Legislature(2005 - 2006)BUTROVICH 205

06/02/2006 08:30 AM JUDICIARY

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08:47:28 AM Start
08:49:01 AM SB2002
10:46:59 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Moved CSSB 2002(JUD) Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE JUDICIARY STANDING COMMITTEE                                                                             
                          June 2, 2006                                                                                          
                           8:47 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Ralph Seekins, Chair                                                                                                    
Senator Charlie Huggins, Vice Chair                                                                                             
Senator Gene Therriault                                                                                                         
Senator Hollis French                                                                                                           
Senator Gretchen Guess, via teleconference                                                                                      
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
OTHER LEGISLATORS PRESENT                                                                                                     
Representative John Coghill                                                                                                     
Senator Gary Stevens                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Lyda Green                                                                                                              
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 2002                                                                                                            
"An Act  conferring original jurisdiction  on the  Alaska Supreme                                                               
Court for the purpose of  providing judicial review of a contract                                                               
executed  under  the Alaska  Stranded  Gas  Development Act,  and                                                               
setting the  time in which  a contract developed under  that Act,                                                               
or  a statute  of limitations  regarding that  contract, must  be                                                               
legally challenged; and providing for an effective date."                                                                       
     MOVED CSSB 2002(JUD) OUT OF COMMITTEE                                                                                      
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB2002                                                                                                                  
SHORT TITLE: GAS PIPELINE CONTRACT: COURT JURISDICTION                                                                          
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR                                                                                    
05/31/06       (S)       READ THE FIRST TIME - REFERRALS                                                                        
05/31/06       (S)       JUD                                                                                                    
WITNESS REGISTER                                                                                                              
Bonnie Harris                                                                                                                   
Office of the Attorney General                                                                                                  
Department of Law                                                                                                               
PO Box 110300                                                                                                                   
Juneau, AK  99811-0300                                                                                                          
POSITION STATEMENT:  Available for questions on SB 2002                                                                       
James Baldwin                                                                                                                   
Counsel to the Office of the Attorney General                                                                                   
227 Harris Street                                                                                                               
Juneau, AK 99801                                                                                                                
POSITION  STATEMENT:    Introduced  SB  2002  on  behalf  of  the                                                             
Douglas Wooliver, Administrative Attorney                                                                                       
Alaska Court System                                                                                                             
820 W 4th Ave                                                                                                                   
Anchorage, AK 99501-2005                                                                                                        
POSITION  STATEMENT:   Provided  Court System  perspective on  SB
ACTION NARRATIVE                                                                                                              
CHAIR  RALPH   SEEKINS  called  the  Senate   Judiciary  Standing                                                             
Committee meeting to  order at 8:47:28 AM.  Present were Senators                                                             
Therriault, French,  Guess via teleconference and  Chair Seekins.                                                               
Senator Huggins arrived shortly.                                                                                                
        SB2002-GAS PIPELINE CONTRACT: COURT JURISDICTION                                                                    
CHAIR SEEKINS announced SB 2002 to be up for consideration.                                                                     
8:49:01 AM                                                                                                                    
BONNIE HARRIS,  Assistant Attorney General, Civil  Division, Oil,                                                               
Gas  &  Mining  Section  in the  Department  of  Law,  introduced                                                               
herself and advised that Jim Baldwin would lead the discussion.                                                                 
JIM  BALDWIN, Counsel  to  the Office  of  the Attorney  General,                                                               
introduced SB 2002  as a bill to create  original jurisdiction in                                                               
the Alaska  Supreme Court to  hear any challenge to  the stranded                                                               
gas  contract.  In  addition  it would  shorten  the  period  for                                                               
appeals from 120 days to 60 days.                                                                                               
The  bill  applies  to  facial  challenges  to  a  statute  or  a                                                               
provision in  law. Creating original jurisdiction  means that the                                                               
Alaska Supreme  Court acts as  the court of first  instance. That                                                               
is  different from  normal  cases that  originate  in the  Alaska                                                               
Superior Court and the result is  that those cases would be given                                                               
more expedited treatment.                                                                                                       
Article IV, Section  1 of the Alaska  State Constitution provides                                                               
that jurisdiction of  the courts may be established  by law. That                                                               
provision  is viewed  as both  a jurisdictional  statement and  a                                                               
form of statute of limitations.                                                                                                 
Article 27.2 in  the fiscal contract has  special provisions that                                                               
apply  to  the  state's  partners  in  the  project.  Under  that                                                               
provision there's  usually a  suspension of  contract obligations                                                               
during a  judicial challenge, but  under Article 27.2  there's an                                                               
exception at  the beginning  of the contract.  It extends  for 15                                                               
months or during project planning  or until $120 million has been                                                               
spent on project planning. The  thinking is that it's appropriate                                                               
to  expedite  any  judicial  challenge of  the  contract  or  the                                                               
Stranded  Gas Development  Act. The  long-term planning  process,                                                               
the  lead  time  for  ordering   materials  and  the  substantial                                                               
financing requirements for  a project of this  magnitude all make                                                               
it important  to clear any  legal defects quickly.  The intention                                                               
isn't to cut off claims but to bring them out early, he said.                                                                   
8:54:23 AM                                                                                                                    
SENATOR  THERRIAULT  asked the  reason  the  period of  time  for                                                               
challenging a contract was cut from 120 days to 60 days.                                                                        
MR.  BALDWIN  replied  based  on the  data  available  on  moving                                                               
regular civil litigation  through the court system,  it was clear                                                               
that to  move things  along faster  the time  frame needed  to be                                                               
