 326 kWh hours would                                                                            
accomplish.  It is very different from urban areas versus                                                                       
rural Alaska, especially the refrigeration needs are higher.                                                                    
                                                                                                                                
Senator Wilken requested further clarification of the                                                                           
spreadsheet.  Senator P. Kelly pointed out that the                                                                             
spreadsheet was not accurate.                                                                                                   
                                                                                                                                
Mr. Yould suggested that it would be beneficial to go to the                                                                    
500 kWh; the 326 kWh is a monthly average and during the                                                                        
winter months, the usage increases.  He stated that there                                                                       
are individual opportunities throughout the State and that                                                                      
some of the other systems being investigated are very                                                                           
costly.  The State does have the resources; however, the                                                                        
problem is an economy of scale.  He added that diesel                                                                           
generation exists but that there is no natural gas in rural                                                                     
Alaska.  Mr. Yould noted that the State is looking for                                                                          
alternatives but that they are generally capital intensive.                                                                     
                                                                                                                                
Senator Wilken inquired about diesel efficiency and working                                                                     
in conjunction with the University.  Mr. Yould replied that                                                                     
ARECA was not working with the University at this time.  He                                                                     
understood that the University was working with Department                                                                      
of Education with a $2.6 million dollar grant to develop a                                                                      
fuel cell using diesel power.                                                                                                   
                                                                                                                                
Senator Wilken asked if the bill would exclude schools from                                                                     
PCE participation in the rural areas.  Ms. Jackson                                                                              
acknowledged that it would exclude schools.  She noted that                                                                     
Senator Torgerson had sent a letter to the Department of                                                                        
Education regarding this concern.                                                                                               
                                                                                                                                
Senator Wilken asked if Mr. Yould was aware of work being                                                                       
done on fuel cells.  Mr. Yould acknowledged that he was                                                                         
aware of the work which in Anchorage was being funded by                                                                        
Chugiach Electric.  He explained that the problem with fuel                                                                     
cells is that they are all natural gas and that it is                                                                           
difficult to distribute natural gas in rural Alaska.                                                                            
                                                                                                                                
CHARLES WALLS, President & CEO, Alaska Village Electric Coop                                                                    
(AVEC), Anchorage, (Testified via Teleconference), pointed                                                                      
out that the statistics being referenced were three years                                                                       
old.  He requested that the cap cut be reconsidered.  Mr.                                                                       
Walls recommended that the Committee carefully scrutinize                                                                       
Section 7, the new section being added. That section could                                                                      
result in a village utility in not receiving the Power Cost                                                                     
Equalization (PCE) which would establish a new floor for all                                                                    
others.  At the present time, the average revenue per                                                                           
kilowatt-hour for a non-PCE utility is regulated by the                                                                         
Alaska Public Utility Commission (APUC).  He urged that the                                                                     
bill be reconsidered.                                                                                                           
                                                                                                                                
Co-Chair Torgerson asked Mr. Walls to verify that used in                                                                       
the bill were dated from 1996.  Mr. Walls replied that the                                                                      
handout referred to was the last published statistics                                                                           
available and was complied in 1996.                                                                                             
                                                                                                                                
Co-Chair Torgerson requested that Mr. Walls fax pertinent                                                                       
information to the Committee dealing with the proposed bill.                                                                    
                                                                                                                                
BRUCE KOVARIK, Executive Director, Association of Alaska                                                                        
Housing Authority (AAHA), Anchorage, (Testified via                                                                             
Teleconference), testified that the Association supports the                                                                    
PCE program for residential and community customers.  The                                                                       
State's regional housing authority has developed and                                                                            
operated home ownership of housing programs for over 7,000                                                                      
families.  He emphasized that the worse case scenario would                                                                     
be the loss of that program.                                                                                                    
                                                                                                                                
                                                                                                                                
TAPE SFC-99 #109 Side A                                                                                                         
                                                                                                                                
                                                                                                                                
Mr. Kovarik continued his testimony.                                                                                            
                                                                                                                                
