Legislature(2003 - 2004)

03/27/2003 01:35 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
          SENATE LABOR AND COMMERCE STANDING COMMITTEE                                                                        
                         March 27, 2003                                                                                         
                           1:35 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Con Bunde, Chair                                                                                                        
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Gary Stevens                                                                                                            
Senator Bettye Davis                                                                                                            
Senator Hollis French                                                                                                           
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 82                                                                                                              
"An Act relating to the  state alcoholic beverage tax for certain                                                               
wine and other beverages."                                                                                                      
                                                                                                                                
     MOVED CSSB 82(L&C) OUT OF COMMITTEE                                                                                        
                                                                                                                                
CS FOR HOUSE BILL NO. 9(FIN) am                                                                                                 
"An Act relating  to the registration of  individuals who perform                                                               
home   inspections;  relating   to  regulation   of  contractors;                                                               
relating  to registration  fees for  specialty contractors,  home                                                               
inspectors,  and  associate  home inspectors;  relating  to  home                                                               
inspection  requirements  for   residential  loans  purchased  or                                                               
approved by  the Alaska Housing Finance  Corporation; relating to                                                               
civil  actions  by  and  against home  inspectors  and  to  civil                                                               
actions arising  from residential  unit inspections;  repealing a                                                               
law that limits liability for damages  based on a duty to inspect                                                               
a  residential unit  to  damages caused  by  gross negligence  or                                                               
intentional misconduct; and providing for an effective date."                                                                   
                                                                                                                                
     MOVED SCS CSHB 9(L&C) OUT OF COMMITTEE                                                                                     
                                                                                                                                
SENATE BILL NO. 151                                                                                                             
"An  Act relating  to  the regulation  of  natural gas  pipelines                                                               
under the Pipeline Act."                                                                                                        
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 146                                                                                                              
"An  Act repealing  the termination  date  of certain  provisions                                                               
that  require  the  reporting  of  social  security  numbers  and                                                               
automated  data matching  with financial  institutions for  child                                                               
support  enforcement purposes;  and  providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
HOUSE BILL NO. 124                                                                                                              
"An Act  relating to commercial  motor vehicle drivers  and their                                                               
employers and to railroad-highway  grade crossings; and providing                                                               
for an effective date."                                                                                                         
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
CS FOR HOUSE BILL NO. 64(JUD)                                                                                                   
"An Act relating to court  approval of the purchase of structured                                                               
settlements."                                                                                                                   
                                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
SB 82 - See Labor and Commerce minutes dated 3/13/03.                                                                           
                                                                                                                                
HB 9 - See Labor and Commerce minutes dated 3/18/03.                                                                            
                                                                                                                                
SB 151 - No previous action to record.                                                                                          
                                                                                                                                
HB 146 - No previous action to record.                                                                                          
                                                                                                                                
HB 124 - No previous action to record.                                                                                          
                                                                                                                                
HB 64 - No previous action to record.                                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mr. Doug Letch                                                                                                                  
Staff to Senator Gary Stevens                                                                                                   
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 82.                                                                                       
                                                                                                                                
Mr. Chuck Harlamert                                                                                                             
Chief of Operations                                                                                                             
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Commented on SB 82.                                                                                       
                                                                                                                                
Ms. Heather Nobrega                                                                                                             
Staff to Representative Rokeberg                                                                                                
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 9.                                                                                        
                                                                                                                                
Mr. Terry Duszynski                                                                                                             
PO Box 83149                                                                                                                    
Fairbanks AK 99708                                                                                                              
POSITION STATEMENT: Opposed HB 9.                                                                                             
                                                                                                                                
Mr. Dave Owens                                                                                                                  
Owens Inspection Service                                                                                                        
PO Box 3589                                                                                                                     
Palmer AK 99645                                                                                                                 
POSITION STATEMENT: Supported HB 9.                                                                                           
                                                                                                                                
Ms. Carol Perkins                                                                                                               
Active Inspections                                                                                                              
PO Box 871825                                                                                                                   
Wasilla AK 99687                                                                                                                
POSITION STATEMENT: Opposed HB 9.                                                                                             
                                                                                                                                
Ms. Mary Jackson                                                                                                                
Staff to Senator Wagoner                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SB 151 for the sponsor.                                                                      
                                                                                                                                
