Legislature(2013 - 2014)SENATE FINANCE 532

04/01/2013 09:00 AM FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 47 STIPEND FOR STATEWIDE BOARDING SCHOOL TELECONFERENCED
Heard & Held
+ SB 59 OIL & GAS EXPLORATION/DEVELOPMENT AREAS TELECONFERENCED
Scheduled But Not Heard
*+ SB 86 APPROVE FLINT HILLS ROYALTY OIL SALE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 49 MEDICAID PAYMENT FOR ABORTIONS; TERMS
Moved SSSB 49 Out of Committee
                 SENATE FINANCE COMMITTEE                                                                                       
                       April 1, 2013                                                                                            
                         9:07 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:07:58 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Meyer  called the Senate Finance  Committee meeting                                                                    
to order at 9:07 a.m.                                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Kevin Meyer, Co-Chair                                                                                                   
Senator Pete Kelly, Co-Chair                                                                                                    
Senator Click Bishop                                                                                                            
Senator Mike Dunleavy                                                                                                           
Senator Lyman Hoffman                                                                                                           
Senator Donny Olson                                                                                                             
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Anna Fairclough, Vice-Chair                                                                                             
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Senator  John Coghill;  Rynnieva Moss,  Staff, Senator  John                                                                    
Coghill;  Michael     Hanley,  Commissioner,  Department  of                                                                    
Education   and   Early   Development;   Elizabeth   Sweeney                                                                    
Nudelman,   Director,   School  Finances   and   Facilities,                                                                    
Department of  Education and Early Development;  Joe Balash,                                                                    
Deputy Commissioner,  Department of Natural  Resources; Jeff                                                                    
Cook, Regional  Director, External Affairs,  Koch Industries                                                                    
Public Sector, Flint Hills Resources                                                                                            
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Steve Noonkesser, Director  of Instruction, Southwest Region                                                                    
School District, Dillingham;  David Piazza, Southwest Region                                                                    
School   District,   Dillingham;  Jerry   Covey,   Education                                                                    
Consultant,  Cook Inlet  Tribal  Council,  Citizens for  the                                                                    
Educational Advancement of  Alaska's Children, Barrow; Chris                                                                    
Ritan, Superintendent, Galena  City School District, Galena;                                                                    
Eric  Gebhart,   Superintendent,  Nenana   School  District,                                                                    
Nenana; Dr.  Norman Eck,  Superintendent, North  West Arctic                                                                    
Borough  School  District,  Kotzebue; Lisa  Rieger,  General                                                                    
Council, Cook Inlet Tribal Council, Anchorage;                                                                                  
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 47     STIPEND FOR STATEWIDE BOARDING SCHOOL                                                                                 
                                                                                                                                
          SB 47 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SB 49     MEDICAID PAYMENT FOR ABORTIONS; TERMS                                                                                 
                                                                                                                                
          SB 49 was REPORTED out of committee with a "do                                                                        
          pass" recommendation and with a previously                                                                            
          published indeterminate fiscal note: FN1(DHS).                                                                        
                                                                                                                                
SB 59     OIL & GAS EXPLORATION/DEVELOPMENT AREAS                                                                               
                                                                                                                                
          SB 59 was SCHEDULED but not HEARD.                                                                                    
                                                                                                                                
SB 86     APPROVE FLINT HILLS ROYALTY OIL SALE                                                                                  
                                                                                                                                
          SB 86 was HEARD and HELD in committee for further                                                                     
          consideration.                                                                                                        
                                                                                                                                
SENATE BILL NO. 49                                                                                                            
                                                                                                                                
     "An Act defining 'medically necessary abortion' for                                                                        
     purposes of making payments under the state Medicaid                                                                       
     program."                                                                                                                  
                                                                                                                                
9:10:30 AM                                                                                                                    
                                                                                                                                
SENATOR JOHN COGHILL,  regretted that he had  been unable to                                                                    
sit in on the previous  public testimony. He offered that he                                                                    
had instructed  his staff  to write up  the six  main points                                                                    
generated  from public  testimony  in  the Senate  Judiciary                                                                    
Committee.  He  said that SB 49 would attempt  to define the                                                                    
term  "medically  necessary"  for the  purpose  of  Medicaid                                                                    
payments for abortions. He cited his six main points:                                                                           
                                                                                                                                
     Rebuttal to Planned Parenthood and Testimony from                                                                          
     Saturday, March 30, 2013                                                                                                   
                                                                                                                                
     1.   The testimony was broad and, at times, emotional.                                                                     
     That is generally a common trait when debating issues                                                                      
     involving abortion.                                                                                                        
                                                                                                                                
     2.   Sen.    Coghill    wants     to    correct    some                                                                    
     misunderstandings about the bill including some                                                                            
     misunderstandings that come from its opponents.                                                                            
                                                                                                                                
     POINT 1 - PLANNED PARENTHOOD STILL COULD NOT CEARLY                                                                        
     DEFINE WHAT AN ELECTIVE ABORTION WAS OR THAT ELECTIVE                                                                      
     ABORTIONS EVEN EXIST.                                                                                                      
                                                                                                                                
          a.   Of  course, a  reasonable person  could argue                                                                    
          that  Planned  Parenthood  cannot  openly  clearly                                                                    
          admit that  elective abortions exist  because that                                                                    
          would make them elective procedures.                                                                                  
               i.    As   we   are    all   aware   elective                                                                    
               procedures are not covered under Medicaid.                                                                       
               ii.  Paying  for  elective  procedures  would                                                                    
               therefore be an open abuse of Medicaid.                                                                          
                                                                                                                                
     POINT 2 - SB 49 DOES SATISFY EQUAL PROTECTION.                                                                             
                                                                                                                                
          1.   The  2001 Supreme  Court Opinion  stated that                                                                    
          the State has to  provide medically necessary care                                                                    
          for women seeking to give birth to a child.                                                                           
          2.   The court  also stated that the  State has to                                                                    
          provide   medically  necessary   care  for   women                                                                    
          seeking an abortion.                                                                                                  
               a.   What some  opponents, even to  this day,                                                                    
               fail  to  recognize   is  the  Supreme  Court                                                                    
               directed  that a  definition for  a medically                                                                    
               necessary abortion can be  crafted as long as                                                                    
               we  base  it  on  neutral  criteria  directly                                                                    
               related to the health  care program.  See tab                                                                    
               4c,  Page 16  highlighted portion.   That  is                                                                    
               what SB  49 does.   It was based on  the very                                                                    
               language  of  the   2001  Planned  Parenthood                                                                    
               decision and  includes direct  language found                                                                    
               in   the  federal   Hyde   Amendment.     The                                                                    
               conditions    are     neutral    and    taken                                                                    
               specifically from doctors in the field.                                                                          
                    i.   One   doctor  disagreed   with  the                                                                    
                    conditions  on Saturday.   What  she may                                                                    
                    or may  not know is that  the conditions                                                                    
                    were overwhelmingly  directly taken from                                                                    
                    the 2001 Planned Parenthood decision.                                                                       
                                                                                                                                
     POINT 3 - SB 49 UNFAIRLY TARGETS POOR WOMEN?                                                                               
                                                                                                                                