Co-Chair John Torgerson commented that it would take time to                                                                    
consolidate the State's commitment and that of AAHA.  Mr.                                                                       
Kovarik noted that a certain amount of funding could be                                                                         
taken from the Native Self-Determination Act and placed into                                                                    
a PCE fund.  That fund would be invested and the interest                                                                       
generated from the fund would go to PCE.                                                                                        
                                                                                                                                
Co-Chair John Torgerson questioned how to get all parties to                                                                    
agree.  Mr. Kovarik reiterated that the participation in the                                                                    
plan would have to be voluntary and flexible.  The Housing                                                                      
Authority has investment strategies and cash flow                                                                               
considerations based upon work to be developed.  It would                                                                       
need to be a plan which allows for the investment of funds.                                                                     
There are federal requirements and regulations.  The hope is                                                                    
for assistance from the Department of Community and Regional                                                                    
Affairs.                                                                                                                        
                                                                                                                                
Co-Chair John Torgerson stressed his intention to move the                                                                      
bill through the Legislature this session.  He commented                                                                        
that if the Housing Authority was to be used as a potential                                                                     
funding source, it is important to finalize that commitment.                                                                    
He was not sure about the possibility of using Alaska                                                                           
Industrial Development Export Authority (AIDEA) funds.                                                                          
                                                                                                                                
Senator Randy Phillips questioned if there had been                                                                             
consideration by the Office of the Governor to use AIDEA                                                                        
funding.  Mr. Kovarik replied that the only comments he had                                                                     
heard were at press conference regarding the consolidation                                                                      
of the Department of Commerce and Economic Development and                                                                      
the Department of Community and Regional Affairs.                                                                               
                                                                                                                                
DICK ENERMAN, Planner, Division of Energy, Anchorage,                                                                           
(Testified via Teleconference) offered to answer any                                                                            
technical questions of the Committee.                                                                                           
                                                                                                                                
Senator Pete Kelly noted that Mr. Enerman would be preparing                                                                    
a spreadsheet for the Committee's review for the following                                                                      
week and recommended any suggestions be given to him.  Mr.                                                                      
Enerman detailed the information he had been requested to                                                                       
present on the spreadsheet.  The spreadsheet would indicate                                                                     
for each of the PCE utilities, an impact of various changes                                                                     
to the PCE would affect the financial impact.                                                                                   
                                                                                                                                
Co-Chair John Torgerson asked if the average use by month                                                                       
would be included.  Mr. Enerman responded that information                                                                      
was not available and would not be included.  The total                                                                         
residential kWh under PCE and for each utility and the                                                                          
number residential customers would be included.  The                                                                            
calculated average annual use per customer could be made                                                                        
with that information, otherwise, only estimates can be                                                                         
made.                                                                                                                           
                                                                                                                                
Co-Chair John Torgerson asked about the data.  Mr. Enerman                                                                      
replied he would be using data from FY96.  Data from FY97                                                                       
and FY98 had not been compiled and examined at present time,                                                                    
however, if possible, he would use more current information.                                                                    
Co-Chair Torgerson asked if the data would be more current                                                                      
than 1986.  Mr. Enerman did not believe that it would be                                                                        
because at this time, that is all which has been published.                                                                     
                                                                                                                                
Senator Adams asked Mr. Enerman's spreadsheet could indicate                                                                    
the effect of changing the floor from 9.9 to 10.9.  Mr.                                                                         
Enerman acknowledged that was his intent.                                                                                       
                                                                                                                                
BRAD REEVE, General Manager, Kotzebue Electric Association                                                                      
(KEA), Kotzebue, (Testified via Teleconference), testified                                                                      
that having power is an important aspect of the future.  He                                                                     
stated that a flat 350 kWh per month rate would not                                                                             
adequately recognize the actual use patterns in Alaska.                                                                         
                                                                                                                                
Mr. Reeve added that KEA has raised two other utility grade                                                                     
wind turpins in Kotzebue.  He suggested that would be the                                                                       
technology that will benefit rural Alaska.  The goal is to                                                                      
reduce annual diesel consumption by about 300 thousand                                                                          
gallons annually.  The program allowed communities to                                                                           
maintain power plants while they investigated alternate                                                                         
power sources that were less expensive.  Mr. Reeve                                                                              
anticipated that diesel would continue to play a large part                                                                     
of power for communities in the future.                                                                                         
                                                                                                                                
