Legislature(2001 - 2002)

02/15/2001 09:02 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                              MINUTES                                                                                         
                     SENATE FINANCE COMMITTEE                                                                                 
                         February 15, 2001                                                                                    
                              9:02 AM                                                                                         
                                                                                                                                
                                                                                                                                
TAPES                                                                                                                       
                                                                                                                                
SFC-01 # 16,  SIDE A                                                                                                          
SFC-01 # 16,  SIDE B                                                                                                          
SFC-01 # 17,  SIDE A                                                                                                          
                                                                                                                              
CALL TO ORDER                                                                                                               
                                                                                                                                
Co-Chair Dave Donley convened  the meeting at approximately 9:02 AM.                                                            
                                                                                                                                
PRESENT                                                                                                                     
                                                                                                                                
Senator Dave Donley, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Jerry Ward, Vice Chair                                                                                                  
Senator Loren Leman                                                                                                             
Senator Alan Austerman                                                                                                          
Senator Lyman Hoffman                                                                                                           
Senator Donald Olson                                                                                                            
Senator Lyda Green                                                                                                              
                                                                                                                                
Also  Attending:   SENATOR  RICK  HALFORD;  MARY GORE,  Juneau  Area                                                          
Director,   Special  Olympics;  JOHN   MAGALOTTI,  Special   Olympic                                                            
Athlete;  JUSTIN ROBERTS,  Special Olympic  Athlete; NIALL  JOHNSON,                                                            
Special  Olympic Athlete;  ANNALEE  MCCONNELL,  Director, Office  of                                                            
Management  and  Budget;  WILLIAM  G.  BRITT,  JR.,  State  Pipeline                                                            
Coordinator,  Office  of the  Commissioner,  Department  of  Natural                                                            
Resources;  KURT FREDRIKSSON,  Deputy  Commissioner,  Department  of                                                            
Environmental  Conservation;   KEN  TAYLOR,  Director,  Division  of                                                            
Habitat  and  Restoration,  Department  of Fish  and  Game;  PATRICK                                                            
GALVIN,  Director, Division  of Governmental  Coordination;  REYMOND                                                            
HENDERSON,  Director, Department  of Administration,  Department  of                                                            
Labor and Workforce  Development; KURT PARKAN, Deputy  Commissioner,                                                            
Department  of Transportation  and Public  Facilities; KEN  FREEMAN,                                                            
Special Assistant, Business  and Gas Line Development, Office of the                                                            
Governor;  JANICE LEVY, Supervising  Attorney,  Oil, Gas and  Mining                                                            
Section, Civil  Division, Department  of Law; LARRY PERSILY,  Deputy                                                            
Commissioner, Department of Revenue                                                                                             
                                                                                                                                
Attending  via Teleconference:    From Anchorage:  KELLY  NICOLELLO,                                                          
Assistant Fire  Marshal, Division of Fire Prevention,  Department of                                                            
Public Safety;  RICHARD MCMAHON, Chief,  Lands Records Information,                                                             
Division of Support Services,  Department of Natural Resources; MARK                                                            
MEYERS, Director,  Division  of Oil and Gas,  Department of  Natural                                                            
Resources                                                                                                                       
                                                                                                                                
SUMMARY INFORMATION                                                                                                         
                                                                                                                                
SB  19-CHILD SUPPORT ENFORCEMENT/SOC SEC. #                                                                                     
                                                                                                                                
The bill moved from Committee.                                                                                                  
                                                                                                                                
SB  80-APPROP: SPECIAL OLYMPICS                                                                                                 
                                                                                                                                
The  Committee  heard from  the  sponsor,  a representative  of  the                                                            
Special Olympics,  and athletes.  An amendment  was adopted  and the                                                            
bill moved from Committee.                                                                                                      
                                                                                                                                
SB  73-SUPPLEMENTAL APPROPRIATIONS/AMEND APPROP.                                                                                
SB  74-FAST TRACK SUPPLEMENTAL APPROPRIATIONS                                                                                   
                                                                                                                                
The Committee  heard from  the departments  involved in the  natural                                                            
gas pipeline efforts. The bill was held in Committee.                                                                           
                                                                                                                                
                                                                                                                                
     CS FOR SENATE BILL NO. 19(HES)                                                                                             
     "An  Act   relating  to  federal   child  support  enforcement                                                             
     requirements  regarding  social  security  number information,                                                             
     employer   reports  about  employees,  and  certain   kinds  of                                                            
     automated data matching  with financial institutions; repealing                                                            
     the termination  date of changes made by ch.  87, SLA 1997, and                                                            
     ch.  132, SLA  1998, regarding  child support  enforcement  and                                                            
     related  programs; repealing  the nonseverability provision  of                                                            
     ch. 132,  SLA 1998; repealing  uncodified laws relating  to ch.                                                            
     87,  SLA 1997,  and ch.  132, SLA  1998; and  providing for  an                                                            
     effective date."                                                                                                           
                                                                                                                                
                                                                                                                                
This was  the second  hearing for  this bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
[TAPE MALFUNCTION]                                                                                                              
                                                                                                                                
It  was  noted  that   there  was  no  further  discussion   on  the                                                            
legislation.                                                                                                                    
                                                                                                                                
Senator Leman  offered a motion to  report from Committee,  CS SB 19                                                            
(HES), with  a new zero fiscal note,  dated February 13,  2001, from                                                            
the Department of Revenue.                                                                                                      
                                                                                                                                
There was no objection and the bill MOVED from Committee.                                                                       
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 80                                                                                                         
     "An  Act making a  special appropriation  to the Department  of                                                            
     Military  and Veterans'  Affairs  for a grant  to 2001  Special                                                            
     Olympics  World Winter  Games; and providing  for an  effective                                                            
     date."                                                                                                                     
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
BILL STOLTZ,  staff  to the bill's  sponsor,  Senator Rick  Halford,                                                            
testified that the $500,000  allocated to the Department of Military                                                            
and Veterans Affairs is  to help cover the costs of food and housing                                                            
for the approaching 2001 Special Olympics World Winter Games.                                                                   
                                                                                                                                
Co-Chair Donley  referred to the proposed Amendment  #1 and asked if                                                            
the bill's sponsor supported it.                                                                                                
                                                                                                                                
Mr.  Stoltz responded  that  the amendment  is consistent  with  the                                                            
intent of  the legislation  to fund food  and housing expenses  with                                                            
the expectation  that any remaining  funds would be returned  to the                                                            
agency.                                                                                                                         
                                                                                                                                
MARY  GORE,  Juneau  Area  Director,  Special  Olympics  in  Juneau,                                                            
emphasized  the  need for  food to  feed  the hungry  athletes.  She                                                            
introduced  three athletes  pointing  out the medals  each wore  and                                                            
explaining that  the victories qualified them to participate  in the                                                            
world games.                                                                                                                    
                                                                                                                                
JOHN MAGALOTTI,  Special Olympic snowboarder, spoke  of his love for                                                            
the sport and  the opportunity to  meet athletes from 80  countries.                                                            
                                                                                                                                
JUSTIN ROBERTS,  Special Olympic alpine skier expressed  that he has                                                            
been  skiing  his  whole  life, the  past  seven  with  the  Special                                                            
Olympics. He stated  that he trains and tries to do  his best in the                                                            
competitions.                                                                                                                   
                                                                                                                                
NIALL  JOHNSON,  Special Olympic  snowboarder,  told  the  Committee                                                            
about the Air  Force Band dances held during the games,  noting that                                                            
at the last event, he danced with Miss Teen Juneau.                                                                             
                                                                                                                                
The Committee members and others present applauded the athletes.                                                                
                                                                                                                                
Amendment #1: This amendment  replaces "operating costs" with "costs                                                            
related  to housing  and food  expenses".  It also adds  a new  bill                                                            
section to  read, "Any  portion of this  appropriation not  expended                                                            
lapses June 30, 2001."                                                                                                          
                                                                                                                                
Senator Leman moved for  adoption. Without objection it was ADOPTED.                                                            
                                                                                                                                