          1.   The  US Supreme  Court, long  ago ruled  that                                                                    
          the Federal Constitution does  not require a State                                                                    
          to pay  for the  costs of elective  abortions just                                                                    
          because  it  pays  for  the  costs  of  childbirth                                                                    
          related medical  care.  See  Maher v. Roe,  432 US                                                                    
          464, 474 (1977)                                                                                                       
          2.   Additionally,   the  United   States  Supreme                                                                    
          Court,   in  1980, ruled  that the  Hyde Amendment                                                                    
          (which  is  the foundation  for  SB  49) does  not                                                                    
          violate women  with lower incomes right  to obtain                                                                    
          a  medically necessary  abortion.    The case  was                                                                    
          Harris v.  McRae, 448  US 297  (1980).   The State                                                                    
          has no obligation to remove  obstacles that it did                                                                    
          not create (namely the woman's  status of being of                                                                    
          little means).                                                                                                        
                                                                                                                                
     POINT 4 - OTHER ATTEMPTS TO LIMIT ABORTIONS SINCE 2001                                                                     
     MAY OR MAY NOT HAVE BEEN SUCCESSFUL.                                                                                       
                                                                                                                                
          1.   SB-49 has nothing to  do with those attempts.                                                                    
          We cannot comment  on the reasons they  may or may                                                                    
          not  have  been  successful.    This  is  a  total                                                                    
          different focus.   SB-49 is a  "lean muscle" bill.                                                                    
          We  have  high  confidence  in  how  thorough  and                                                                    
          specific the bill is drafted.                                                                                         
                                                                                                                                
     POINT 5 - SURVIVAL OF FETUS IS NOT CONSIDERED?                                                                             
                                                                                                                                
          1.   That  is  simply   incorrect.    We've  heard                                                                    
          testimony as to the  "floating tomb" and the child                                                                    
          being "brainless."  We  considered that option and                                                                    
          incorporated  Paragraph  4,  B, 22  (See  Tab  1).                                                                    
          "Another   physical   disorder…arising  from   the                                                                    
          pregnancy….that   would   be    a   major   bodily                                                                    
          impairment."                                                                                                          
                                                                                                                                
     POINT 6 - AN OPPONENT OF THE BILL STATED THAT YOU                                                                          
     CANNOT SEPARATE "PHYSICAL HEALTH" AND "MENTAL HEALTH."                                                                     
                                                                                                                                
          1.   With  all due  respect,  President Obama  via                                                                    
          Executive  Order 13535,  case  law,  and the  very                                                                    
          existence of  the Hyde Amendment  prove otherwise.                                                                    
          Sen. Coghill invites you to  look at tab 7 in your                                                                    
          binders.    The  language is  clear  to  emphasize                                                                    
          "physical   disorder",   "physical   injury",   or                                                                    
          "physical  illness."    It specifically  does  not                                                                    
          include mental or psychological disorders.                                                                            
          2.   In  addition, SB  49 supporters,  including 3                                                                    
          national   doctors    and   7    Alaskan   doctors                                                                    
          fundamentally  disagree   with  that  presumption.                                                                    
          There  is a  genuine disagreement  in the  medical                                                                    
          community    that    mental   and    psychological                                                                    
          conditions   should   be    included   under   the                                                                    
          definition of "medically necessary abortion."                                                                         
                                                                                                                                
9:15:28 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  recalled  that  there  had  been  testimony                                                                    
suggesting that  the legislation  could result in  a savings                                                                    
for the state.                                                                                                                  
                                                                                                                                
Senator Coghill  replied that possible savings  to the state                                                                    
were indeterminate.                                                                                                             
                                                                                                                                
9:15:50 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer wondered  about possible  cost to  the state                                                                    
for litigating the legislation.                                                                                                 
                                                                                                                                
Senator Coghill replied that possible  litigation was out of                                                                    
his control.                                                                                                                    
                                                                                                                                
9:16:14 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly MOVED  to REPORT SB 49 out  of committee with                                                                    
individual  recommendations  and   the  accompanying  fiscal                                                                    
note. There being NO OBJECTION, it was so ordered.                                                                              
                                                                                                                                
9:16:29 AM                                                                                                                    
                                                                                                                                
SB  49  was REPORTED  out  of  committee  with a  "do  pass"                                                                    
recommendation    and    with   a    previously    published                                                                    
indeterminate fiscal note: FN1(DHS).                                                                                            
                                                                                                                                
SENATE BILL NO. 47                                                                                                            
                                                                                                                                
     "An Act  increasing the  monthly stipend  available for                                                                    
     students   attending   a  statewide   boarding   school                                                                    
     operated  by a  school district;  and providing  for an                                                                    
     effective date."                                                                                                           
9:16:58 AM                                                                                                                    
                                                                                                                                
Senator  Coghill testified  that the  bill would  remove the                                                                    
sunset   provision  for   providing  stipends   to  boarding                                                                    
schools.  He  said that  there  were  many burgeoning  small                                                                    
boarding  and  trade schools  that  had  been helping  young                                                                    
people in  rural Alaska  to receive  an education  that they                                                                    
might not  otherwise experience.  He asserted  that boarding                                                                    
schools not  only raised the  bar for  educational standards                                                                    
but also created work and college ready members of society.                                                                     
                                                                                                                                
9:19:31 AM                                                                                                                    
                                                                                                                                
RYNNIEVA MOSS,  STAFF, SENATOR  JOHN COGHILL,  discussed the                                                                    
sectional analysis:                                                                                                             
                                                                                                                                
     *Sec. 1.  This section removes  narrow applicability to                                                                    
     schools  operating  before  June 1,  2005.    Currently                                                                    
     three  school  districts  are  receiving  the  stipend:                                                                    
     Nenana,  Bethel   and  Galena.     The   Department  of                                                                    
     Education  is  currently  soliciting  applications  for                                                                    
     three additional boarding schools statewide.                                                                               
                                                                                                                                
          Sec. 1 also adds magnet schools that have                                                                             
     variable-length terms but have a 180-day school year.                                                                      
                                                                                                                                
     *Sec. 2.  Section 2 increases  the monthly stipend rate                                                                    
     based on  the region of  the state the  boarding school                                                                    
     is located.                                                                                                                
                                                                                                                                
     *Sec. 3.  Section   4   allows  school   districts   to                                                                    
     contract room and board.                                                                                                   
                                                                                                                                
     *Sec. 4.  This  section repeals  AS 14.17.200(c)  which                                                                    
     limited  DOE  to  approving three  additional  boarding                                                                    
     school applications.                                                                                                       
                                                                                                                                
     Sec. 4 also repeals  AS 14.16.200(d)(2), the definition                                                                    
     for  "district-operated  statewide residential program"                                                                    
     as Section 1 now  included both statewide and district-                                                                    
     wide residential schools.                                                                                                  
                                                                                                                                
    *Sec. 5. This Act has an immediate effective date.                                                                          
                                                                                                                                
Co-Chair Meyer  observed that  part of  the fiscal  note for                                                                    
the  bill needed  to be  included in  the 2013  Supplemental                                                                    
Budget.                                                                                                                         
Ms. Moss replied that the  administration could speak to the                                                                    
fiscal note.                                                                                                                    
                                                                                                                                
9:22:55 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer asked about the  Jesse Lee Home in Seward. He                                                                    
wondered  about the  qualifications needed  to be  labeled a                                                                    
boarding school.                                                                                                                
                                                                                                                                