shortened. Cutting  back to  60 days  seems consistent  with what                                                               
the court  did in  the redistricting cases  and it's  longer than                                                               
the 30 days allowed for certain election challenges.                                                                            
SENATOR  THERRIAULT argued  that  quick action  is required  with                                                               
redistricting because of the election  date deadline. He asked if                                                               
the administration  had considered limiting the  time under which                                                               
the  court had  to render  a decision  instead of  truncating the                                                               
timeframe that the public has to bring a challenge.                                                                             
MR.  BALDWIN responded  doing  that  would entail  administrative                                                               
rule   making,  which   would   require  certain   constitutional                                                               
procedural  steps. The  administration  takes the  view that  the                                                               
Alaska Supreme Court  is being pushed hard enough  by asking that                                                               
the Legislature consider restoring original jurisdiction on it.                                                                 
CHAIR SEEKINS said  he'd prefer to lean on the  court to expedite                                                               
a decision  than to lean  on the people  to hurry a  challenge to                                                               
provisions  in  a  contract. Certainly  there  are  sophisticated                                                               
people who already  have attorneys at work  looking for potential                                                               
challenge points  in a  contract, but  what do  you do  about the                                                               
potato farmer from the Mat-Su, he questioned.                                                                                   
MR. BALDWIN  agreed that there  will be  sophisticated plaintiffs                                                               
who  will sweep  up  the potato  farmer,  but the  administration                                                               
believes that they  would litigate the issues to  the extent that                                                               
the potato  farmer will  be collaterally  estopped or  the issues                                                               
will be  res judicata to that  party anyway. The main  idea is to                                                               
get the cases out in the open and into the court system.                                                                        
Arguing that  the time  frame is  fair, he  pointed out  that the                                                               
attorney general  has been  open with the  legal issues  and that                                                               
the  public has  been  able  to consider  and  analyze the  legal                                                               
opinion  since about  May 10  when  it was  issued. Whenever  the                                                               
authorization  bill takes  effect the  60-day count  down to  the                                                               
effective day  begins. It's  possible that  the contract  will be                                                               
signed earlier, but  more than likely the legal  position will be                                                               
out there and  subject to analysis for  substantially longer than                                                               
60 days.                                                                                                                        
9:03:00 AM                                                                                                                    
SENATOR FRENCH said the other way  of looking at that is that 100                                                               
some  extra  pages  of  the  contract  have  just  recently  been                                                               
released and some people would assert  that this is day 24 of the                                                               
public  comment period.  It's not  clear that  both sides  are on                                                               
even  footing   with  respect  to  having   all  the  information                                                               
necessary to mount a challenge.                                                                                                 
He   expressed   concern  about   the   notion   that  the   most                                                               
sophisticated litigant  would focus  his or  her legal  energy on                                                               
the issues that  are of utmost interest to  Alaskans. People that                                                               
are  interested in  such  things  as the  legality  of the  State                                                               
taking its  royalty in-kind  or the  constitutionality of  a long                                                               
term tax  lock might not be  at all interested in  Alaska hire or                                                               
work commitments.  Those issues might  be addressed in  a cursory                                                               
fashion if at all.                                                                                                              
He   questioned  what   would   happen  when   one  litigant   is                                                               
sophisticated, well-heeled  and fastest  to file while  the other                                                               
struggles  through the  contract's Byzantine  intricacies and  is                                                               
slow on the legal uptake.                                                                                                       
MR. BALDWIN said that's a due  process issue that is connected to                                                               
the length of time during which  this bill would allow a claim to                                                               
be brought.  He acknowledged that  the Alaska Supreme  Court does                                                               
consider  due  process  issues  connected  to  appeal  limitation                                                               
periods. He mentioned that the  court upheld a 30-day time period                                                               
for initiative  petitions and  noted in  that instance  the court                                                               
considered an initiative  committee to be a  citizen group rather                                                               
than a sophisticated individual.                                                                                                
He  summarized the  fiscal note  and  said all  the elements  are                                                               
present to warrant a shortened  appeal period. The administration                                                               
advocates  a  60-day  period  in   recognition  of  the  15-month                                                               
obligation  in  Article 27.2  of  the  contract. If  the  State's                                                               
partners  are  expected to  spend  significant  amounts of  money                                                               
without the ability  to spend their obligations in the  face of a                                                               
lawsuit,  then  any lawsuit  ought  proceed  as expeditiously  as                                                               
possible. Although everything may not  get done within 15 months,                                                               
it is a good faith effort to move things forward.                                                                               
9:07:31 AM                                                                                                                    
SENATOR FRENCH  said he  was concerned  about the  unequal fiscal                                                               
standing   of   the   parties.  Basically   it's   Exxon   Mobil,                                                               
ConocoPhillips,  British  Petroleum  and   the  State  of  Alaska                                                               
against   a  citizen   so  the   responsibility  of   bringing  a                                                               
sophisticated  legal challenge  to this  contract within  60 days                                                               
could  fall on  just  a  few legislators  and  some other  public                                                               
interest folks.  They would be  matched against some of  the most                                                               
well financed corporations  in the world and 60 days  is just too                                                               
short a time.                                                                                                                   
CHAIR  SEEKINS said  the current  language concentrates  from the                                                               
date the  contract is  executed and he  would suggest  going back                                                               
several  steps to  where  the final  fiscal  interest finding  is                                                               
prepared by the commissioner. He continued to say:                                                                              
     The  renegotiated  contract  after the  public  comment                                                                    
     period  is agreed  to by  all the  parties. The  fiscal                                                                    
     interest  finding  and   the  final  determination  are                                                                    
     published  by the  commissioner  and  they forward  the                                                                    
