Legislature(2005 - 2006)BUTROVICH 205

04/19/2006 08:30 AM JUDICIARY


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ SB 307 LANDLORD REMEDIES; LATE FEE TELECONFERENCED
Heard & Held
*+ SB 316 COURT REVIEW OF STRANDED GAS DECISION TELECONFERENCED
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE JUDICIARY STANDING COMMITTEE                                                                             
                         April 19, 2006                                                                                         
                           8:40 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Ralph Seekins, Chair                                                                                                    
Senator Charlie Huggins, Vice Chair                                                                                             
Senator Gene Therriault                                                                                                         
Senator Hollis French                                                                                                           
Senator Gretchen Guess                                                                                                          
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 307                                                                                                             
"An Act  relating to a fee  provided for in the  rental agreement                                                               
for late payment  of rent under the  Uniform Residential Landlord                                                               
and Tenant Act."                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
SENATE BILL NO. 316                                                                                                             
"An  Act amending  the  Alaska Stranded  Gas  Development Act  to                                                               
eliminate  the opportunity  for judicial  review of  the findings                                                               
and determination  of the  commissioner of  revenue on  which are                                                               
based legislative review for a  proposed contract for payments in                                                               
lieu of taxes  and for the other purposes described  in that Act;                                                               
and providing for an effective date."                                                                                           
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: SB 307                                                                                                                  
SHORT TITLE: LANDLORD REMEDIES; LATE FEE                                                                                        
SPONSOR(s): LABOR & COMMERCE                                                                                                    
                                                                                                                                
02/23/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/06       (S)       L&C, JUD                                                                                               
03/09/06       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/09/06       (S)       Heard & Held                                                                                           
03/09/06       (S)       MINUTE(L&C)                                                                                            
03/16/06       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/16/06       (S)       Scheduled But Not Heard                                                                                
03/28/06       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/28/06       (S)       Heard & Held                                                                                         
03/28/06       (S)       MINUTE(L&C)                                                                                            
03/30/06       (S)       L&C AT 1:30 PM BELTZ 211                                                                               
03/30/06       (S)       Moved SB 307 Out of Committee                                                                          
03/30/06       (S)       MINUTE(L&C)                                                                                            
03/31/06       (S)       L&C RPT  2DP 1NR 2AM                                                                                   
03/31/06       (S)       DP: BUNDE, STEVENS B                                                                                   
03/31/06       (S)       NR: DAVIS                                                                                              
03/31/06       (S)       AM: ELLIS, SEEKINS                                                                                   
                                                                                                                              
BILL: SB 316                                                                                                                  
SHORT TITLE: COURT REVIEW OF STRANDED GAS DECISION                                                                              
SPONSOR(s): JUDICIARY                                                                                                           
                                                                                                                                
04/13/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/13/06       (S)       JUD                                                                                                    
04/19/06       (S)       JUD AT 8:30 AM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Senator Con Bunde                                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK 99801-1182                                                                                                           
POSITION STATEMENT:  Introduced SB 307                                                                                        
                                                                                                                                
Bob Maier                                                                                                                       
Alaska Manufactured Housing Association                                                                                         
No address provided                                                                                                             
POSITION STATEMENT:  Testified in support of SB 307                                                                           
                                                                                                                                
Leo Regner, Landlord                                                                                                            
North Pole, Alaska                                                                                                              
POSITION STATEMENT:  Testified in support of SB 307                                                                           
                                                                                                                                
William Whipple, Landlord                                                                                                       
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in support of SB 307                                                                           
                                                                                                                                
Steve Cleary, Executive Director                                                                                                
Alaska Public Interest Research Group                                                                                           
No address provided                                                                                                             
POSITION STATEMENT:  Testified in opposition to SB 307                                                                        
                                                                                                                                
Pat Luby, Executive Director                                                                                                    
AARP Alaska                                                                                                                     
No address provided                                                                                                             
POSITION STATEMENT:  Testified in opposition to SB 307                                                                        
                                                                                                                                
Wayne Stevens, President and CEO                                                                                                
Alaska State Chamber of Commerce                                                                                                
217 Second Street                                                                                                               
Juneau, Alaska 99801                                                                                                            
POSITION STATEMENT:  Testified in support of SB 307                                                                           
                                                                                                                                
Ed Sniffen, Assistant Attorney General                                                                                          
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:   Informed the committee  of the implications                                                             
of SB 307                                                                                                                       
                                                                                                                                
Steven Porter, Deputy Commissioner                                                                                              
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT:  Answered questions regarding SB 316                                                                      
                                                                                                                                
Larry Ostrovsky, Chief Assistant Attorney General                                                                               
Oil and Gas Section                                                                                                             
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Answered questions regarding SB 316                                                                      
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
                                                                                                                                
CHAIR  RALPH   SEEKINS  called  the  Senate   Judiciary  Standing                                                             
Committee meeting to  order at 8:40:09 AM.  Present were Senators                                                             
Gretchen Guess, Charlie Huggins, and Chair Ralph Seekins.                                                                       
                                                                                                                                
               SB 307-LANDLORD REMEDIES; LATE FEE                                                                           
                                                                                                                                
8:40:28 AM                                                                                                                    
CHAIR RALPH SEEKINS announced SB 307 to be up for consideration.                                                                
                                                                                                                                
SENATOR  CON   BUNDE,  Sponsor,  introduced  the   bill.  SB  307                                                               
addresses  a problem  in  the  landlord/tenant relationship  that                                                               
surfaced due  to a  2002 Superior  Court decision,  which changed                                                               
the status  quo on  collection of  late rent  and late  fees. The                                                               
bill would return  the notification process back  to its original                                                               
process.                                                                                                                        
                                                                                                                                