Ms. Moss  replied that  boarding school  qualifications were                                                                    
determined by the  public school system. She  thought that a                                                                    
public school  could contract  with the  Jesse Lee  Home for                                                                    
room and board.                                                                                                                 
                                                                                                                                
9:23:25 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer noted that it sounded like a charter school.                                                                     
                                                                                                                                
Ms.  Moss informed  the committee  that charter  schools are                                                                    
public schools.                                                                                                                 
                                                                                                                                
9:23:36 AM                                                                                                                    
                                                                                                                                
Senator  Bishop  pointed  to  Section  3.  He  requested  an                                                                    
example of the kind of school intended in the section.                                                                          
                                                                                                                                
Ms.  Moss replied  that the  example would  be a  non-profit                                                                    
organization that was providing  room and board for students                                                                    
attending a public school.                                                                                                      
                                                                                                                                
9:24:17 AM                                                                                                                    
                                                                                                                                
Senator  Dunleavy stated  that  all charter  schools in  the                                                                    
state  were  public  schools under  the  district  of  their                                                                    
location.                                                                                                                       
                                                                                                                                
9:24:48 AM                                                                                                                    
                                                                                                                                
Co-Chair   Meyer   inquired   whether   the   administration                                                                    
supported the bill.                                                                                                             
                                                                                                                                
MICHAEL   HANLEY, COMMISSIONER, DEPARTMENT OF  EDUCATION AND                                                                    
EARLY  DEVELOPMENT, stated  that the  department appreciated                                                                    
the cost of housing and  monitoring students 24 hours a day,                                                                    
7  days per  week.  He  believed that  the  increase in  the                                                                    
funding represented  true costs. He supported  shifting from                                                                    
a statewide to a  district-wide component, which would allow                                                                    
programs  to bring  in students  from  outlying schools  and                                                                    
provide them the intensives for  qualification in the Alaska                                                                    
Native   Science  and   Engineering   Program  (ANSEP).   He                                                                    
explained  that  the  variable  term  component  meant  that                                                                    
although  the school  would run  for the  full school  year,                                                                    
students participating  in the  ANSEP intensive  could cycle                                                                    
through and return  to their home schools  within the school                                                                    
year.                                                                                                                           
                                                                                                                                
9:27:33 AM                                                                                                                    
                                                                                                                                
Co-Chair  Meyer  understood  that boarding  schools  boasted                                                                    
high test scores and academic achievement.                                                                                      
                                                                                                                                
Commissioner Hanley  replied that comparisons  in graduation                                                                    
and achievement  rates between the boarding  schools and the                                                                    
student's home  schools in the  state had  revealed positive                                                                    
results on the boarding school side.                                                                                            
                                                                                                                                
9:28:00 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer asked how many  boarding schools in the state                                                                    
would apply and receive the stipend.                                                                                            
                                                                                                                                
Commissioner  Hanley responded  four.  He  noted that  Mount                                                                    
Edgecumbe was unique as it was a state-run private school.                                                                      
                                                                                                                                
9:28:31 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer pointed out to  the committee that passage of                                                                    
the legislation  would result in an  additional $1.6 million                                                                    
in the supplemental budget.                                                                                                     
                                                                                                                                
9:28:46 AM                                                                                                                    
                                                                                                                                
ELIZABETH  SWEENEY NUDELMAN,  DIRECTOR, SCHOOL  FINANCES AND                                                                    
FACILITIES, DEPARTMENT  OF EDUCATION AND  EARLY DEVELOPMENT,                                                                    
agreed that  additional funding  would need  to be  added to                                                                    
the supplemental budget to support the legislation.                                                                             
                                                                                                                                
9:29:08 AM                                                                                                                    
                                                                                                                                
Commissioner  Hanley interjected  that the  stipend increase                                                                    
that was  awarded two years  ago would sunset this  year. He                                                                    
said  that  the lack  of  the  additional funds  would  make                                                                    
future funding  of the state's  private schools,  except for                                                                    
Mount Edgecumbe, challenging.                                                                                                   
9:29:35 AM                                                                                                                    
                                                                                                                                
Co-Chair Meyer relayed  that the state paid  for students to                                                                    
fly several times  per year to Mount Edgecumbe  in Sitka. He                                                                    
wondered if boarding schools saved the state money.                                                                             
                                                                                                                                
Commissioner  Hanley replied  that boarding  school students                                                                    
still  received  the  BSA,  but   that  the  added  boarding                                                                    
component  allowed each  student one,  round-trip ticket  to                                                                    
and  from school.  He believed  that  boarding schools  were                                                                    
more  expensive than  traditional neighborhood  schools, but                                                                    
that  tickets would  be  based  on the  number  of beds  the                                                                    
school housed, rather  that the number of  students who came                                                                    
and went.                                                                                                                       
                                                                                                                                
9:31:56 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly  queried whether a  boarding school  had been                                                                    
planned for Kotzebue.                                                                                                           
                                                                                                                                
Commissioner   Hanley  replied   that  the   department  had                                                                    
recently  begun   an  open   application  period   to  allow                                                                    
districts to apply  for schools. He stated that  the Star of                                                                    
the Northwest boarding school  was considering allowing high                                                                    
school students to register.                                                                                                    
                                                                                                                                
9:32:58 AM                                                                                                                    
                                                                                                                                
Co-Chair  Kelly  inquired  what communities  the  department                                                                    
would target for boarding schools.                                                                                              
                                                                                                                                
Commissioner  Hanley  replied  that  he  would  do  regional                                                                    
research.  He  said  he  would  consider  Barrow,  Kotzebue,                                                                    
Bethel and Southeast Alaska.                                                                                                    
                                                                                                                                
Co-Chair Kelly asked about Dillingham and McGrath.                                                                              
                                                                                                                                
Commissioner  Hanley   said  that  the  Bristol   Bay  area,                                                                    
Dillingham, King Salmon and Naknek  had all been considered.                                                                    
He  stressed  the  importance of  building  schools  in  the                                                                    
region  of need  so that  students still  felt connected  to                                                                    
home.                                                                                                                           
                                                                                                                                
Co-Chair Kelly  queried the  lack of roads  as a  barrier to                                                                    
the success of a boarding school in Kotzebue.                                                                                   
                                                                                                                                
Commissioner  Hanley  responded  that   road  access  was  a                                                                    
barrier. He said  that currently there were no  roads to any                                                                    
of  Alaska's  boarding  schools. He  believed  that  greater                                                                    
access would be beneficial.                                                                                                     
                                                                                                                                
9:35:48 AM                                                                                                                    
                                                                                                                                
Senator Olson stated that Nenana had a road.                                                                                    
                                                                                                                                
Commissioner Hanley  said that  the road was  relatively far                                                                    
removed from  other communities;  most of the  student still                                                                    
had to fly to the school.                                                                                                       
                                                                                                                                
9:36:17 AM                                                                                                                    
                                                                                                                                
Senator  Olson asked  whether there  had been  requests from                                                                    
certain school districts for a boarding school.                                                                                 
                                                                                                                                
Commissioner Hanley replied that  requests had been made. He                                                                    
said that local communities should  make their need known to                                                                    
the  department.  He stated  that  four  areas had  applied:                                                                    
Kotzebueu, Nome, Chugach, and Anchorage.                                                                                        
                                                                                                                                