     bill  along with  the contract  to the  Legislature for                                                                    
     approval of the contract.                                                                                                  
     It seems to  me, at that point the  contract itself and                                                                    
     the terms of  the contract - if a legal  action were to                                                                    
     be brought  are all  contained within the  four corners                                                                    
     of that  document and  they're not  going to  change at                                                                    
     this  point in  time unless  the Legislature  says 'No,                                                                    
     but if you change this we'll  say yes.' So let's say at                                                                    
     this point this is the final product. It's all there.                                                                      
CHAIR SEEKINS suggested that the  clock ought to start ticking at                                                               
that point  rather than at  the point of execution.  According to                                                               
the law, the administration and  the parties to the contract have                                                               
60  days to  execute after  the  Legislature has  passed the  law                                                               
authorizing execution of the contract.                                                                                          
SENATOR THERRIAULT  said you don't want  citizen groups preparing                                                               
a challenge for something that might not happen.                                                                                
CHAIR SEEKINS commented  he couldn't see the  parties agreeing to                                                               
a contract and then not executing it.                                                                                           
MR.  BALDWIN   cautioned  the  committee  to   think  about  that                                                               
carefully in light of the  suspension provision because he wasn't                                                               
sure how the other entities would  view it if suit a were brought                                                               
before the  contract was signed.  Currently the clause  says that                                                               
if the contract is ongoing and  a lawsuit is brought then there's                                                               
a 15-month period when they're  locked into the planning process.                                                               
Whether  or not  the other  entities might  view the  contract as                                                               
giving a suspension right is something to think about.                                                                          
CHAIR  SEEKINS clarified  this  bill  talks about  constitutional                                                               
MR. BALDWIN agreed adding it's  authorizing the enforceability of                                                               
the  contract   under  the  Stranded  Gas   Development  Act.  He                                                               
reiterated   those   are   facial  challenges   meaning   they're                                                               
enforceable on its face.                                                                                                        
CHAIR SEEKINS  questioned what the  enforceability of  a contract                                                               
MR. BALDWIN  replied it  falls back  on constitutional  issues at                                                               
this stage  and whether  something appears to  be invalid  on its                                                               
face under the constitution of other common law doctrines.                                                                      
SENATOR   FRENCH  asked   him   to  clarify   whether  the   word                                                               
"enforceability" would  also include the ability  to challenge to                                                               
the fiscal interest finding.                                                                                                    
MR. BALDWIN answered he'd have  to think about that because there                                                               
are separate provisions for that kind of challenge.                                                                             
SENATOR  FRENCH  asked  where  the  provisions  are  because  the                                                               
language says "original and exclusive  jurisdiction." He asked if                                                               
he was suggesting that there  might be a superior court challenge                                                               
to  the  fiscal interest  finding  and  an original  jurisdiction                                                               
challenge to the constitutionality.                                                                                             
MR.  BALDWIN  replied  he  was   suggesting  there  are  separate                                                               
provisions  that  deal with  challenges  to  the fiscal  interest                                                               
finding and the  final agency action when that  happens. He noted                                                               
that  the legislation  addressing that  issue didn't  pass during                                                               
the regular session.                                                                                                            
CHAIR  SEEKINS  added the  challenge  has  to take  place  before                                                               
legislative authorization.                                                                                                      
MR. BALDWIN  clarified that the  final agency action is  when the                                                               
final fiscal interest finding is released.                                                                                      
CHAIR SEEKINS  said that's  after the  public comment  period and                                                               
before the final contract is forwarded to the Legislature.                                                                      
MR. BALDWIN  declared that  that is  a separate  legal challenge.                                                               
This deals with a facial challenge to the contract itself.                                                                      
CHAIR   SEEKINS   asked   whether  that's   brought   under   the                                                               
Administrative Procedures Act.                                                                                                  
MR. BALDWIN replied  it's not clear but it would  appear to be an                                                               
administrative appeal  type action. The legislation  that died at                                                               
the end of the regular session was meant to clarify that point.                                                                 
SENATOR FRENCH  questioned whether  this would be  an improvement                                                               
over the existing  legal system. Basically it's  a superior court                                                               
challenge  to the  fiscal interest  finding. There  would be  the                                                               
right of  appeal for that  to the  supreme court and  probably at                                                               
some point  a superior court  judge would  issue a stay  based on                                                               
his  or  her desire  to  deeply  look  into the  fiscal  interest                                                               
finding  to determine  whether it  truly  is in  the best  fiscal                                                               
interest to the State. He suggested  that that might take just as                                                               
long as this challenge to  the constitutionality of the contract.                                                               
Are  we really  imagining  two parallel  sets  of challenges,  he                                                               
MR.  BALDWIN replied  it's  possible, but  he  would imagine  the                                                               
State would try to nullify  the action using a dispositive motion                                                               
to  deal with  a challenge  to  the fiscal  interest finding.  He                                                               
added that  the existence of  other statutes can't be  ignored in                                                               
the consideration of possible legal challenges.                                                                                 
9:18:24 AM                                                                                                                    
CHAIR SEEKINS asked Senator Guess if she had any questions.                                                                     
SENATOR GUESS,  who was  participating via  teleconference, asked                                                               
what happens to challenges under the U.S. Constitution.                                                                         
CHAIR SEEKINS asked Mr. Baldwin to comment.                                                                                     
MR. BALDWIN  advised that challenges under  the U.S. Constitution                                                               
can be  brought in  state court and  the proposed  language deals                                                               
broadly with challenging the constitutionality  of the law or the                                                               
enforceability of the  contract. He expressed the  view that this                                                               
statute would have  to be followed to invoke  the jurisdiction of                                                               
