Legislature(2007 - 2008)SENATE FINANCE 532
05/10/2007 01:30 PM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB162 | |
| SB104 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 104 | TELECONFERENCED | |
| + | TELECONFERENCED |
MINUTES
SENATE FINANCE COMMITTEE
May 10, 2007
1:51 p.m.
CALL TO ORDER
Co-Chair Bert Stedman convened the meeting at approximately
1:51:48 PM.
PRESENT
Senator Bert Stedman, Co-Chair
Senator Lyman Hoffman, Co-Chair
Senator Charlie Huggins, Vice Chair
Senator Fred Dyson
Senator Kim Elton
Senator Donny Olson
Senator Joe Thomas
Also Attending: SENATOR JOHNNY ELLIS; SENATOR HOLLIS FRENCH;
REPRESENTATIVE BOB LYNN; MARK DAVIS, Director, Division of
Banking & Securities, Department of Commerce, Community and
Economic Development; PAT GALVIN, Commissioner, Department of
Revenue; STEVE PORTER, Staff to Senator Bert Stedman; MARCIA
DAVIS, Deputy Commissioner, Department of Revenue; KEVIN
BREELAND, President, Alaska Mortgage Bankers Association, and
Partner and Mortgage Loan Originator, Residential Mortgage;
PETER EASAW, Primerica Financial Services; JULIE GRANGER,
Primerica Financial Services; LYNNEA OLSEN, Citigroup
Attending via Teleconference: From an Offnet Location: SIMON
KEYMER, American Financial Services Association; From Mat-Su:
JEFFREY SMITH, Primerica Financial Services; PHYLISS HOFFMAN,
Primerica Financial Services; From Anchorage: FRED LAURION
Primerica Financial Services; LAIRD JENKINS, Primerica Financial
Services; CARL MCINTYRE, Primerica Financial Services; JOHN
PEEK, Primerica Financial Services; MIKE CLAYBORN, Primerica
Financial Services; JULIA COSTER, Assistant Attorney General,
Commercial/Fair Business Section, Civil Division (Anchorage),
Department of Law; DUSTIN SHANNON, Primerica Financial Services;
JOHN MARTIN, Alaska Mortgage Solution, and Past President,
Alaska Mortgage Brokers Association; ROGER PRINCE, Securities
Examiner, Division of Banking, Securities and Corporations,
Department of Commerce, Community and Economic Development; From
Fairbanks: NICOLE STRELTSOVA, Primerica Financial Services;
LAVADA CHRISTINASON, Primerica Financial Services; ROSE BAADE,
Primerica Financial Services; JENNIFER MACOMBER, Primerica
Financial Services; RON HUNT, Primerica Financial Services;
DENNIS SHINN, Primerica Financial Services; CURTIS MACOMBER,
Primerica Financial Services; DAVID MUELLER, Primerica Financial
Services; BETTY KETZLER Primerica Financial Services; DOTHORTHY
JONES, Primerica Financial Services; MAUREEN MISEWICZ, Primerica
Financial Services; JONATHAN BOURNE, Primerica Financial
Services
SUMMARY INFORMATION
HB 162-MORTGAGE LENDING
The Committee heard from the bill's sponsor, the Department of
Commerce, Community and Economic Development, and the industry.
A committee substitute was adopted, and the bill was held in
Committee.
SB 104-NATURAL GAS PIPELINE PROJECT
The Committee heard from the Department of Revenue. A committee
substitute and eight amendments were adopted, and the bill
reported from Committee.
1:51:56 PM
CS FOR HOUSE BILL NO. 162(L&C)
"An Act relating to mortgage lenders, mortgage brokers,
mortgage originators, state agents who collect program
administration fees, and other persons who engage in
activities relating to mortgage lending; relating to
mortgage loan activities; relating to an originator fund;
relating to fees for mortgage loan transactions; making
certain violations unfair trade practices; relating to
persons who are licensed under the Alaska Small Loans Act;
and providing for an effective date."
This was the first hearing for this bill in the Senate Finance
Committee.
AT EASE 1:52:18 PM / 1:54:11 PM
Senator Elton moved to adopt Finance committee substitute
Version 25-LS0070\N, Bannister, dated May 8, 2007, as the
working document.
There being no objection, the Version "N" committee substitute
was ADOPTED as the working document.
1:54:38 PM
REPRESENTATIVE BOB LYNN, the bill's sponsor and a licensed
Alaska real estate broker, contended that the largest real
estate loan typically committed to by an individual is the one
utilized to finance the purchase of their home. Nonetheless, few
people understand the "hidden mechanisms and inner workings" of
mortgage loans or keep abreast of "ever-changing" federal and
state mortgage laws. Not finding the right loan with the right
terms "could be a very expensive 30 year mistake."
Representative Lynn became aware of the intricacies of the
mortgage business when he became a licensed realtor. "The most
important thing I know about mortgages is what I don't know."
Representative Lynn recounted that when he made his first home
real estate sale, he purposely arranged for the home buyer to
meet with an experienced mortgage lender; one he believed to be
honest, knowledgeable about the law, and qualified to arrange
the proper loan and address any problem that arose.
Representative Lynn considered finding the right mortgage lender
to be as important as finding the perfect home for his client.
This is "exactly why" he sponsored this bill.
Representative Lynn noted that this bill is supported by the
Alaska Mortgage Bankers Association, the Alaska Mortgage Brokers
Association, the Alaska Independent Lenders Association,
realtors from across the State, and the Division of Banking &
Securities in the Department of Commerce, Community and Economic
Development.
Representative Lynn pointed out that Alaska is the only state
that does not regulate the mortgage loan industry. There are no
licensing or training requirements for people working in the
mortgage industry. This is nonsensical since the State has
licensing and training requirements for tattoo artists and
hairdressers. No background checks or periodic examinations by
the Division of Banking & Securities are conducted. This bill
would "fix that."
1:57:29 PM
Representative Lynn favored licensing any entity, large or
small, making a home loan in the State. The goal should be to
provide "a level playing field" in the mortgage lending
industry. This is contrary to the opinion of those wishing to
"exempt affiliates" and companies that operate via the internet
from outside Alaska.
Representative Lynn characterized state and federal loan
origination laws as complex and ever-changing. "One must be an
expert to speak with any kind of competence on the subject"
addressed in this legislation.
1:58:13 PM
Representative Lynn informed the Committee that Mark Davis with
the Department of Commerce, Community and Economic Development
and industry professionals were available to further address the
intricacies of the subject and the bill before the Committee.
1:58:35 PM
Representative Lynn deemed this a consumer protection bill of
"great importance". He asked the Committee to support the bill.
1:58:51 PM
MARK DAVIS, Director, Division of Banking & Securities,
Department of Commerce, Community and Economic Development
specified that this bill would require the licensing of mortgage
bankers, brokers, and originators. No such licensing
requirements currently exist in Alaska.
Mr. Davis noted that even though ten federal statutes are
applicable to this industry, the absent of a State licensing
requirement prevents the State from ensuring "that the mortgages
being done in this State were in compliance with those laws."
Mr. Davis explained that this bill would allow for State
examination and investigation of licensees and would prohibit
certain acts such as deceptive advertising. It would also
require licensees to comply with federal laws including the
Truth in Lending Act and the Real Estate Settlement Procedures
Act of 1974 (RESPA). In addition, the bill would allow
disciplinary action against any licensee conducting a mortgage
loan in violation of these laws.
Mr. Davis informed that the bill would provide a mechanism
through which the State could examine licensees to ensure they
followed the law and met educational requirements. Predatory
practices, specifically the practice referred to as "flipping",
would be prohibited. Flipping is a practice in which a property
is refinanced within a 12-month period. This practice is not in
the best interest of the borrower.
Mr. Davis contended that "the best deterrence was not the force
of the law", it was education. "If people are educated and
understand the laws then they are able to comply with them."
2:00:42 PM
To that point, Mr. Davis specified that the bill would mandate
continuing education to ensure that people in the mortgage
industry have "the minimum standard of education." This is a
requirement imposed on numerous professions.
Mr. Davis revealed that during recent Division-sponsored
investment and financial education seminars conducted in 13
communities throughout the State, numerous complaints about the
mortgage lending industry surfaced.