Senator Ward  noted the great  amount of  volunteer efforts  and the                                                            
exposure the  games would bring to  Alaska. He stated, "this  is one                                                            
example of  public funds … [where]  we're going to have a  roll-over                                                            
effect and  good will for  years and years  to come not only  in the                                                            
lives of  the participants  but all  those who got  to enter  in and                                                            
help along with this."                                                                                                          
                                                                                                                                
SENATOR  RICK HALFORD  arrived  and  stated that  the  bill and  the                                                            
accompanying  sponsor  statement  were  self-explanatory.  [Copy  on                                                            
file.] He  added that the  amendment is consistent  with his  intent                                                            
that any unused funds would lapse.                                                                                              
                                                                                                                                
Co-Chair Donley  shared his discussion with US Senator  Ted Stevens,                                                            
Honorary Chair,  2001 Special Olympics  World Winter Games,  and was                                                            
assured there would be an effort to lapse any unnecessary funds.                                                                
                                                                                                                                
Senator  Leman  concurred with  Senator  Ward's  statement.  Senator                                                            
Leman  stated  that  he  carefully  scrutinizes  supplement   budget                                                            
requests,  but that this  request, "is one  that I believe  rises to                                                            
the top." He continued,  "These three young men well-represent  what                                                            
this is  about." He stated  that he was proud  to be a supporter  of                                                            
the legislation.                                                                                                                
                                                                                                                                
Co-Chair   Donley  reminded   the  Committee   of  the  legislative                                                             
commitment  made to  support the  world games,  which helped  secure                                                            
Anchorage as the chosen site.                                                                                                   
                                                                                                                                
Senator  Leman  offered  a motion  to  move SB  80  22-LS0550\A,  as                                                            
amended, from Committee.                                                                                                        
                                                                                                                                
The  motion  carried  without  objection  and the  bill  MOVED  from                                                            
Committee.                                                                                                                      
                                                                                                                                
                                                                                                                                
     SENATE BILL NO. 73                                                                                                         
     "An Act making supplemental appropriations and making and                                                                  
     amending other appropriations; and providing for an effective                                                              
     date."                                                                                                                     
                                                                                                                                
     SENATE BILL NO. 74                                                                                                         
     "An Act making supplemental and other appropriations; and                                                                  
     providing for an effective date."                                                                                          
                                                                                                                                
                                                                                                                                
This was the  second hearing for these  bills in the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
     Section 8                                                                                                                  
     Multiple Departments                                                                                                       
     Gasline-Capital Budget Review Unit (BRU)                                                                                   
     Gas pipeline development-related activities to expedite field                                                              
     season    research    and    other    pre-application     state                                                            
     responsibilities.                                                                                                          
     $1,960,100 general funds                                                                                                   
                                                                                                                                
ANNALEE  MCCONNELL,  Director,  Office  of  Management  and  Budget,                                                            
Office  of the Governor,  shared that  since the  fall of 2000,  the                                                            
governor  has  had state  agencies  working  as  a team  to  advance                                                            
development of  North Slope natural gas. She spoke  to the intensive                                                            
effort  and  the importance   that the  state  support  the  private                                                            
sector's heavy  workload rather than impede those  efforts. She said                                                            
it had become apparent  that the magnitude of the work ahead is more                                                            
than initially predicted.  She noted that the governor has requested                                                            
funding for FY 02 to address  these issues, but that additional work                                                            
must be done before the start of that fiscal year.                                                                              
                                                                                                                                
Ms. McConnell explained  the reasons for submitting the request as a                                                            
capital project  rather than as an operating expense.  She said that                                                            
by  listing  the project  as  a  single  budget  item, it  would  be                                                            
possible  to view the process  as an inter-related  package  between                                                            
the agencies involved.  She also stressed that as a capital project,                                                            
it would be clear  that the efforts are project-specific  instead of                                                            
the on-going state  agency operations. She added that  any positions                                                            
added  would be  funded only  through the  duration  of the  project                                                            
rather than  permanent positions,  which would  be clearer  with the                                                            
capital project designation.                                                                                                    
                                                                                                                                
WILLIAM G.  BRITT, JR.,  State Pipeline Coordinator,  Office  of the                                                            
Commissioner,  Department of  Natural Resources  testified that  the                                                            
supplemental  budget  request  would  help  advance  development  of                                                            
Alaskan's natural gas consistent with the following principles.                                                                 
                                                                                                                                
        · Alaskans working on the project                                                                                       
        · Alaskan businesses providing services and materials for                                                               
          the project                                                                                                           
        · Alaskan consumers with access to the gas                                                                              
        · New  and existing Alaskan industrial users  with access to                                                            
          the gas                                                                                                               
        · Alaskans  receiving  a  fair return  for  the state-owned                                                             
          resources                                                                                                             
                                                                                                                                
Mr.  Britt  asserted   that  the  time  is  right  for  large-scale                                                             
development  of Alaskan natural  gas and that  North America  is the                                                            
market to receive  the gas. He added  that the North American  route                                                            
is  the way  to move  the gas  from  the source  to  the market.  He                                                            
stressed that the gas pipeline  must "be built now because demand is                                                            
up, supplies  are not  keeping up,  storage docks  are down  and the                                                            
price of gas is up as a result."                                                                                                
                                                                                                                                
Co-Chair  Donley interrupted  to stress that  the Committee  did not                                                            
need to be convinced  of the reasons for getting the  gas to market,                                                            
but rather needed  to understand the necessity for  the fast tracked                                                            
money.                                                                                                                          
                                                                                                                                
Mr. Britt  resumed,  saying the  request  would allow  the state  to                                                            
advance the natural gas development project by:                                                                                 
                                                                                                                                
        · establishing a coordinated state permitting process                                                                   
        · beginning to gather data for processing the permits                                                                   
        · working   with project   proponents  to  advocate  Alaskan                                                            
          interests                                                                                                             
        · working  with  project  proponents  to insure  that  their                                                            
          permit application are complete, which would allow the                                                                
          state to move more rapidly when the applications are                                                                  
          received                                                                                                              
        · developing  information on economic and  fiscal issues for                                                            
          policy makers                                                                                                         
        · advocating  Alaskan interests  before the US Congress  and                                                            
          with federal and Canadian agencies                                                                                    
        · informing  Alaskans of the  issues involved in  developing                                                            
          Alaskan natural gas and soliciting their views on those                                                               
          issues                                                                                                                
                                                                                                                                
Mr. Britt stated these efforts would make:                                                                                      
                                                                                                                                
        · the  gas pipeline  project  more responsive  to the  state                                                            
          priorities                                                                                                            
        · state    government   smarter   about   critical    issues                                                            
          surrounding a gas pipeline project                                                                                    
        · better decisions related to those issues                                                                              
        · it possible to authorize the project more quickly when an                                                             
          application is received                                                                                               
        · better permit and authorizations that the state issues                                                                
        · the permits and authorizations that others issue more                                                                 
          responsive to Alaskan priorities                                                                                      
        · Alaska's financial return from the project greater                                                                    
                                                                                                                                
Senator Ward  wanted to know the existing  permitting problems  that                                                            
call for the streamline efforts.                                                                                                
                                                                                                                                
Mr. Britt  stated he would  not characterize  the current system  as                                                            
having problems.  He described his  duties as a coordinator  and the                                                            
discovery  that when  state agencies  work together  with a  unified                                                            
plan,  resources and  information could  be shared  and the  process                                                            
would move efficiently.                                                                                                         
                                                                                                                                
Ms. McConnell  also noted that a coordinated effort  would allow the                                                            
statutory and regulatory process to proceed faster.                                                                             
                                                                                                                                
Ms. McConnell  then addressed Co-Chair Donley's earlier  question on                                                            
the need  for the funds before  the start  of the next fiscal  year.                                                            
She relayed that  producers had already announced  their expectation                                                            
to spend  $75 million over  the next nine  months. She stressed  the                                                            
need for the state to be  prepared to address applications when they                                                            
are submitted.  She added  that the  fiscal issues  also need  to be                                                            
resolved  and that the public  needs to be  educated on the  matter.                                                            
She stated  that in order for field  research and data gathering  to                                                            
begin the upcoming  summer, preparation for that work  must begin at                                                            
once.                                                                                                                           
                                                                                                                                
