Legislature(2005 - 2006)BUTROVICH 205

04/21/2006 09:30 AM JUDICIARY


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09:39:07 AM Start
09:39:33 AM SB316
11:12:20 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
-- Time Change --
-- Recessed to 9:00 am 4/22/06 --
-- Continued from 04/20/06 --
+= SB 316 COURT REVIEW OF STRANDED GAS DECISION TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE JUDICIARY STANDING COMMITTEE                                                                             
                         April 21, 2006                                                                                         
                           9:39 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. 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 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                                                                           
04/19/06       (S)       Heard & Held                                                                                           
04/19/06       (S)       MINUTE(JUD)                                                                                            
04/20/06       (S)       JUD AT 8:30 AM BUTROVICH 205                                                                           
04/20/06       (S)       Heard & Held                                                                                           
04/20/06       (S)       MINUTE(JUD)                                                                                            
04/21/06       (S)       JUD AT 9:30 AM BUTROVICH 205                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
Larry Ostrovsky, Assistant Attorney General                                                                                     
Oil, Gas & Mining Section                                                                                                       
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Answered questions on SB 316                                                                             
                                                                                                                                
Steve Porter, Deputy Commissioner                                                                                               
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT:  Answered questions on SB 316                                                                             
                                                                                                                                
Paul Fuhs, Lobbyist                                                                                                             
Backbone                                                                                                                        
1635 Sitka St                                                                                                                   
Anchorage, AK                                                                                                                   
POSITION STATEMENT:  Commented on SB 316                                                                                      
                                                                                                                                
Tim Beck                                                                                                                        
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 316                                                                        
                                                                                                                                
Phil Kugzruk                                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 316                                                                        
                                                                                                                                
Jomo Stewart                                                                                                                    
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 316                                                                        
                                                                                                                                
Steve Hovenden                                                                                                                  
Fairbanks, Alaska                                                                                                               
POSITION STATEMENT:  Testified in opposition to SB 316                                                                        
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR  RALPH   SEEKINS  called  the  Senate   Judiciary  Standing                                                             
Committee meeting to  order at 9:39:07 AM.  Present were Senators                                                             
Hollis French,  Gretchen Guess, Charlie Huggins,  and Chair Ralph                                                               
Seekins.                                                                                                                        
                                                                                                                                
          SB 316-COURT REVIEW OF STRANDED GAS DECISION                                                                      
                                                                                                                                
9:39: 33 AM                                                                                                                   
CHAIR RALPH SEEKINS announced SB 316 to be up for consideration.                                                                
                                                                                                                                
STEVE PORTER,  Deputy Commissioner,  Department of  Revenue (DOR)                                                               
and  LARRY OSTROVSKY,  Assistant Attorney  General, Gas  & Mining                                                               
Section, Department  of Law (DOL), introduced  themselves for the                                                               
record.                                                                                                                         
                                                                                                                                
SENATOR  CHARLIE HUGGINS  asked  Mr. Ostrovsky  how difficult  it                                                               
would be to complete the gas contract.                                                                                          
                                                                                                                                
MR.  OSTROVSKY responded  the agreement  of  the contract  should                                                               
happen  in  the  political  process   rather  than  the  judicial                                                               
process.  The   DOL  anticipates  that  somebody   will  file  an                                                               
administrative appeal on the findings  and that has the potential                                                               
of stalling the contract.                                                                                                       
                                                                                                                                
SENATOR  GRETCHEN  GUESS  asked  Mr.  Ostrovsky  and  Mr.  Porter                                                               
whether  they have  had the  chance to  discuss Senator  French's                                                               
proposed  amendment.   She  said  it  addresses   some  of  their                                                               
concerns.                                                                                                                       
                                                                                                                                
MR. OSTROVSKY  replied they  have looked  at it  but they  do not                                                               
support it because  it does not reflect what is  really going on.                                                               
The  amendment might  move the  judicial review  to the  end, but                                                               
there is  no place for  judicial review  of a proposal.  When the                                                               
Legislature amended the  Stranded Gas Act (SGA) in  1998 to leave                                                               
a role for itself, it  essentially converted what would have been                                                               
a  final agency  decision into  something that  is essentially  a                                                               
proposal  to  the Legislature  and  "for  that reason,  we  don't                                                               
support the amendment," he explained.                                                                                           
                                                                                                                                