Mr. Davis opined that the incorporation of federal mortgage
laws" into this legislation avoided the creation of "a second
layer of regulation," as, in essence, the licensee would be
required "to follow the laws they should already be following."
The decision to incorporate federal mortgage laws was based on a
report compiled by the State of Maine. That report concluded
"that the best reform Maine could make for their mortgage
licensing would be to re-incorporate those federal mortgage laws
in the State law."
Mr. Davis stated that the deceptive advertising prohibitions
would ensure that accurate information on loan percentage rates
and the type of loan qualifying for a specified rate would be
provided.
2:02:17 PM
Mr. Davis recounted that legislation was adopted a few years
earlier that allowed the Division to license and regulate
deferred deposit lenders commonly referred to as payday lenders.
Since that time, ten lenders have left the profession: "some
voluntarily, some by order". However, "30 new companies have
entered the industry and rates have gone down."
Mr. Davis noted that the payday lender legislation also
contained restitution language. As a result, the Division has
been able to collect in excess of "$700,000 in restitution for
people who took out loans that were in violation of the
Statute." This bill contains "similar restitutions provision,"
which would allow the State to "make people whole who had been
harmed by predatory lending practices."
2:03:01 PM
Mr. Davis noted that the majority of the exemptions specified in
the bill follow federal law. State banks and other entities
currently subject to regulation would not be subject to this
bill.
Mr. Davis agreed with Representative Lynn's assessment that this
bill would create "a more level playing field." Lending
practices of banks operating in the State are subject to
Division supervision; however, there are mortgages being
processed "by other companies that may be affiliated with that
bank that are not being regulated."
Mr. Davis advised that the Division was in support of the bill,
"as important financial transactions should be licensed." The
education requirements and criminal background checks on
licensees are also important components.
Mr. Davis also specified that the Federal Bureau of
Investigations (FBI), which is currently conducting a mortgage
investigation in the State, has issued a favorable opinion on
the bill, as documented in a [unspecified] newspaper article.
Mr. Davis emphasized that the adoption of this bill would allow
the Division to respond to consumer complaints.
Mr. Davis concluded by stating that the bill's combination of
licensing and continuing education requirements would improve
mortgage lending industry operations in the State.
2:04:26 PM
Senator Dyson inquired to the cost and time required to obtain a
mortgage lender's license.
Mr. Davis estimated that the initial cost would be approximately
$1,000. This would include a $250 one-time licensing fee, a
biannual licensing fee of $500, and annual continuing education
costs of approximately $200. Many states allow the use of
internet training programs. There are also companies that would
contract with the State to provide training.
Mr. Davis advised that the bill would create a commission to
assist the Department in developing the training component. The
goal would be to keep costs to a minimum.
2:05:43 PM
Senator Dyson asked an estimate of the time that would be
required to complete the training requirements.
Mr. Davis expressed that a specific number of training hours
would be required. Internet training programs are favored
because a person could do them at their convenience. While this
would be subject to the "honor system", internet training is
currently permitted for other professions, including Alaska Bar
Association training.
2:06:25 PM
Senator Dyson cited the argument that the enactment of this bill
could limit competition. That would be detrimental to Alaska
consumers as they might not be able to access the best deal
available.
Mr. Davis disagreed. The Division receives calls each week from
mortgage loan entities inquiring to the State's mortgage lending
licensure requirements. There are two reactions to being told
there were none: some say okay with it while others say they'll
wait until some are established.
Mr. Davis reminded the Committee that more payday lenders are
operating in the State now than before the State began to
license and regulate that industry.
Mr. Davis also pointed out that there is no shortage of mortgage
lending companies in the State. Like the payday lending
legislation, this bill would also require internet mortgage
lenders to abide by Alaska law. Two internet payday lender
entities went out of business due to their inability to comply
with State law.
2:07:36 PM
Senator Thomas, describing this as a long and difficult bill to
read, asked whether interest-only loans were addressed in the
bill.
Mr. Davis clarified that the "bill does not prohibit any
particular type of lending", with the exception of flipping, as
addressed earlier in the discussion. The bill does however
require lenders to comply with federal law, refrain from
deceptive practices, and fully disclose loan terms.
Mr. Davis allowed that even thought certain types of loans are
riskier than others the bill would not curtail loan products.
Thus, experienced borrowers would continue to have a variety of
loan products to choose from.
Mr. Davis informed the Committee that while the Division
wholeheartedly supports the State enacting a predatory loan law
that law should not occur until after the State enacts
legislation requiring money transmitters and mortgages lenders
to be licensed.
Mr. Davis communicated that banning interest-only loans might
limit some people's ability to utilize a loan that might be
appropriate for them. Nonetheless, certain people should not
consider interest-only loans. "That's the reason RESPA and Truth
in Lending and other statutes require disclosure.
Mr. Davis advised that testimony before the House of
Representatives on this topic indicated "that there have been
repeated violations of RESPA at closings in Alaska and they
often pertain to lack of disclosure."
2:09:15 PM
Senator Thomas clarified his question. He was not implying that
interest-only loans should be banned, but rather that some type
of warning ought to be provided.
Mr. Davis expressed that the prohibition of deceptive
advertising would help address this concern. Some deceptive
advertising does not disclose the mechanics involved in
establishing the actual interest rates. Thus, one of the goals
of this legislation is to educate consumers about terminology
such as "a reset rate" that might be referenced in the terms of
a loan and how it might affect the loan they are agreeing to.
2:10:07 PM
Senator Elton asked for clarification about the $150 fee that
would be charged for a person to retake the competency test, as
specified in Section 1 Section 06.60.040. Competency testing.
(a), page 6 line 11 of Version "N". It is unclear whether there
would be a fee for the initial test.
Mr. Davis replied that in an effort to keep an individual's
costs to a minimal, the cost of taking the competency test the
first time would be covered in the fees collected to establish
the educational program. A fee would only be charged if the
person failed the first test and had to retake it.
Senator Elton suggested that the language be changed to clarify
no fee would be charged for the first test.
Mr. Davis agreed. Further discussion in this regard would occur.
Senator Huggins commended Mr. Davis on the effort the Division
exerted on the bill. Legislation considered the previous year on
this issue recommended exempting people who conducted six or
less loans annually from the licensing requirements. He asked
whether that recommendation was included in this legislation.
2:12:14 PM
Mr. Davis affirmed the bill contained a provision which allowed
for "a very small exemptions for mortgage lenders" who conducted
six or less loans a year. However, they would still be subject
to the enforcement provisions of the bill; they would be
"required to register," comply with "all the dictates of the
bill and be subject to examination upon a complaint."
2:12:39 PM
Senator Dyson understood that the majority of "bad loan"
problems could be attributable to an "organization that offers
many financial products and services" and hires "part time
employees to sell those services". This might include insurance,
real estate sales, and investment services.
2:13:33 PM
Mr. Davis affirmed that as being part of the problem. However,
the Division has received complaints about loans made through
larger entities including federal banks and large mortgage
companies.
2:13:59 PM
Senator Olson surmised that the process of licensing individuals
would be a "cumbersome" task. He questioned whether this impact
was adequately reflected in the fiscal notes accompanying the
bill.
Mr. Davis agreed the licensing task would be labor intensive.
Nonetheless, it would be appropriate action. He agreed with
Representative Lynn that buying a home is one of "the most
important financial commitments" a person could make. The person
offering a mortgage loan service should have "the type of
licensing required of an insurance agent, a securities agent, or
an investment advisor." Requiring loan originators to undergo
background checks and take education courses will help prevent
"a lot of the problems" that have been experienced.
Mr. Davis disclosed that four cases involving the mortgage loan
industry have been filed in United States Federal Court in
Anchorage in the last month. This "is indicative of the problem
we have in the State."
Senator Olson asked whether having the licensing requirements
proposed in this legislation in place would have prevented the
events depicted in the articles [copies on file] printed in the
Alaska Daily News newspaper on April 21 and May 3, 2007.
Mr. Davis hoped that would be the case. Individuals seeking to
acquire a license would undergo a background check which would
likely alert authorities about prior suspect activities. The
background check activity has been helpful in other professions,
such as security broker dealers.