Senator  Austerman commented  on where  the pipeline  would run  and                                                            
what the  benefits to  Alaska would  be. He was  concerned that  the                                                            
producers  are  hesitant to  discuss  the  matter before  they  have                                                            
decided where they would  like the pipeline. He stressed that he had                                                            
not yet agreed  to allow the producers  to determine that  location.                                                            
He  qualified that  the  pipeline must  be built,  but  that he  was                                                            
uncomfortable with the governor's efforts.                                                                                      
                                                                                                                                
Senator  Wilken  wanted  to  know  how  this  supplemental   request                                                            
involves  the  University  of  Alaska.  He  relayed  President  Mark                                                            
Hamilton's  desire to be included  in the planning of the  pipeline.                                                            
Senator  Wilken  stated that  the  university  had assets  it  could                                                            
"bring to the table."                                                                                                           
                                                                                                                                
Ms. McConnell stated that  it was anticipated that the University of                                                            
Alaska would  be very involved  in the job  training aspects  of the                                                            
project, which would occur in FY 02.                                                                                            
                                                                                                                                
AT EASE 9:25 AM / 9:27 AM                                                                                                       
                                                                                                                                
Department of Environmental Conservation                                                                                      
                                                                                                                                
KURT FREDRIKSSON,  Deputy Commissioner, Department  of Environmental                                                            
Conservation, testified  that the department would play a major role                                                            
in  the gas  line project.  He  listed air  permits  for the  vessel                                                            
station, water  quality issues, domestic wastewater  issues with the                                                            
camp,  solid  waste  and  food  safety,  as  examples  of  the  many                                                            
departmental programs  that would be involved in the  permitting and                                                            
oversight of the project.  He stated that the requested supplemental                                                            
funds  would be used  to help  identify where  potential  permitting                                                            
problems could  arise. He shared that  there is confusion  with what                                                            
the state requires  for environmental protection and  the aspects of                                                            
the project itself.  He explained that the intent  is for the future                                                            
applicant and the department  to prepare an appropriate application.                                                            
He emphasized that submission  of the actual application is expected                                                            
in December 2001.                                                                                                               
                                                                                                                                
Mr. Fredriksson  continued saying  that the department's  main focus                                                            
is air, water and fuel  issues. He pointed out that a portion of the                                                            
requested funds  would be used to  hire an air chemist to  work with                                                            
the industry  on ambient air quality  monitoring and meteorological                                                             
data that must  be collected the summer  of 2001. State statute  and                                                            
federal  requirements,   he informed   the  Committee,  dictate  the                                                            
department to have one year of this data.                                                                                       
                                                                                                                                
Senator Austerman  asked if  the $140,000  allocated to this  effort                                                            
would be utilized during the next four months.                                                                                  
                                                                                                                                
Mr. Fredriksson affirmed  and stressed the producers were requesting                                                            
discussions on this project  to begin in the next month. He stressed                                                            
the need to design  the facilities to avoid potential  environmental                                                            
problems.                                                                                                                       
                                                                                                                                
Co-Chair Donley asked if  this supplemental request would apply only                                                            
to  the  current  year  or  if  the  department  anticipated   these                                                            
expenditures would continue  and whether the department would submit                                                            
requests for additional funds.                                                                                                  
                                                                                                                                
Ms. McConnell  replied that the proposed FY 02 budget  contains such                                                            
a request and  that she could explain in further detail  at members'                                                            
request.  She stressed  that  the supplemental  request  before  the                                                            
Committee at this time was smaller than the FY 02 request.                                                                      
                                                                                                                                
Co-Chair  Donley asked if  the FY 02 request  would be contained  in                                                            
the capital budget.                                                                                                             
                                                                                                                                
Ms.  McConnell  affirmed.   She  spoke  to  additional  information                                                             
received  since  the  December  2000  submittal,   noting  that  the                                                            
Administration would submit amendments to the original proposal.                                                                
                                                                                                                                
Senator Leman requested  backup information detailing the additional                                                            
positions.                                                                                                                      
                                                                                                                                
Mr. Fredriksson stated he would provide such information.                                                                       
                                                                                                                                
Senator Hoffman asked if  the department was working with the Native                                                            
corporations  who  own much  of the  land  that the  pipeline  would                                                            
traverse.                                                                                                                       
                                                                                                                                
Mr. Fredriksson  responded that while no such efforts  had been made                                                            
to date, the department  included working with all landowners in its                                                            
planning process.                                                                                                               
                                                                                                                                
Co-Chair  Donley  understood  that the  oil  companies  had not  yet                                                            
announced a timetable  for the total project and that  their working                                                            
group would start April  1, 2001. He asked why the department needed                                                            
the money at this time.                                                                                                         
                                                                                                                                
Mr. Fredriksson  replied that the  funds are necessary to  "gear up"                                                            
and to acquire  and update the information gathered  during previous                                                            
gas pipeline  discussions held between  1978 and 1982. While  he was                                                            
unsure of the April 1 timeframe,  he knew that discussions regarding                                                            
environmental  issues   had  already  begun.  He  advised  that  the                                                            
industry has hired 50 new  employees, with a goal of 90 employees to                                                            
address this  issue. He relayed  that the  department had a  meeting                                                            
scheduled for February 28, 2001 with the producers.                                                                             
                                                                                                                                
Mr.  Britt  interjected  that the  producers  are  only one  of  the                                                            
project  components. He  stressed  that the producers  have  already                                                            
submitted requests for  approximately $75 million worth of proposals                                                            
and have hired  additional staff in  anticipation for the  projects.                                                            
He stated,  "We are obligated  to advocate  the state's interest  in                                                            
all of these different arenas."                                                                                                 
                                                                                                                                
Senator  Green  asked  if  any  existing  staff  has  the  necessary                                                            
qualifications listed in the proposal.                                                                                          
                                                                                                                                
Mr. Fredriksson answered  that there were such employees and that he                                                            
would like  to fill  the new  positions with  these qualified  staff                                                            
members.  He  singled  out an  employee  currently  working  in  the                                                            
Division of Oil Spill Prevention  and Response who previously worked                                                            
in the  former  gas line  office. He  emphasized the  need for  such                                                            
expertise.  He suggested that new  staff would be hired to  fill the                                                            
existing  positions  and the  expertise  would  be directed  to  the                                                            
natural gas project.                                                                                                            
                                                                                                                                
Senator Green wanted to  know if the department had a prioritization                                                            
mechanism in place to share  these duties if the legislature did not                                                            
fund this request.                                                                                                              
                                                                                                                                
Mr. Fredriksson affirmed  the department does have a system and that                                                            
the  natural  gas  pipeline  project  would  compete  with  existing                                                            
projects, such as air monitoring and air permitting work.                                                                       
                                                                                                                                
Ms. McConnell  added that other industries depend  on the department                                                            
for their projects.  She warned that because many  services are fee-                                                            
based and not funded from  the general fund, the amount of work that                                                            
could be redirected  to the pipeline  project is limited.  She added                                                            
that there is great concern  with the matter of recruitment and that                                                            
many employees  are  being lost to  the federal  government and  the                                                            
private sector.                                                                                                                 
                                                                                                                                
Senator  Green  asked for  the  total  number  of employees  in  the                                                            
Department of Environmental Conservation.                                                                                       
                                                                                                                                
Mr. Fredriksson  replied there were  approximately 425 positions  in                                                            
the department.                                                                                                                 
                                                                                                                                
                                                                   st                                                           
Senator  Leman referred  to HB  361, the  "Fees Bill"  from the  21                                                             
Alaska State Legislature  and asked the state's obligation  for cost                                                            
recovery of this natural gas project under this law.                                                                            
                                                                                                                                
Mr.  Fredriksson   explained  the   implications  of  HB   361  that                                                            
established  a fee system,  which holds  the department accountable                                                             
for its  time and  reimbursement. He  noted that  this law does  not                                                            
require  100 percent  reimbursement  and that  the department  would                                                            
look to the state lease authorities for reimbursement.                                                                          
                                                                                                                                