Prior to 2002,  inclusion of a late fee on  the same 7-day notice                                                               
to  quit for  nonpayment of  rent was  an accepted  practice. The                                                               
court  ruled  that  this  was   illegal  and  required  that  the                                                               
landlords use an additional 10-day notice for the late fee.                                                                     
                                                                                                                                
Simple, clear language between landlord  and tenant is essential.                                                               
Replacing one  notice with two  notices, both with  different due                                                               
dates and amounts owed causes  problems, and a dispute invariably                                                               
ends up  in court. The  bill would  allow landlords to  return to                                                               
the same  7-day notice  requirement for  non-payment of  the rent                                                               
plus the additional late fee.                                                                                                   
                                                                                                                                
8:42:49 AM                                                                                                                    
Senator Hollis French joined the meeting.                                                                                       
                                                                                                                                
8:43:38 AM                                                                                                                    
BOB MAIER, Alaska Manufactured  Housing Association, testified in                                                               
support of the  bill. He said historically the  late was included                                                               
in  the  7-day  notice  to  quit of  non-payment  of  rent.  This                                                               
practice has been  going on since before  the Landlord-Tenant Act                                                               
was enacted. He asked the committee  to support the bill and gave                                                               
a comparative  example of an  electric bill that includes  a late                                                               
fee on the same notice with the same due date.                                                                                  
                                                                                                                                
8:46:02 AM                                                                                                                    
Senator Gene Therriault joined the meeting.                                                                                     
                                                                                                                                
SENATOR GRETCHEN GUESS asked Mr.  Maier whether a person could be                                                               
evicted for not paying a late fee even after paying the rent.                                                                   
                                                                                                                                
MR. MAIER  said yes but it  has never happened. A  landlord would                                                               
not  pursue an  action based  on a  late fee  due to  all of  the                                                               
additional costs  involved, including  court costs and  the costs                                                               
involved in re-renting the property.                                                                                            
                                                                                                                                
SENATOR  GUESS countered  that as  the bill  is written  it would                                                               
allow for an eviction based on the late fee.                                                                                    
                                                                                                                                
MR. MAIER agreed and said that  it has never been the practice of                                                               
a landlord to evict a person  based on non-payment of a late fee.                                                               
He said  he has sat  through over  400 eviction hearings  and has                                                               
never seen  a judge evict  on the basis of  a late fee  alone and                                                               
has never seen  an action brought forward on the  basis of a late                                                               
fee alone.                                                                                                                      
                                                                                                                                
8:48:38 AM                                                                                                                    
LEO REGNER, Landlord,  testified in support of the  bill. He said                                                               
the   contract  agreement   should   be   enforceable  with   one                                                               
notification to  quit. The  law as  currently written  allows the                                                               
tenant  to  extend the  problem  due  to  all of  the  additional                                                               
paperwork and waiting that both parties have to go through.                                                                     
                                                                                                                                
8:53:48 AM                                                                                                                    
WILLIAM WHIPPLE, Landlord,  testified in support of  the bill. He                                                               
voiced  support  of  the  previous  testimony  and  informed  the                                                               
committee of the  difficulty in evicting tenants  who have failed                                                               
to pay their rent.                                                                                                              
                                                                                                                                
8:57:39 AM                                                                                                                    
STEVE   CLEARY,  Executive   Director,  Alaska   Public  Interest                                                               
Research Group  (AkPIRG), testified in  opposition to SB  307. He                                                               
asserted that  late fees should  not be  treated as rent  and the                                                               
bill would cause that to happen.                                                                                                
                                                                                                                                
8:58:55 AM                                                                                                                    
PAT  LUBY,   Executive  Director,   AARP  Alaska,   testified  in                                                               
opposition to the bill. He  cautioned the committee that the bill                                                               
would allow  for landlords to  impose unreasonable late  fees and                                                               
that the bill would force the  courts to include that late fee in                                                               
the rent.  AkPIRG agrees with  the attorney general's  office and                                                               
with the court on the issue.                                                                                                    
                                                                                                                                
ED SNIFFEN, Assistant Attorney General,  Department of Law (DOL),                                                               
testified that the DOL has  already provided comments to the bill                                                               
sponsor  in the  previous  committee hearing.  Senator Guess  has                                                               
highlighted some  issues with the  bill. Currently if a  late fee                                                               
is assessed  the landlord has the  right to give a  10-day notice                                                               
and the recipient  has the opportunity to schedule  a hearing and                                                               
challenge the reasonableness  of that late fee. If  a person does                                                               
not pay  the late fee, the  judge must decide whether  failure to                                                               
pay  constitutes   a  material  non-compliance  with   the  lease                                                               
agreement.                                                                                                                      
                                                                                                                                
Hence,  the court  is forced  to  apply a  different standard  of                                                               
review to  the failure  to pay  rent and the  failure to  pay the                                                               
late  fee. Combining  these  two issues  into  one hearing  would                                                               
allow the court to  evict a tenant for failing to  pay a late fee                                                               
and it  wouldn't necessarily need to  consider the reasonableness                                                               
of the  late fee. The  DOL does not take  a position on  the bill                                                               
but   the  committee   should  understand   the  impact   of  the                                                               
legislation, he stated.                                                                                                         
                                                                                                                                
9:03:47 AM                                                                                                                    
SENATOR FRENCH said for the record  he has done two evictions for                                                               
non-payment of  rent and they  were over  10 years ago.  He asked                                                               
Mr. Sniffen  if there  was anything  in the  law that  outlines a                                                               
maximum late fee proportional to the rent.                                                                                      
                                                                                                                                