2:16:07 PM
Senator Thomas asked whether the non-profit organization
exemptions referenced in paragraph (5) of Section 1, subsection
Sec. 06.60.015.Exemptions; requirements of registration., page 3
lines 9 through 12, referred to exemptions allowed under federal
law and well as non-profit housing authorities such as the
Alaska Housing Finance Corporation (AHFC) and the Tlingit Haida
Housing Authority.
2:16:44 PM
Mr. Davis affirmed that to be correct.
Senator Thomas acknowledged. He then asked whether individuals
who work for an exempted institution such as a bank licensed
under federal law would be exempt from the licensing
requirements of this bill.
2:17:15 PM
Mr. Davis clarified that those employees would not be required
to be licensed, however "they would be subject to general
supervision". For example, when conducting an examination of a
State bank, the Division would review the bank's loan portfolio
including its mortgage loan files, to ensure the bank was
compliant with federal law, the Truth in Advertising Act, and
RESPA regulations.
Mr. Davis noted that the rating given a bank by the Division is
based on its compliance record. That rating "has a profound
affect on the bank's ability to raise money." Banks have reason
to maintain a high rating.
Senator Thomas deduced therefore that a loan officer would be
responsible for individuals reporting to them.
Mr. Davis affirmed.
2:18:21 PM
SIMON KEYMER, American Financial Services Association (AFSA)
testified via teleconference from an offnet location. AFSA is a
financial trade association based in Washington DC. Its members
include mortgage lenders and other "financial services companies
who provide credit to consumers and small businesses."
Mr. Keymer communicated AFSA's "grave concern" about the bill,
as written. He encouraged the Committee to review the amendment
language recommendations [copy not on file] the Association had
provided which mirror language in the mortgage lending bill, SB
272 that passed the Senate the previous year. Else wise, the
recommendation would be to hold this bill in Committee until the
next Legislative session in order to allow time for its "complex
technical and legal issues" to be further scrutinized.
Mr. Keymer pointed out that holding the bill in Committee would
not be detrimental since the licensing provisions in the bill
would not be implemented until 2009.
Mr. Keymer communicated that AFSA believes the best approach
would be to license "large multi-state lenders", but provide a
licensing exemption to their employees. This would balance
consumer protection needs with a wide array of consumer credit
options. This bill, in its current form, could lead to a "flawed
law" that would require it to be re-addressed during the next
session.
Mr. Keymer highlighted some of the consumer protection language
proposed by AFSA: a company would be required to sign an
agreement with the Department of Commerce, Community and
Economic Development "stating that they would accept full
responsibility for ensuring that the employee acts in full
compliance with this chapter." The agreement might also require
a company to conduct employee background checks, provide
continuing education, and other items deemed important by the
Department.
2:20:34 PM
Mr. Keyner pointed out that the Department could retain their
"ability to examine the company to ensure compliance with the
Act". Other recommendations by AFSA include requiring a company
to secure a bond, at a level specified by the Department, to
address any cost the State or a person might experience as a
result of a violation of this chapter.
Mr. Keyner stated that, in its current form, the bill is
contrary to actions of other states. Fewer than ten states
require employees of large multi-State mortgage companies to
acquire individual licenses. Doing so significantly increases
the administrative burden on lenders and regulators; lenders
would be forced to pass costs on to consumers.
Mr. Keyner urged the Committee to recognize the differences
between small and large interstate and intrastate mortgage
lending companies. AFSA members are typically big companies that
are licensed in multiple states and have large numbers of
employees. They are concerned about their reputation and are
often affiliated with a company regulated by the Federal Reserve
Board. These are the reasons they conduct pre-employment
screening including background checks and provide education, and
compliance training.
Mr. Keyner urged the Committee to adopt the amendment language
proposed by ASFA.
2:22:56 PM
KEVIN BREELAND, President, Alaska Mortgage Bankers Association
and Partner and Mortgage Loan Originator, Residential Mortgage
Alaska, shared his extensive background in the mortgage loan
profession. Alaska is the only state that does not require
mortgage lender licensing for companies. 26 states require some
form of licensing for mortgage loan originators. All that is
currently required in Alaska is a business license.
Mr. Breeland stated that except for the non-licensed mortgage
loan originator, a typical real estate transaction involves
numerous licensed individuals including, for example, a licensed
real estate agent, a licensed home inspector, a licensed
engineer if such service is required, and a licensed real estate
appraiser. Any construction work required would be done by a
licensed and bonded contractor and any new construction must be
inspected by a licensed or certified inspector or a municipal or
borough inspector. The title work on the transaction is
performed by a licensed title company under the jurisdiction of
the insurance commission.
2:25:58 PM
Mr. Breeland thought that everyone in the industry, regardless
of their length of experience, should take competency tests. He
also contended that the 2009 effective date specified in the
bill would provide sufficient time for those in the industry to
comply with its regulations.
2:26:54 PM
Mr. Breeland characterized this as "an industry bill brought to
you by industry. It is a collaborated effort," eight years in
the making, involving the Alaska Mortgage Bankers Association
and the Alaska Mortgage Brokers Association. The bill has the
support of AARP, the Alaska Association of Realtors, the Alaska
Home Builders Association, the Alaska Land Title Association,
the Appraiser Institute, Alaska Chapter, the Anchorage Board of
Realtors, the Valley Board of Realtors, and the Anchorage
Homebuilders Association. He urged the Committee to support the
bill.
2:27:34 PM
PETER EASAW, Primerica Financial Services, reviewed his
background in the mortgage industry. This bill would be "a
disservice to" Primerica and its customers. Primerica offers
personalized "financial solutions" to its customers and believes
in educating its customers prior to selling or proposing a
product to them.
Mr. Easaw considered this legislation a duplication of the
efforts currently administered by Primerica. The company already
strives to educate its clients, provides continuing education to
its employees, and has a mission of doing "what's right".
Mr. Easaw strongly believed this bill would prevent people from
having the same opportunity he has had with his company. He
urged a no vote on the bill in its current form.
2:30:17 PM
Senator Dyson asked Mr. Easaw to discuss what he would change in
the bill.
Mr. Easaw supported licensing a company as opposed to each
individual working for it.
2:30:51 PM
JULIE GRANGER, Primerica Financial Services, introduced herself.
Co-Chair Stedman asked Ms. Granger to clarify her capacity with
Primerica.
Ms. Granger worked at Primerica's corporate head office in
Atlanta Georgia and was testifying today on behalf of the
company and its 150 Alaskan employees.
Co-Chair Stedman, observing that the public testimony ledger for
this bill included numerous Primerica employees, asked whether
the company closed its offices today in order to allow its
employees to testify on the bill.
Ms. Granger responded no. Primerica employees elected to testify
because they were "passionate about the service that we provide
to Alaska borrowers." They are concerned that their services
might be jeopardized by some of the requirements in the bill.
The hope is that a workable solution could be achieved; one that
would protect consumers and allow the Department to examine the
industry to ensure there were no problems with the company or
its services.
In response to a question from Co-Chair Stedman, Ms. Granger
affirmed the company sent her to testify on the bill and express
how important Alaska is to Primerica.
Co-Chair Stedman specified that his questions were intended to
assist him in understanding the nature of the testimony that
would be provided by other Primerica employees.
Ms. Granger expressed that the number of Primerica employees
willing to testify today should be viewed as an indication of
the importance of the bill and concern about its effects on
their livelihood.
2:32:51 PM
Senator Olson inquired to Primerica's position on the bill.
Ms. Granger expressed support for regulating the mortgage
industry in the State; however, the company did not favor the
bill as written. She was optimistic that a workable solution,
one that would protect consumers and allow for regulatory
oversight, was obtainable.
2:33:30 PM
Senator Olson concluded from the testimony that the changes made
in the Version "N" committee substitute did not address the
company's concern about the bill.
2:33:38 PM
Ms. Granger affirmed.
Co-Chair Stedman asked that the company provide his office a
list of concerns specific to Version "N".
Ms. Granger agreed.
2:34:05 PM
Senator Huggins deduced that the company had been actively
involved in legislation on this issue in other states.