Senator Leman  urged the accounting  to be detailed and accurate  in                                                            
order to justify what the state may wish to recover.                                                                            
                                                                                                                                
Ms. McConnell  stated that a working  group had already been  formed                                                            
to devise a tracking system to identify any recoverable costs.                                                                  
                                                                                                                                
Senator  Hoffman   asked  about  the  term  of  employment   of  the                                                            
additional staff requested.                                                                                                     
                                                                                                                                
Mr. Fredriksson  referred to a projected  timeframe up through  2002                                                            
when the  issue would  be reconsidered.  He  stressed the  positions                                                            
would not continue past the construction of the pipeline.                                                                       
                                                                                                                                
Department of Fish and Game, Division of Habitat and Restoration                                                              
                                                                                                                                
KEN  TAYLOR,   Director,  Division   of  Habitat  and  Restoration,                                                             
Department  of  Fish  and  Game,  testified  that  the  division  is                                                            
responsible  for ensuring that the  fish and wildlife resources  are                                                            
not impacted,  or that impacts are  avoided during the construction                                                             
of  the gas  pipeline.  He  stated  that  this could  be  done  most                                                            
successfully  when  the division  is involved  in  the planning  and                                                            
design phases  of construction. He  explained that the supplemental                                                             
request  would fund  a minimal approach  to the  issue, funding  two                                                            
positions in FY 01 to prepare  for the upcoming summer field season.                                                            
He stressed the need for  receiving the funds in order to have staff                                                            
in  place  by  the  start  of  the  summer  season,  when  gas  line                                                            
consultants would be in the field.                                                                                              
                                                                                                                                
Mr. Taylor  spoke to the  three critical  field seasons, the  summer                                                            
and  winter of  2001 and  the spring  of 2002.  He  stated that  the                                                            
primary  impacts  to  avoid  are  fisheries  related  and  that  the                                                            
different  field  seasons are  necessary  to survey  impacts  during                                                            
different times of the year.                                                                                                    
                                                                                                                                
Co-Chair Donley wondered  how the division would be able to do field                                                            
surveys without knowing for certain the route of the pipeline.                                                                  
                                                                                                                                
Mr. Taylor  replied  that the  division  would focus  on the  Alaska                                                            
Highway route due to existing permit activity on that location.                                                                 
                                                                                                                                
Co-Chair Donley  challenged that a  recent poll shows 70  percent of                                                            
Alaskans support  a tidewater route. He then asked  if, because most                                                            
of  the  highway route  follows  the  pipeline  corridor,  the  data                                                            
already exists.                                                                                                                 
                                                                                                                                
Mr. Taylor  responded that the existing  data was collected  between                                                            
1978 and  1982 and does not  focus on the  entire area. He  stressed                                                            
that changes have been made and more studies are necessary.                                                                     
                                                                                                                                
Senator Austerman  questioned the  $60,000 allocation for  two four-                                                            
month positions.  He calculated the annual salary  would be $120,000                                                            
per employee  and asked  if that  were appropriate  for the  type of                                                            
work performed.                                                                                                                 
                                                                                                                                
Mr. Taylor  affirmed, explaining that  the positions would  be upper                                                            
level positions,  one supervisor and  one pipeline coordinator,  who                                                            
would supervise  the field  workers. He emphasized  that the  during                                                            
the Trans-Alaskan  Pipeline construction  in the 1970s the  division                                                            
had a field crew of 15.  He stressed that the gas pipeline is a "big                                                            
effort" and the funding level is appropriate for the positions.                                                                 
                                                                                                                                
Senator  Leman asked  if the  division  should rely  on the  project                                                            
sponsors to gather necessary  information rather than collecting the                                                            
information itself.                                                                                                             
                                                                                                                                
Mr. Taylor  agreed and  stressed the effectiveness  of working  with                                                            
industry in the field, identifying solutions together.                                                                          
                                                                                                                                
Senator Ward asked if the  division planned on transferring existing                                                            
employees into the positions.                                                                                                   
                                                                                                                                
Mr. Taylor responded that  while there were qualified people already                                                            
on staff, their workloads  were full. He stated that he did not plan                                                            
to transfer existing  employees into the new positions  but stressed                                                            
that employees  could apply during  the open recruitment  period and                                                            
that they would be considered.                                                                                                  
                                                                                                                                
Senator  Ward  asked  if  the  witness  had  identified  what  other                                                            
projects  would be  impacted if  the supplemental  funding were  not                                                            
provided.                                                                                                                       
                                                                                                                                
Mr. Taylor had  not because 80 percent of the division's  funding is                                                            
already targeted  to existing projects and could not  be redirected.                                                            
                                                                                                                                
                                                                                                                                
Tape SFC-01 #16 Side B   9:50 AM                                                                                                
                                                                                                                                
                                                                                                                                
Senator Ward asked if this  meant no other projects would "drop off"                                                            
because of the natural gas pipeline.                                                                                            
                                                                                                                                
Mr. Taylor did not know  how the division could assume this workload                                                            
with the existing staff level.                                                                                                  
                                                                                                                                
Ms. McConnell  explained  that  project-specific  federal and  other                                                            
fund sources could not be shifted to a different project.                                                                       
                                                                                                                                
Senator Ward  understood that 20 percent  of the division's  funding                                                            
was not project-specific.                                                                                                       
                                                                                                                                
Mr. Taylor responded that  approximately 12 percent is general funds                                                            
and that the legislature  has directed the division  to target those                                                            
funds toward the  statutory permitting responsibilities.  Therefore,                                                            
he  stressed that  without  instructions  from the  legislature  the                                                            
division would continue to follow the directive.                                                                                
                                                                                                                                
Senator Austerman  asked how many  employees work for the  division.                                                            
                                                                                                                                
Mr. Taylor answered there are 90 employees.                                                                                     
                                                                                                                                
Senator  Austerman   wanted  to  know  how  many  were   located  in                                                            
Anchorage.                                                                                                                      
                                                                                                                                
Mr. Taylor estimated the number was between 40 and 43.                                                                          
                                                                                                                                
Senator Hoffman referred  to the $32,000 Department of Environmental                                                            
Conservation  travel  budget,   with  which  that  department  could                                                            
conduct fieldwork.  He wondered how  much fieldwork the Division  of                                                            
Habitat and Restoration  could perform with the only  $3,900 that it                                                            
requested.                                                                                                                      
                                                                                                                                
Mr. Taylor  replied that  most of the fieldwork  would be  conducted                                                            
during  the  upcoming summer  and  that  funds  for that  work  were                                                            
requested in the  FY 02 budget. He stressed that the  initial effort                                                            
would focus on analyzing  the earlier collected data contained in 35                                                            
file cabinets  and to  hire staff  and plan  fieldwork projects.  He                                                            
hoped to fill  the two positions in April, with fieldwork  beginning                                                            
in early June.                                                                                                                  
                                                                                                                                
Office of the Governor, Division of Governmental Coordination                                                                 
                                                                                                                                
PATRICK  GALVIN, Director,  Division of  Governmental Coordination,                                                             
out-laid the division's  primary responsibility for implementing the                                                            
Alaska  Coastal   Management  Program   (ACMP).  He  explained   the                                                            
statutory  obligation  to  make  a  consistency  determination   for                                                            
projects that  require a state or federal permit.  He noted that for                                                            
this   project,   the   division   would   perform   a  consistency                                                             
determination  for the gas pipeline.  He stated that the  request is                                                            
to  hire a  project  review coordinator  who  would  engage in  pre-                                                            
application assistance  for this fiscal year, and perform the actual                                                            
consistency review  when the project is submitted  in December 2001.                                                            
                                                                                                                                
Mr. Galvin explained the  process of coordinating all permit issuers                                                            
to  make  the  determination   of  whether  the  project   would  be                                                            
consistent  with federal  and state  requirements  and also how  the                                                            
permits would be implemented.                                                                                                   
                                                                                                                                
Co-Chair  Donley  asked  which  portion  of the  pipeline  would  be                                                            
subject to the ACMP requirements.                                                                                               
                                                                                                                                