SENATOR GUESS  disagreed and countered  that the  Legislature put                                                               
itself in  the middle of the  contract but not the  findings. She                                                               
said this is  what she has been  trying to get at  for three days                                                               
and the answer  is still not clear.  She said it seems  as if the                                                               
bulk of  the focus has  been on the delay  but the other  part is                                                               
that the Administration  seems to be saying that they  want it so                                                               
that  an entity  could  only  take the  contract  to court  under                                                               
constitutional grounds.                                                                                                         
                                                                                                                                
MR. OSTROVSKY said  that is correct. The DOL  believes it doesn't                                                               
make sense to subject a recommendation  to review when it is only                                                               
half  the  story. When  the  Legislature  amended the  SGA,  they                                                               
wanted the findings  attached when the contract  was presented to                                                               
them.                                                                                                                           
                                                                                                                                
SENATOR  GUESS stated  that  the committee  seems  unsure of  the                                                               
intent  in  1998.  She  doubted that  was  what  the  Legislature                                                               
intended  and said  the question  is what  the process  should be                                                               
now.                                                                                                                            
                                                                                                                                
MR.  PORTER  said  he  looks  at the  requirements  of  what  the                                                               
Department  is designed  to  do and  he looks  and  at the  final                                                               
findings  and what  is appealable  to  the courts.  Now that  the                                                               
finding is  no longer  a final finding,  the Department  only has                                                               
the right  to make  a recommendation  and so  there is  no action                                                               
available to the Department. From  a process standpoint, it makes                                                               
sense that  something appealable in  court would be  charged upon                                                               
an action.                                                                                                                      
                                                                                                                                
SENATOR HOLLIS  FRENCH said the prior  day discussion enlightened                                                               
them with  the understanding  of how the  SGA works.  One notable                                                               
thing is the  lateness of when the final  fiscal interest finding                                                               
is  released. He  speculated that  it  was very  unlikely that  a                                                               
court would assume it had the  power to stop the Legislature from                                                               
working  on  a contract.  He  challenged  Mr. Ostrovsky  and  Mr.                                                               
Porter to  find a case where  a court ordered the  Legislature to                                                               
stop a process so that they could review it.                                                                                    
                                                                                                                                
He said he  was in favor of changing the  timing but he disagreed                                                               
with  the reduction  of citizen's  right  to have  access to  the                                                               
modeling,  data and  assumption that  goes into  the Department's                                                               
recommendation.                                                                                                                 
                                                                                                                                
9:54:16 AM                                                                                                                    
Senator Gene Therriault joined the meeting.                                                                                     
                                                                                                                                
CHAIR  SEEKINS   said  the  committee  shared   Senator  French's                                                               
concern. He said once the  commissioner has compiled all the data                                                               
in  order to  publish  the preliminary  findings, the  supporting                                                               
data becomes public.                                                                                                            
                                                                                                                                
MR. PORTER  said that  was correct. There  will be  a preliminary                                                               
finding  that will  look similar  to the  final finding.  At that                                                               
time the Department would make  economic models available as well                                                               
as the reports and analysis. The  DOR will build all of that into                                                               
files and make it available to the public via the Internet.                                                                     
                                                                                                                                
9:57:59 AM                                                                                                                    
CHAIR  SEEKINS asked  Mr. Porter  to comment  on rumors  that the                                                               
Governor was "hiding  the ball" and not disclosing  a vast amount                                                               
of models and competing numbers from competing contracts.                                                                       
                                                                                                                                
MR. PORTER replied  two years ago the price of  oil was below $60                                                               
a barrel  and some of  the original reports have  progressed over                                                               
time. Even so, the Department  should provide every piece of that                                                               
data used to consider the best option for the state, he said.                                                                   
                                                                                                                                