Ms. Granger confirmed that to be the case. 26 states have
enacted legislation in this regard. While the recent trend has
been to require individual licensing, the majority of the 26
states that have enacted mortgage lending legislation have
recognized the company's "good compliance history" and the
uniqueness of its business model. They have allowed the company
to be licensed and accountable for its employees instead of
requiring employees to hold individual licenses.
Ms. Granger reiterated that the company's reputation and
financial success are affected by its agents' actions.
Senator Huggins asked the number of states that require
individual licensing.
Ms. Granger stated that fewer than ten states the company
operates in require individual licensing; several of those are
simply registrations wherein the company just provides a listing
of its employees. This listing is utilized by the state to track
where individuals are employed. While a multitude of approaches
have been taken, the majority of states have endeavored to reach
a reasonable solution.
Senator Huggins asked Ms. Granger to identify components of the
bill deemed particularly onerous.
2:35:47 PM
Ms. Granger responded that the company's business model requires
them to screen its agents. This would include background checks
and internal auditing. The company is also subject to federal
law since its loans involve federal lenders. Insurance products
sold by the company must also comply with insurance and security
regulations.
Ms. Granger declared that this legislation, in its current form,
would produce "another level of regulation that does not provide
any additional benefit to consumers".
Ms. Granger declared that Primerica "is stepping up" in support
of State licensing and regulations. The money raised from
licensing fees will support the State's mortgage regulation
efforts. The amendment Primerica supports is "fiscally neutral".
2:36:49 PM
Senator Thomas understood that Primerica, as the owner company,
supported having the company, rather than individuals, assume
the entirety of licensing responsibilities specified in this
bill. He noted that the only element missing from the mortgage
lending legislation considered the previous year was the
determination of who would be applying for the license.
Senator Thomas asked for further information about why Primerica
considered individual licensing requirements so burdensome;
specifically whether it was the cost associated with individual
licensing or whether the employment status of the individuals
working for it would change from being independent contract
agents to being employees.
2:37:37 PM
Ms. Granger responded that Primerica has successfully utilized
the independent contract agent business model for approximately
30 years. The company sees it as "a way to cut costs" and
thereby support its ability "to market to middle and lower
income consumers who have very low transaction amounts".
2:38:18 PM
Senator Elton appreciated Ms. Granger's testimony. Rather than
protecting consumers from companies such as Primerica which
might have "all the controls in place", the purpose of licensing
"is to protect the consumer from bad actors". Thus, his concern
is that implementing something that helps a company like
Primerica would "open the door for companies that might not have
the same kind of controls".
Ms. Granger stated that this concern had been raised during
deliberations on the bill in the House. There was concern that
the amendment proposed by Primerica was "not narrow enough" and
that other companies would not perform in the same manner as
Primerica.
Ms. Granger advised that the amendment has been narrowed in
scope in that it would now apply "to exclusive agents". The
company would be required to pay licensing fees and also hold an
insurance license. The amendment is now significantly different
than the one offered in the House.
2:40:09 PM
Ms. Granger emphasized that "the solution" being proposed has
worked in other states.
2:40:45 PM
Senator Elton asked that, after review, the Department provide
its recommendation on the amendment being offered by the
industry.
2:41:03 PM
In response to a question from Senator Olson, Co-Chair Stedman
clarified that the amendment being discussed "is not on the
table".
2:41:15 PM
LYNNEA OLSEN, Citigroup, informed the Committee that Citigroup
is the parent company to Primerica. She traveled here from
California to testify on behalf of Citigroup in opposition to
the bill in its current form. Citigroup strongly supports
regulation of the mortgage industry and has actively
participated in establishing "high thresholds" for the industry
in other states in its desire to uphold its reputation, enhance
its economic viability, and provide appropriate products to
consumers.
Ms. Olsen cited Citigroup's willingness to continue working with
the State to reach a solution that would benefit the Primerica
business model. This would include corporate rather than
individual licensure. She reminded the Committee that that
concept had been included in the mortgage lending legislation
considered the previous year.
Ms. Olsen stressed that corporate licensure would ensure
consumer protection. The company would commit to being
responsible for any violation of State Statute and would file a
surety bond with the State. In addition, the company would
pledge "to make any borrower whole" if they suffered an injury.
They would also pledge that the company and its agents would
comply with State law. The company was confident that its
business model, which includes such things as internal training
and auditing, would be able to uphold its commitments.
2:43:34 PM
Ms. Olsen also considered corporate licensure an appropriate
mechanism as it would allow the State to review the company's
operations through routine, spot, or periodic audits. She urged
that the bill be held in Committee in order for further
discussion to occur. Primerica has a good business model and it
would be disappointing were its Alaska operations and consumer
services limited.
Co-Chair Stedman, noting that a number of individuals working
with Primerica had signed up to testify, asked, in consideration
of time that those individuals limit their remarks to whether
they support or oppose the legislation. They should only expand
their remarks if they had something "new to add to the
discussion".
2:45:05 PM
JEFFREY SMITH, Primerica Financial Services testified via
teleconference from Mat-Su in opposition to the bill. It would
place a "huge financial burden on my small business". This in
turn would be detrimental to his clients.
2:45:29 PM
PHYLISS HOFFMAN, Primerica Financial Services, testified via
teleconference from Mat-Su in opposition to the bill. Primerica
agents are internally monitored, must meet internal continuing
education requirements, and must comply with regulations. "A
duplicate mortgage loan originator license makes absolutely no
sense." The services provided by Primerica agents to people in
this State are appreciated.
Co-Chair Stedman repeated his request that Primerica agents keep
their comments on point.
2:48:02 PM
FRED LAURION, Primerica Financial Services, testified via
teleconference from Anchorage and elaborated on the importance
the company places on educating the consumer. Anything that
might hamper the company's ability to operate in the State would
be detrimental to that effort. He opposed the bill, as written,
and urged the Committee to either amend or postpone action on
it.
2:49:37 PM
LAIRD JENKINS, Primerica Financial Services, testified via
teleconference from Anchorage in opposition to the bill, as
written.
2:49:53 PM
CARL MCINTYRE, Primerica Financial Services, testified via
teleconference from Anchorage. He opposed the bill as written.
2:50:12 PM
JOHN PEEK, Primerica Financial Services, testified via
teleconference from Anchorage and spoke in opposition to the
bill, as written. The company provides a great service to
residents of the State.
2:50:36 PM
MIKE CLAYBORN, Primerica Financial Services, testified via
teleconference from Anchorage. He opposed the bill as written.
JULIA COSTER, Assistant Attorney General, Commercial/Fair
Business Section, Civil Division (Anchorage), Department of Law
testified via teleconference from Anchorage and informed the
Committee she was available to answer questions.
2:51:00 PM
DUSTIN SHANNON, Primerica Financial Services, testified via
teleconference from Anchorage in opposition to the bill as
written. While receiving his economics degree at the University
of Alaska Anchorage, he became aware of the "unintended
consequences" that sometimes occur when the government attempts
to protect the consumer. He was opposed to the bill, as written.
Increasing overhead expenses on individuals might dissuade them
from participating in this business.
2:52:06 PM
JOHN MARTIN, Alaska Mortgage Solution, and Past President,
Alaska Mortgage Brokers Association, testified via
teleconference from Anchorage. Recent media attention on
mortgage loan fraud in the State has contributed to the effort
behind this bill. People in the mortgage loan industry
"recognize the need for change" and have assisted in the
development of "this industry bill". "This bill effectively
addresses our concerns;" particularly in respect to licensing
mortgage companies and, specifically, mortgage loan originators.
Mr. Martin clarified that the bill would not require people who
process or underwrite loans to be licensed.
Mr. Martin asserted that the bill has broad industry support.
Other professional organizations also recognize the importance
of this legislation and the protection it can afford to our
residents.
Mr. Martin declared that the bill is "revenue neutral".
Furthermore, this "straight forward" bill would "not place an
undue burden or cost on business."
Mr. Martin reiterated that the bill would license an industry
that is currently unregulated.