WALTER SAMPSON, NANA Corporation, Kotzebue, (Testified via                                                                      
Teleconference), voiced his appreciation of the Committee's                                                                     
effort to address the rural power situation.  He restated                                                                       
the high cost of fuel in rural Alaska and the difficulty in                                                                     
getting it those remote areas.  He pointed out that there                                                                       
are fears in many communities that power systems will be                                                                        
shut down.  Mr. Sampson urged the Committee to give                                                                             
communities an opportunity to look at alternative fuel                                                                          
sources.                                                                                                                        
                                                                                                                                
Co-Chair John Torgerson noted that the bill would be held in                                                                    
Committee.                                                                                                                      
                                                                                                                                
SB 157 was HEARD and HELD in Committee for further                                                                              
consideration.                                                                                                                  
                                                                                                                                
                                                                                                                                
SENATE BILL NO. 68                                                                                                              
"An Act relating to cooperation with federal programs                                                                           
relating to management of fish and game."                                                                                       
                                                                                                                                
CS FOR SENATE BILL NO. 68(RES)                                                                                                  
"An Act relating to cooperation with federal programs                                                                           
relating to management of fish and game."                                                                                       
                                                                                                                                
BRETT HUBER, Staff, Senator Rick Halford, testified that the                                                                    
intent of the proposed legislation is that the State should                                                                     
not be left with the burden of unfunded federal mandates.                                                                       
He pointed out that the Court system has agreed with this.                                                                      
Alaska became a state in 1959. In accordance with the                                                                           
Statehood Act, Secretary Fred Seaton transferred the fish                                                                       
and wildlife management responsibilities to the new State in                                                                    
1960. Since then, Alaskans have witnessed the continued                                                                         
erosion of their fish and wildlife management authorities.                                                                      
Mr. Huber pointed out that passage of federal legislation                                                                       
such as the Marine Mammal Protection Act, the Endangered                                                                        
Species Act, the Magnuson Fishery Conservation and                                                                              
Management Act, and the Alaska National Interest Lands                                                                          
Conservation Act have all contributed directly or                                                                               
indirectly to the loss of jurisdiction.  Mr. Huber                                                                              
continued, equally important are the administrative actions                                                                     
and legislative interpretations developed by the various                                                                        
federal agencies.  In a recent transmittal to the                                                                               
Superintendent of Glacier Bay National Park and Preserve,                                                                       
Governor Knowles clearly indicated the growing conflict                                                                         
with the federal agencies.                                                                                                      
Mr. Huber commented that the Governor has commented on the                                                                      
proposed rule to phase out commercial fishing in Glacier Bay                                                                    
proper and to develop a cooperative management and planning                                                                     
system for the remainder of the marine waters. The 1998                                                                         
Congressional amendments to Glacier Bay National Park and                                                                       
Preserve (NPP) did require cooperation in the development of                                                                    
a management plan.  Mr. Huber pointed out that it was                                                                           
obvious from the environmental assessment that the agency                                                                       
would attempt to exercise its prerogative of overriding                                                                         
State management when the agency decides the necessity to                                                                       
protect the park "resources and values."                                                                                        
Mr. Huber noted that Alaska's fisheries management has been                                                                     
more successful than the Federal management it succeeded.                                                                       
Although most resources are transient to the Park, it is                                                                        
believed that Alaska will now be required to establish a                                                                        
much expanded and expensive research and management program                                                                     
just to satisfy the demands of the National Park Service,                                                                       
which has taken the form of an unnecessary and unfunded                                                                         
mandate.                                                                                                                        
Mr. Huber stressed that there are a growing number of                                                                           
unfunded mandates associated with the preempted actions of                                                                      
the federal agencies. On June 6 and 7, 1996, the U.S. Fish                                                                      
and Wildlife Service released material related to the                                                                           
implications of Federal Management of Subsistence Fisheries                                                                     
in Alaska.  The document states that two scenarios could                                                                        
occur for Federal subsistence management.                                                                                       
The first scenario would assume that the State of Alaska                                                                        
would cooperate with the federal managers, allowing federal                                                                     
management activities to supplement State management in a                                                                       
partnership effort. The second scenario assumes that the                                                                        
State would not cooperate, requiring a complete duplication                                                                     
of the State system with federal staff to perform all                                                                           
management.  He warned that would be more expensive.                                                                            
Mr. Huber continued, Congress and the Federal Courts have                                                                       
made it clear that states should not be faced with unfunded                                                                     
Federal mandates. During this period of severe State budget                                                                     
deficits, Mr. Huber noted that it is important that the                                                                         
Federal government pay its share, especially when it is the                                                                     
intent to preempt traditional State management of resources.                                                                    
                                                                                                                                