9:37:27 AM                                                                                                                    
                                                                                                                                
Senator  Olson  referred  to  earlier  testimony  that  some                                                                    
students became  homesick during Christmastime  visits which                                                                    
resulted  in students  dropping out  of boarding  school. He                                                                    
wondered if  it would be  best to  not allow them  to return                                                                    
home at Christmastime.                                                                                                          
                                                                                                                                
Commissioner  Hanley said  that  experience  had shown  that                                                                    
when students were  away from home for too long  it became a                                                                    
problem. He recognized that being  away from home could be a                                                                    
challenge for teenagers.                                                                                                        
                                                                                                                                
9:38:25 AM                                                                                                                    
                                                                                                                                
Senator Olson  commented that  he came from  a long  line of                                                                    
people that  had attended boarding school.  He wondered what                                                                    
the  options would  be for  these students  if the  boarding                                                                    
schools did not exist.                                                                                                          
                                                                                                                                
Commissioner Hanley  responded that the option  would be the                                                                    
neighborhood school;  a school  with 10-20 students  and two                                                                    
teachers. He  noted that it  was difficult to offer  a broad                                                                    
ranged curriculum at a very small school.                                                                                       
9:39:22 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly  queried what the  cost would be to  make the                                                                    
boarding school model work for the state across the board.                                                                      
                                                                                                                                
Commissioner  Hanley  responded  that   the  answer  was  to                                                                    
provide  more  opportunities  for  students  throughout  the                                                                    
state.                                                                                                                          
                                                                                                                                
Co-Chair  Kelly  asserted  that  he  was  seeking  a  dollar                                                                    
number.                                                                                                                         
                                                                                                                                
Commissioner Hanley replied  that if you looked  at the four                                                                    
schools that had  applied and several that  had not applied,                                                                    
the department would  have to add the cost of  access to the                                                                    
schools. He stressed  that an exact number  was difficult to                                                                    
pencil  in. He  hypothesized that  if you  added 1000  rural                                                                    
Alaskan  student   to  full   or  part-time   variable  term                                                                    
programs,  the   total  cost  would  be   approximately  $10                                                                    
million.                                                                                                                        
                                                                                                                                
Co-Chair  Kelly queried  what the  capital  costs would  be,                                                                    
once  there  was an  additional  $10  million added  to  the                                                                    
operating budget.                                                                                                               
                                                                                                                                
Commissioner Hanky relayed that  the state did not currently                                                                    
build residential  facilities; if the  state were to  do so,                                                                    
the  capital  cost could  be  as  high  as $50  million  per                                                                    
school.                                                                                                                         
                                                                                                                                
9:42:53 AM                                                                                                                    
                                                                                                                                
Senator Bishop  noted that there  were assets that  could be                                                                    
utilized for  room and board  components. He cited  the work                                                                    
in Galena  where the Air  Force facility was being  used for                                                                    
culinary classes. He stressed  that there were existing hard                                                                    
assets that could be utilized to stretch state funding.                                                                         
                                                                                                                                
9:44:04 AM                                                                                                                    
                                                                                                                                
Senator  Dunleavy  asked what  kind  of  school the  if  the                                                                    
commissioner would send his children  to given the choice of                                                                    
a small,  two teacher,  school or a  comprehensive, boarding                                                                    
home, high school.                                                                                                              
                                                                                                                                
Commissioner Hanley replied that he  would be tempted by the                                                                    
greater options  of a boarding  school but  would ultimately                                                                    
choose the school that was best for the individual child.                                                                       
                                                                                                                                
9:44:52 AM                                                                                                                    
                                                                                                                                
Senator Dunleavy restated the question.                                                                                         
Commissioner Hanley asserted that  his fist inclination as a                                                                    
parent would be to keep his children close to home.                                                                             
                                                                                                                                
9:45:09 AM                                                                                                                    
                                                                                                                                
Senator Dunleavy  asked what  if the  schools were  both two                                                                    
blocks away from the commissioner home.                                                                                         
                                                                                                                                
Commissioner Hanley replied  that he would send  them to the                                                                    
school with the greater opportunity.                                                                                            
                                                                                                                                
9:45:34 AM                                                                                                                    
                                                                                                                                
Senator Hoffman noted that Akiak,  Akiachak and Tuluksak had                                                                    
been  contemplating a  sub-regional high  school for  over a                                                                    
decade.  He   said  that  sub-regional  schools   should  be                                                                    
considered before  taking half of the  student population of                                                                    
a small  town and  relocating them  to boarding  schools. He                                                                    
expressed  concern  that  the  children  left  behind  could                                                                    
suffer reduced educational opportunities.                                                                                       
                                                                                                                                
Commissioner  Hanley  agreed  that  the  problem  should  be                                                                    
considered. He stressed that with  the variable term program                                                                    
the funding would stay with the home schools.                                                                                   
                                                                                                                                
9:48:07 AM                                                                                                                    
                                                                                                                                
Co-Chair Kelly believed that  information should be gathered                                                                    
concerning the  cost of building  boarding schools  and that                                                                    
the  Commissioner of  Transportations and  Public Facilities                                                                    
should be probed  for the costs of road they  may need to be                                                                    
built to  ensure access. He  thought that  information about                                                                    
the impact of  more boarding schools on  home schools should                                                                    
be examined.                                                                                                                    
                                                                                                                                
Commissioner  Handley responded  that  he  would gather  the                                                                    
information.                                                                                                                    
                                                                                                                                
9:50:24 AM                                                                                                                    
                                                                                                                                
Senator Dunleavy asked  if there was a  current waiting list                                                                    
for Mount Edgecumbe.                                                                                                            
                                                                                                                                
Commissioner Handley said yes.                                                                                                  
                                                                                                                                
9:50:37 AM                                                                                                                    
                                                                                                                                
STEVE NOONKESSER, DIRECTOR  OF INSTRUCTION, SOUTHWEST REGION                                                                    
SCHOOL DISTRICT,  DILLINGHAM (via teleconference),  spoke in                                                                    
support of  SB 47. He  stated that declining  enrollment had                                                                    
caused the  district to  close two  schools in  seven years.                                                                    
He  added that  the economy  of  the region  did not  afford                                                                    
parents  the ability  to move  their  family for  schooling,                                                                    
which had  resulted in elementary  school student  moving in                                                                    
with other  families of other  schools in the district.   He                                                                    
discussed  a  proposed  amendment   that  removed  the  word                                                                    
"secondary" from  statute which  would provide an  avenue to                                                                    
financially assist  the house-parents that took  in boarding                                                                    
students for  communities that  no longer  had a  school. He                                                                    
did  not  believe  that the  amendment  would  increase  the                                                                    
fiscal note to an unreasonable level.                                                                                           
                                                                                                                                
9:53:17 AM                                                                                                                    
                                                                                                                                
DAVID PIAZZA,  SOUTHWEST REGION SCHOOL  DISTRICT, DILLINGHAM                                                                    
(via  teleconference), testified  in  support of  SB 47  and                                                                    
echoed the comments of the previous testifier.                                                                                  
                                                                                                                                