Mr. Martin stated that the licensing fee being proposed would
cost a large multi-state lender, for example, approximately $20
each month. Those entities would save money by not having to
conduct background checks or provide continuing education
programs to their associates, as that effort would be conducted
under State oversight. This savings could be beneficial to
consumers.
Mr. Martin also noted that this legislation would require each
mortgage loan originator to be "responsible for paying their
very own low fees" which would amount to less than one dollar
per day.
Mr. Martin considered the best features of the bill to be that
the State would conduct licensee background checks and establish
industry performance standards. He supported the bill in its
current form; it would protect the citizens of the State.
2:55:04 PM
ROGER PRINCE, Securities Examiner, Division of Banking,
Securities and Corporations, Department of Commerce, Community
and Economic Development testified via teleconference from
Anchorage and informed the Committee he was available to answer
questions.
2:55:28 PM
NICOLE STRELTSOVA, Primerica Financial Services, testified via
teleconference from Fairbanks in opposition to the bill.
2:56:00 PM
LAVADA CHRISTINASON, Primerica Financial Services, testified via
teleconference from Fairbanks and opposed the bill as written.
2:56:19 PM
ROSE BAADE, Primerica Financial Services, testified via
teleconference from Fairbanks and spoke in opposition to the
bill as written. She urged the Committee to either postpone
action on the bill or amend it.
2:56:33 PM
JENNIFER MACOMBER, Primerica Financial Services, testified via
teleconference from Fairbanks in opposition to the bill, as
written.
2:56:52 PM
RON HUNT, Primerica Financial Services testified via
teleconference from Fairbanks and voiced opposition to the bill
as written.
2:57:12 PM
DENNIS SHINN, Primerica Financial Services, testified via
teleconference from Fairbanks in opposition to the bill, as
written.
2:57:37 PM
CURTIS MACOMBER, Primerica Financial Services, testified via
teleconference from Fairbanks and opposed the bill, as written.
2:58:08 PM
DAVID MUELLER, Primerica Financial Services, testified via
teleconference from Fairbanks in opposition to the bill as
written.
2:58:22 PM
BETTY KETZLER Primerica Financial Services testified via
teleconference from Fairbanks in opposition to the bill.
2:58:39 PM
DOTHORTHY JONES, Primerica Financial Services, testified via
teleconference from Fairbanks and spoke in opposition to the
bill, as written.
2:59:08 PM
MAUREEN MISEWICZ, Primerica Financial Services, testified via
teleconference from Fairbanks and spoke in opposition to the
bill as written. The bill should be amended in consideration of
Primerica's business model.
2:59:33 PM
JONATHAN BOURNE, Primerica Financial Services, testified via
teleconference from Fairbanks and opposed the bill as written.
3:00:30 PM
Senator Olson asked Roger Prince whether the Division was in
support of the bill.
Mr. Prince deferred to Mr. Davis to speak on behalf of the
Department; however, Mr. Davis was no longer available.
Co-Chair Stedman ordered the bill HELD in Committee.
RECESS TO CALL OF THE CHAIR 3:01:30 PM / 6:23:56 PM
CS FOR SENATE BILL NO. 104(FIN)
"An Act relating to the Alaska Gasline Inducement Act;
providing inducements for the construction of a natural gas
pipeline and shippers that commit to use that pipeline;
establishing the Alaska Gasline Inducement Act matching
contribution fund; providing for an Alaska Gasline
Inducement Act coordinator; making conforming amendments;
and providing for an effective date."
This was the 20th hearing for this bill in the Senate Finance
Committee.
6:24:56 PM
Co-Chair Hoffman move to adopt the Finance committee substitute
Version 25-GS1060\T, Bullock, dated May 10, 2007, as the working
document.
Without objection, the Version "T" committee substitute was
ADOPTED as the working document.
6:25:24 PM
Chapter 90. Alaska Gasline Inducement Act.
STEVE PORTER, Staff to Senator Bert Stedman, discussed the
changes the Version "T" committee substitute would make to
provisions of Chapter 90, added to AS 43 by Section 1 of the
bill.
Article 2. Alaska Gasline Inducement Act License.
Section 43.90.110. Natural gas pipeline project
construction inducement.
Mr. Porter stated that the first change in Version "T", as
compared to the previous Finance committee substitute Version
25-GS1060\N, was in Article 2, Section 43.90.110 subsection
(a)(1). The words "in the form of reimbursements" was added
following "contributions" on page 2, line 17.
6:26:25 PM
MARCIA DAVIS, Deputy Commissioner, Department of Revenue,
informed the Committee that this "technical" change would
strengthen language pertaining to the $500 million grant
reimbursement monies provided by the State to the licensee. It
would require "adequate support and identification of the costs
before monies are provided for that particular expenditure".
Requesting "reimbursement monies for an expenditure that does
not meet the qualifications as a qualified expenditure" would be
a violation.
6:28:36 PM
Mr. Porter noted that the word "match" was replaced with
"reimburse" in two sections of Section 43.90.110: page 2 line 24
of subsection (a)(1)(A) and page 2 line 29 of subsection
(a)(1)(B). This change would further clarify provisions relating
to qualified expenditures.
Mr. Porter also noted that the language "pursuing firm
transportation commitments in a binding open season, to securing
financing for the project, or" was inserted following the phrase
"reasonably related to" in subsection (a)(1)(C), page 3 line 4
of this section, in order "to expand" the activities "the
licensee could actually perform during" the five year period
immediately following receipt of the license.
6:29:56 PM
Senator Dyson asked whether changing from a matching situation
to a reimbursement scenario, as specified by the revisions to
Section 43.90.110, subsections (a)(1)(A) and (B), would have
"the affect of cutting in half the amount of money for the work
that would be done during this period."
(1) subject to appropriation, state matching
contributions in the form of reimbursements in a total
amount not to exceed $500,000,000, paid to the licensee
during the five-year period immediately following the date
the license is awarded;…
Ms. Davis identified "the actual language change" as being in
subsection (a)(1), page 2 lines 17 through 19. She read the
language and expressed the following.
…the actual matching percentage is still in play. So, if
they say, I want a match prior to open season of 40
percent, it would be a reimbursement up to the 40 percent.
So the percentage level of match is still in play. The only
thing that the addition of the word reimburse does is
affect the timing, so that the State isn't paying the match
at the initial outlay of cash by that licensee but rather
its after they've outlaid, provided the documentary
support, then we provide the reimbursement that's still
subject to those caps of percentages.
Senator Dyson appreciated the clarification.
6:31:31 PM
Section 43.90.130. Application requirements.
Mr. Porter next directed attention to paragraph (1) of Section
43.90.130, page 3 beginning on line 26. The phrase "the
applicant shall file with the commissioners the number of copies
of the application, and any amended application, required by the
commissioners; at the same time the copies of the application or
an amended application are filed with the commissioners, the
applicant shall provide six copies of the application or amended
application to the presiding officer of each chamber of the
legislature" was added following "request for applications" in
paragraph (1), page 3 line 31.
6:32:21 PM
Section 43.90.160. Notice, review, and comment.
(c) After the commissioners determine that the
applications are complete under AS 43.90.140, ….
Mr. Porter advised that the change in subsection (c) of this
section was to pluralize "the application is complete" to read
"the applications are complete", as reflected on page 12 line 3.
Ms. Davis noted that this language had been pluralized in
previous versions of the bill. Changing it from the singular to
the plural recognized that all license applications would be
received at one time rather than at staggered times.
6:34:07 PM
Section 43.90.170. Application evaluation and ranking.
(b) When evaluating the net present value of
anticipated cash flow to the state from the applicant's
project proposal, the commissioners shall use an
undiscounted value and, at a minimum, discount rates of
two, five, six, and eight percent, and consider
Mr. Porter stated that the discount rate of six percent was
added to subsection (b) page 12 line 20.
6:34:49 PM
Section 43.90.200. Certification by regulatory authority
and project sanction.
(a) A licensee that is awarded a certificate of public
convenience and necessity from a regulatory agency with
jurisdiction over the project shall accept the certificate
on or before the date the order granting the certificate is
no longer subject to judicial review.
6:35:43 PM
Mr. Porter stated that, as a clarifying measure, the words "on
or before the date" were added following the first reference to
"the certificate" in subsection (a) page 15 line 4. The words
"or earlier at the licensee's discretion" were deleted following
"judicial review" at the end of the subsection, page 15 line 5.