Mr. Galvin  responded  the highway  route would  be subject to  ACMP                                                            
requirements at the origination point on the North Slope.                                                                       
                                                                                                                                
Department of Labor and Workforce Development                                                                                 
                                                                                                                                
REYMOND   HENDERSON,   Director,   Department   of  Administration,                                                             
Department  of  Labor   and  Workforce  Development,   detailed  the                                                            
department's  role in assessing the  occupational supply  and demand                                                            
to determine what job classes  would be required to construct and to                                                            
operate  the gas  pipeline. He  stated  that a new  labor  economist                                                            
position would  supervise existing staff, and that  the remainder of                                                            
the costs would cover associated travel and contractual needs.                                                                  
                                                                                                                                
Senator Green  asked how a three-month  delay in this funding  would                                                            
affect the department's efforts.                                                                                                
                                                                                                                                
Mr. Henderson replied that  the Occupational Employment Survey (OES)                                                            
begins  in October of  each year  and that the  department needs  to                                                            
begin  right  away to  modify  the survey.  He  warned  that if  the                                                            
process did not  begin immediately, the entire survey  project would                                                            
be delayed 12 months.                                                                                                           
                                                                                                                                
Ms.  McConnell  added   that  Department  of  Labor  and   Workforce                                                            
Development  has been  identified  as a  significant  aspect of  the                                                            
overall  gas pipeline  project. She  asserted that  the goal  of the                                                            
legislature,  the Administration and  the private sector  is to fill                                                            
as  many jobs  as possible  with  Alaskans.  With accurate  data  up                                                            
front,  she stated  that the  Administration  would be  in a  better                                                            
position  to work  with the  university  and others  to provide  job                                                            
training and to match Alaskans with employers.                                                                                  
                                                                                                                                
Senator  Green  asked if  industry  already  knew their  needs.  She                                                            
questioned the need for special research.                                                                                       
                                                                                                                                
Mr. Henderson responded  that while the industry may have an idea of                                                            
their  needs,  the  department  needed  to  begin  discussions  with                                                            
experts to "find out exactly what it is going to take."                                                                         
                                                                                                                                
Department of Public Safety, Division of Fire Prevention                                                                      
                                                                                                                                
[Note: Audio malfunction with teleconference sound quality.]                                                                    
                                                                                                                                
KELLY  NICOLELLO, Assistant  State  Fire Marshal,  Division of  Fire                                                            
Prevention,    Department   of   Public    Safety   testified    via                                                            
teleconference  from Anchorage  that the  legislature's approval  of                                                            
the  supplemental  request  would  allow  the  division  to  prepare                                                            
engineering  and training  regarding the  practices and development                                                             
criteria of natural gas  pipeline production. He continued that this                                                            
would allow the  division to respond to the applicant's  request for                                                            
building  and  construction  permits, stressing  the  importance  of                                                            
understanding,  ascertaining  and avoiding  the hazards involved  in                                                            
advancing  technology. He  pointed out that  while the division  has                                                            
experience  with other oil production  facilities, their  experience                                                            
with  natural gas  is limited.  He  anticipated that  this  training                                                            
would help eliminate delays with project approvals.                                                                             
                                                                                                                                
Mr. Nicolello  advised  that if this  request is  not approved,  the                                                            
division  would not alter  the level of  service currently  offered,                                                            
but would be disadvantaged  in pre-construction design and planning.                                                            
                                                                                                                                
Senator Leman wanted to know where the training is available.                                                                   
                                                                                                                                
Mr. Nicolello replied that  the most economical courses were held on                                                            
a regular basis in Chicago, Illinois and Houston, Texas.                                                                        
                                                                                                                                
Senator Leman  found the  particular request  refreshing in  that it                                                            
uses  existing staff.  He  urged other  departments  to "follow  the                                                            
lead" of this department.                                                                                                       
                                                                                                                                
Senator Austerman asked  if the training had to be undertaken within                                                            
the next four months or  whether it could wait until the next fiscal                                                            
year.                                                                                                                           
                                                                                                                                
Mr. Nicolello replied that  the division has been receiving requests                                                            
from planners,  but is currently unable to provide  answers to their                                                            
various questions.                                                                                                              
                                                                                                                                
Senator Ward wanted  to know if the division knew  what courses were                                                            
applicable given that a pipeline route was not yet chosen.                                                                      
                                                                                                                                
Mr. Nicolello answered  that the specialized training would apply to                                                            
the natural gas facilities no matter where they are located.                                                                    
                                                                                                                                
Department of Transportation and Public Facilities                                                                            
                                                                                                                                
KURT PARKAN, Deputy  Commissioner, Department of Transportation  and                                                            
Public Facilities  detailed the request to hire an  Engineer III for                                                            
two  months in  2001.  He explained  that  the department  owns  the                                                            
highway  right-of-way   and  therefore   must  participate   in  any                                                            
permitting  activities. He  continued that  the employee in  the new                                                            
position would develop  a work plan for the next fiscal year as well                                                            
as preparing  right-of-way  files  and make  them  available to  the                                                            
industry.                                                                                                                       
                                                                                                                                
Senator  Austerman  calculated  the  salary  for  this  position  at                                                            
$22,500  for the  requested two  months,  with an  annual salary  of                                                            
$135,000.                                                                                                                       
                                                                                                                                
Mr. Parkan responded  that the figure was higher than  the salary of                                                            
an Engineer III.                                                                                                                
                                                                                                                                
Ms. McConnell  interjected  that the funds  pay for both salary  and                                                            
benefits.                                                                                                                       
                                                                                                                                
Department of Natural Resources                                                                                               
                                                                                                                                
Mr.  Britt shared  that  during FY  01,  the Joint  Pipeline  Office                                                            
proposes  using   the  supplemental  funds  to  begin  implementing                                                             
Administrative  Order # 187, which allows permitting  authorities to                                                            
begin  to prepare  for receipt  of a  gas pipeline  application.  He                                                            
stated that the  major task would be the creation  of a Gas Pipeline                                                            
Office  (GPO)   as  an   operating  unit   of  the  State   Pipeline                                                            
Coordinator's  Office.  He pointed  out that  currently the  Federal                                                            
State Joint Pipeline Office  is the only operating unit of the State                                                            
Pipeline  Coordinator's  Office.  He explained  that  the GPO  would                                                            
provide   multi-agency  one   stop  permitting   authorization   and                                                            
oversight.                                                                                                                      
                                                                                                                                
Mr. Britt detailed that  the supplemental would fund the acquisition                                                            
of office space,  begin to staff the  office and create a  work plan                                                            
that would  allow  the participating  agencies  to work effectively                                                             
together.  He noted  that the Joint  Pipeline  Office would  provide                                                            
management  and engineering  technical work  for the new office.  He                                                            
stated  that   he  intended   to  hire  a   Deputy  State   Pipeline                                                            
Coordinator,  an Administrative  Manager,  a Systems Administrator,                                                             
and a  Records Manager  by the  end of FY  01 to  assist him  in the                                                            
startup  of the  new office.  He anticipated  that  recruitment  for                                                            
these positions  would be difficult and that there  were no existing                                                            
employees  who were  qualified. He  referred to  the vast amount  of                                                            
data  from   the  previous  gas  pipeline   efforts  that   must  be                                                            
inventoried  with gaps  identified  and a  plan written  to  collect                                                            
information  in the summer of 2001.  He added that the Office  would                                                            
need  to  work  with   federal  and  Canadian  agencies   to  create                                                            
compatible  processes for  dealing with the  applications,  and work                                                            
with the applicants  themselves, and  inform and engage the  public.                                                            
                                                                                                                                
[Note: audio recording of teleconference feed is inaudible.]                                                                    
                                                                                                                                
RICHARD  MCMAHON,  Chief, Lands  Records  Information,  Division  of                                                            
Support  Services, Department  of Natural  Resources, testified  via                                                            
teleconference  from Anchorage  on the  goals of  the division  with                                                            
regard to the  project. The first,  he said, is to meet information                                                             
requirements  to allow the GPO to  make decisions. He indicated  the                                                            
need to determine the complex  ownership and right-of-way matters of                                                            
the affected  land. He stressed  that the "sooner  we get a  jump on                                                            
that, the  faster we can  respond to those  kinds of questions  that                                                            
come  up." He  listed  the identification  of  hazardous  materials,                                                            
ecological   assessment,  water  quality,   water  volume   and  the                                                            
archeological  impacts as other areas  where questions could  arise.                                                            
                                                                                                                                