the state courts.                                                                                                               
SENATOR GUESS  asked him  to verify that  a federal  court filing                                                               
could not be limited.                                                                                                           
MR.  BALDWIN responded,  "I'm sure  if  we could,  we would  have                                                               
tried earlier."                                                                                                                 
SENATOR  THERRIAULT referenced  the version  of SB  316 that  the                                                               
Judiciary  Committee passed  and recalled  that the  placement of                                                               
the fiscal  interest finding challenge had  been problematic, but                                                               
there was no  mention that the 120-day time frame  was a concern.                                                               
SB 2002 indicates that the 120  days is a problem, but it doesn't                                                               
indicate concern about  the placement of the  public challenge to                                                               
the fiscal interest finding.                                                                                                    
He  questioned why  there was  one problem  then and  a different                                                               
problem  now  and  suggested  that  the work  that  was  done  in                                                               
Sections  7  and  8  of  SB 316(JUD)  giving  the  Supreme  Court                                                               
original  jurisdiction ought  to be  the way  both questions  are                                                               
CHAIR SEEKINS expressed the opinion  that there are two questions                                                               
in the bill that ought to  be addressed separately; first look at                                                               
the question of  original jurisdiction and then look  at the time                                                               
frame during which a challenge can take place.                                                                                  
SENATOR  FRENCH agreed  then added  that SB  2002 is  basically a                                                               
rewrite of  AS 43.82.440 and  it happens  to be the  same statute                                                               
where  the challenge  to the  final fiscal  interest finding  was                                                               
placed.  If SB  2002 were  adopted, that  right to  challenge the                                                               
fiscal interest finding  would be gone so he  questioned what the                                                               
administration thinks would preserve that right.                                                                                
CHAIR SEEKINS  said what  SB 316(JUD)  accomplished was  to bring                                                               
the challenge  to the fiscal interest  finding to the end  of the                                                               
process. Without amendment, the  challenge to the fiscal interest                                                               
finding would stay in AS 43.82.430.                                                                                             
9:23:29 AM                                                                                                                    
CHAIR SEEKINS asked Mr. Wooliver  to give the court's reaction to                                                               
original jurisdiction as it relates to SB 2002.                                                                                 
DOUGLAS WOOLIVER,  Administrative Attorney  for the  Alaska Court                                                               
System,  stated  that the  court  is  neutral  on the  bill,  but                                                               
advised  that  there  is precedence  for  original  jurisdiction.                                                               
There is one existing statute on  election law and one that is no                                                               
longer on the books. In  both instances original jurisdiction was                                                               
preferred on the Supreme Court.  Five opinions have been recorded                                                               
under  the two  statutes reflecting  how the  court handles  this                                                               
sort of case. Three of the  cases were resolved without a special                                                               
master  because there  was  no need  for  additional evidence.  A                                                               
special master was  appointed in two cases and  in both instances                                                               
a superior  court judge  who was appointed  as special  master to                                                               
take  evidence.  The  Supreme Court  then  reviewed  the  special                                                               
master's opinion.  He said he  would anticipate that that  is how                                                               
it would be done in this case.                                                                                                  
He agreed with  Mr. Baldwin that there  are constitutional issues                                                               
involved  in placing  a  time limit  on the  court  for making  a                                                               
decision,  but  that  there  are  some  time  limits  in  statue.                                                               
Although the court  makes every effort to  meet timelines whether                                                               
they  are  constitutionally required  or  not,  he cautioned  the                                                               
committee to consider  carefully the wisdom of  rushing the court                                                               
to issue an opinion. The  Legislature and the Judiciary Committee                                                               
in particular has spent time  deliberating the oil tax provisions                                                               
that are  likely to  be a  part of the  contract and  have worked                                                               
hard not to  rush the process. He suggested that  the court ought                                                               
not be put in the position of rushing its process either.                                                                       
He said  that the forgoing  discussion raised a question  that he                                                               
hadn't thought  about previously.  If there  were a  challenge to                                                               
the fiscal  interest finding and  the remedy that was  sought was                                                               
to void the contract, it would  be arguable that that is a review                                                               
of the contract. If that were  the case he asked whether it would                                                               
go directly to the Supreme Court or to a trial court first.                                                                     
9:27:57 AM                                                                                                                    
CHAIR SEEKINS  recapped that if  the Legislature were  to require                                                               
expedited   consideration   of    a   lawsuit   challenging   the                                                               
constitutionality  of a  contract the  Supreme  Court would  make                                                               
every  effort  to  meet  the  timeline, but  it  might  not  feel                                                               
constrained by it because of separation of powers.                                                                              
MR.  WOLIVER  said   yes,  but  the  court   does  recognize  the                                                               
importance  and priority  of any  of the  related cases  that are                                                               
likely to come before it regardless of timelines.                                                                               
SENATOR FRENCH asked if it's  basically superior court procedures                                                               
that are followed when a special master is appointed.                                                                           
MR. WOOLIVER said yes.                                                                                                          
SENATOR   FRENCH   said  it   seems   that   challenges  to   the                                                               
constitutionality  of  the  law  or  the  enforceability  of  the                                                               
contract are strictly  legal issues that the  Supreme Court might                                                               
decide to have  briefs on and argument. They  are not fact-driven                                                               
inquiries. Fiscal  interest findings  are different and  would be                                                               
very fact-driven inquiries.  He asked Mr. Wooliver if  he sees it                                                               
the same way.                                                                                                                   
MR. WOOLIVER replied  he would imagine it that way,  but he could                                                               
also imagine  a mix. If  the lawsuit was  a pure question  of law                                                               
then  it's  unlikely  that  the court  would  appoint  a  special                                                               
master, but if  there were questions in which evidence  had to be                                                               
taken  then it's  more  likely  that a  special  master would  be                                                               
SENATOR  FRENCH  asked whether  the  parties  have the  right  to                                                               