CHAIR  SEEKINS   asked  Mr.  Ostrovsky  whether   he,  as  Senate                                                               
Judiciary  Committee chairman,  could put  Mr. Porter  under oath                                                               
and ask  him whether  he provided all  of the  documentation that                                                               
would otherwise be discoverable under court proceedings.                                                                        
                                                                                                                                
MR. OSTROVSKY indicated there would  always be discovery disputes                                                               
but the question  really is whether or not the  Department has to                                                               
disclose every single piece of data.                                                                                            
                                                                                                                                
CHAIR SEEKINS asked  Mr. Porter to define  what information would                                                               
be considered confidential.                                                                                                     
                                                                                                                                
MR. PORTER replied some of  the discoverable information would be                                                               
available to the legislators but not necessarily the public.                                                                    
                                                                                                                                
10:04:48 AM                                                                                                                   
CHAIR  SEEKINS asked  whether there  were any  internal documents                                                               
that would be kept confidential.                                                                                                
                                                                                                                                
MR.  PORTER  advised  if  the  current  contract  does  not  move                                                               
forward, there are  certain documents that the  producers are not                                                               
privy to  and if released,  would limit the  Department's ability                                                               
to negotiate future contracts.                                                                                                  
                                                                                                                                
CHAIR  SEEKINS  speculated  that  would be  an  area  of  dispute                                                               
regarding discoverable documents.                                                                                               
                                                                                                                                
MR. OSTROVSKY  said to  some degree. The  Stranded Gas  Act (SGA)                                                               
provides  a cloak  of confidentiality  for internal  documents up                                                               
until the time of the  proposed contract so that negotiations can                                                               
take place.  He informed  the committee  that the  Public Records                                                               
Act is a statute that operates  very quickly. Once the request is                                                               
made,  agencies  have to  respond  within  10 working  days.  The                                                               
reason for withholding  any documents has to be  described and if                                                               
the party  were not satisfied  they would  appeal to a  judge who                                                               
would  then  ask  the  agency  the  reason  for  withholding  the                                                               
documents. Both  the SGA  and the Public  Records Act  compel the                                                               
release of the supporting documents.                                                                                            
                                                                                                                                
10:11:59 AM                                                                                                                   
CHAIR SEEKINS read  page 19, line 25, subsection  (f) [version L]                                                               
and   said  basically   everything  that   would  be   considered                                                               
discoverable documents would become public.                                                                                     
                                                                                                                                
MR.  OSTROVSKY said  there are  statutory exceptions  set out  in                                                               
paragraphs 1-3.                                                                                                                 
                                                                                                                                
SENATOR FRENCH  asked whether subsection  (f) makes  the contract                                                               
itself confidential.                                                                                                            
                                                                                                                                
MR. OSTROVSKY  said, "We believe  it would be  confidential under                                                               
(f)." It  is a  question of  when the  contract is  completed. He                                                               
said  until  the  commissioner   proposes  the  contract,  it  is                                                               
difficult  to say  whether it  is  complete because  it is  still                                                               
subject to a decision not to present it.                                                                                        
                                                                                                                                
SENATOR FRENCH  said it  seems like (f)  is all  about protecting                                                               
the strategizing and assembling the pieces of the contract.                                                                     
                                                                                                                                
10:15:59 AM                                                                                                                   
CHAIR  SEEKINS   said  there  is   no  argument  that   once  the                                                               
preliminary findings are  published that the contract  and all of                                                               
the supporting documents become public.                                                                                         
                                                                                                                                
MR.  PORTER  agreed.  There are  three  classes  of  information;                                                               
information  provided  to  the public,  confidential  information                                                               
provided  to  the  legislators, and  proprietary  data  from  the                                                               
industry that  the state does not  have the right to  disclose to                                                               
anyone.                                                                                                                         
                                                                                                                                
10:18:53 AM                                                                                                                   
CHAIR SEEKINS asserted the intent  of the committee was to ensure                                                               
that the  public would have  plenty of opportunity to  review the                                                               
contract and the supporting documents.                                                                                          
                                                                                                                                