Senator Green asked about  the addition of two employees included in                                                            
the budget request.                                                                                                             
                                                                                                                                
Mr. McMahon detailed  the four part-time positions  spread over five                                                            
divisions.                                                                                                                      
                                                                                                                                
Senator Hoffman  asked for more details  on the $28,000 request  for                                                            
equipment and the $185,000 for contractual services.                                                                            
                                                                                                                                
Mr.  Britt  replied  that the  equipment  would  supply  the  office                                                            
itself. He  relayed the department's  obligation to make  the office                                                            
functional.  He listed the  largest contractual  project for  a file                                                            
inventory,  which he hoped  could begin as  soon as possible.  Staff                                                            
recruitment, he  said is another large procurement  item in addition                                                            
to rent charges  for the existing  staff that would eventually  move                                                            
into the GPO.                                                                                                                   
                                                                                                                                
Mr. McMahon wanted  to make the Committee aware of  the departments'                                                            
cooperation  with  the University  of  Alaska on  obtaining  federal                                                            
funding for a geological mapping project.                                                                                       
                                                                                                                                
Senator  Wilken asked  what proposed  corridor  the mapping  project                                                            
would study.  He wanted to know if  the study area would  follow the                                                            
rail belt.                                                                                                                      
                                                                                                                                
Mr. McMahon  responded that the study  would begin in the  Fairbanks                                                            
area and follow the Alaska Highway to the Canadian border.                                                                      
                                                                                                                                
Ms. McConnell  then noted  that the budget  request items  presented                                                            
were covered  by the administrative  order and would be represented                                                             
in the GPO. She  stated that other agencies were also  participating                                                            
and that their presentations would begin.                                                                                       
                                                                                                                                
MARK  MEYERS,  Director, Division  of  Oil  and Gas,  Department  of                                                            
Natural Resources  testified via teleconference from  Anchorage that                                                            
the division needs  to study four basic issues to  properly evaluate                                                            
any proposal for North Slope gas production.                                                                                    
                                                                                                                                
Mr. Meyers  stressed the reason the  funding was needed immediately                                                             
was to provide  an "inherent understanding  of any proposals  by the                                                            
producers." He  noted that these projects would be  conducted almost                                                            
exclusively by  consultants with department staff  acting as project                                                            
managers.                                                                                                                       
                                                                                                                                
Mr.  Meyers explained  the  first study  evaluates  the royalty.  He                                                            
asserted that  royalty valuation makes  a sizable difference  in the                                                            
amount  of  revenue  collected  from  oil  and  would  also  have  a                                                            
"tremendous  affect" on the  natural gas. He  expressed the  need to                                                            
understand  what the appropriate tariffs  would be, what  the market                                                            
conditions are,  and the effects of a possible royalty  reduction in                                                            
the future. He stated that this study would cost $55,000.                                                                       
                                                                                                                                
Mr. Meyers detailed the  second study, which is to access the demand                                                            
for in-state natural gas.  He stressed the importance of knowing the                                                            
demand  between  industrial,  commercial,  and  residential  heating                                                            
users.  He relayed the  need to  also ascertain  the demand  and the                                                            
economic  viability of  supplying natural  gas to  rural Alaska.  He                                                            
listed the  cost of this  study as $75,000  and noted that  the work                                                            
would be contracted.                                                                                                            
                                                                                                                                
Mr. Meyers continued  that the third item is a "supply  side study",                                                            
which would  entail looking at other  sources of gas in addition  to                                                            
the known  resources on the  North Slope.  He shared that there  has                                                            
been  a great  deal of  effort to  locate  oil, but  very little  to                                                            
locate  natural   gas.  He  explained  that  this   portion  of  the                                                            
appropriation   would  be  used  to   hire  a  consultant   and  for                                                            
contracting helicopters,  etc. to perform the necessary  field work,                                                            
beginning  in  July 2001.  He  continued  that  the study  would  be                                                            
expanded in FY 02.                                                                                                              
                                                                                                                                
Mr. Meyers then  listed a revenue study of Prudhoe  Bay as the final                                                            
project. He informed  that major gas sales from the  reservoir would                                                            
likely  result in  lower annual  reservoir pressures.  He  suggested                                                            
that proper  timing  in utilizing  alternative sites  such as  Point                                                            
Thomson,  which  contain  a  large  amount  of  natural  gas,  could                                                            
minimize  the amount of royalty  oil losses.  He continued  that the                                                            
study would  also review actual production  methods in conjunction.                                                             
He  spoke of  economic  factors involved  in  the two  parts of  the                                                            
study.                                                                                                                          
                                                                                                                                
Senator Austerman requested  more backup information on the in-state                                                            
natural gas  demands study, particularly  the criteria employed.  He                                                            
then asked  about the $36,000 funding  request for personnel  costs,                                                            
but noted no new positions were proposed.                                                                                       
                                                                                                                                
Mr. Meyers replied that  the department would engage student interns                                                            
to  compile  data.  He assured  there  would  be  no  new  positions                                                            
created. He noted  the request also includes funds  for travel costs                                                            
associated  with the necessary fieldwork  for the supply  and demand                                                            
studies.                                                                                                                        
                                                                                                                                
Mr. Meyers then  addressed the in-state demand study,  relaying that                                                            
additional information would be provided to the Committee.                                                                      
                                                                                                                                
Co-Chair  Donley  remarked  that  the  federal  government  recently                                                            
renewed the export  permit for liquefied natural gas  (lng) from the                                                            
Cook Inlet.                                                                                                                     
                                                                                                                                
Mr. Meyers  affirmed the  permit has been  renewed through  the year                                                            
2009.                                                                                                                           
                                                                                                                                
Co-Chair  Donley  asked  whether  the  review  process  was  already                                                            
performed during the application for permit renewal.                                                                            
                                                                                                                                
Mr. Meyers responded  that the Office of Fossil Energy  oversaw that                                                            
effort but that study does  not take the global view or the in-state                                                            
viability  into account.  He added  that the  projections were  only                                                            
made through 2009.                                                                                                              
                                                                                                                                
Co-Chair  Donley commented  that this was  "disappointing"  that the                                                            
federal   government  would   approve  an   export  permit   without                                                            
performing an analysis of the domestic market.                                                                                  
                                                                                                                                
Senator  Hoffman  asked if  the  studies  were planned  to  consider                                                            
pipeline spurs to increase  in-state demand in rural Alaska. He also                                                            
wanted to know  the level of demand in the Pacific  Rim and the best                                                            
method of delivering natural gas to the Rim countries.                                                                          
                                                                                                                                
Mr. Meyers replied that  the export demand is studied on an on-going                                                            
basis. He stated  that the potential  for delivering natural  gas to                                                            
rural areas inside the  state was contained in the proposed studies.                                                            
                                                                                                                                
Office of the Governor                                                                                                        
                                                                                                                                
Ms. McConnell  announced that  the Alaska  Oil and Gas Conservation                                                             
Commission  (AOGCC) would have an  appropriation request  for FY 02,                                                            
and  that  the office  is  involved  in  the  natural  gas  pipeline                                                            
project.                                                                                                                        
                                                                                                                                
KEN FREEMAN, Special  Assistant, Business and Gas  Line Development,                                                            
Office of the Governor,  explained his charge to take the lead staff                                                            
roll for the  Alaska Highway Natural  Gas Policy Council,  which was                                                            
created by a recent  administrative order. He described  the council                                                            
as 28 individuals  from across the state, co-chaired  by Jim Sampson                                                            
and Frank Brown. He stated  that the council in turn is charged with                                                            
the following duties.                                                                                                           
                                                                                                                                