preemptively bump a master.                                                                                                     
MR. WOOLIVER said he didn't know, but he could try and find out.                                                                
CHAIR   SEEKINS  expressed   the   view   that  questions   about                                                               
constitutional provisions  wouldn't necessarily require  a master                                                               
and  neither  would questions  about  whether  the terms  of  the                                                               
contract were enforceable under the law.                                                                                        
MR. WOOLIVER said  he would agree that pure questions  of law are                                                               
unlikely to  result in the  appointment of a special  master, but                                                               
he couldn't predict what the cases would look like.                                                                             
CHAIR SEEKINS  said as someone  who isn't a lawyer  he interprets                                                               
the contract to be a question  of law as well as a constitutional                                                               
question. He solicited comment.                                                                                                 
MR.  BALDWIN  offered the  opinion  that  if the  record  becomes                                                               
substantial and  the discovery is  long and disputed  it's likely                                                               
that the court would appoint a special master.                                                                                  
CHAIR SEEKINS  read the first  sentence of the bill.  "The Alaska                                                               
Supreme  Court has  original and  exclusive  jurisdiction of  any                                                               
judicial review of  a contract developed under  this chapter." He                                                               
asked Senator Therriault to comment.                                                                                            
SENATOR THERRIAULT asked Senator French  if the opportunity for a                                                               
challenge might evaporate because it  would be swept in under the                                                               
proposed language.                                                                                                              
SENATOR FRENCH replied that's a  question for the administration.                                                               
Mr. Baldwin has said it's preserved, but it's a broad sentence.                                                                 
CHAIR SEEKINS said it appears to  him that it's a challenge of an                                                               
administrative  action rather  than a  challenge of  the contract                                                               
MR.  BALDWIN said  timing is  a consideration.  First, he  didn't                                                               
know whether this would be effective  in time to deal with when a                                                               
claim  would be  ripe under  AS  43.82.430(c), which  is when  it                                                               
would  be   a  final   agency  action.   If  it   were  effective                                                               
immediately,  it  could be  argued  that  the first  sentence  is                                                               
expansive and would  sweep much of it in. If  it is not effective                                                               
then you would  have to deal with the effects  of the statutes as                                                               
they now read.                                                                                                                  
He reflected that testimony during  the regular session indicated                                                               
that the statute  is broken and the result could  be an immediate                                                               
administrative  challenge once  the  fiscal  interest finding  is                                                               
finalized. The challenge would be  whether or not that finding is                                                               
an  appropriate basis  for taking  further  action. The  contract                                                               
itself would not  be in effect, but he would  assume that a party                                                               
would  try and  suspend  its effectiveness.  He  stated that  the                                                               
effort was  to preserve the  Legislature's power to  step forward                                                               
in the next phase to authorize the contract or not.                                                                             
That's  the  problem that  was  addressed  at  that time  and  he                                                               
separates  the issues  because they  address different  times. SB
2002  deals with  judicial  review of  the  contract -  presuming                                                               
there is one. But because of the  words that are used it may give                                                               
a  right of  action to  challenge the  finding itself  before the                                                               
contract is in effect.                                                                                                          
CHAIR  SEEKINS disagreed  with  the notion  that  the ability  to                                                               
challenge the finding  evaporates because it exists  one place or                                                               
the other. There's still the  ability to seek redress through the                                                               
Administrative Procedures Act in its  current form or directly to                                                               
the  supreme court.  The ability  to challenge  isn't taken  away                                                               
either way.                                                                                                                     
SENATOR  FRENCH  said anticipating  a  future  argument from  the                                                               
administration  he  would  suggest  that the  committee  be  very                                                               
explicit in its intention.                                                                                                      
CHAIR  SEEKINS said  it seems  explicit  that it  applies to  any                                                               
jurisdiction of a contract developed under this chapter.                                                                        
SENATOR  THERRIAULT asked  the  Chair  if he  was  sure that  the                                                               
language  didn't sweep  in  the fiscal  findings  upon which  the                                                               
contract is based.                                                                                                              
CHAIR  SEEKINS  argued that  when  the  Legislature approves  the                                                               
contract it  does matter what the  commissioner's fiscal interest                                                               
findings have to  say because it is just a  recommendation to the                                                               
Legislature.  There's nothing  in the  law that  says legislative                                                               
approval  is  pending  on  the  fiscal  interest  findings  being                                                               
correct or  not. The Legislature's  final decision will  be based                                                               
on what it thinks is the  best fiscal interest of the citizens of                                                               
the State  of Alaska  and not what  the administration  thinks it                                                               
SENATOR HUGGINS agreed with the Chair.                                                                                          
CHAIR SEEKINS  added the committee  tried to correct  the problem                                                               
in SB 316 and it didn't go anywhere.                                                                                            
SENATOR  THERRIAULT reflected  on  Mr. Baldwin's  words that  the                                                               
existing  statute is  broken and  said he  anticipated that  this                                                               
legislation would have a fix, but it doesn't.                                                                                   
CHAIR  SEEKINS  said  that  issue might  be  addressed  when  the                                                               
special  committee meets  to consider  amendment to  the Stranded                                                               
Gas  Development Act,  but the  question here  is whether  or not                                                               
it's a  problem to say  that the  supreme court has  original and                                                               
exclusive jurisdiction  for any judicial review  of the contract.                                                               
He stated the  opinion that it isn't a problem  and he would find                                                               
comfort  in knowing  that he  could  go directly  to the  supreme                                                               
court  for a  decision. He  asked  if that's  what the  committee                                                               
wants to allow.                                                                                                                 
SENATOR FRENCH  said he  doesn't find  that to  be controversial,                                                               
but  the open  and interesting  question  is whether  or not  the                                                               
first sentence  sweeps into its  jurisdiction a challenge  to the                                                               