MR. SNIFFEN said  no but courts are unlikely to  allow a late fee                                                               
that is greater than the rent.                                                                                                  
                                                                                                                                
SENATOR  FRENCH referred  to  Mr. Sniffen's  letter  in the  bill                                                               
packet regarding the  possibility of moving everything  to a ten-                                                               
day notice.  He asked him  to review  the letter dated  March 22,                                                               
2006  from Mr.  Maier,  which  claims that  going  to the  10-day                                                               
notice would be a disaster for the tenant.                                                                                      
                                                                                                                                
MR. SNIFFEN responded that he spoke  to Mr. Maier about the issue                                                               
of landlords  being able to  evict tenants and stated  that there                                                               
are a number  of ways for landlords to evict  tenants. He said he                                                               
would read the letter and get back to the committee.                                                                            
                                                                                                                                
SENATOR  FRENCH said  his experience  is that  25 percent  of the                                                               
people he rents  to are young people renting for  the first time.                                                               
He said  when they sign  the lease  they generally don't  know to                                                               
what  obligation they  are signing.  He expressed  agreement with                                                               
the one time  notice and said he is looking  for a procedure that                                                               
is more efficient yet protects both sides.                                                                                      
                                                                                                                                
9:09:08 AM                                                                                                                    
WAYNE  STEVENS,  President  and  CEO,  Alaska  State  Chamber  of                                                               
Commerce, testified  in support  of the bill.  He said  the court                                                               
decision  created unnecessary  confusion  and  disruption to  the                                                               
rental and leasing services in Alaska.                                                                                          
                                                                                                                                
CHAIR  SEEKINS saw  no further  testimony  and held  the bill  in                                                               
committee.                                                                                                                      
                                                                                                                                
                                                                                                                                
          SB 316-COURT REVIEW OF STRANDED GAS DECISION                                                                      
                                                                                                                                
9:12:27 AM                                                                                                                    
CHAIR SEEKINS  announced SB  316 to be  up for  consideration. He                                                               
said the committee has reviewed  the legislative findings and are                                                               
familiar with the contents of the bill.                                                                                         
                                                                                                                                
STEVE PORTER,  Deputy Commissioner, Department of  Revenue (DOR),                                                               
and LARRY  OSTROVSKY, Assistant  Attorney General,  Department of                                                               
Law (DOL), introduced themselves.                                                                                               
                                                                                                                                
9:13:29 AM                                                                                                                    
MR. PORTER  said the administration supports  the legislation and                                                               
the  DOR has  written  a zero  fiscal note  because  the bill  is                                                               
primarily clarification of  the department's responsibilities. He                                                               
advised  that Mr.  Ostrovsky  would explain  the  details of  the                                                               
legislation to the committee.                                                                                                   
                                                                                                                                
MR. OSTROVSKY directed the committee  to AS 43.82.430(b) and said                                                               
under the  original version of  the Stranded Gas  Development Act                                                               
(SGDA) it provided  that the commissioner of the  DOR present the                                                               
proposed contract  to the  public and  the Legislature  and after                                                               
comment and  review, the  commissioner had  the power  to execute                                                               
the contract. That decision would  be a final agency decision and                                                               
would   normally  be   subject  to   administrative  review   and                                                               
challengeable.                                                                                                                  
                                                                                                                                
9:17:08 AM                                                                                                                    
CHAIR SEEKINS  asked the procedure  if someone were  to challenge                                                               
the commissioner's final findings  and determination after he has                                                               
executed the contract.                                                                                                          
                                                                                                                                
MR. OSTROVSKY referred to the  DOR regulations and explained that                                                               
the challenge  has to happen within  30 days of the  decision. He                                                               
said  additionally under  appellate rule  602, an  appeal may  be                                                               
taken to superior  court from an administrative  agency within 30                                                               
days from the date that the decision is distributed.                                                                            
                                                                                                                                
9:18:48 AM                                                                                                                    
SENATOR FRENCH asked the kinds  of documents and information that                                                               
the challenger would be entitled to in the course of discovery.                                                                 
                                                                                                                                
MR.  OSTROVSKY said  typically when  there  is an  administrative                                                               
appeal the superior  courts will order the agency  to compile the                                                               
record and that would be all  of the papers that were present and                                                               
considered.  Once the  record  is compiled,  the  court sets  the                                                               
briefing schedule.                                                                                                              
                                                                                                                                
SENATOR FRENCH  speculated that the  record would be  composed of                                                               
the modeling,  assumptions, fiscal  terms, data, and  every piece                                                               
of evidence that the commissioner  took into account when finding                                                               
that the  contract was  in the long-term  fiscal interest  of the                                                               
state.                                                                                                                          
                                                                                                                                
MR. OSTROVSKY  said he did  not have  the particular rule  but in                                                               
his  experience,  agencies typically  have  files  and the  court                                                               
orders the file  put together. In the case of  the SGDA there are                                                               
probably numerous relevant  files. He said there  would likely be                                                               
some discussion about  where the record actually  begins and ends                                                               
with respect to the contract.                                                                                                   
                                                                                                                                
CHAIR SEEKINS  asked whether historically the  person challenging                                                               
the contract  would be appealing  the finding or the  contract or                                                               
both.                                                                                                                           
                                                                                                                                