Mr. Ben Schoffmann, Project Manager                                                                                             
Alaska Business Unit, Domestic Production                                                                                       
Marathon Oil Company                                                                                                            
P.O. Box 196168                                                                                                                 
Anchorage AK 99519-6168                                                                                                         
POSITION STATEMENT: Supported SB 151.                                                                                         
                                                                                                                                
Mr. Anthony Scott                                                                                                               
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
400 Willoughby Ave.                                                                                                             
Juneau, AK  99801-1724                                                                                                          
POSITION STATEMENT: Supported SB 151.                                                                                         
                                                                                                                                
Commissioner Jim Strandberg                                                                                                     
Regulatory Commission of Alaska (RCA)                                                                                           
Department of Community & Economic Development                                                                                  
PO Box 110800                                                                                                                   
Juneau, AK 99811-0800                                                                                                           
POSITION STATEMENT: Supported SB 151.                                                                                         
                                                                                                                                
Mr. Todd Larkin                                                                                                                 
Staff to Representative Jim Holm                                                                                                
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 124.                                                                                      
                                                                                                                                
Representative Lesil McGuire                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of HB 124.                                                                                        
                                                                                                                                
Ms. Karen Hemmings                                                                                                              
No address provided                                                                                                             
POSITION STATEMENT: Supported HB 124.                                                                                         
                                                                                                                                
Mr. Paul LaBolle                                                                                                                
Staff to Representative Foster                                                                                                  
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on HB 64 for the sponsor.                                                                       
                                                                                                                                
Mr. Albert Tamagni, Sr.                                                                                                         
Structured Financial Settlements of Anchorage Alaska                                                                            
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supported HB 64.                                                                                          
                                                                                                                                
Mr. Randy Dyer, Executive Vice President                                                                                        
National Structured Settlement Trade Association                                                                                
No address provided                                                                                                             
POSITION STATEMENT: Supported HB 64.                                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-16, SIDE A                                                                                                            
                                                                                                                                
        SB  82-ALCOHOLIC BEVERAGE TAX FOR WINE & OTHERS                                                                     
                                                                                                                              
CHAIR CON BUNDE called the Senate Labor and Commerce Standing                                                                 
Committee meeting to order at 1:35 p.m. Present were Senators                                                                   
Stevens, Davis and  Chair Bunde. He announced SB 82  to be up for                                                               
consideration.                                                                                                                  
                                                                                                                                
SENATOR STEVENS moved to adopt Amendment 1.                                                                                     
                                                                                                                                
CHAIR BUNDE objected for discussion purposes.                                                                                   
                                                                                                                                
MR. DOUG LETCH,  staff to Senator Gary Stevens,  explained he got                                                               
together  with representatives  from the  small wineries  and the                                                               
Department of  Revenue to  come up with  new language  that would                                                               
reduce the  amount of revenue  lost to the state.  That amendment                                                               
is  before members  [Amendment  1]. It  would  delete the  3,000-                                                               
gallon per  year exemption  and replace it  with 100  gallons per                                                               
month, which will insure that  the state will receive tax revenue                                                               
on  every gallon  sold over  100 gallons  each month.  The second                                                               
part  of  the  amendment  would  further  protect  the  state  by                                                               
insuring that two or more taxpayers  who have a relationship in a                                                               
business  would be  taxed  as  a single  taxpayer.  That means  a                                                               
company cannot  get an exemption  for each  one of its  brands of                                                               
wine.                                                                                                                           
                                                                                                                                
CHAIR BUNDE asked what the new fiscal note would look like.                                                                     
                                                                                                                                
MR. LETCH said  Amendment 1 needs to be adopted  by the committee                                                               
before a new  fiscal note could be prepared but  he understood it                                                               
should severely reduce the amount of lost income to the state.                                                                  
                                                                                                                                
MR.  CHUCK HARLEMERT,  Department of  Revenue, estimated  the tax                                                               
impact on an ongoing basis would  be between $18 and $20 thousand                                                               
dollars  per year.  In the  first year,  it would  be twice  that                                                               
amount, or about $37,000.                                                                                                       
                                                                                                                                
CHAIR  BUNDE  announced  there  were  no  further  questions.  He                                                               
removed his objection and Amendment 1 was adopted.                                                                              
                                                                                                                                
SENATOR  STEVENS moved  to  pass CSSB  82(L&C)  and the  attached                                                               
fiscal  note  from  committee  with  individual  recommendations.                                                               
There were no objections and it was so ordered.                                                                                 
                                                                                                                                