Mr. Huber advised that the bill would not prohibit the                                                                          
cooperation of the Federal agencies. It would require that                                                                      
when Federal actions restrict State management of fish and                                                                      
game resources, the State would be fully reimbursed for any                                                                     
action taken in that cooperative effort.                                                                                        
                                                                                                                                
Mr. Huber listed the points of the Alaska National Interest                                                                     
Lands Conservation Act (ANILCA) unfunded federal mandate.                                                                       
                                                                                                                                
? To date, the federal preemption under ANILCA of                                                                               
State fish and game management has been mostly                                                                                  
applied to wildlife.                                                                                                            
                                                                                                                                
? State management costs have increased                                                                                         
significantly in an attempt to comply with                                                                                      
federal law.                                                                                                                    
? ANILCA provided for reimbursement of up to $5                                                                                 
million for 50% of the State's effort to implement                                                                              
subsistence provisions in law.                                                                                                  
? The federal government has never provided over $1                                                                             
million, despite the fact that the State has                                                                                    
consistently submitted $2.0 to $3.5 million in                                                                                  
reimbursable expenses.                                                                                                          
? The reimbursable expenses submitted to the                                                                                    
federal agencies should have been much higher, as                                                                               
expenses associated with data gathering required                                                                                
by the Advisory Committees and Regional Boards,                                                                                 
although, they qualified for federal                                                                                            
reimbursement and were never submitted.                                                                                         
? The federal agencies used the State technical                                                                                 
staff as management instructors until they                                                                                      
reached a point of self-sufficiency and technical                                                                               
independence. This is clearly illustrated by the                                                                                
areas where State wildlife management decisions                                                                                 
have been preempted by the federal process.                                                                                     
? The federal agencies are now proposing to                                                                                     
duplicate the same process for fisheries.                                                                                       
? To illustrate how much the State is spending to                                                                               
facilitate federal management, the "Implications                                                                                
of Federal Management" booklet indicates that it                                                                                
would cost $9 million dollars to implement with                                                                                 
State cooperation and $31 million dollars to                                                                                    
implement without State cooperation. In other                                                                                   
words, the State is subsidizing the federal                                                                                     
program to the tune of almost $22 million per                                                                                   
year.                                                                                                                           
                                                                                                                                
Senator Adams questioned if Senator Halford would support                                                                       
cooperation between the State and the federal government in                                                                     
the management of the State's fish and game resource.  Mr.                                                                      
Huber believed that Senator Halford did not favor duel                                                                          
management.                                                                                                                     
                                                                                                                                
Senator Al Adams questioned if the bill would send a message                                                                    
to the public that the Legislature has given up on the                                                                          
possibility of a resolution.  Mr. Huber advised that there                                                                      
are other bills that recognize these issues.                                                                                    
                                                                                                                                
MIKE SALLEE, Commercial Fisherman, Ketchikan, (Testified via                                                                    
Teleconference), spoke in support of the proposed                                                                               
legislation.  He stated that if there was a federal takeover                                                                    
that the State should not be required to pay the costs of                                                                       
operation.  Mr. Sallee voiced concern with Section 1(a) and                                                                     
the viability of the fish and game population.                                                                                  
                                                                                                                                