9:21:56 AM                                                                                                                    
MR.  OSTROVSKY said  both but  most likely  that person  would be                                                               
appealing the  finding as the  basis for the contract.  There are                                                               
various   standards  of   review  for   appealing  administrative                                                               
determinations. The court  would look to see whether  there was a                                                               
reasonable basis for the commissioner's findings.                                                                               
                                                                                                                                
CHAIR SEEKINS  asked whether it  would be right for  appeal prior                                                               
to the signing of the contract.                                                                                                 
                                                                                                                                
MR. OSTROVSKY  said it probably  would. He  used an analogy  of a                                                               
lease sale by the Department  of Natural Resources. They have had                                                               
many  challenges   to  administrative  determinations   and  they                                                               
usually  occur   directly  before  the  lease   sale.  After  the                                                               
commissioner has  released his findings  then he is  empowered to                                                               
go  forth  and   lease.  "Under  the  original   law,  after  the                                                               
commissioner   issued   the    fiscal   interest   finding,   the                                                               
commissioner would  then be empowered  to execute a  contract, so                                                               
it would be after the finding," he said.                                                                                        
                                                                                                                                
CHAIR SEEKINS asked how close in juxtaposition that would be.                                                                   
                                                                                                                                
MR.  OSTROVSKY   said  under  the   original  law  it   could  be                                                               
sequentially.                                                                                                                   
                                                                                                                                
9:24:12 AM                                                                                                                    
SENATOR FRENCH  said the term "final  findings and determination"                                                               
is a term  of art and is a  signal to the world that  this is the                                                               
place  to mount  the  challenge. Under  the  SGDA, the  threshold                                                               
question is  whether or  not the  gas is  stranded and  the chief                                                               
point of  anyone challenging the  decision would be that  the gas                                                               
is not  stranded. Since the  department has  all of the  data and                                                               
modeling to prove  that the gas is stranded, he  asked whether it                                                               
would be  reasonable to believe  that a challenger would  be able                                                               
to obtain all that data.                                                                                                        
                                                                                                                                
MR. OSTROVSKY said  under the SGDA there are a  number of factors                                                               
that the commissioner must weigh  and balance. A challenger might                                                               
disagree on  a number of issues,  such as whether it  is the best                                                               
project, whether  it serves  communities, or  whether there  is a                                                               
constitutional issue.  He said a  challenger would  want anything                                                               
that was relevant to their claim.                                                                                               
                                                                                                                                
9:27:51 AM                                                                                                                    
MR.  OSTROVSKY  continued  in  March  of  1998,  the  Legislature                                                               
amended  the  original  version  of  the  Stranded  Gas  Act.  He                                                               
referred the committee  to AS 43.82.435 and  said the Legislature                                                               
retained  the ultimate  authority to  authorize execution  of the                                                               
contract. "This is an unusual  statute and quite frankly I've not                                                               
seen one like it," he stated.                                                                                                   
                                                                                                                                
9:30:20 AM                                                                                                                    
Under the  old Act,  the place for  the challenge  is appropriate                                                               
because it  is directly after  the final agency decision.  In the                                                               
amended  version,  the  commissioner's  fiscal  interest  finding                                                               
doesn't enable  the commissioner to execute  the contract; rather                                                               
the  Legislature must  authorize  it first.  People who  normally                                                               
might oppose  it and have  no recourse under the  fiscal interest                                                               
finding, now have  recourse to the Legislature because  that is a                                                               
step  that  happens  between  the  fiscal  interest  finding  and                                                               
authorization. That is a step that doesn't exist in other cases.                                                                
                                                                                                                                
9:32:41 AM                                                                                                                    
One  issue with  the  current law  is  that it  could  lead to  a                                                               
premature court case  before all of the facts  are disclosed, and                                                               
it could  put the  court of  law in  between the  legislative and                                                               
executive  branches. As  a general  rule courts  like to  take up                                                               
final  decisions because  they don't  want to  take up  something                                                               
until  there is  finality. The  risk is  that all  the facts  and                                                               
circumstances won't be in front of  the court and also there is a                                                               
risk that the case might be moved.                                                                                              
                                                                                                                                
A legal challenge set before  the Legislature has the opportunity                                                               
to consider and debate the  contract would prevent the court from                                                               
seeing whether there  are aggrieved parties and  also prevent the                                                               
court from  taking into consideration  the full  facts underlying                                                               
the contract.  The practical  implications are  that it  puts the                                                               
court squarely between the flow  of the executive and legislative                                                               
branches,  Mr Ostrovsky  stated. Normally  the governor  proposes                                                               
bills  and  the Legislature  acts  on  the  bills and  the  court                                                               
doesn't get  involved until somebody  challenges a bill  that has                                                               
been enacted. He offered to answer questions.                                                                                   
                                                                                                                                
9:38:06 AM                                                                                                                    
CHAIR  SEEKINS  referred  to  the  flowchart  comparison  of  the                                                               
original  SGDA version  and the  current Act.  He said  in either                                                               
case, the contract is subject to judicial review.                                                                               
                                                                                                                                
SENATOR  THERRIAULT asked  Mr. Ostrovsky  if the  legal challenge                                                               
were at the end  of the chain of events, would  the court be able                                                               
to review  the findings  that the contract  was predicated  on to                                                               
determine  whether   the  commissioner  has  "struck   the  right                                                               
balance"  or would  they  be  precluded to  only  looking at  the                                                               
constitutional challenges to the words of the contract itself.                                                                  
                                                                                                                                
MR. OSTROVSKY responded there is a  remedy for when people do not                                                               
agree with the  balance that the commissioner struck  and that is                                                               
to  go  to the  Legislature  and  prove that  the  commissioner's                                                               
reasoning  was  faulty.  If  the process  goes  through  and  the                                                               
Legislature  passes  it and  somebody  challenges  it, the  court                                                               
would look  at what led to  the contract and also  what developed                                                               
in the Legislature.                                                                                                             
                                                                                                                                