          CSHB 9(FIN)am - HOME INSPECTORS/CONTRACTORS                                                                       
                                                                                                                                
                                                                                                                                
CHAIR BUNDE announced CSHB 9(FIN)am to be up for consideration.                                                                 
                                                                                                                                
MS. HEATHER  NOBREGA, staff to Representative  Rokeberg, sponsor,                                                               
said she would answer questions, but there were none.                                                                           
                                                                                                                                
SENATOR  DAVIS  moved to  adopt  the  Senate Labor  and  Commerce                                                               
committee substitute to  CSHB 9(FIN)am, version U.  There were no                                                               
objections and it was so ordered.                                                                                               
                                                                                                                                
SENATOR  STEVENS moved  to pass  SCS CSHB  9(L&C) from  committee                                                               
with individual recommendations.                                                                                                
                                                                                                                                
SENATORS SEEKINS and FRENCH arrived at 1:44 p.m.                                                                                
                                                                                                                                
CHAIR  BUNDE  announced that  he  had  been notified  that  other                                                               
people wanted to testify.                                                                                                       
                                                                                                                                
MR.  TERRY DUSZYNSKI,  Fairbanks building  inspector since  1978,                                                               
said  when  this bill  was  introduced,  it was  about  providing                                                               
proper   qualifications  for   home  inspectors,   insurance  and                                                               
continuing  education. However,  this bill  seems to  have gotten                                                               
way out of  control as far as what it's  trying to accomplish. It                                                               
is  tying to  dictate how  an  inspection is  to be  done it  but                                                               
doesn't provide  everything that is  necessary. On page  6, under                                                               
existing  homes, the  provisions do  not specify  what code  they                                                               
refer  to. Another  concern is  subsection (d)  on page  6, which                                                               
specifies that  the inspection  is valid for  180 days  after the                                                               
date the home  inspector signs and dates the  report. However, it                                                               
doesn't keep home inspectors from being sued after six months.                                                                  
                                                                                                                                
On page 10 the  home inspector is held liable for  two years on a                                                               
new construction,  yet the builder  has only a  one-year warranty                                                               
on the house. He thought that was a little out of line.                                                                         
                                                                                                                                
Page 18  contains a list  of components  of a residence  that the                                                               
inspector is  liable for and  includes built-in  appliances, such                                                               
as dishwashers  and built-in ranges.  He thought it goes  too far                                                               
in defining what inspectors are supposed to do.                                                                                 
                                                                                                                                
He said  the language on  page 20 is of  most concern as  it says                                                               
that   inspectors  shall   determine  whether   the  construction                                                               
conforms to relevant provisions of  the construction codes of the                                                               
municipality or  of the  state building  code, as  applicable, at                                                               
each of the  following stages of construction. There  is no state                                                               
building code  for residential construction. The  State of Alaska                                                               
has adopted uniform building codes,  but only for four-plexes and                                                               
above.  Now, home  inspectors are  going  to be  held liable  for                                                               
something  that there  is  no state  law to  follow.  All of  the                                                               
cities  have  different  codes.  Inspectors  need  to  know  what                                                               
standards they will be held to when doing an inspection.                                                                        
                                                                                                                                
MR.  DAVE  OWENS,  Owens  Inspection Service,  said  he  has  not                                                               
supported the bill in the past,  but he could if three amendments                                                               
were adopted.  One would be  to consolidate and create  an Alaska                                                               
state residential  building code  and regulations  for commercial                                                               
building  inspectors. He  said  this bill  does  not address  the                                                               
relationship   between  real   estate   agents  and   third-party                                                               
inspectors.   Liability  is   the  biggest   problem  that   most                                                               
inspectors  have.  If  this  bill   passes  with  this  level  of                                                               
liability,  a good  percentage of  the inspectors  on the  Alaska                                                               
housing  roster that  perform  new construction  will  go out  of                                                               
business.                                                                                                                       
                                                                                                                                
MS. CAROL PERKINS, Active Inspections,  stated opposition to HB 9                                                               
and  said  the  bill  would  open  inspectors  up  to  a  lot  of                                                               
"lawyering."  She  pointed  out  the building  department  has  a                                                               
grievance  process and  the  authority to  adopt  codes and  make                                                               
amendments  so  that   the  codes  are  adjustable   to  a  local                                                               
situation.                                                                                                                      
                                                                                                                                