LANCE NELSON, Assistance Attorney General, Natural Resources                                                                    
Section, Civil Division, Department of Law, Anchorage,                                                                          
(Testified via Teleconference), stated that there were                                                                          
several legal concerns with the proposed legislation.  Mr.                                                                      
Nelson noted that the restriction of cooperation with the                                                                       
federal government could be unconstitutional and that the                                                                       
Legislature can not restrict the Executive Branch.  He felt                                                                     
that the Court system would rule the law unconstitutional in                                                                    
relationship to the separation of power rules.                                                                                  
                                                                                                                                
Mr. Nelson was concerned that the restrictions would                                                                            
prohibit the State's ability to take legal action against                                                                       
the federal government for regulations on the management of                                                                     
fish and game.                                                                                                                  
                                                                                                                                
DICK BISHOP, Vice-President, Alaska Outdoor Council (AOC),                                                                      
Juneau, testified that the Council supported the bill.  He                                                                      
stated that a stronger incentive or requirement for                                                                             
compensation for the State for costs associated with federal                                                                    
fish and wildlife management agencies is essential.                                                                             
                                                                                                                                
Mr. Bishop added that even when the State was in compliance                                                                     
with ANILCA, the federal support that had been authorized by                                                                    
Congress was not fulfilled.  He emphasized that fair                                                                            
compensation for services rendered are important in this                                                                        
concern.                                                                                                                        
                                                                                                                                
GERON BRUCE, Legislative Liaison, Office of the                                                                                 
Commissioner, Department of Fish and Game, testified against                                                                    
the proposed legislation.  He emphasized that it is a "sad                                                                      
day" when the Department of Fish and Game must testify                                                                          
before the Legislature on such a bill under consideration.                                                                      
He qualified that statement, noting that the preference                                                                         
would be to testify on a solution to prevent such a law.                                                                        
Mr. Bruce suggested that the way to accomplish that would be                                                                    
to put the vote before the people.                                                                                              
                                                                                                                                
Mr. Bruce reviewed the intention of the bill.  Under SB68,                                                                      
the federal manager would be prohibited from speaking with                                                                      
the State manager, unless the agency from which that federal                                                                    
manager worked, had entered into an agreement to pay the                                                                        
State judicial costs to cooperate with the federal program.                                                                     
                                                                                                                                
                                                                                                                                
TAPE SFC-99 #109 Side B                                                                                                         
                                                                                                                                
                                                                                                                                
Mr. Bruce voiced concern that the information gathered by                                                                       
the Department would then be used against it.  The                                                                              
obligation of the Department's activities is a function to                                                                      
fulfill the constitution mandate for sustained yield                                                                            
management.  He questioned if the State assumes that the                                                                        
federal managers are going to assume the costs of a                                                                             
significant portion of the basic State responsibility.  Mr.                                                                     
Bruce stressed that the Department does not believe that                                                                        
will occur.  Under that situation, there are several                                                                            
possibilities which could happen and that none of them are                                                                      
good.                                                                                                                           
                                                                                                                                
Senator Lyda Green voiced her offense with the reference to                                                                     
the constitutional amendments and the issue of subsistence.                                                                     
Co-Chair John Torgerson requested Mr. Bruce to direct his                                                                       
testimony to the proposed legislation.  Mr. Bruce stressed                                                                      
that SB 68 is about subsistence.  He noted that the                                                                             
Department of Fish and Game has urged the Senate Finance                                                                        
members not to move the bill from Committee.  He advised                                                                        
that such a move would not be of benefit to the Alaska                                                                          
fishery, resources or the people of the State.                                                                                  
                                                                                                                                
Co-Chair John Torgerson advised that the "sad day" was                                                                          
when Governor Knowles failed to defend the State of Alaska's                                                                    
rights issue through the Court System.  He believed that was                                                                    
the "problem".                                                                                                                  
                                                                                                                                
Co-Chair John Torgerson ordered the bill to be HELD in                                                                          
Committee.                                                                                                                      
                                                                                                                                
SB 64 was HEARD and HELD in Committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                     
                                                                                                                                
The meeting adjourned at 10:50 A.M.                                                                                             
                                                                                                                                
SFC-99 (18) 4/23/99                                                                                                             

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