SENATOR   THERRIAULT  asked   whether   it  is   constitutionally                                                               
allowable for the Legislature to have  a roll in the SGDA. In the                                                               
original version of  the SGDA, the administration saw  no role of                                                               
the Legislature in the function, he said.                                                                                       
                                                                                                                                
MR.  OSTROVSKY  said that  might  be  a potential  separation  of                                                               
powers  issue since  the  Legislature isn't  in  the business  of                                                               
negotiating  contracts. The  legislative history  on the  SGDA is                                                               
skimpy and there  doesn't seem to be much  discussion through the                                                               
process  of the  bill. Regardless,  if the  court found  that the                                                               
Legislature had no  role in the development of  the contract then                                                               
that  contract  would  only  be  based on  the  findings  of  the                                                               
commissioner.                                                                                                                   
                                                                                                                                
9:48:26 AM                                                                                                                    
CHAIR SEEKINS read AS 43.82.430(a):                                                                                             
     (a) Within 30 days after the close of the public comment                                                                   
period under AS 43.82.410(4), the commissioner of revenue shall                                                                 
     (1) prepare a summary of the public comments received in                                                                   
response to  the proposed contract  and the  preliminary findings                                                               
and determination;                                                                                                              
     (2) after consultation with the commissioner of natural                                                                    
resources,  if  appropriate,  and with  the  pertinent  municipal                                                               
advisory group established under AS  43.82.510, prepare a list of                                                               
proposed amendments,  if any, to  the proposed contract  that the                                                               
commissioner of  revenue determines  are necessary to  respond to                                                               
public comments;                                                                                                                
     (3) make final findings and a determination as to whether                                                                  
the proposed contract and any  proposed amendments prepared under                                                               
(2)  of this  subsection meet  the requirements  and purposes  of                                                               
this chapter.                                                                                                                   
                                                                                                                                
CHAIR SEEKINS  asked, "Isn't  that what  would be  appealed under                                                               
the current law?"                                                                                                               
                                                                                                                                
MR. OSTROVSKY  stated yes.  The difference is  under the  old law                                                               
the commissioner would then sign the contract.                                                                                  
                                                                                                                                
CHAIR  SEEKINS  asked,  "Isn't it  the  determinations  that  the                                                               
proposed   contract  and   the  amendments   prepared  meet   the                                                               
requirements of the Chapter?"                                                                                                   
                                                                                                                                
MR. OSTROVSKY stated yes.                                                                                                       
                                                                                                                                
CHAIR SEEKINS said, "So his  final determination is everything in                                                               
this proposed contract  meet the requirements of  the chapter and                                                               
is in the fiscal interest of the state."                                                                                        
                                                                                                                                
MR. OSTROVSKY stated yes.                                                                                                       
                                                                                                                                
CHAIR SEEKINS said:                                                                                                             
     So  isn't  it  now  under  the  new  law  part  of  the                                                                    
     responsibility  of the  Legislature in  its review,  to                                                                    
     make sure or to become  satisfied that the contract and                                                                    
     the  proposed  amendments  that are  forwarded  by  the                                                                    
     governor to us meet the requirements of the Chapter?                                                                       
                                                                                                                                
MR. OSTROVSKY stated yes.                                                                                                       
                                                                                                                                
CHAIR SEEKINS asked, "And  isn't that determination challengeable                                                               
at the point where we say the governor can now sign it?"                                                                        
                                                                                                                                
MR. OSTROVSKY stated:                                                                                                           
     Because   the   Legislature   writes  the   laws,   the                                                                    
     Legislative  determination  that  the  facts  that  are                                                                    
     developed are consistent with the  law would not likely                                                                    
     survive  a   challenge.  But   what  would   survive  a                                                                    
     challenge is if somebody  believes that the Legislature                                                                    
     [or the commissioner] violated the Constitution.                                                                           
                                                                                                                                
9:53:48 AM                                                                                                                    
CHAIR SEEKINS countered if the  Legislature reviewed the contract                                                               
and determined that  it meets the requirements of  the bill, they                                                               
would be making  the determination that the  facts are consistent                                                               
with the law and with the fiscal interest of the state.                                                                         
                                                                                                                                
MR.  OSTROVSKY said  that is  right  and that  is something  that                                                               
doesn't normally exist.  People normally do not  have recourse to                                                               
the Legislature.                                                                                                                
                                                                                                                                
CHAIR SEEKINS said:                                                                                                             
     Otherwise  what  purpose  does the  legislative  review                                                                    
     have? When I look at the  new law, it says the governor                                                                    
     can transmit the  contract to us and it  is not binding                                                                    
     or enforceable  unless the  governor has  authorized to                                                                    
     execute the contact.                                                                                                       
                                                                                                                                
MR. OSTROVSKY agreed.                                                                                                           
                                                                                                                                
CHAIR  SEEKINS said  it seems  that at  the end  of the  process,                                                               
after the Legislature  has reviewed the contract,  there is still                                                               
the ability  to challenge  the conclusion that  it does  not meet                                                               
the requirements of the Chapter.                                                                                                
                                                                                                                                
MR. OSTROVSKY  said people would  still be able to  challenge the                                                               
constitutionality.  It  would  be   difficult  to  challenge  the                                                               
Legislature's determination  that the commissioner's  finding was                                                               
sufficient because it is not  necessarily required to do a fiscal                                                               
interest finding.                                                                                                               
                                                                                                                                