MS. NOBREGA said  the first concern is addressed on  page 6, (b).                                                               
She explained that the bill  allows for a preinspection document,                                                               
which talks  about the expectations  and what the  home inspector                                                               
will be doing,  which can vary. This also  applies to appliances.                                                               
A home  inspector might not  look at appliances according  to the                                                               
preinspection document.  She pointed out the  180-day validity of                                                               
the report means that its accuracy  is valid only for that period                                                               
of time. She told members the  provisions on page 10 for bringing                                                               
a claim,  one-year for an existing  home and two-years for  a new                                                               
home, are from  the statute of limitations of when  a lawsuit can                                                               
be  brought. On  page 20,  the state  building code  language was                                                               
inserted to cover the possible eventuality of getting one.                                                                      
                                                                                                                                
MS.  NOBREGA  said  Mr.  Owens'   concerns  about  liability  are                                                               
partially covered in  a compromise. Because the  bill repeals the                                                               
AHFC  provision, section  41, other  provisions were  inserted to                                                               
limit  inspectors'  liability.  One  limits  the  length  of  the                                                               
report's validity,  another limits the  one and two  year period,                                                               
and another limits who can sue them.                                                                                            
                                                                                                                                
Repealing section  41 does  not open  inspectors up  to frivolous                                                               
lawsuits. Now, a  homeowner can only sue for  gross negligence or                                                               
intentional misconduct. Section 41 will  allow a homeowner to sue                                                               
for  regular  negligence  and damage.  The  standard  under  that                                                               
provision is very, very high.                                                                                                   
                                                                                                                                
CHAIR  BUNDE thanked  her for  her explanation  and noted  that a                                                               
motion was pending. He asked for  the roll to be called. SENATORS                                                               
FRENCH, SEEKINS, STEVENS, DAVIS and  BUNDE voted yea and SCS CSHB                                                               
9 (L&C) moved out of committee.                                                                                                 
                                                                                                                                
           SB 151-REGULATION OF NATURAL GAS PIPELINES                                                                       
                                                                                                                                
CHAIR BUNDE announced SB 151 to be up for consideration.                                                                        
                                                                                                                                
MS. MARY JACKSON, staff to  Senator Wagoner, sponsor, said SB 151                                                               
is a housekeeping  measure. In 2000, the  legislature amended the                                                               
Alaska Pipeline  Act. One of  the provisions of  that legislation                                                               
allowed   for  two   classes  of   pipeline  service:   firm  and                                                               
interruptible.  Those services  applied  to the  North Slope  gas                                                               
pipeline because  it was  the only pipeline  at that  time. Since                                                               
then, the  Kenai Kachemak (KKPL)  pipeline has come on  line. The                                                               
KKPL was initially  intended to run from the southern  end of the                                                               
Kenai Peninsula  back to Kenai  as the  oil reserves were  in the                                                               
south.  The KKPL  wrote to  the Regulatory  Commission of  Alaska                                                               
(RCA)  requesting that  it  be  allowed to  offer  both firm  and                                                               
interruptible   services.  The   RCA   replied   that  the   2000                                                               
legislation governing  classes of  service to pipelines  was only                                                               
specific to the North Slope.  This bill deletes "North Slope" and                                                               
adds a section  that defines a natural gas  pipeline facility and                                                               
a natural gas pipeline carrier.                                                                                                 
                                                                                                                                
MS. JACKSON  told members  the bill  should contain  an immediate                                                               
effective  date  as  the  pipeline  is  under  construction.  She                                                               
pointed out the Department of  Natural Resources submitted a zero                                                               
fiscal  note, but  included  some concerns  on  page 2.  [Senator                                                               
Wagoner]   disagrees  with   the   assertion   that  this   could                                                               
potentially  be   used  to  impede   pipeline  access   for  non-                                                               
affiliated producers  and could  hinder natural  gas exploration.                                                               
She  told  members  that representatives  of  Marathon  Oil  were                                                               
present to  speak to that. She  noted the function of  the RCA is                                                               
to insure fairness.                                                                                                             
                                                                                                                                