9:53:37 AM                                                                                                                    
                                                                                                                                
JERRY  COVEY,   EDUCATION  CONSULTANT,  COOK   INLET  TRIBAL                                                                    
COUNCIL,  CITIZENS   FOR  THE  EDUCATIONAL   ADVANCEMENT  OF                                                                    
ALASKA'S  CHILDREN, BARROW  (via teleconference),  expressed                                                                    
support  for SB  47. He  testified that  short-term variable                                                                    
and  district  residential  programs worked  and  were  cost                                                                    
effective. He  stated that they had  minimal negative impact                                                                    
on the student's  home schools because they were  gone for a                                                                    
short period of  time. He believed that the  increase of the                                                                    
stipend amount was warranted based  on the cost of delivery.                                                                    
He believed that the benefit  of the proposed programs would                                                                    
greatly outweigh the costs. He urged support of the bill.                                                                       
                                                                                                                                
9:57:15 AM                                                                                                                    
                                                                                                                                
Senator  Olson asked  about the  ultimate  cost of  students                                                                    
dropping out of school in underserved areas.                                                                                    
                                                                                                                                
Mr.  Covey responded  with  a history  of  Bureau of  Indian                                                                    
Affairs (BIA) Schools in the  state. He pointed out that the                                                                    
capital costs  would need  to be addressed  in terms  of the                                                                    
construction of  a residential facility, and  that the state                                                                    
would also  need to determine that  existing facilities were                                                                    
being used to  their maximum extent. He said  that there was                                                                    
space  in Kotzebue  High School  that  could accommodate  an                                                                    
additional  150 students.  He  believed existing  facilities                                                                    
should  be  maximized in  the  effort  to  keep costs  at  a                                                                    
minimum.  He  estimated  that  a new,  50  student  dorm  in                                                                    
Kotzebue would be approximately  $12 million. He stated that                                                                    
as the  population shifted, the  rural schools  were getting                                                                    
smaller  and smaller  and were  among  the lowest  achieving                                                                    
schools  in the  state. He  stressed  that one  of the  best                                                                    
things for  students in  small schools  was to  provide them                                                                    
with  access to  a comprehensive  high school  located in  a                                                                    
rural community.                                                                                                                
                                                                                                                                
10:02:01 AM                                                                                                                   
                                                                                                                                
CHRIS  RITAN, SUPERINTENDENT,  GALENA CITY  SCHOOL DISTRICT,                                                                    
GALENA (via  teleconference), spoke  in favor  of SB  47 and                                                                    
discussed some of the history  of Galena school district. He                                                                    
stated that  the district started  a boarding in  1997 after                                                                    
gaining  access to  old Air  Force  buildings. He  explained                                                                    
that the district had grown  each year thereafter. He shared                                                                    
that  there were  213 students  currently enrolled.  He said                                                                    
that the main  focus of the school  was vocational programs.                                                                    
He shared  that a 2005  bill had provided funding  to offset                                                                    
room  and board  costs, which  up until  that time  had been                                                                    
paid for through  the BSA and federal funding.  He said that                                                                    
the extra  money saved  through the  room and  board stipend                                                                    
would  give the  school the  ability to  expand its  already                                                                    
high quality programs for students in the state.                                                                                
                                                                                                                                
10:05:04 AM                                                                                                                   
                                                                                                                                
ERIC  GEBHART,   SUPERINTENDENT,  NENANA   SCHOOL  DISTRICT,                                                                    
NENANA (via teleconference), testified in support of SB 47.                                                                     
                                                                                                                                
10:05:48 AM                                                                                                                   
                                                                                                                                
DR. NORMAN  ECK, SUPERINTENDENT,  NORTH WEST  ARCTIC BOROUGH                                                                    
SCHOOL  DISTRICT, KOTZEBUE  (via  teleconference), spoke  in                                                                    
support of  SB 47. He  stressed the importance  of finishing                                                                    
high  school with  specific job  skills and  the ability  to                                                                    
enter into  post-secondary schooling.  He said  that smaller                                                                    
regional schools were  necessary as a part  of school choice                                                                    
in rural  Alaska. He stated  9th and  10th graders in  the 9                                                                    
high schools  in his district  had a 27  percent proficiency                                                                    
rate  on   state  standardized  tests.  He   said  that  the                                                                    
percentage was  higher in Kotzebue,  51 percent,  because it                                                                    
had a comprehensive  high school in a regional  hub. He said                                                                    
Northwest  Arctic  had  a 53  percent  graduation  rate  for                                                                    
native students;  however, each student that  took 2 classes                                                                    
in career  technical education had an  83 percent graduation                                                                    
rate.   He  stressed   that  innovative   and  instructional                                                                    
programs  of  practical   application  to  students  brought                                                                    
success. He said that the  dormitory should be considered an                                                                    
integral part  of the school  in terms of  major maintenance                                                                    
and school construction.                                                                                                        
                                                                                                                                
10:09:05 AM                                                                                                                   
                                                                                                                                
Senator  Olson  inquired  the testifier  thoughts  regarding                                                                    
homesickness among students.                                                                                                    
                                                                                                                                
Mr.  Eck  responded  that  the hope  was  to  have  wireless                                                                    
internet in  the dorm.  He shared that  in the  ten outlying                                                                    
villages in  Northwest Arctic over  65 percent of  the homes                                                                    
had internet  access and  could use  SKYPE. He  stressed the                                                                    
importance that students have a strong cultural base.                                                                           
                                                                                                                                
10:11:21 AM                                                                                                                   
                                                                                                                                
Senator Olson  acknowledged that the state  was dealing with                                                                    
a budget shortfall.  He asked whether Dr.  Eck believed that                                                                    
the limited  funds should be  dedicated to  boarding schools                                                                    
or early childhood education.                                                                                                   
                                                                                                                                
Dr.  Eck  replied  that  both  were  needed,  and  that  his                                                                    
district believed  so strongly in early  childhood education                                                                    
that it had a program for  4 year-olds. He asserted that the                                                                    
program was so  important that it was  conducted without any                                                                    
dedicated  funding.  He  stressed the  importance  that  all                                                                    
children learn to  read at grade level by the  3rd grade. He                                                                    
thought  early  childhood was  the  key  to future  academic                                                                    
success. He  added that students  who graduated  from school                                                                    
had to  be career  and job  ready. He  opined that  too many                                                                    
students  that graduated  from the  district could  be found                                                                    
unemployed six  months later. He  concluded that it  was the                                                                    
districts obligation  to provide  the programs  necessary in                                                                    
order for students to be successful.                                                                                            
                                                                                                                                
10:14:19 AM                                                                                                                   
                                                                                                                                
Senator  Bishop  wondered if  elder  mentors  in the  magnet                                                                    
schools  could   help  ease  homesickness   among  displaced                                                                    
students.                                                                                                                       
Dr.  Eck  replied in  the  affirmative.  He noted  that  the                                                                    
district  planned to  use  elders as  part  of its  advisory                                                                    
group in the dormitory.                                                                                                         
                                                                                                                                
10:15:49 AM                                                                                                                   
                                                                                                                                
LISA  RIEGER, GENERAL  COUNCIL, COOK  INLET TRIBAL  COUNCIL,                                                                    
ANCHORAGE (via  teleconference), spoke in support  SB 47 and                                                                    
echoed earlier testimony.                                                                                                       
                                                                                                                                
10:19:10 AM                                                                                                                   
                                                                                                                                
Co-Chair Meyer CLOSED public testimony.                                                                                         
                                                                                                                                
10:19:28 AM                                                                                                                   
                                                                                                                                
SB  47  was   HEARD  and  HELD  in   committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
SENATE BILL NO. 86                                                                                                            
                                                                                                                                