SENATOR   FRENCH   agreed   but  expressed   concern   that   the                                                               
Administration might  not disclose  all of  the specifics  of the                                                               
contract.                                                                                                                       
                                                                                                                                
10:22:50 AM                                                                                                                   
TIM  BECK, Fairbanks,  testified  in opposition  to the  proposed                                                               
change to  the SGA saying it  would be a detriment  to the people                                                               
of the  State of  Alaska. He  asserted that  Governor Murkowski's                                                               
Administration was  attempting to thwart the  judicial system and                                                               
not  allow  the public  access  to  the gas  contract,  therefore                                                               
eliminating citizens' rights.                                                                                                   
                                                                                                                                
SENATOR THERRIAULT  asked Mr.  Beck whether  he would  agree with                                                               
the direction that the committee was headed on the bill.                                                                        
                                                                                                                                
MR.  BECK replied  he would  have to  see the  bill in  its final                                                               
form. He stated a preference  for allowing public review early in                                                               
the contract process.                                                                                                           
                                                                                                                                
CHAIR  SEEKINS  suggested  that   people  were  taking  positions                                                               
without being fully knowledgeable about the process.                                                                            
                                                                                                                                
10:28:59 AM                                                                                                                   
SENATOR  FRENCH  referred  to  AS  43.82.430(a)(3)  and  said  he                                                               
assumed that  is the same  final findings and  determination that                                                               
is referred to in (c) and  the challenge would come to that final                                                               
finding and determination.                                                                                                      
                                                                                                                                
CHAIR  SEEKINS asked  Mr. Ostrovsky  whether  (b) referenced  the                                                               
preliminary finding.                                                                                                            
                                                                                                                                
MR. OSTROVSKY said  that was a "playground for  lawyers" and that                                                               
there was "ambiguity in AS  43.82.430(b)." The DOL would consider                                                               
the material  described in subsections  (a) and (b)  tied because                                                               
the  final  findings  and determination  are  what  underlie  the                                                               
conclusion  that the  long-term fiscal  interest findings  are in                                                               
the best interest of the state.                                                                                                 
                                                                                                                                
CHAIR SEEKINS asked  whether there were one or  two findings that                                                               
would come to the Legislature.                                                                                                  
                                                                                                                                
MR. OSTROVSKY said there would be  one document, which would be a                                                               
findings  and determination.  The  determination  being that  the                                                               
contract is  in the  long-term financial  interest to  the state.                                                               
Ambiguity aside,  the court would  probably not separate  out the                                                               
two because the conclusion would be based on the package.                                                                       
                                                                                                                                
10:33:46 AM                                                                                                                   
CHAIR SEEKINS agreed the wording was ambiguous.                                                                                 
                                                                                                                                
SENATOR FRENCH  agreed and said  it is important to  clarify what                                                               
the Act says.                                                                                                                   
                                                                                                                                
SENATOR  THERRIAULT  asked  Mr.  Ostrovsky whether  it  would  be                                                               
clearer  if  subsection  (c)   said,  "The  commissioner's  final                                                               
findings and determination  under (a) or (b) of  this section are                                                               
final agency decisions under this chapter."                                                                                     
                                                                                                                                
MR. OSTROVSKY said that was a "belt and suspenders approach."                                                                   
                                                                                                                                
10:36:34 AM                                                                                                                   
PAUL FUHS,  Lobbyist for  Backbone, testified  regarding concerns                                                               
that the organization  has on the bill. Backbone  is comprised of                                                               
approximately thirty  citizens of past legislators  and governors                                                               
who care about the issue.  The organization was first formed when                                                               
BP attempted to take over the  entire North Slope. They have been                                                               
quiet until  interest of this  issue came  up. This is  the final                                                               
year  of the  current administration  and Alaska  still does  not                                                               
have a gas contract, he said.                                                                                                   
                                                                                                                                