MR. BEN SCHOFFMANN, Marathon Oil,  said he is the project manager                                                               
for the  Kenai Kachemak  Pipeline project known  as KKPL.  SB 151                                                               
would provide the  RCA with a tool to offer  two types of service                                                               
to pipelines,  firm and interruptible, that  it currently applies                                                               
to the North Slope gas line.  FERC has used the same policy often                                                               
in the  Lower 48  over the  past two decades  by FERC.  This bill                                                               
would  clarify that  the RCA  has  the authority  to grant  other                                                               
pipelines the  authority to grant  those two classes  of service,                                                               
otherwise known as contract carriage,  to regulated gas pipelines                                                               
elsewhere in the state.                                                                                                         
                                                                                                                                
He  explained  that firm  service  is  a commitment  between  the                                                               
pipeline owner and  its customers to provide  a designated amount                                                               
of throughput  on a set  daily basis.  The shipper agrees  to pay                                                               
for that  capacity whether or  not it is  utilized. It is  a risk                                                               
decision the shipper makes to  reserve capacity. The shipper pays                                                               
what is known as a reservation charge for that privilege.                                                                       
                                                                                                                                
Interruptible service  is offered on  an as available  basis. The                                                               
pipeline would offer  to transport volumes and  the shipper would                                                               
only have to pay for services  actually used. The parties have no                                                               
long-term commitment  as to  promised throughputs,  deliveries or                                                               
payments for gas that is not rendered for delivery.                                                                             
                                                                                                                                
SB 151  is important to investors  because when you put  money on                                                               
the line, it's good to know  that people are actually going to be                                                               
interested  in  using  the  pipeline  capacity  you're  building.                                                               
Offering firm transportation  is a way for  pipeline investors to                                                               
make sure  they will  have customers and  to understand  what the                                                               
level of interest is and how  serious that interest is. With firm                                                               
transportation, shippers are asked to  commit in advance and make                                                               
payments  for  capacity whether  it's  used  or  not. It  sets  a                                                               
minimum standard for  how large the pipeline must  be. He stated.                                                               
"Without that,  it's a  wild guess...It  helps them  reduce their                                                               
risk and manage their expectations."                                                                                            
                                                                                                                                
MR.  SCHOFFMANN said  SB 151  is important  for shippers  because                                                               
they want to  be sure that they're  going to be able  to ship gas                                                               
on  that line.  Shippers generally  have two  types of  gas sales                                                               
contracts and those  are firm or interruptible. If  a pipeline is                                                               
then placed between  a gas supplier and their  end customer, like                                                               
Enstar, Chugach Electric, industrial  users and residents, but it                                                               
doesn't have  the capability to  offer the same type  of service,                                                               
then it almost undermines the  contractual relationship between a                                                               
supplier and a customer. The  supplier needs the ability not only                                                             
to produce the  gas with certainty, but also to  ship that gas to                                                               
the customer  with certainty.  This helps  the shipper  align its                                                               
transportation services  with its gas  contracts. If it  has firm                                                               
gas contracts, it more than  likely will want firm transportation                                                               
services.                                                                                                                       
                                                                                                                                
CHAIR BUNDE asked  if this bill would only allow  the smaller gas                                                               
pipeline the same flexibility that TAPS has currently.                                                                          
                                                                                                                                
MR. SCHOFFMANN  replied that current  law deals with  natural gas                                                               
pipelines and the TAPS.                                                                                                         
                                                                                                                                
CHAIR BUNDE  asked him to  address DNR's concern that  the fiscal                                                               
note might discourage gas development.                                                                                          
                                                                                                                                
MR. SCHOFFMANN  replied that the  situation with the  fiscal note                                                               
seems to  imply that unaffiliated  shippers would not be  able to                                                               
have certainty  with which  to conduct  their operations,  but he                                                               
disputes  that implication  because the  producers are  given two                                                               
options, one of  firm service and the other to  wait and see what                                                               
the development  is before they  put money  on the line.  The RCA                                                               
will be  involved in insuring  that this is  a non-discriminatory                                                               
process  that is  fairly transparent.  This includes  designating                                                               
expansions of the line.                                                                                                         
                                                                                                                                
SENATOR FRENCH  asked if this  legislation would be  necessary if                                                               
the KKPL was proposed as a common carrier pipeline.                                                                             
                                                                                                                                
MR.  SCHOFFMANN replied  that the  common carrier  provisions are                                                               
already  in AS  42.06.  This  is a  clarification  to the  common                                                               
carrier  provisions  that  allow  two classes  of  service.  Now,                                                               
practically  speaking, all  common  carriers offer  interruptible                                                               
service  only,  because  if  the  pipelines  get  oversubscribed,                                                               
everybody gets curtailed.                                                                                                       
                                                                                                                                