fiscal interest findings. He stated  he would prefer that a court                                                               
decide  whether  or  not   legislative  approval  supersedes  and                                                               
renders unchallengeable the fiscal interest finding.                                                                            
CHAIR SEEKINS asked what would be undone.                                                                                       
SENATOR FRENCH answered passing  SB 2002 could provide ammunition                                                               
to the  administration should they  argue in court that  there is                                                               
no  challenge to  the fiscal  interest finding  because it's  not                                                               
listed as a point of challenge.                                                                                                 
CHAIR  SEEKINS said  that section  of law  is untouched.  It says                                                               
it's a judicial review of a contract  and so at that point it's a                                                               
finding and  not a contract.  Furthermore he doesn't  believe the                                                               
fiscal interest  finding is  included in  the contract.  He asked                                                               
Mr. Baldwin if they were either referenced or an exhibit.                                                                       
MR. BALDWIN replied not to his knowledge.                                                                                       
CHAIR  SEEKINS asserted  that this  limits the  challenge to  the                                                               
contract itself and  nothing that took place  in the development.                                                               
He asked whether  the administration didn't intend  it to include                                                               
just  what is  contained within  the  final four  corners of  the                                                               
MR. BALDWIN  responded the  administration is  ready to  take its                                                               
chances  in court  with regard  to the  issues encompassed  in SB
316, which is why the broken statute isn't addressed.                                                                           
CHAIR SEEKINS restated his position  that this bill limits action                                                               
on the final the contract developed under this law.                                                                             
SENATOR  HUGGINS  announced  that  he  wants  to  make  sure  the                                                               
citizens of  Alaska are  heard but  he doesn't  want to  create a                                                               
playground for lawyers  as has happened as a result  of the Exxon                                                               
Valdez grounding 17 years ago.                                                                                                  
9:50:36 AM                                                                                                                    
MR. BALDWIN  asked the  committee to  consider a  drafting point.                                                               
The  definition of  "person"  on page  1, line  10  might not  be                                                               
interpreted to include a government entity.                                                                                     
CHAIR SEEKINS said he had an amendment to address that point.                                                                   
The question,  he said, is  whether or  not to allow  an original                                                               
action of  the Supreme  Court. He restated  his opinion  that the                                                               
bill deals with what is contained  within the four corners of the                                                               
final contract and  not with any of the steps  leading to a final                                                               
SENATOR THERRIAULT said  he didn't have a  problem going directly                                                               
to the Supreme Court but he  does have concern about impacting or                                                               
extinguishing the public's right  on the fiscal interest finding.                                                               
To  address  that  issue  he suggested  adding  the  language  in                                                               
Sections 7 and 8 of SB 316 before the first sentence in SB 2002.                                                                
SENATOR HUGGINS asked for a copy of SB 316.                                                                                     
CHAIR SEEKINS called an at-ease from 9:53:59 AM to 10:06:56 AM.                                                             
CHAIR  SEEKINS  asked  if  the   suggesting  was  to  insert  the                                                               
following after "review" on page 1, line 8:                                                                                     
     Notwithstanding any  other provision: of law,  a person                                                                    
     may  not bring  an  action challenging  a final  agency                                                                    
     decision of  the commissioner of revenue  made under AS                                                                    
     43.82.430(c),   the   constitutionality    of   a   law                                                                    
     authorizing a  contract enacted under AS  43.82.435, or                                                                    
     the enforceability  of a  contract executed  under this                                                                    
     chapter  until  that  contract has  been  executed  and                                                                    
     unless the  action is commenced  within 120  days after                                                                    
     the date  that the contract  was executed by  the state                                                                    
     and the other parties to the contract."                                                                                    
SENATOR  THERRIAULT said  that  is his  suggestion  and he  would                                                               
think that Section 8 ought to be included as well.                                                                              
CHAIR SEEKINS  asked Mr. Baldwin  to comment on  the advisability                                                               
of inserting:                                                                                                                   
     Rights  under  a  contract   entered  into  under  this                                                                    
     chapter may not  vest until the day  after the deadline                                                                    
     to bring an action under (a) of this section.                                                                              
He  questioned  how  that  would fit  into  the  15-month  period                                                               
MR. BALDWIN  explained that when the  contract becomes effective,                                                               
the  parties  cannot suspend  their  performance  for a  15-month                                                               
period in face of a judicial challenge.                                                                                         
He referenced  the suggested  language from Section  7 of  SB 316                                                               
and interpreted it to mean  that the contractual rights would not                                                               
vest until the 120 days had elapsed.                                                                                            
SENATOR THERRIAULT noted there had  been concern about preserving                                                               
the public's right to challenge and  so that was moved to the end                                                               
of the process. Regarding the  issue of legislative authorization                                                               
and  whether  it supersedes  the  public's  challenge rights,  he                                                               
recalled   there   was    considerable   discussion   about   the                                                               
constitutionality of the Legislature's right to authorize.                                                                      
CHAIR  SEEKINS  repeated  the  point that,  under  the  old  law,                                                               
findings  were necessary  before the  commissioner could  execute                                                               
the   contract.  The   Legislature  removed   the  commissioner's                                                               
authority to execute the contract  and assigned that authority to                                                               
itself. The Legislature was charged  with reviewing the contract,                                                               
making  a  best  interest  determination,  and  then  authorizing                                                               
execution of  the contract. Chair  Seekins expressed  the opinion                                                               
that  since that  law hasn't  been amended,  the fiscal  interest                                                               
finding is  simply a  recommendation and  the Legislature  is not                                                               
constrained from being able to  authorize a contract based on the                                                               
commissioner's fiscal interest finding.                                                                                         
He  questioned  whether  the  committee   wanted  to  insert  the                                                               
language from SB 316 to say  that any challenge of a final agency                                                               