Mr. Porter informed the Committee that the term "amended
certificate" was utilized throughout the previous version of the
bill. That term is deleted entirely from Version "T" by changing
the definition of certificate to include "both certificate and
language sufficient to cover amended certificate as well."
Further discussion on this change would be forthcoming.
(f) In this section, "effective date of the
certificate of public convenience and necessity" means the
earlier of the date the order granting the certificate is
not longer subject to judicial review or the date the
licensee accepts the certificate.
Mr. Porter advised that two changes were made to subsection (f)
of this section. The words "the earlier of" were inserted
following "means" on page 16 line 3 and the words "or the date
the licensee accepts the certificate" were added following
"review" on line 4.
6:37:30 PM
(e) The transfer and assignments under (d) of this
section as a result of failure to comply with (a) or (b) of
this section are at no cost to the state or the state's
designee. A transfer under (c) of this section shall be
subject to the state's payment to the licensee of the net
amount of expenditures incurred and paid by the licensee
that are qualified expenditures for the purposes of AS
43.90.110.
Ms. Davis advised that the phrase "is at the licensee's net
cost" were deleted and replaced with "shall be subject to the
state's payment to the licensee of the net amount of
expenditures incurred and paid by the licensee that are
qualified expenditures" following "A transfer under (c) of this
section" on page 15 line 30.
6:38:17 PM
Section 43.90.210. Amendment of or modification to the
project plan. Subject to the approval of the commissioners,
a licensee may amend or modify its project plan if the
amendments or modifications improve the net present value
of the project to the state, are necessary because of an
order or requirement by a regulatory agency with
jurisdiction over the project or by the Alaska Oil and Gas
Conservation Commission, or the amendment or modification
is necessary because of changed circumstances outside the
licensee's control and not reasonably foreseeable before
the license was issued. An amendment or modification
approved under this section must be consistent with the
requirements of AS 43.90.130 and, except for an amendment
or modification required because of an order or requirement
of a regulatory agency with jurisdiction over the project
or by the Alaska Oil and Gas Conservation Commission, may
not substantially diminish the value of the project to the
state or the project's likelihood of success.
Mr. Porter informed that the words "an order issued" were
deleted following "jurisdiction over the project or" on page 16
lines 9 and 15 of this section.
Ms Davis advised that the phrase "net present" was also deleted
following "may not substantially diminish the" on line 16. This
phrase was inadvertently included in the previous version of the
bill as the result of a technical drafting error.
6:39:33 PM
Section 43.90.220. Records, reports, conditions, and audit
requirements.
(2) receive all relevant notices when and as
issued and information when and as sent to the governing
body or bodies and equity holders;
Mr. Porter stated that the words "when and as" were inserted in
subsection (d)(2), page 17 line 4, of this section.
6:40:03 PM
Section 43.90.240. Abandonment of project.
(b) If the commissioners and the licensee do not agree
that the project is uneconomic, the disagreement shall be
settled by arbitration administered by…..
Mr. Porter stated that the phrase "or the licensee find that the
project is uneconomic and the other parties disagree" was
deleted and replaced with "and the licensee do not agree"
following "commissioners" on page 18 line 26 of subsection (b)
of this section in order to clarify that "commissioners and
licensees don't make findings, they disagree".
6:40:51 PM
Article 3. Resource Inducements.
Section 43.90.300. Qualification for resource inducements.
Mr. Porter stated that the word "inducement" was pluralized to
"inducements" on page 20, line 27 of the section title.
Section 43.90.310. Royalty inducement.
(c) To claim the inducement under (b) of this section,
a lessee or other person qualified under AS 43.90.300 shall
agree, on an application form provided by the Department of
Natural Resources, that the lessee or other person, and the
lessee's or other person's affiliates, successors, assigns,
and agents will not protest or appeal a filing by the
licensee to roll in expansion costs of the mainline up to a
level that is required in AS 43.90.130(7) if the Federal
Energy Regulatory Commission does not have a rebuttable
presumption in effect that rolled-in treatment applies to
the cost of the expansion of the project. The agreement not
to protest may not preclude the lessee or other person, or
the lessee's or other person's affiliates, successors,
assigns, and agents from protesting a filing to roll in
mainline expansion costs that licensee is not required to
propose and support under AS 43.90.130(7).
Section 43.90.320. Gas production tax exemption.
(c) The person claiming the exemption under this
section shall agree that the person, and the person's
affiliates, successors, assigns, and agents will not
protest or appeal a filing by the licensee to roll in
mainline expansion costs up to the level that the licensee
is required to propose an support under AS 43.90.130(7) if
the Federal Energy Regulatory Commission does not have a
rebuttable presumption in effect that rolled-in treatment
applies to the cost of the expansion of the project. The
agreement required under this subsection may not preclude
the person, or the person's affiliates, successors,
assigns, and agents, from protesting a filing to roll in
mainline expansion costs that licensee is not required to
propose and support under AS 43.90.130(7).
Section 43.90.330. Inducement vouchers.
(d) A person that receives a voucher under this
section and a gas producer that receives resource
inducements under a voucher shall agree that the person and
the gas producer and their respective affiliates,
successors, assigns, or agents will not protest or appeal a
filing by the licensee to roll-in mainline expansion costs
up to the level that the licensee is required to propose
and support under AS 43.90.130(7) if the Federal Energy
Regulatory Commission does not have a rebuttable
presumption in effect that rolled-in treatment applies to
the cost of the expansion of the project. The agreement
required under this subsection may not preclude the person
or gas producer or their respective affiliates, successors,
assigns, or agents from protesting a filing to roll-in
mainline expansion costs that the licensee is not required
to propose and support under AS 43.90.130(7).
Mr. Porter stated that the clause "if the Federal Energy
Regulatory Commission does not have a rebuttable presumption in
effect that rolled-in treatment applies to the cost of the
expansion of the project." has been inserted following the first
reference to "AS 43.90.130(7)" in three subsections of the bill:
Section 43.90.310. Royalty inducement., subsection (c), page 23
line 8; Section 43.90.320. Gas production tax exemption.,
subsection (c), page 24, line 9; and Section 43.90.330.
Inducement vouchers., subsection (d), page 25 line 9.
Article 4. Miscellaneous Provisions.
Section 43.90.400. Alaska Gasline Inducement Act matching
contribution fund; disbursements; audits.
(c) The commissioners shall adopt regulations that
provide for application to receive matching contributions
in the form of reimbursements for qualified expenditures as
provided under AS 43.90.110, and ……
Mr. Porter stated that the phase "in the form of reimbursements"
was inserted following "contributions" in subsection (c) page 25
line 30 of Section 43.90.400.
6:43:14 PM
Section 43.90.440. Licensed project assurances.
(a) Except as otherwise provided in this chapter, the
state grants a licensee assurances that the licensee has
exclusive enjoyment of the inducements provided under this
chapter before the commencement of commercial operations….
Mr. Porter pointed out that the word "operation" in Section
43.90.440, subsection (a) page 26 line 22 was pluralized to
"operations" in this version of the bill.
6:43:32 PM
Article 5. General Provisions.
Section 43.90.900. Definitions.
(4)"certificate of public convenience and
necessity" and "certificate" mean a certificate of public
convenience and necessity issued by the Federal Energy
Regulatory Commission or the Regulatory Commission of
Alaska, and a certificate of public convenience of
necessity issued by the Federal Energy Regulatory
Commission under 15 U.S.C. 719 et seq. (Alaska Natural Gas
Transportation Act of 1976) that is amended to comply with
the terms of the license;
Mr. Porter stated that, as mentioned earlier, the definitions of
"certificate of public convenience and necessity" and
"certificate" were changed to accommodate the deletion of the
term "amended certificate" from this version of the bill. This
definition is depicted in paragraph (4), page 28 line 31 through
page 29 line 5, of Section 43.90.900.