CHAIR  SEEKINS  asked  whether,  based  on  the  fiscal  interest                                                               
finding, could  a person still  bring a challenge if  that fiscal                                                               
interest finding  did not comply  with Article 8, paragraph  2 of                                                               
the Alaska State Constitution.                                                                                                  
                                                                                                                                
MR. OSTROVSKY  responded the person could  challenge the ultimate                                                               
contract.                                                                                                                       
                                                                                                                                
9:57:30 AM                                                                                                                    
SENATOR  FRENCH  pointed  out   that  the  exchange  between  the                                                               
Chairman and  Mr. Ostrovsky highlights  the concerns that  he has                                                               
heard  regarding the  bill. The  question  is whether  SB 316  is                                                               
about where to make the challenge  or whether a person could make                                                               
a challenge  at all.  He said  that is his  concern. It  is quite                                                               
possible that a  court would say that  the Legislature's findings                                                               
are not challengeable.                                                                                                          
                                                                                                                                
MR. OSTROVSKY said,                                                                                                             
       In the original bill, and in most processes in the                                                                       
     state that concerns a best interest finding, the best                                                                      
     interest finding  is the end  of the story and  that is                                                                    
     the  distinction.  When  the contract  is  signed,  the                                                                    
     court  would look  at the  whole story.  And the  whole                                                                    
     story is both the  commissioner's determination and the                                                                    
     legislative  findings and  that is  why I  believe that                                                                    
     the findings  would likely be important  but not viewed                                                                    
     in isolation.                                                                                                              
                                                                                                                                
SENATOR  FRENCH  concluded  the  fact  is  that  the  bill  would                                                               
restrict a challenge strictly to  constitutional grounds. What is                                                               
completely taken away  is a person's right to  challenge that the                                                               
contract is in  violation of the SGDA  or the law. That  is a far                                                               
more difficult challenge to win.                                                                                                
                                                                                                                                
MR. OSTROVSKY  insisted conversely one  would have access  to the                                                               
Legislature that they normally don't have.                                                                                      
                                                                                                                                
SENATOR  FRENCH expressed  concern that  aggrieved parties  would                                                               
not have  access to  the entire  record in  order to  bring their                                                               
case to the Legislature.                                                                                                        
                                                                                                                                
10:00:51 AM                                                                                                                   
MR. OSTROVSKY argued that one  remedy that the Legislature always                                                               
has  is they  can  reject  the contract  if  they  feel there  is                                                               
insufficient information in front of it.                                                                                        
                                                                                                                                
SENATOR GUESS said:                                                                                                             
     What gives us  the authority on the  findings? It seems                                                                    
     like why have  the findings at all,  honestly? You said                                                                    
     that  we have  the authority  to approve  the findings,                                                                    
     well, we  have the  contract in front  of us,  we don't                                                                    
     have  the  findings  and determination  necessarily  in                                                                    
     front  of us  and  we don't  necessarily  have all  the                                                                    
     background  information, nor  are we  always successful                                                                    
     in getting  all the background information  for what is                                                                    
     in front of us.                                                                                                            
                                                                                                                                
She said  the bill seems to  take the consideration of  whether a                                                               
contract serves the  long-term interest of the  state and whether                                                               
the  contract  complies   with  the  SGDA  off   the  table.  She                                                               
questioned the  purpose of the  bill and questioned  the approach                                                               
to the bill. She said she  does not understand the intent and she                                                               
does not "buy the whole  delay issue." Historically speaking, and                                                               
especially on  initiatives, the courts  wait to see if  it passes                                                               
before they  deal with it and  in this situation the  court would                                                               
wait  to see  if the  Legislature passed  the contract  and would                                                               
then go back to look at the findings.                                                                                           
                                                                                                                                
MR.  OSTROVSKY responded  that it  was dangerous  to opine  about                                                               
legislative intent.  The SGDA requires that  the commissioner set                                                               
out findings  with the contract  and to answer  certain questions                                                               
specifically  dealing with  that contract.  Because of  that, the                                                               
findings  have an  important  purpose, he  said.  He agreed  that                                                               
courts do  not like to  take up  matters until there  is finality                                                               
but indicated that it could if  it felt there was adequate reason                                                               
for the challenge.                                                                                                              
                                                                                                                                
SENATOR GUESS  asked whether  it would void  the contract  if the                                                               
court ruled  that the contract  did not meet the  requirements of                                                               
the chapter.                                                                                                                    
                                                                                                                                
10:06:33 AM                                                                                                                   
MR.  OSTROVSKY  admitted  that  is untested  terrain  and  it  is                                                               
possible  that  the  Legislature   would  take  up  the  contract                                                               
regardless.                                                                                                                     
                                                                                                                                
SENATOR GUESS said  she did not see the tie  between the findings                                                               
and the contract.                                                                                                               
                                                                                                                                
MR. OSTROVSKY responded  the tie is there and there  is an avenue                                                               
for challenge.                                                                                                                  
                                                                                                                                
SENATOR GUESS challenged  Mr. Ostrovsky to explain  how the court                                                               
could prevent  the governor from transmitting  the contract, even                                                               
if somebody took the findings to court.                                                                                         
                                                                                                                                
MR. OSTROVSKY  said what would  happen is the  commissioner would                                                               
issue the  final finding and  a person would  go to court  with a                                                               
reasonable basis  for challenge. The  court would order  a record                                                               
compiled and there would be  arguments. The court would determine                                                               
whether the  commissioner had  a reasonable  basis. If  the court                                                               
found that  the commissioner  didn't, the  court would  remand it                                                               
back to  the commissioner and make  him redo the finding.  So the                                                               
commissioner  would not  have  the ability  to  then advance  the                                                               
contract.                                                                                                                       
                                                                                                                                