10:38:56 AM                                                                                                                   
The gas  contract is similar  to a royalty  oil and gas  deal, he                                                               
stated. The administration  negotiates the deal and  brings it to                                                               
the Legislature for an up or down  vote. The concern is the up or                                                               
down vote because  there will be no chance for  amendments and so                                                               
there will be a lot of  pressure involved. He agreed with Senator                                                               
Guess's comments regarding,  "why have the Stranded  Gas Act?" He                                                               
said, "Just pass  a law of applicability of  gas development, put                                                               
the incentives in and the first  people who show up can build the                                                               
project," he said.                                                                                                              
                                                                                                                                
10:43:22 AM                                                                                                                   
CHAIR  SEEKINS agreed  that the  gas  was stranded  but said  the                                                               
question is how to get the gas to market.                                                                                       
                                                                                                                                
SENATOR  THERRIAULT  said  he wasn't  sure  that  Backbone  could                                                               
question whether the  gas was stranded since they  would not know                                                               
the cost of the development of the project.                                                                                     
                                                                                                                                
10:45:35 AM                                                                                                                   
SENATOR THERRIAULT  asked Mr. Fuhs whether  preserving the public                                                               
process would address Backbone's concern.                                                                                       
                                                                                                                                
MR. FUHS  said he thought it  would. It would make  more sense to                                                               
have public comment before the Legislature voted on it.                                                                         
                                                                                                                                
CHAIR SEEKINS  stated under the  original Act,  the challengeable                                                               
point was after the final agency determinations.                                                                                
                                                                                                                                
10:52:14 AM                                                                                                                   
CHAIR SEEKINS  noted there  were three more  people signed  up to                                                               
testify.                                                                                                                        
                                                                                                                                
PHIL  KUGZRUK, Fairbanks,  testified in  opposition to  the bill.                                                               
Oil companies  have a paternalistic attitude  toward Alaskans and                                                               
Alaskans  should not  agree to  that,  he said.  He compared  the                                                               
administration's bill and their holding  of the gas contract to a                                                               
person buying  a house and  not allowing his  wife to see  any of                                                               
the details.                                                                                                                    
                                                                                                                                
10:56:29 AM                                                                                                                   
SENATOR THERRIAULT advised Mr. Kugzruk  of Mr. French's amendment                                                               
that would preserve the citizen's right to review the contract.                                                                 
                                                                                                                                
JOMO  STEWART of  Fairbanks  offered to  let  Mr. Steve  Hovenden                                                               
testify in his stead.                                                                                                           
                                                                                                                                
MR. HOVENDEN, Fairbanks, testified  against the bill. He informed                                                               
the committee  that the  bill infuriates people  and they  do not                                                               
agree with eliminating judicial review.                                                                                         
                                                                                                                                
11:04:01 AM                                                                                                                   
CHAIR  SEEKINS asked  Mr. Hovenden  whether he  has followed  the                                                               
discussion of the committee on the bill.                                                                                        
                                                                                                                                
MR. HOVENDEN said  he has not followed all of  the discussion but                                                               
when  it comes  down  to eliminating  public  review, people  are                                                               
getting upset.                                                                                                                  
                                                                                                                                
CHAIR SEEKINS  suggested he get  a copy  of the Stranded  Gas Act                                                               
and  read  the sections  dealing  with  preliminary findings  and                                                               
public review.  The intent of  the committee is to  establish the                                                               
point at  which a judicial review  would take place. The  bill is                                                               
poorly worded and the committee is working on that, he stated.                                                                  
                                                                                                                                
SENATOR THERRIAULT thanked  the witness and advised  him that the                                                               
original bill would not likely  pass out of committee. He assured                                                               
the witness that the Senate  Judiciary Committee is the committee                                                               
that would come  up with a good bill. He  clarified that the bill                                                               
came into  committee as a  request of Governor  Frank Murkowski's                                                               
administration.                                                                                                                 
                                                                                                                                
11:12:20 AM                                                                                                                   
CHAIR SEEKINS held  SB 316 in committee and  recessed the meeting                                                               
until 9:30 AM Saturday, April 22, 2006.                                                                                         
                                                                                                                                

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