     "An Act approving and ratifying the sale of royalty                                                                        
     oil by the State of Alaska to Flint Hills Resources                                                                        
    Alaska, LLC; and providing for an effective date."                                                                          
                                                                                                                                
10:20:20 AM                                                                                                                   
                                                                                                                                
JOE  BALASH,  DEPUTY  COMMISSIONER,  DEPARTMENT  OF  NATURAL                                                                    
RESOURCES,  stated that  the  bill  would grant  legislative                                                                    
approval  for  the  sale  of  royalty  oil  to  Flint  Hills                                                                    
Resources by  the Department of Natural  Resources (DNR). He                                                                    
began  with Slide  2 of  the presentation,  "Royalty In-Kind                                                                    
Sale to Flint Hills Resources" (copy on file):                                                                                  
                                                                                                                                
     The state has a choice to take its royalty in-value                                                                        
     (RIV) or in-kind (RIK).                                                                                                    
                                                                                                                                
          •When  the State  takes its  royalty  as RIV,  the                                                                    
          lessees  who  produce  the  oil  also  market  the                                                                    
          State's share along with  their own production and                                                                    
          pay the State the value of its royalty share.                                                                         
                                                                                                                                
          •When the  State takes its  royalty share  as RIK,                                                                    
          the State  assumes ownership of  the oil,  and the                                                                    
          commissioner  disposes  of  it  through  the  sale                                                                    
          procedures prescribed by AS 38.05.183.                                                                                
                                                                                                                                
10:22:13 AM                                                                                                                   
                                                                                                                                
Mr. Balash spoke to Slide 3, "Non-Competitive RIK Sale                                                                          
Process":                                                                                                                       
                                                                                                                                
     •Statute presumes State's Best Interest is met by                                                                          
          -Taking royalty in-kind-AS 38.05.182(a)                                                                               
          -With sale to in-state buyer-AS 38.05.183(d)                                                                          
          -Accomplished through a competitive process-AS                                                                        
          30.05.183(a)                                                                                                          
                                                                                                                                
     •August 13, 2012 Informal Solicitation of Interest                                                                         
     sent to:                                                                                                                   
          -North Slope Producers                                                                                                
          -In-state Refiners                                                                                                    
          -Industry specific & general media                                                                                    
                                                                                                                                
10:24:04 AM                                                                                                                   
                                                                                                                                
Mr. Balash addressed Slide 4, "RIK Contract Terms":                                                                             
                                                                                                                                
    •Proposed 2013 contract is similar to 2004 contract                                                                         
     •Proposed 2013 contract, like 2004 contract, does not                                                                      
     directly reference RIV valuation in RIK price                                                                              
     calculations                                                                                                               
     •Key Contract provisions                                                                                                   
          -Price                                                                                                                
          -Quantity                                                                                                             
          -Term                                                                                                                 
          -Special Commitments                                                                                                  
          -In-State Processing and Local Hire                                                                                   
                                                                                                                                
10:24:59 AM                                                                                                                   
                                                                                                                                
Mr. Balash discussed Slide 5, "RIK Contract Price":                                                                             
                                                                                                                                
     ANS Spot Price - $2.15 - Tariff Allowance ± Quality                                                                        
     Bank Adjustment - Line Loss                                                                                                
                                                                                                                                
     •ANS Spot Price = Average US West Coast Price for                                                                          
     Alaska North Slope oil.                                                                                                    
          -Reported by industry  trade publications: Platts,                                                                    
          Telerate, Reuters                                                                                                     
                                                                                                                                
     •$2.15 = RIK Differential                                                                                                  
          -Destination Value - Marine Costs so RIK •5,9                                                                       
          -Subject to a one-time  adjustment of no more than                                                                    
          ± $0.15 per barrel.                                                                                                   
          -This  amount =  $1.65 per  barrel in  the current                                                                    
          2004 contract.                                                                                                        
                                                                                                                                
     •Tariff Allowance = TAPS and Pipelines Upstream of PS-                                                                     
     1.                                                                                                                         
                                                                                                                                
     •Quality Bank Adjustment = as reported by the TAPS                                                                         
     Quality Bank Administrator                                                                                                 
                                                                                                                                
     •Line Loss = 0.0009 times the netback price                                                                                
                                                                                                                                
10:25:53 AM                                                                                                                   
                                                                                                                                
Mr. Balash pointed to Slide 6, "RIK Contract Quality":                                                                          
                                                                                                                                
     •Initial Quantity Range                                                                                                    
          -18,000 - 30,000 barrels per day                                                                                      
          -May   be   adjusted   after   12   months,   with                                                                    
          Commissioner approval                                                                                                 
                                                                                                                                
     •Termination of Contract                                                                                                   
          -No  or zero  nomination for  3 months  terminates                                                                    
          contract                                                                                                              
          -Contract terms comparable to the private market                                                                      
                                                                                                                                
     •Refinery Turnaround                                                                                                       
          -Contract  allows  FHR  the flexibility  to  cease                                                                    
         royalty oil purchases during maintenance                                                                               
                                                                                                                                
     •Guarantees, reserves and proration clauses included                                                                       
          -24,000 barrels  per day with 15  percent reserves                                                                    
          for other RIV or RIK interests                                                                                        
                                                                                                                                
10:27:31 AM                                                                                                                   
                                                                                                                                
Mr. Balash addressed Slide 7, "2013 RIK Contract Term":                                                                         
                                                                                                                                
     •FHR initially sought a ten-year contract                                                                                  
          -Creates supply and price risk                                                                                        
          -Increases counterparty risk                                                                                          
          -Limits the  State's ability  to supply  other RIK                                                                    
          buyers                                                                                                                
     •DNR negotiated a five year term                                                                                           
          -April 1, 2014 to March 31, 2019                                                                                      
          -Possible extension condition for:                                                                                    
               •Large capital improvement at the North Pole                                                                     
               Refinery                                                                                                         
               •Binding support for a North Slope natural                                                                       
               gas transportation system                                                                                        
                                                                                                                                
10:29:47 AM                                                                                                                   
                                                                                                                                
Mr. Balash discussed Slide 8,  "2013 RIK Contract Quantity",                                                                    
which was  a bar graph  that illustrated the  total expected                                                                    
royalty oil and  liquid natural gas volume  and the expected                                                                    
share committed to Flint Hills Resources.                                                                                       
                                                                                                                                
10:30:54 AM                                                                                                                   
                                                                                                                                
Mr. Balash spoke to Slide 9, "Commissioner's Decision                                                                           
Criteria":                                                                                                                      
                                                                                                                                
     AS 38.05.183(e) states that  the commissioner must sell                                                                    
     the  State's  royalty  oil  to  the  buyer  who  offers                                                                    
     "maximum  benefits to  the citizens  of the  state." In                                                                    
     making   this  determination   the  commissioner   must                                                                    
     consider:                                                                                                                  
          1)The cash value offered                                                                                              
          2)The  projected  effects  of   the  sale  on  the                                                                    
          economy of the state                                                                                                  
          3)The   projected   benefits    of   refining   or                                                                    
          processing the oil in state                                                                                           
          4)The ability of the  prospective buyer to provide                                                                    
          refined products for distribution  and sale in the                                                                    
          state  with  price  or   supply  benefits  to  the                                                                    
          citizens of the state                                                                                                 
          5)The eight criteria  listed in AS38.06.070(a), as                                                                    
          reviewed by the Royalty Board                                                                                         
                                                                                                                                