SENATOR  THERRIAULT  asked  whether  there  could  be  clarifying                                                               
language that  a challenge to  the findings could  be guaranteed.                                                               
The criticism that  is being heard from the  constituency is that                                                               
the process they normally have access  to would be gone if SB 318                                                               
were to be enacted.                                                                                                             
                                                                                                                                
10:11:44 AM                                                                                                                   
MR. OSTROVSKY replied  under the SGDA that could be  a problem in                                                               
terms of  finality since someone could  challenge an intermediate                                                               
step   in  the   process.  He   questioned  how   meaningful  the                                                               
commissioner's findings would  be at the final  point. "It's only                                                               
one piece of the puzzle," he stated.                                                                                            
                                                                                                                                
10:14:19 AM                                                                                                                   
MR.  OSTROVSKY  posed a  hypothetical  situation  of a  challenge                                                               
where  the  person  said  the commissioner  did  not  consider  a                                                               
certain economic aspect therefore  the finding lacks a reasonable                                                               
basis.  The Legislature  comes to  the same  conclusion yet  they                                                               
address it  and fix it.  There are  facts that develop  after the                                                               
fiscal interest  findings that  might take  care of  the original                                                               
reason for challenge.                                                                                                           
                                                                                                                                
CHAIR  SEEKINS  asked Mr.  Ostrovsky  to  explain the  difference                                                               
between the  commissioner's final findings and  determination and                                                               
a final agency decision.                                                                                                        
                                                                                                                                
10:16:34 AM                                                                                                                   
MR. OSTROVSKY replied  the final agency decision  is normally the                                                               
trigger for  an administrative appeal  under the  appellate rules                                                               
and under the regulation.                                                                                                       
                                                                                                                                
CHAIR SEEKINS  said if a  person wanted to delay  a consideration                                                               
by the Legislature by filing  an action against the findings that                                                               
person could automatically ask for a stay on the contract.                                                                      
                                                                                                                                
MR. OSTROVSKY  agreed. On the other  hand if SB 316  is passed it                                                               
says to  the court that  the commissioner's finding  and contract                                                               
are tantamount to proposing legislation.                                                                                        
                                                                                                                                
CHAIR SEEKINS speculated  that the Legislature would  look at the                                                               
findings  to make  sure the  commissioner served  his or  her due                                                               
diligence,  which includes  making sure  that all  of the  public                                                               
comments have  been compiled and addressed,  and after consulting                                                               
with  the commissioner  of  the DNR,  ensures  that the  contract                                                               
meets the  purposes of  the chapter  and that  it also  meets the                                                               
long-term  fiscal  interest   of  the  state.  It's   more  of  a                                                               
recommendation than a final agency decision, he said.                                                                           
                                                                                                                                
MR. OSTROVSKY responded  that is the way the Act  reads since the                                                               
Legislature decided to retain the authority for the approval.                                                                   
                                                                                                                                
10:20:03 AM                                                                                                                   
CHAIR  SEEKINS  said  he  could   not  imagine  that  during  the                                                               
committee   process  of   looking  at   the  contract   that  the                                                               
Legislature  would not  examine  the challenge  and  look at  the                                                               
findings. He  asked Mr.  Ostrovsky whether  there was  any record                                                               
during the  consideration of  the amended  bill indicating  if it                                                               
was the intent of the Legislature  to obtain a judicial review at                                                               
the point of the final findings of the commissioner.                                                                            
                                                                                                                                
MR. OSTROVSKY said  no and indicated that  the legislative record                                                               
on the 1998 amendment of the SGDA was skimpy.                                                                                   
                                                                                                                                
10:23:56 AM                                                                                                                   
MR. OSTROVSKY added  the DOL believes the  1998 Legislature might                                                               
not have thought out the entire procedural process.                                                                             
                                                                                                                                
SENATOR FRENCH said  he was not sure the  committee has addressed                                                               
Senator  Guess's concern  regarding the  likelihood of  delay. He                                                               
said  that  potentially within  minutes  of  releasing the  final                                                               
findings,  the  commissioner  would  give  the  contract  to  the                                                               
Legislature. He said it was  beyond the realm of possibility that                                                               
a  court would  at  that  time issue  an  injunction  based on  a                                                               
challenge to the findings.                                                                                                      
                                                                                                                                
10:26:22 AM                                                                                                                   
SENATOR GUESS added that under  the amendment, the findings could                                                               
only be evaluated  as to the constitutionality since  the bill is                                                               
taking out any  relationship between, or any court  review of, AS                                                               
43.82.440(a)(3).  She  added  that there  are  supposedly  twenty                                                               
amendments coming  from the  administration to  the SGDA.  One of                                                               
them is  an amendment  to the  SGDA relating  to the  taxation of                                                               
oil. She said:                                                                                                                  
     If  we pass  this [SB  316] it  doesn't really  matter,                                                                    
     does it?  Probably it is  still constitutional  to have                                                                    
     oil and gas in the  contract. It's probably not against                                                                    
     the [Alaska  State] Constitution.  It would  be against                                                                    
     the statute  of the  Stranded Gas Act.  But if  we pass                                                                    
     this,  it wouldn't  matter so  why do  we even  need to                                                                    
     amend the Stranded  Gas Act and I even  question why do                                                                    
     we  even follow  the Stranded  Gas Act  and don't  just                                                                    
     follow the Constitution?                                                                                                   
                                                                                                                                