6:44:55 PM
(17) "open season" means the process that
complies with 18 C.F.R. Part 157, Subpart B (Open Seasons
for Alaska Natural Gas Transportation Projects) or similar
procedures for soliciting commitments for pipeline capacity
under the regulations, policies, rules or precedent of the
Regulatory Commission of Alaska;
Mr. Porter also advised that the language "or similar procedures
for soliciting commitments for pipeline capacity under the
regulations, policies, rules or precedent of the Regulatory
Commission of Alaska" was added to the definition of "open
season", as depicted in paragraph (17) of the Definitions
section, page 30 line 9.
6:45:35 PM
This concluded the overview of the changes included in the
Version "T" committee substitute.
AT EASE 6:46:34 PM / 6:50:31 PM
Amendment #1: This amendment inserts "lobbying costs," following
"overhead costs," in Section 43.90.110(a)(1)(C), page 3 line 10,
of Article 2. Chapter 90. Alaska Gasline Inducement Act
License., added to AS 43 by Section 1.
Co-Chair Stedman moved and objected for discussion.
Co-Chair Stedman explained that this amendment would disqualify
lobbying costs from being a qualified expenditure, as defined in
this subsection.
6:51:03 PM
PATRICK GALVIN, Commissioner, Department of Revenue,
communicated that the Department did not object to the
amendment.
Co-Chair Stedman removed his objection.
6:52:26 PM
There being no further objection, Amendment #1 was ADOPTED.
Amendment #2: This amendment increases the "five-year" time
period specified in Section 43.90.110(a)(1), page 2 line 19, of
Article 2. Chapter 90. Alaska Gasline Inducement Act License.,
added to AS 43 by Section 1, to a "seven-year" time period.
Co-Chair Stedman moved and objected for discussion.
6:53:26 PM
Commissioner Galvin advised that subsection (a)(1) addressed the
time period in which qualified expenditures would be matched by
the State. The amendment would increase that time period to
seven years after the issuance of the license.
Commissioner Galvin spoke as follows.
In response to testimony and information provided by
potential applicants, its been requested to provide more
flexibility in terms of both the time line and in the
ability of applicants to potentially have costs associated
with the actual FERC [Federal Energy Regulatory Commission]
determination timeframe, if there's additional costs while
FERC may be considering an application and also providing
potentially more time between an open season and when the
beginning … engineering and other field work would be
undertaken to pursue the FERC certificate that this would
provide more flexibility for applicants and potentially
increase our pool of applicants by providing this
flexibility.
6:54:42 PM
Senator Huggins stated he would "counter-intuitively" support
the amendment in spite of his concern that it might have "the
potential net effect of expanding the timeline."
6:55:13 PM
Co-Chair Stedman maintained his objection to the amendment.
A roll call was taken on the motion.
IN FAVOR: Senator Olson, Senator Huggins, Senator Thomas,
Senator Dyson, Senator Elton and Co-Chair Hoffman
OPPOSED: Co-Chair Stedman
The motion PASSED (6-1)
Amendment #2 was ADOPTED.
6:56:07 PM
Amendment #3: This amendment deletes "80" and inserts "90" in AS
43.90.110(a)(1)(B), page 2 line 30. The language would read, in
part, as follows.
(B) after the close of the first binding open
season, the state shall reimburse the licensee's qualified
expenditures at the level specified in the license;
however, the state's matching contribution may not exceed
90 percent of the qualified expenditures …
Co-Chair Stedman moved and objected for discussion.
6:56:46 PM
Commissioner Galvin explained that this amendment pertained to
the timeframe in which an applicant could establish the level of
the State's matching contribution rate after the initial open
season. The adoption of this amendment would increase that level
to no more than 90 percent of the qualified expenditures.
Commissioner Galvin continued as follows.
Again, it is something that the applicant will establish in
their proposal. This provides more flexibility for
applicants to potentially put more of the weight on the
State. It is being responsive to primarily concerns raised
by TransCanada in terms of recognizing the risk sharing
after an open season and concern with regard to the fact
that its primarily the State's desire and in the State's
interest to have the project continue to move forward,
whereas the company may see a different risk profile, and
allowing for the State to take on more of that weight may
again encourage more applications, which is the ultimate
goal, and recognizing, also, that the State's cap on
expenditures remains at $500 million.
Commissioner Galvin considered "it appropriate to be responsive
to the desire for flexibility in that area with the primary
desire to increase the potential pool of applicants."
6:58:24 PM
Co-Chair Stedman thought that changes, such as the one proposed
in this amendment, have been made to "attract more midstream
participants" such as potential pipeline builders like
TransCanada and Enbridge.
6:59:57 PM
Commissioner Galvin expressed that, over the past few weeks,
numerous changes have been made "to the bill to attract
additional applicants" in an effort "to eliminate potential
barriers" identified by producers and others. Concerns raised by
TransCanada and others about such things as upstream activities
have been addressed. More changes would be anticipated in the
endeavor to make the Alaska Gasline Inducement Act (AGIA) "more
flexible for all potential participants."
7:00:34 PM
Senator Huggins appreciated the Commissioner's "candor" and
hoped that the actions taken in the bill "would attract more
applicants." Nonetheless, he would be voting against the
amendment because he was uncomfortable being told by a company
that, the in order to get them to apply, the State must increase
its matching contribution level to 90 percent.
7:01:14 PM
Commissioner Galvin clarified that "neither TransCanada nor any
other applicant has stated if this changed from 80 to 90 that
they would come." The overall effort is to make AGIA "more
attractive" and "to be responsive to our applicant pool." The
issue addressed in this amendment "was identified as an area of
concern."
Senator Huggins appreciated the clarification. Nonetheless,
"when it comes to dollars and cents, I have a little different
value system. So I'm a no vote."
A roll call was taken on the motion.
IN FAVOR: Senator Olson, Senator Thomas, Senator Dyson, Senator
Elton and Co-Chair Hoffman
OPPOSED: Senator Huggins and Co-Chair Stedman
The motion PASSED (5-2)
Amendment #3 was ADOPTED.
7:03:01 PM
Amendment #4: This amendment deletes "and" following "AS
43.90.130(9);" on page 12 line 31 of Article 2, Section
43.90.170(b)(5) of Chapter 90, added to AS 43 by Section 1, and
adds a new paragraph that reads as follows.
(6) economic value resulting from payments
required to be made to the state under the terms of the
proposal;
Co-Chair Stedman moved and objected for discussion.
7:03:40 PM
Commissioner Galvin stated that this amendment would allow the
State to consider a variety of applicant payment options.
Further clarifying remarks were provided as follows.
If an applicant were to propose, as part of their proposal,
making payments to the State, either in the form of a
passive equity interest, where the payment would be made as
part of some profit sharing or payments based upon the
revenues generated by the project, or, as the port
authority has indicated, they would create a profit sharing
opportunity for the State, or if the applicant were to
propose some sort of repayment in a form of just a set
payment as opposed to something based upon revenues.
All of those would be something that could be considered
and evaluated as part of the net present value economic
evaluation criteria. And, we believe that this is the most
responsive way to capture some of those areas of interest
and also to provide flexibility from the applicants.
But, make it clear that within the bill the requirement
that any State contribution will reduce the rate base and
thereby reduce the tariff remains: that this is not a
substitute where the State contribution will become the
loan and will end up being paid by the shippers when they
make their tariff payments. This would be something that
would be offered by the licensee out of their proceeds from
the project and would be offered as a way of making their
proposal more attractive and more likely to potentially
succeed in the competitive bidding process.
7:06:03 PM
In response to a concern voiced by Senator Elton, Co-Chair
Stedman stated that any language issues associated with
inserting this new paragraph into the bill would be addressed by
the bill's drafters.
7:06:41 PM
Senator Olson asked whether the net affect of the amendment
would be to provide an opportunity "to have an increased bottom
line for the State."
Commissioner Galvin responded in the affirmative. "This would
anticipate that if the licensee were to propose making these
payments it would result in an increased bottom line for the
State. We would get more value out of the project."
7:07:08 PM
Senator Huggins complimented the Commissioner on developing
amendment language that would provide an opportunity for the
State to further benefit from the project.
Co-Chair Stedman removed his objection.
There being no further objection, Amendment #4 was ADOPTED.