SENATOR FRENCH said his sense  is that this legislation would not                                                               
be  necessary  if it  just  involved  common carriers,  but  that                                                               
wouldn't satisfy his business plans.                                                                                            
                                                                                                                                
MR. SCHOFFMANN agreed and said SB  151 is necessary as a function                                                               
of  the development  of the  gas transportation  and deregulation                                                               
process  that's  happened  over   the  past  couple  of  decades.                                                               
Projects that define  what has happened in the  industry have not                                                               
come up during that time frame.                                                                                                 
                                                                                                                                
SENATOR SEEKINS  asked if SB  151 will allow  smaller independent                                                               
producers to find  carriers to get their products  to market that                                                               
might not exist under any  other scenario unless they built their                                                               
own pipelines.                                                                                                                  
                                                                                                                                
MR. SCHOFFMANN replied  they believe SB 151  will be advantageous                                                               
to  all potential  customers, small  producers included,  because                                                               
they are not  being asked to commit anything in  advance over the                                                               
long-term. However, they  will see a pipeline  with published and                                                               
regulated  tariffs and  the  fact that  the  pipeline is  getting                                                               
built and is getting closer  to some of their operations provides                                                               
a huge  incentive to accelerate  their plans or drill  wells that                                                               
they wouldn't have  if they were 33 miles further  away from that                                                               
infrastructure.                                                                                                                 
                                                                                                                                
SENATOR SEEKINS  said that this  addresses an overall  concern he                                                               
has about how to encourage  smaller independent businesses to get                                                               
into the energy production business in Alaska.                                                                                  
                                                                                                                                
MR.  ANTHONY  SCOTT, Division  of  Oil  and  Gas, DNR,  said  the                                                               
contract carriage provisions can reduce  producer risk for a non-                                                               
producer affiliated  pipeline, which is the  general case outside                                                               
of  Alaska. With  a producer-affiliated  pipeline,  there is  the                                                               
potential for concern  that during the open  season, the pipeline                                                               
could decide to either meet the  needs of the producers, which he                                                               
understands is  not the  case with  KKPL, or  monopolize capacity                                                               
before  an independent  shipper  has explored  or discovered  the                                                               
gas.  This legislation  will  affect not  only  KKPL, but  future                                                               
pipelines as well.                                                                                                              
                                                                                                                                
SENATOR FRENCH  asked if  this proposed pipeline  is going  to be                                                               
owned by an affiliated or non-affiliated pipeline company.                                                                      
                                                                                                                                
MR. SCHOFFMANN  responded that  KKPL is  a joint  venture between                                                               
Marathon and  Unocal, who  are also  committed as  shippers. They                                                               
are an affiliated company. The  issues that were raised really do                                                               
fall  under the  purview of  the  RCA to  make sure  that a  fair                                                               
process is  in place. If  Marathon and  Unocal find gas  in other                                                               
areas of  the Kenai Peninsula  where they have not  yet explored,                                                               
they would be in the same position  as anyone else who has yet to                                                               
make a commitment  to the pipeline. The RCA has  the authority to                                                               
look at the tariffs to make sure they are balanced.                                                                             
                                                                                                                                
SENATOR SEEKINS  moved to adopt  Amendment 1 to add  an immediate                                                               
effective date. There were no objections and it was so ordered.                                                                 
                                                                                                                                
MR. STRANDBERG,  RCA Commissioner,  testified that  this approach                                                               
would be a new one in the regulation of pipelines.                                                                              
                                                                                                                                
TAPE 03-16, SIDE B                                                                                                            
                                                                                                                              
MR.  STRANDBERG said  he  didn't  know how  SB  151 would  affect                                                               
preexisting  firm  transport  contracts that  can  be  negotiated                                                               
under new language and whether the  RCA would have the ability to                                                               
require the parties  to those contracts to renegotiate  for a pro                                                               
rata  share reduction  that would  be required  under the  common                                                               
carrier provision.                                                                                                              
                                                                                                                                
SENATOR SEEKINS  questioned why  this would  be considered  a new                                                               
approach if, in effect, SB 151 only removes "North Slope."                                                                      
                                                                                                                                