MR.  OSTROVSKY  responded  he  wasn't   sure  he  understood  the                                                               
question  and  indicated  that  there   might  or  might  not  be                                                               
amendments to the SGDA. He said,  "I think that is the purpose of                                                               
the Act.  That the Legislature  doesn't want just a  contract, it                                                               
wants the due diligence too so it can make that determination."                                                                 
                                                                                                                                
SENATOR GUESS  argued that the commissioner's  "due diligence" is                                                               
just to ensure that the contract complies with the Act.                                                                         
                                                                                                                                
MR. OSTROVSKY stated, "Correct."                                                                                                
                                                                                                                                
CHAIR SEEKINS said  the two findings are that  the contract meets                                                               
the  terms of  the Act  and that  it is  in the  long-term fiscal                                                               
interest of the state.                                                                                                          
                                                                                                                                
10:30:14 AM                                                                                                                   
SENATOR GUESS  agreed but countered  that the final  findings are                                                               
just that  the contract meets  the requirements and  the purposes                                                               
of  the Act.  The long-term  interest  is not  reiterated; it  is                                                               
implied.                                                                                                                        
                                                                                                                                
CHAIR SEEKINS argued that it was in subsection (b).                                                                             
                                                                                                                                
SENATOR GUESS agreed  but countered that subsection (b)  is not a                                                               
final finding; only subsection (a)  is. Really the entire bill is                                                               
about subsection (a), she said.                                                                                                 
                                                                                                                                
SENATOR GUESS asked  Mr. Ostrovsky what happens if  a contract is                                                               
passed that is in contradiction to the statute.                                                                                 
                                                                                                                                
MR. OSTROVSKY  said the governor's  intention would be  to follow                                                               
the statute.                                                                                                                    
                                                                                                                                
10:32:05 AM                                                                                                                   
CHAIR  SEEKINS referred  to Article  8, paragraph  2 and  said it                                                               
appears  that   a  challenge   to  the   contract,  based   on  a                                                               
constitutional  issue,   would  be  that  the   findings  of  the                                                               
commissioner did not meet the  requirement that natural resources                                                               
were  to be  developed  for  the maximum  benefit  of the  people                                                               
because the findings were flawed.                                                                                               
                                                                                                                                
MR. OSTROVSKY  responded that  if one  brought that  challenge to                                                               
the contract the court after  it was approved by the Legislature,                                                               
the court would find that  neither the commissioner's findings or                                                               
the   legislative   record   was    sufficient   to   meet   that                                                               
constitutional provision because the court  would have to look at                                                               
the whole record.                                                                                                               
                                                                                                                                
SENATOR THERRIAULT  said under the  long-term fiscal  interest to                                                               
the state  there are  eight things  listed that  the commissioner                                                               
should look to.  Under the pending contract, Alaska  is aiming to                                                               
supply the market in the  Midwest. He said the commissioner would                                                               
be  limited  to making  a  comparison  with competition  on  that                                                               
particular  project.  He  asked  Mr. Porter  whether  he  was  at                                                               
liberty  to  say  whether  the   commissioner,  when  making  his                                                               
determination,  was  limiting  himself  to  comparison  of  other                                                               
projects delivering  into that market  or whether he was  able to                                                               
look at similar projects delivering into other markets.                                                                         
                                                                                                                                
10:36:38 AM                                                                                                                   
MR.  PORTER  responded that  the  commissioner  would review  the                                                               
competitiveness of both the North  American and the International                                                               
markets.  The   fiscal  interest   finding  though,   would  deal                                                               
specifically with the SGDA and all the elements within.                                                                         
                                                                                                                                
SENATOR  THERRIAULT   said  the  first  item   details  that  the                                                               
commissioner   must   look   at   whether   the   project   under                                                               
consideration  meets  the  competitiveness with  other  competing                                                               
projects for the specific market.                                                                                               
                                                                                                                                
MR. PORTER stated that would certainly be addressed.                                                                            
                                                                                                                                
SENATOR  THERRIAULT stated,  "It would  have to  be addressed  or                                                               
that will have to be modified."                                                                                                 
                                                                                                                                
MR. PORTER agreed.                                                                                                              
                                                                                                                                
CHAIR  SEEKINS   remarked  that  a  contract   forwarded  to  the                                                               
Legislature would have  to comply with the elements  of the SGDA.                                                               
Somebody  who wanted  to challenge  whether  or not  the gas  was                                                               
stranded  would have  to  deal  with the  definition  in the  Act                                                               
itself. If  the Legislature were  to find that the  definition of                                                               
stranded gas  were outdated they  have the prerogative  to change                                                               
the definition.                                                                                                                 
                                                                                                                                
SENATOR  FRENCH  said  the  bill   severely  restricts  when  the                                                               
challenge could be  brought. He suggested there is a  way to keep                                                               
"full public  availability to  the documents that  led up  to the                                                               
contract."                                                                                                                      
                                                                                                                                
CHAIR SEEKINS said  he believed that the way the  SGDA is written                                                               
comes  down  to  the  Legislature   authorizing  that  the  final                                                               
findings  and   determination  by  the  commissioner   meets  the                                                               
elements of  the Act. The  intent is to develop  Alaska's natural                                                               
resources to  the benefit of the  people of the State  of Alaska.                                                               
He held the bill in committee.                                                                                                  
There being  no further  business to  come before  the committee,                                                               
Chair Seekins adjourned the meeting at 10:45:54 AM.                                                                           
                                                                                                                                

Document Name Date/Time Subjects