   · Identify how to maximize the benefits of an Alaska Highway                                                                 
     pipeline project for the citizens of the state.                                                                            
   · Conduct public hearings and take testimony from the public to                                                              
     begin an assessment of the public's priorities with regard to                                                              
     the pipeline project.                                                                                                      
   · Compile a report for submission to the governor, the Gas                                                                   
     Cabinet and the public by November 30, 2001.                                                                               
                                                                                                                                
Mr. Freeman elaborated  that the council plans to  hold eight to ten                                                            
public hearings in either  Anchorage or Fairbanks. He noted that the                                                            
funding  request would provide  staff support,  travel and  expenses                                                            
and contractual services.                                                                                                       
                                                                                                                                
Senator Ward  asked if the financial  planning for the gas  pipeline                                                            
project reflects  a particular route. He mentioned  a route that led                                                            
to tidewater in Nikiski.                                                                                                        
                                                                                                                                
Mr. Freeman  responded  that  the counsel  did not  have a  position                                                            
regarding  financing.  He  explained  this is  because  the  counsel                                                            
planned to  examine and determine  the best financing method  if the                                                            
state were to play a financial role in the project.                                                                             
                                                                                                                                
Senator  Ward then  asked  about discussions  held  to  date on  the                                                            
matter.                                                                                                                         
                                                                                                                                
Mr. Freeman relayed  that it was not the governor's  assessment that                                                            
an Alaska Highway pipeline precluded a pipeline to tidewater.                                                                   
                                                                                                                                
Senator  Ward emphasized,  "I'm not  talking  about precluding.  I'm                                                            
talking  about  including   and  making  it  part  of  the  original                                                            
discussion."                                                                                                                    
                                                                                                                                
Mr.  Freeman  reiterated  the  counsel's  mission  to  maximize  the                                                            
benefits to  the state of an Alaskan  Highway gas line project.  One                                                            
aspect of this process,  he surmised, would be to give consideration                                                            
to  the best  way to  finance  and make  the pipeline  possible.  He                                                            
shared that subcommittees  would be formed and that one subcommittee                                                            
would  be directed  to  investigate  the  best  way to  utilize  the                                                            
state's royalty  share and whether  the state should have  a role in                                                            
financing the pipeline project.                                                                                                 
                                                                                                                                
Senator Wilken pointed  out that the Department of Natural Resources                                                            
components  consisted of 40 percent  of the funds requested  but was                                                            
concerned  with  the 20  percent  allocated  to  the Office  of  the                                                            
Governor.  He  wanted to  know  "what  we're  getting for  the  over                                                            
$400,000".  He calculated  that  90 percent  of the  request is  for                                                            
contractual  and travel  expenses. He  asked for  an explanation  of                                                            
"contractual".                                                                                                                  
                                                                                                                                
Mr. Freeman  responded that  the contractual  component would  cover                                                            
the costs of  holding public statewide  meetings and also  examining                                                            
studies  by the  Division  of Oil  and Gas.  He indicated  that  the                                                            
subcommittees would be  posed a number of questions, such as what is                                                            
the best  way to access the  natural gas.  He listed the options  as                                                            
access  on  the  North Slope  and  access  along  the  pipeline  for                                                            
communities.  He stated  that the council would work internally with                                                            
the Division  of Oil and  Gas to ensure there  is no duplication  of                                                            
contractual services.                                                                                                           
                                                                                                                                
Ms. McConnell  stressed the  issue of "relative  weight in  terms of                                                            
the  dollar  amount."  She  acknowledged   that  public  process  is                                                            
particularly important  at the beginning of the process and that the                                                            
council needs funds in order to conduct public meetings.                                                                        
                                                                                                                                
Senator  Wilken  countered  that  the people  of  Alaska  support  a                                                            
natural  gas line  that runs  through the  state.  He surmised  that                                                            
extensive public input  is not necessary until "we put a little more                                                            
flesh on the bones."   He referenced page 13 of the  "Description of                                                            
Services in the  Governor's FY2001 Supplemental Gas  Pipeline Budget                                                            
Request."  [Copy on file.]  Specifically, he  noted the eight  items                                                            
that this "well  intentioned group" would focus on.  These items are                                                            
as follows.                                                                                                                     
                                                                                                                                
        · Benefits    of   natural   gas   development   to   Alaska                                                            
          communities, including those located in rural areas of                                                                
          Alaska;                                                                                                               
        · Best  uses of  the state's  royalty share  of the gas  and                                                            
          promotion or attraction of investment for in-state and                                                                
          value-added processing;                                                                                               
        · Costs  and benefits  of the state  taking delivery  of its                                                            
          royalty share of the gas in Alaska versus allowing a                                                                  
          project developer to include the gas in its delivery flow                                                             
          to the Lower 48 states;                                                                                               
        · Options  for projects utilizing gas-to-liquids,  liquefied                                                            
          natural gas, and natural gas liquids;                                                                                 
        · Demand   for in-state   natural  gas  consumption  and  it                                                            
          effects on a gas project;                                                                                             
        · Environmental  impacts and necessary protection  measures;                                                            
        · Training  and  readiness  of Alaskans  for jobs  on a  gas                                                            
          project; use of Alaska labor pool by contractors and                                                                  
          subcontractors, and use of Alaska businesses; and                                                                     
        · State  promotion  and facilitation  of project  financing,                                                            
          including potential ownership by the state of some or all                                                             
          of a project.                                                                                                         
                                                                                                                                
Senator  Wilken focused  on the first  five and  the eighth  issues,                                                            
noting that  the Division of Oil and  Gas is undertaking  these with                                                            
the  three  proposed   studies.  The  Department  of  Environmental                                                             
Conservation,  he pointed out, would  handle the sixth item  and the                                                            
seventh  is a  function of  the Department  of Labor  and  Workforce                                                            
Development. He  wondered if the $400,000 would not  be better spent                                                            
in these departments  rather than for the counsel.  He stressed that                                                            
it  is  the duty  of  these  departments  to  maximize  the  state's                                                            
investment in these matters.                                                                                                    
                                                                                                                                
                                                                                                                                
TAPE SFC-01 #17, SIDE A   10:38AM                                                                                               
                                                                                                                                
                                                                                                                                
Senator Wilken  concluded  that he thought  the $1.96 million  total                                                            
amount  of  requested funds  could  be  better  spent by  using  the                                                            
"professionals  who are charged with providing the  answers that the                                                            
legislature requires."  He did not question that Alaskans are behind                                                            
the pipeline  project and suggested  that the public hearings  could                                                            
be a trade-off  to allocating the  funds to the agencies  that would                                                            
better address the issues.                                                                                                      
                                                                                                                                
Co-Chair  Donley commented  on  the name  of the  group, the  Alaska                                                            
Highway Natural  Gas Policy Council,  and noted its bias  toward the                                                            
highway  route. He  questioned the  group's ability  to objectively                                                             
ascertain which route the public prefers.                                                                                       
                                                                                                                                
Mr. Freeman responded that  the council is specifically charged with                                                            
looking at  the benefits  of a highway route,  and then to  consider                                                            
opportunities of spur routes  to deliver natural gas to other areas.                                                            
                                                                                                                                
Co-Chair Donley  challenged that the  "governor put the cart  before                                                            
the horse" and that it  would have been better to determine the best                                                            
route  first  rather  than  choosing   the  route  then  working  to                                                            
determine that it was the  best choice. He predicted that during the                                                            
public process,  the council might learn that many  people support a                                                            
different route.                                                                                                                
                                                                                                                                
Ms.  McConnell  assured  that   an alternate   route  had  not  been                                                            
precluded.  However, she  stressed that  because  no buyer has  been                                                            
secured, the Administration  is focusing on Alaska's "best shot" for                                                            
development in a "window that may not last for very long."                                                                      
                                                                                                                                
Co-Chair Donley  remarked that several Alaskan mayors  had submitted                                                            
alternative proposals  and that there seems to be  local support for                                                            
a different  route than the  governor's plan.  He stated that  it is                                                            
inconsistent to  fund a group that would only advocate  one specific                                                            
proposal when there was interest in others.                                                                                     
                                                                                                                                