Mr. Balash addressed Slide 10, "Royalty Board's Decision                                                                        
Criteria":                                                                                                                      
                                                                                                                                
     AS 38.06.070(a) states that the Alaska Royalty Oil and                                                                     
     Gas Development Advisory Board must consider:                                                                              
          1)The   revenue   needs   and   projected   fiscal                                                                    
          condition of the state                                                                                                
          2)The   existence  and   extent  of   present  and                                                                    
          projected  local and  regional needs  for oil  and                                                                    
          gas products                                                                                                          
          3)The    desirability    of   localized    capital                                                                    
          investment,    increased     payroll,    secondary                                                                    
          development and other possible effect of the sale                                                                     
          4)The projected social impacts of the transaction                                                                     
          5)The     projected    additional     costs    and                                                                    
          responsibilities which  could be imposed  upon the                                                                    
          state  and  affected   political  subdivisions  by                                                                    
          development related to the transactions                                                                               
                                                                                                                                
10:32:09 AM                                                                                                                   
                                                                                                                                
Mr.  Balash  continued  with   Slide  11,  "Royalty  Board's                                                                    
Decision Criteria":                                                                                                             
                                                                                                                                
     AS 38.06.070(a) states that the Alaska Royalty Oil and                                                                     
     Gas Development Advisory Board must consider:                                                                              
          6)The  existence  of  specific local  or  regional                                                                    
          labor or consumption markets  or both which should                                                                    
          be met by the transaction                                                                                             
          7)The     projected    positive     or    negative                                                                    
          environmental effects related to the transactions                                                                     
          8)The   projected   effects    of   the   proposed                                                                    
          transaction   upon  existing   private  commercial                                                                    
          enterprise and patterns of investment                                                                                 
                                                                                                                                
10:32:32 AM                                                                                                                   
                                                                                                                                
Mr. Balash  addressed Slide 12, "Royalty  In-Kind Sales." He                                                                    
noted that  it was difficult  to read. He relayed  that over                                                                    
the course of  the last 30 years the state  had been engaged                                                                    
in the continuous  sale of royalty oil. He  noted that there                                                                    
were a  variety of sales in  the early 1980s and  that there                                                                    
had been a  lot more oil during that time.  He said that the                                                                    
price crash of 1986 had  caused the department to reconsider                                                                    
how  royalty  oil was  sold  and  to  limit the  number  and                                                                    
variety of sales.                                                                                                               
                                                                                                                                
10:33:58 AM                                                                                                                   
                                                                                                                                
Mr. Balash  spoke to Slide  13, "Best Interest of  the State                                                                    
Served by the RIK Contract  with Flint Hills Resources (FHR)                                                                    
":                                                                                                                              
                                                                                                                                
     •Cash Value Offered with Contract                                                                                          
          -Cash value of $3.5-5.9 Billion over 5 years                                                                          
               •Analyzed for Consistent value between RIK                                                                       
               and RIV                                                                                                          
               •Volume weighted average of current reported                                                                     
               netback price (11 AAC 03.026(b))                                                                                 
          -Anticipated increases in marine transportation                                                                       
          allowance will favor RIK contract                                                                                     
                                                                                                                                
     •Positive effect on the State                                                                                              
          -Maintain stability in in-state refining and                                                                          
          distribution of refined products.                                                                                     
          -Support jobs and economy of Fairbanks North Star                                                                     
          Borough                                                                                                               
                                                                                                                                
10:35:00 AM                                                                                                                   
                                                                                                                                
Mr. Balash addressed Slide 14, "FHR's North Pole Refinery":                                                                     
                                                                                                                                
     •Strategically located on TAPS                                                                                             
                                                                                                                                
     •Current throughput of 82,000-84,000 barrels per day                                                                       
     of ANS crude                                                                                                               
                                                                                                                                
     •Producing approximately 22,000-25,000 barrels of                                                                          
     refined product                                                                                                            
                                                                                                                                
     •All crude and constituents that are not transformed                                                                       
     into refined product are injected back into TAPS (with                                                                     
     a penalty paid)                                                                                                            
                                                                                                                                
10:35:44 AM                                                                                                                   
                                                                                                                                
Mr. Balash continued to Slide 15, "FHR's North Pole                                                                             
Refinery":                                                                                                                      
                                                                                                                                
     •FHR produces approximately                                                                                                
          -672,000 gallons of jet fuel per day                                                                                  
          -143,000 gallons of gasoline per day                                                                                  
          -41,000 gallons of home heating fuel per day                                                                          
          -68,000  to 194,000  gallons  per  day of  product                                                                    
          consisting  of   HAGO,  LAGO,   naphtha,  asphalt,                                                                    
          refining fuel,  and a small volume  of high-sulfur                                                                    
          diesel                                                                                                                
                                                                                                                                
     •680,000 gallons per day shipped to Anchorage via the                                                                      
     Alaska Railroad                                                                                                            
                                                                                                                                
     •230,000 gallons of ultra-low sulfur diesel and                                                                            
     gasoline on the backhaul to Fairbanks                                                                                      
                                                                                                                                
    •FHR owns 50 million gallons of storage facilities                                                                          
          -30.7  million in  Anchorage and  19.3 million  in                                                                    
          Fairbanks                                                                                                             
                                                                                                                                
10:36:42 AM                                                                                                                   
                                                                                                                                
Mr. Balash addressed Slide 16, "Proposed Contract                                                                               
Benefits":                                                                                                                      
                                                                                                                                
     •Proposed contract is expected to:                                                                                         
          -Maintain   status   quo  of   in-state   refining                                                                    
          behavior                                                                                                              
          -Produce  330 million  gallons of  refined product                                                                    
          or 18%  of gasoline and  26% of jet  fuel consumed                                                                    
          in Alaska                                                                                                             
          -Provide  approximately $140  million per  year in                                                                    
          gross  regional product  sales  for the  Fairbanks                                                                    
          North Star Borough (FNSB)                                                                                             
          -Support  1,300 direct  and indirect  jobs in  the                                                                    
          FNSB                                                                                                                  
          -Sustain $100 million in annual earnings in FNSB                                                                      
          -Provide  socio-economic stability  against energy                                                                    
          costs                                                                                                                 
                                                                                                                                
10:37:53 AM                                                                                                                   
                                                                                                                                
Mr. Balash discussed Slide 17, "Projected Impacts if not                                                                        
Approved":                                                                                                                      
                                                                                                                                
     •If FHR stops refining, anticipated effects include:                                                                       
          -Loss of  approximately 1,300 direct  and indirect                                                                    
         jobs in the Fairbanks North Star Borough                                                                               
          -State could  experience increased  utilization of                                                                    
          the social safety net                                                                                                 
         -Possibility of population redistribution                                                                              
          -Increased     and    decreased     infrastructure                                                                    
          utilization and maintenance with population shift                                                                     
          -Impact to  the fuel supply for  the Fairbanks and                                                                    
          Anchorage  airports, affecting  trade and  tourism                                                                    
          and the Alaska Railroad                                                                                               
          -Loss of heat source for warming low flow in TAPS                                                                     
                                                                                                                                
10:39:14 AM                                                                                                                   
                                                                                                                                
Senator  Hoffman pointed  to Slide  9. He  requested further                                                                    
explanation of bullet four:                                                                                                     
                                                                                                                                