decision  of  the commissioner  would  also  have to  be  brought                                                               
within the time  period and after the execution  of the contract.                                                               
If that  isn't done it  allows someone to challenge  the findings                                                               
of  fact as  soon as  they're published  and become  final agency                                                               
decisions. The questions are: whether or  no we want to move that                                                               
challenge to  the end; whether  or not we  want to include  it in                                                               
this language;  and whether or  not we want  to put it  under the                                                               
same original jurisdiction of the Alaska State Supreme Court.                                                                   
He said he didn't object to  putting it under the jurisdiction of                                                               
the  Supreme  Court  because  it still  preserves  the  right  to                                                               
challenge whether or not it is a meaningful challenge.                                                                          
SENATOR  THERRIAULT  remarked that  was  the  result of  previous                                                               
deliberation.  The  right  would  be preserved  but  the  current                                                               
placement was  problematic. He agreed  that having  the challenge                                                               
come under the Supreme Court for expediency would seem proper.                                                                  
With regard to truncating the  timeline for mounting a challenge,                                                               
he said the 120 day statutory  timeline ought to be preserved. He                                                               
is not comfortable cutting it in half.                                                                                          
MR. BALDWIN stated  that the underlying concern is  to maintain a                                                               
level playing field. The Legislature  wants to preserve the right                                                               
to bring a challenge and the  state wants to preserve the ability                                                               
to argue that a claim  regarding the decision of the commissioner                                                               
may be moot.  If the Legislature allows appeal of  a final agency                                                               
decision  of  the  commissioner, the  administration  would  like                                                               
express language or  a separate intent statement  saying it isn't                                                               
the purpose  of the committee to  come down on the  side that the                                                               
claim is justiciable.                                                                                                           
SENATOR  FRENCH  said  it's surprising  that  the  administration                                                               
wouldn't welcome  a detailed examination  of the  fiscal interest                                                               
finding. The  concern has been  to let  there be discovery  and a                                                               
detailed analysis of the finding  to determine whether or not the                                                               
gas truly  is stranded and  whether it's necessary for  the state                                                               
to make concessions  to industry. Preserving that  inquiry to the                                                               
extent that it's available very important, he asserted.                                                                         
SENATOR THERRIAULT agreed that this  committee made that decision                                                               
after lengthy  debate and he  hadn't heard a  compelling argument                                                               
to change his mind.                                                                                                             
SENATOR HUGGINS reiterated the statement  that he doesn't want to                                                               
create a  "playground for lawyers"  such that  future generations                                                               
will be talking about building a gas line.                                                                                      
CHAIR  SEEKINS read  language Section  7 of  SB 316  and asserted                                                               
that the  Legislature isn't required  to have findings  of fiscal                                                               
interest  in order  to  authorize the  execution  of a  contract.                                                               
There  is no  intention to  extinguish a  right to  point out  an                                                               
egregious  error in  the process;  the intention  is to  make the                                                               
process as efficient  and effective as possible in  order to come                                                               
up with a final decision.                                                                                                       
SENATOR THERRIAULT mentioned the  Exxon Valdez case and commented                                                               
that because  the supreme  court is in  the position  of original                                                               
jurisdiction, the  potential for lengthy litigation  is truncated                                                               
CHAIR SEEKINS asked what he would suggestion for the amendment.                                                                 
SENATOR THERRIAULT  replied he would suggest  adding the language                                                               
from Sections  7 and 8  that the  committee had developed  and it                                                               
could  be  inserted before  or  after  the original  jurisdiction                                                               
SENATOR  FRENCH  agreed  that adding  the  original  jurisdiction                                                               
language  to the  language from  Section  7 makes  sense, but  he                                                               
wasn't  sure  about  Section  8.  That  was  written  before  the                                                               
contract was released  so it wasn't known that  the parties would                                                               
have  to move  forward for  a 15-month  period. He  asked whether                                                               
inserting Section 8 might alter that  and suspend the duty not to                                                               
suspend their actions.                                                                                                          
CHAIR SEEKINS said it would.                                                                                                    
MR. BALDWIN  replied he didn't want  to give a seat  of the pants                                                               
answer that might be misleading. He  said he would want to review                                                               
the  contract and  consult  with attorneys  that  dealt with  the                                                               
issue. He allowed that it is a bit confusing.                                                                                   
10:28:30 AM                                                                                                                   
CHAIR  SEEKINS  said  the special  committee  could  review  that                                                               
issue. The challenge  before this committee is  to decide whether                                                               
or not to  allow original action of the supreme  court. The other                                                               
challenge is looking  at whether or not the  timeframe in current                                                               
law ought to be shortened.                                                                                                      
SENATOR THERRIAULT recalled there  had been concern about whether                                                               
or  not  there would  be  damages  if contractual  rights  vested                                                               
before a challenge was brought.                                                                                                 
MR.  BALDWIN  responded Article  27.2  requires  them to  perform                                                               
notwithstanding  a challenge,  which explains  the effort  to get                                                               
the Legislature  to approve the expedited  consideration. Whether                                                               
rights  vest  or  not  they're required  to  perform  during  the                                                               
pendency of litigation, which is an important consideration.                                                                    
CHAIR SEEKINS said this conflicts with that.                                                                                    
MR. BALDWIN replied  it might because upon the  effective date of                                                               
the  contract they  have  an obligation  under  the contract.  He                                                               
reiterated he  would prefer to reflect  on the matter and  give a                                                               
more considered response.                                                                                                       
CHAIR SEEKINS restated  that he didn't object to  looking at that                                                               
as one of the amendments that the Stranded Gas Development Act.                                                                 
SENATOR THERRIAULT  noted that  it would  be a  potential 3-month                                                               
delay. He  wasn't sure what  expenditures might potentially  be a                                                               