7:07:53 PM
Amendment #5: This amendment inserts the word "maximum"
following "the" in Article 2, Section 43.90.130. Application
requirements, subparagraph (15) on page 9 line 21 of Chapter 90,
added to AS 43 by Section 1. The language would read, in part,
as follows.
(15) to the maximum extent permitted by law,
commit to…
Co-Chair Stedman moved Amendment #5.
There being no objection, Amendment #5 was ADOPTED.
7:09:22 PM
Commissioner Galvin addressed another area of concern in the
bill; specifically language added to paragraph (1) of Article 2,
Section 43.90.130. Application requirements., page 3 line 30
through page 4, line 4 that reads, in part, as follows.
…the applicant shall file with the commissioners the
number of copies of the application, and any amended
application, required by the commissioners; at the
same time the copies of the application or an amended
application are filed with the commissioners, the
applicant shall provide six copies of the application
or amended application to the presiding officer of
each chamber of the legislature;
Commissioner Galvin was particularly concerned about the
language requiring the applicant to provide copies of their
application to the presiding officer of each chamber of the
legislature. The concern is that this action could compromise
the integrity of the process. It is imperative that there be "no
opportunity for one of the applicants, who that point still has
the opportunity to amend their application, to have access to
information provided by a competing applicant."
Commissioner Galvin declared that the commissioners must be able
to keep the applications "secure" and "within their control".
Co-Chair Stedman advised that forthcoming Amendment #6 might
address this concern.
AT EASE 7:11:54 PM / 7:24:26 PM
Amendment #6: This amendment deletes the ";" following
"legislature" on page 4 line 4 of subsection (1) of Article 2,
Section 43.90.130 of Chapter 90 added to AS 43 by Section 1 and
inserts new language as follows.
in a sealed envelope, and such envelope shall not be
opened and the contents distributed until the receipt by
the presiding officers of each chamber of notice, that the
commissioners have determined the applications are complete
under AS 43.90.140 and the presiding officer may open the
envelop after signing a confidentiality agreement under AS
43.90.160(c).
Co-Chair Stedman moved and objected for discussion.
Co-Chair Stedman thought this language would address the
confidentially concern arising from providing copies of the
applications to the presiding officer of each chamber of the
Legislature.
7:25:26 PM
Commissioner Galvin advised that the issue "still causes us
concern." He elaborated as follows.
…the Executive Branch is still responsible for implementing
the laws. And, as part of that, we are responsible for
implementing the AGIA process. And, that process has
safeguards with regard to both the flow of the applications
and the retention of the confidential materials. What this
does, is it goes outside of the process and additional
language that, as far as I'm aware, is unprecedented
anywhere else in State procedure, to have the information
provided simultaneously to the Executive Branch and to the
presiding officers.
Now, there's no limitation in here on, once the presiding
officers open these, whether they are bound to not
distribute the confidential information as is provided in
other sections with regard to the commissioners. It states
that the commissioners can only provide the information to
others once those others within the Legislature have signed
a confidentially agreements provided by the commissioners.
This does not have those safeguards built into it. It's
coming in from a completely different angle. I cannot
understand the motivations given that this information will
basically be available to the Legislature at the exact same
time under this as under this other provision, as the
existing provision.
7:27:22 PM
Commissioner Galvin advised that the Department of Law
recommends the existing bill language and has "established that
it's got the safeguards necessary to ensure that the integrity
of the process remains. This is not worked out in that regard
and there are potential loopholes that I can already see."
Commissioner Galvin noted that, in addition to the question of
confidentiality, the inclusion of an amended application in the
requirement is troublesome because "no where in the bill do we
talk about them being able to submit an amended application."
Commissioner Galvin pointed out that the application process
currently involves the submittal of an application, with
additional information to be provided as requested by the
commissioners. "That information would then be made public, as
well as the correspondence, when the applications are deemed
complete. This just is basically additional process that's being
tacked on here late in the day without us being able to work
through the various pitfalls that may be associated with this
additional process that, again, I'm not aware of anywhere else"
in the bill.
Commissioner Galvin urged the Committee to return to the
language in the original version of the bill as it would provide
the Legislature "full access to the information once its been
complete, full access to the confidential information, and
ensures that there isn't any question after the fact about the
integrity of the information flow."
AT EASE 7:29:28 PM / 7:30:07 PM
Without objection, Co-Chair Stedman WITHDREW Amendment #6.
Conceptual Amendment #8: This amendment deletes "the applicant
shall file with the commissioners the number of copies of the
application, and any amended application, required by the
commissioners; at the same time the copies of the application or
an amended application are files with the commissioners, the
applicant shall provide six copies of the application or amended
application to the presiding officer of each chamber of the
legislature" following "applications;" on page 3 line 30 through
page 4 line 4 of paragraph (1) of Article 2, Section 43.90.130.
Application requirements. in Chapter 90 added to AS 43 by
Section 1
Co-Chair Stedman moved and objected for further discussion.
7:32:34 PM
No discussion forthcoming, Co-Chair Stedman removed his
objection.
There being no further objection, Conceptual Amendment #8 was
ADOPTED.
7:33:18 PM
Amendment #7: This amendment inserts "an amendment to" following
"and" in paragraph (4), page 29, line 2 of Section 1, Article 5,
Section 43.90.900. Definitions, of Chapter 90 added to AS 43 by
Section 1.
The amendment also deletes "that is amended to comply with the
terms of the license" following "(Alaska Natural Gas
Transportation Act of 1976)" on page 29, line 4 of that same
paragraph.
The changes proposed in the amendment would read as follows.
(4) "certificate of public convenience and
necessity" and "certificate" mean a certificate of public
convenience and necessity issued by the Federal Energy
Regulatory Commission or the Regulatory Commission of
Alaska, and an amendment to a certificate of public
convenience of necessity issued by the Federal Energy
Regulatory Commission under 15 U.S.C. 719 et seq. (Alaska
Natural Gas Transportation Act of 1976);
Co-Chair Stedman moved and objected for discussion.
7:33:27 PM
Commissioner Galvin explained that, as mentioned earlier, the
term "or amended certificate" accompanied all references made to
a FERC certificate in previous bill versions. A "global change"
was made in this committee substitute in that the term "or
amended certificate" was omitted, and the concept of that term
was added to the definition of "certificate".
Commissioner Galvin communicated, however, that the Department
has determined that the manner in which the amended certificate
is referenced in that definition could "be clarified further".
This is the purpose of the amendment.
In response to a question from Co-Chair Stedman, Commissioner
Galvin affirmed that the Department supported the amendment.
Co-Chair Stedman removed his objection.
There being no other objection, Amendment #7 was ADOPTED.
No further amendments were offered.
AT EASE 7:35:33 PM / 7:36:56 PM
7:37:24 PM
Senator Dyson was pleased with the Committee's bill and with the
cooperation provided by the Administration in the endeavor.
While he would have welcomed having the bill reviewed by
Legislative consultants, he was sympathetic to the time
constraint placed on Committee actions.
7:38:21 PM
Co-Chair Stedman appreciated Senator Dyson's remarks. The amount
of time he, Co-Chair Hoffman, and Senator Huggins spent "working
through the details" of the bill, with the assistance of the
Administration, is evidenced by the limited number and nature of
the amendments offered today.
7:39:06 PM
Co-Chair Hoffman moved to report the Version 25-GS1060\T
committee substitute, as amended, from Committee with individual
recommendations and accompanying fiscal notes.
7:39:27 PM
There being no objection, CS SB104(FIN) was REPORTED from
Committee with six previous fiscal notes: zero fiscal note #2
from the Division of Oil & Gas, Department of Natural Resources;
$2,226,000 fiscal note #3 from the Department of Revenue; zero
fiscal note #4 from the Department of Commerce, Community and
Economic Development; zero fiscal note #5 from the Department of
Administration; $302,100 fiscal note #6, from the Division of
Oil & Gas, Department of Natural Resources; and $6,500,000
capital expenditure fiscal note #7 from the Department of Labor
and Workforce Development.
7:40:32 PM
Co-Chair Stedman conducted housekeeping on the following day's
Committee schedule.
ADJOURNMENT
Co-Chair Bert Stedman adjourned the meeting at 7:40:48 PM.
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