     4)The  ability  of  the prospective  buyer  to  provide                                                                    
     refined  products  for  distribution and  sale  in  the                                                                    
     state with price or supply  benefits to the citizens of                                                                    
     the state                                                                                                                  
                                                                                                                                
Mr.  Balash responded  that the  criteria had  been examined                                                                    
during  the  evaluation.  He   said  that  FHR  distribution                                                                    
patterns had been  examined. He said that FHR  had been able                                                                    
to sell  locally, in the  interior at the refinery,  as well                                                                    
as the  Port of Anchorage area.  He stated that there  was a                                                                    
special  contract  commitment   provision  relative  to  the                                                                    
pricing of  gasoline in  the Fairbanks  market that  help to                                                                    
provide price  discipline for the transportation  segment of                                                                    
the business line in the interior.                                                                                              
                                                                                                                                
10:41:23 AM                                                                                                                   
                                                                                                                                
Senator Hoffman  wondered how that equated  to "the citizens                                                                    
of the state" versus "the citizens of Fairbanks."                                                                               
                                                                                                                                
Mr.  Balash responded  that  that  question encompassed  the                                                                    
tension that was embedded throughout  the body of the statue                                                                    
and regulations. He  said it would be one thing  if DNR were                                                                    
to sell royalty  oil at a steep discount to  any refinery in                                                                    
that region of the state that  resulted in a lower price for                                                                    
consumers of the  region. He said that DNR  worked to ensure                                                                    
that one  community was  not benefitting  at the  expense of                                                                    
others by getting at least  royalty and value equivalent for                                                                    
the price offered in the sale  of the royalty oil itself. He                                                                    
said that the  price available in Fairbanks  was a wholesale                                                                    
price that  was being offered  to the retail outlets  in the                                                                    
area.                                                                                                                           
                                                                                                                                
10:43:12 AM                                                                                                                   
                                                                                                                                
Senator Olson asked what were  the possibly penalties to the                                                                    
state for not honoring the guarantees provided to FHR.                                                                          
                                                                                                                                
Mr.  Balash turned  to Slide  6. He  said that  the steepest                                                                    
penalty  could be  grounds for  termination of  the contract                                                                    
itself. He said  that the refinery was  required to maintain                                                                    
a  letter of  credit  in  good standing.  He  said that  the                                                                    
credit quality  of the parent  company would  be scrutinized                                                                    
as well.                                                                                                                        
10:44:34 AM                                                                                                                   
                                                                                                                                
Senator Olson restated the question.                                                                                            
                                                                                                                                
Mr. Balash  responded that he  did not think there  were any                                                                    
specific penalties to  the state. He said  that the contract                                                                    
itself would obligate  the state to no more  than 85 percent                                                                    
of the total  royalty volume. He assured  the committee that                                                                    
the state was protected to a certain degree.                                                                                    
                                                                                                                                
10:45:24 AM                                                                                                                   
                                                                                                                                
Senator  Olson queried  the future  of the  refinery in  the                                                                    
North Pole area that had been in decline.                                                                                       
                                                                                                                                
Mr. Balash responded that both  the refineries in North Pole                                                                    
served  distinct  markets.  He  said that  FHR  was  in  the                                                                    
business  of  making  jet  fuel  for  sale  at  Ted  Stevens                                                                    
International Airport;  however, some products were  sold in                                                                    
the  interior. He  shared that  the  other refinery  largely                                                                    
supplied  fuel to  military installations  and home  heating                                                                    
fuel  in the  residential  market. He  thought  that if  the                                                                    
refineries  could  fire their  plants  with  a cheaper  fuel                                                                    
product  than was  currently  being  used, overall  business                                                                    
would improve.                                                                                                                  
                                                                                                                                
10:47:57 AM                                                                                                                   
                                                                                                                                
JEFF  COOK,   REGIONAL  DIRECTOR,  EXTERNAL   AFFAIRS,  KOCH                                                                    
INDUSTRIES PUBLIC  SECTOR, FLINT  HILLS RESOURCES,  spoke in                                                                    
support of SB 86.                                                                                                               
                                                                                                                                
10:53:46 AM                                                                                                                   
                                                                                                                                
Senator Bishop  inquired whether the bill  could bring about                                                                    
growth opportunities in jet fuel.                                                                                               
                                                                                                                                
Mr. Cook responded in the affirmative.                                                                                          
                                                                                                                                
10:54:52 AM                                                                                                                   
                                                                                                                                
Senator  Dunleavy  requested  a  hard  copy  of  the  public                                                                    
testimony.                                                                                                                      
                                                                                                                                
10:55:07 AM                                                                                                                   
                                                                                                                                
Co-Chair Meyer CLOSED public testimony.                                                                                         
SB 86 was HEARD and HELD in committee for further                                                                               
consideration.                                                                                                                  
                                                                                                                                
SB 59 was SCHEDULED but not HEARD.                                                                                              
                                                                                                                                
10:55:27 AM                                                                                                                   
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:55 a.m.                                                                                         
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
SB 47 ADM Statewide.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 AFN 2012 Resolution.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Alaska Dispatch are Boarding Schools the Solution.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Boarding School Enrollees By City.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Chugach SB47 Testimony.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 CITC Letter of Support.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Galena School Letter Dec 2012.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 North Slope School District Letter.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Residential Boarding Homes 2013Summary 3 6 13.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 ResidentialActualCostsFY09-FY13 3 12 13.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 SchoolClosuresFY99-FY13_3-4-13.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Sectional Analysis Version P.docx SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 SSSB047-EED-K12-3-5-13 Fiscal Note.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 47 Support Letter for SB 47 Nenana.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 59 Briefing Paper.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 59 BRPC Letter of Support.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 59 Letter DNR 2013.03.19.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 59 Linc Letter of Support for Permit Reform 4 Mar 13.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 59 NSB Support Letter.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 59 Sectional Analysis.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 59 Transmittal Letter.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 86 Final BIF FHR 3-25-13.pdf SFIN 4/1/2013 9:00:00 AM
SB 86
SB 49 Rebuttal to Planned Parenthood and testimony from Saturday.docx SFIN 4/1/2013 9:00:00 AM
SB 49
SB 47Boarding School Stipends.pdf SFIN 4/1/2013 9:00:00 AM
SB 47
SB 86 DNR FHR PBIF Presentation 4-1-13.pdf SFIN 4/1/2013 9:00:00 AM
SB 86
SB59_SFIN Areawide_Approvals_4-1-2013.pdf SFIN 4/1/2013 9:00:00 AM
SB 59
SB 18 Public Testimony - Weld.doc SFIN 4/1/2013 9:00:00 AM
SB 18
Ann Yadon letter 2012.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
FW Northern Susitna Institute CAPSIS request.msg SFIN 4/1/2013 9:00:00 AM
SB 18
FW Tsunami debris cleanup funding testimony.msg SFIN 4/1/2013 9:00:00 AM
SB 18
Mayor DeVilbiss letter.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
McKinley View support.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
Public Testimony 4 1 13 Senate Finance Committee.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
Ruth Wood's Letter.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
Sassan Mossanen support letter.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
SB 18 Johnson Retirement Liability.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
SB18_4113.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
TAT support.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
TCC support.pdf SFIN 4/1/2013 9:00:00 AM
SB 18
Testimony SB 18 ALPAR Sen Fin.pdf SFIN 4/1/2013 9:00:00 AM
SB 18