Mr.  Freeman  reiterated  Ms.  McConnell  comments  adding  that  he                                                            
anticipated  increased  permitting  complications  if  there were  a                                                            
route  change.  He  stated that  the  Administration  does  not  see                                                            
benefits   to  the   state  through   contractual   and   employment                                                            
opportunities.  He warned that if  Middle East producers  approached                                                            
the state with a liquefied  natural gas project proposal, "no one in                                                            
the  Administration  would   be turning   them  away."  However,  he                                                            
stressed  that 15  years of  effort have  been invested  in a  North                                                            
Slope  to Valdez  route, with  no results.  He emphasized  that  the                                                            
Alaska  Highway  route  is  the best  opportunity  to  "tap  into  a                                                            
massive,  domestic  demand  of  gas",  pointing  out  that  American                                                            
consumers  are using  21 trillion  cubic feet of  natural gas,  with                                                            
projections of almost 30  by the end of the decade. He asserted that                                                            
Alaska should be involved in supplying some of that gas.                                                                        
                                                                                                                                
Co-Chair  Donley suggested  that instead  of  spending $420,000,  as                                                            
proposed,  the  council  could  spend $15,000  and  learn  that  the                                                            
majority of Alaskans agree  that a pipeline should run south, rather                                                            
than  north.  He added  that  most  Alaskans  would also  prefer  to                                                            
maximize the benefits  to Alaska, including employment  of Alaskans.                                                            
                                                                                                                                
Senator Ward  agreed and spoke of  the constituents in his  district                                                            
who have been  working for years on  securing a pipeline  route that                                                            
ends  in  Nikiski.   He  also  agreed   that  this  is  a   one-time                                                            
opportunity,  but stressed that the  alternate routes should  not be                                                            
precluded from discussion.                                                                                                      
                                                                                                                                
Mr.  Freeman  responded  that  the governor  was  not  precluding  a                                                            
tidewater route  to either Valdez or Nikiski. Mr.  Freeman specified                                                            
that  the  primary  goal is  to  develop  a pipeline  and  that  the                                                            
governor believes  that the most likely route is an  Alaskan highway                                                            
project. Mr. Freeman  testified that this route is  contained in the                                                            
state as far south  as Delta, with a possible spur  to Cook Inlet or                                                            
Prince William Sound.                                                                                                           
                                                                                                                                
Senator Ward understood  the dynamics that the route  would go south                                                            
at  least as  far as  Fairbanks.  He argued  that  600,000  Alaskans                                                            
"would not  get another bite of this  apple" if the pipeline  turned                                                            
east into Canada.  He added that the natural gas supply  in the Cook                                                            
Inlet was depleting  and that Anchorage, Kenai Peninsula  and Mat-Su                                                            
Valley residents  could benefit from a gas pipeline  traversing this                                                            
area.                                                                                                                           
                                                                                                                                
Mr. Freeman  remarked  that the time  was right  to examine  whether                                                            
there is a possibility  to add a spur to the Alaska Highway pipeline                                                            
leading  to Cook Inlet.  He stated  that the intent  is not  only to                                                            
determine what  is the best route within the Administration,  but to                                                            
also garner the public's input.                                                                                                 
                                                                                                                                
Senator  Ward  suggested  that  the  governor  should  issue  a  new                                                            
administrative   order  renaming   the  task  force  with   a  title                                                            
indicating  support for a  pipeline following  the rail belt  and to                                                            
the majority of Alaska's population.                                                                                            
                                                                                                                                
Co-Chair  Donley pointed out  that while a  pipeline route  to South                                                            
Central Alaska  has not materialized after 15 years  of work neither                                                            
had the Alaska Highway  route. He also took issue with the witness's                                                            
emphasis that  a southern route would be a spur option,  rather than                                                            
the main route.                                                                                                                 
                                                                                                                                
Senator Austerman  felt that most  Alaskans would be more  concerned                                                            
about the well  being of Alaska rather  than being overly  concerned                                                            
about the energy situation  in Oregon and California. He approved of                                                            
the Department  of Natural Resources study that would  help make the                                                            
determination of the best route.                                                                                                
                                                                                                                                
Mr.  Freeman   responded  that  the   governor  has  three   primary                                                            
principles  with regard  to  the development  of  an Alaska  Highway                                                            
pipeline. The first, Mr.  Freeman stated, is opportunities for jobs;                                                            
the second  is access  to the gas  for Alaskans;  and finally,  best                                                            
utilizing  the state's  royalty  share.  Therefore,  he stated  that                                                            
while the Administration  wants to bring domestic natural gas to the                                                            
rest of the country, it  is also a "phenomenal opportunity" to bring                                                            
gas to Alaskans.                                                                                                                
                                                                                                                                
Senator Olson  commended the valid points made by  Committee members                                                            
regarding the budget and  the location of the gas pipeline. However,                                                            
he stressed  the importance of "getting  on the table" the  pipeline                                                            
in order to begin discussion.                                                                                                   
                                                                                                                                
Department of Law                                                                                                             
                                                                                                                                
JANICE  LEVY, Supervising  Attorney,  Oil, Gas  and Mining  Section,                                                            
Civil Division,  Department of Law  testified that the department's                                                             
request would be used to  assist the agencies with the missions that                                                            
have been  outlined.  She explained  that one  "in-house"  assistant                                                            
attorney general  along with outside  council would work  to educate                                                            
the other departments  on the legal issues involved  in a project of                                                            
such magnitude.  She  opined that  Morrison and  Foerster, hired  to                                                            
provide  expertise, would  be cost-effective  and  valuable for  the                                                            
state. She noted  that the firm has been representing  the state for                                                            
many years  and was involved  in Alaska  Natural Gas Transportation                                                             
Act.                                                                                                                            
                                                                                                                                
Ms. Levy stressed  that any application received by  the state would                                                            
be stringently evaluated to ensure fair review.                                                                                 
                                                                                                                                
Department of Revenue                                                                                                         
                                                                                                                                
LARRY  PERSILY,   Deputy   Commissioner,   Department  of   Revenue,                                                            
testified that  it is the department's directive to  tax the natural                                                            
gas no  matter where  the pipeline  is located.  He stated that  the                                                            
department supports  the route that is most feasible  and profitable                                                            
and that  the budget  request  is to deal  with this  issue. If  the                                                            
pipeline  is built, he added  that the department  would need  to be                                                            
educated  so that  as much  value as  possible can  be captured.  He                                                            
noted that natural gas  issue has never been evaluated thoroughly by                                                            
the department  and that the proposed project would  be 20 times the                                                            
volume that is currently exported from Cook Inlet.                                                                              
                                                                                                                                
Senator  Leman asked  if  the department  had  plans  to review  the                                                            
Economic Limit  Factor (ELF) revisions in either oil  or gas, and if                                                            
so when recommendations would be presented to the legislature.                                                                  
                                                                                                                                
Mr. Persily  replied  that the department  was not  working on  such                                                            
legislation  but that it  has been reviewing  the activities  of ELF                                                            
over the  past five years  and making projections  for the  upcoming                                                            
ten years  with regard to  oil. He shared  that a tentative  session                                                            
was planned  for Pedro  van Meurs,  a consultant  based in  Calgary,                                                            
Alberta, in the next month to specifically address ELF.                                                                         
                                                                                                                                
Ms. McConnell  hoped the presentation conveyed the  magnitude of the                                                            
project and the importance of beginning the process immediately.                                                                
                                                                                                                                
Senator Austerman  asked if  the total $420,000  requested  would be                                                            
expended  in  the  next four  months  with  the  report  written  in                                                            
November 2001.                                                                                                                  
                                                                                                                                
Ms. McConnell  qualified that the  original request was prepared  in                                                            
December  2000, and that  exact expenditure  dates of the funds  was                                                            
uncertain,  although anticipated before  June 30, 2001. She  offered                                                            
to provide more details on the matter.                                                                                          
                                                                                                                                
Senator Austerman asked about the additional staff positions.                                                                   
                                                                                                                                
Ms. McConnell  stated that the positions  would support the  council                                                            
and would provide clerical  support and were nonpermanent positions.                                                            
                                                                                                                                
ADJOURNMENT                                                                                                                 
                                                                                                                              
Co-Chair Donley adjourned the meeting at 10:57 AM.                                                                              

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