vested right or a potential damage.                                                                                             
CHAIR SEEKINS said it would be  a 4-month delay and potentially a                                                               
6-month delay if they take 60 days to execute.                                                                                  
He asked if  there was objection to using the  language in SB 316                                                               
Section 7, line 6 to replace the  second sentence on page 1 of SB
SENATOR THERRIAULT moved  to replace the second  sentence on page                                                               
1, line 10 of SB 2002 with the  language on page 5, lines 6-12 of                                                               
SB 316(JUD).                                                                                                                    
CHAIR SEEKINS found no objection  and Amendment 1 was adopted. He                                                               
queried the committee about the change from 60 days to 120 days.                                                                
10:34:02 AM                                                                                                                   
SENATOR HUGGINS said  he'd like to hear whether  there is concern                                                               
about the implications of doubling the timeframe.                                                                               
MR. BALDWIN responded 60 days was selected in light of the 15-                                                                  
month obligation.                                                                                                               
SENATOR  THERRIAULT clarified  that the  time isn't  doubled; 120                                                               
days currently exists  in statute so the effect  of the amendment                                                               
is to simply preserve the status quo.                                                                                           
CHAIR SEEKINS said  he had no real problem with  the change. More                                                               
than likely  what will  happen is  that the  sophisticated person                                                               
will begin analyzing  as soon as the final  contract is presented                                                               
to the Legislature. They will  have a challenge ready well within                                                               
60 days of the time  that the Legislature authorizes the contract                                                               
and it's  executed. He stated  he didn't  have a problem  if that                                                               
was 120  days after the date  that the contract is  authorized by                                                               
the Legislature rather than executed by the state.                                                                              
SENATOR FRENCH  expressed the view  that the state and  the three                                                               
producers have had  two years to become  intimately familiar with                                                               
the contract while  the rest of the public hasn't  even gotten to                                                               
the latest  version. He said  he was willing  to bet that  if the                                                               
Legislature authorizes  the Governor's  bill and he  executes it,                                                               
those parties will be ready to sign up in 10 to 15 days.                                                                        
10:37:03 AM                                                                                                                   
CHAIR SEEKINS  said he too was  a bit conflicted because  he want                                                               
to get to finality within a  reasonable period of time. He didn't                                                               
want  the  oil companies  to  drag  their  feet  if there  was  a                                                               
contract but at the same time  he didn't have any problem holding                                                               
the state's feet to  the fire as well so that  things are done in                                                               
a timely  manner. He  didn't really  think the  extra 60  days is                                                               
necessary, but it isn't worth falling on your sword over either.                                                                
SENATOR  THERRIAULT  mentioned   another  amendment  he  provided                                                               
10:38:40 AM                                                                                                                   
CHAIR  SEEKINS said  before  addressing that  issue  he'd like  a                                                               
motion  to  amend  under  AS   43.320.340(8)  the  definition  of                                                               
"person" to  be the  definition contained  under AS 02.25.110(5),                                                               
which reads as follows:                                                                                                         
          (5)   "person"   means    an   individual,   firm,                                                                    
     copartnership,   corporation,   company,   association,                                                                    
     joint stock association, or  body politic, and includes                                                                    
     a    trustee,    receiver,   assignee,    or    similar                                                                    
SENATOR HUGGINS moved Amendment 2 as outlined above.                                                                            
CHAIR SEEKINS  announced that without  objection, Amendment  2 is                                                               
SENATOR  THERRIAULT explained  that  the impact  of the  proposed                                                               
amendment is to  extend the public comment period  from a minimum                                                               
30  days to  a minimum  90 days.  This was  discussed during  the                                                               
regular session  and the administration's  spokesperson indicated                                                               
support for 60  days. He said he continued to  be concerned about                                                               
the public's  ability to fully  understand the full  document and                                                               
the  smaller  producers  in  the state  are  also  scrambling  to                                                               
understand the  full impact  of the contract  so they  can submit                                                               
comments to the administration within  the public comment period.                                                               
It  is  through that  process  that  the administration  and  the                                                               
producers  can consider  support  or expressions  of concern  and                                                               
make  possible contract  modifications before  it's submitted  to                                                               
the Legislature for final action.                                                                                               
He  noted that  the administration  indicated the  minimum public                                                               
comment  period would  be  45 days  rather than  30  days but  he                                                               
continues to support a more expansive timeframe.                                                                                
CHAIR  SEEKINS asked  that the  amendment be  submitted when  the                                                               
Stranded Gas Development  Act is reviewed and amended  so that SB
2002 is confined to judicial review issues.                                                                                     
SENATOR THERRIAULT  expressed concern  because he isn't  a voting                                                               
member  of  the  Special  Committee on  Natural  Gas  Development                                                               
SENATOR HUGGINS supported the Chair's position.                                                                                 
CHAIR  SEEKINS  told  Senator  Therriault   he  could  offer  the                                                               
amendment to  the NGD committee and  he would be welcome  to take                                                               
part in  the discussion as  well. He said  he didn't like  the 30                                                               
day timeframe in the current law either.                                                                                        
SENATOR FRENCH advised that this is day 24.                                                                                     
SENATOR  THERRIAULT  said with  the  Chair's  assurance that  the                                                               
amendment could  be offered  in the NGD  Committee he  would hold                                                               
the amendment.                                                                                                                  
CHAIR SEEKINS  found there  was no  further discussion  and asked                                                               
for the will of the committee.                                                                                                  
SENATOR  HUGGINS  moved  CSSB  2002  (JUD)  from  committee  with                                                               
individual  recommendations and  attached  fiscal note(s).  There                                                               
being no objection, the motion carried.                                                                                         
There being nothing  further to come before  the committee, Chair                                                               
Seekins adjourned the meeting at 10:46:59 AM.                                                                                 

Document Name Date/Time Subjects