MR. STRANDBERG replied currently, the  RCA is just regulating two                                                               
gas pipelines in the state.  The North Slope pipeline hadn't been                                                               
constructed  yet.  The two  gas  lines  are regulated  under  the                                                               
state's public  utility statutes.  He clarified, "We  really have                                                               
no gas pipelines that are regulated under AS 42.06 right now."                                                                  
                                                                                                                                
SENATOR SEEKINS  noted that it  isn't a new approach  in statute,                                                               
since the statute  already exists for North Slope  gas. It's just                                                               
that there isn't one in operation yet.                                                                                          
                                                                                                                                
MR. STRANDBERG said he is correct.                                                                                              
                                                                                                                                
CHAIR BUNDE asked Mr. Strandberg  to submit a written response to                                                               
the concern  expressed by  DNR in  its fiscal  note, and  said he                                                               
would  distribute  copies  to the  committee.  He  announced  the                                                               
committee would hold SB 151 until further notice.                                                                               
                                                                                                                                
          HB 146-CHILD SUPPORT/SOCIAL SECURITY NUMBERS                                                                      
                                                                                                                                
CHAIR BUNDE announced HB 146 to be up for consideration.                                                                        
                                                                                                                                
REPRESENTATIVE LESIL MCGUIRE,  sponsor, said HB 146  stems from a                                                               
federal  act that  went into  place in  1996 called  the Personal                                                               
Responsibility and  Work Opportunity  Reconciliation Act  of '96.                                                               
The  act's  goal  is  simply  to  reduce  dependence  on  welfare                                                               
programs  across the  board. The  federal  act required  numerous                                                               
additional  requirements for  child support  enforcement programs                                                               
across  the United  States.  One of  those  requirements was  the                                                               
reporting  of   social  security  numbers  and   matching  it  to                                                               
automated  data from  financial institutions  for the  purpose of                                                               
child support enforcement.                                                                                                      
                                                                                                                                
REPRESENTATIVE  MCGUIRE   said  while  the  welfare   system  was                                                               
designed to provide  the basics of food and  shelter to children,                                                               
sometimes  a family  was receiving  welfare because  a "deadbeat"                                                               
mom  or dad  did  not participate  financially  in their  child's                                                               
life.  The Act  recognized that  new  tools were  needed to  help                                                               
state  agencies  crack down  on  "deadbeat"  moms and  dads.  She                                                               
cautioned if  HB 146 is not  enacted, the state would  lose $75.6                                                               
million -  $15.4 million for  Alaska's Child  Support Enforcement                                                               
Division  (CSED)   and  $60.2  million  for   Alaska's  temporary                                                               
assistance program.                                                                                                             
                                                                                                                                
She  explained the  legislature adopted  the law  that is  before                                                               
them in  1997 and readopted it  in 1998 with a  sunset provision.                                                               
HB 146 repeals the sunset provision  that would go into effect on                                                               
July 1 of this year. The  state would continue on with the policy                                                               
that has been in place since 1997.                                                                                              
                                                                                                                                
REPRESENTATIVE  MCGUIRE described  another  part of  the bill  as                                                               
further clarification of existing  policy. The word "resident" on                                                               
page 1,  line 7, was  removed so that  any person applying  for a                                                               
commercial fishing  license shall  provide their  social security                                                               
number. She  noted that would  codify a  policy that has  been in                                                               
effect since 1997.                                                                                                              
                                                                                                                                
CHAIR  BUNDE added  that  a  few years  ago  deadbeats owed  over                                                               
$100,000  in  child  support  arrears and  the  people  were  all                                                               
fathers and most  of them were fishermen. There  being no further                                                               
questions, he held the bill.                                                                                                    
                                                                                                                                
        HB 124-COMMERCIAL MOTOR VEHICLE DRIVERS/EMPLOYER                                                                    
                                                                                                                                
CHAIR BUNDE announced HB 124 to be up for consideration.                                                                        
                                                                                                                                
MR. TODD  LARKIN, staff to  Representative Jim Holm, said  HB 124                                                               
is  a housekeeping  measure suggested  by the  Administration. It                                                               
would cost  the state $20 to  $40 million in highway  funds if it                                                               
does  not come  into compliance  with  a federal  code that  says                                                               
commercial drivers  need to stop at  railroad crossings. Although                                                               
that's taught in  CDL classes and is a  federal requirement, it's                                                               
never been  the law in  Alaska. He  found that Alaska  is already                                                               
past its deadline  for compliance, so the bill  should be hurried                                                               
along. He noted that HB 124 has an immediate effective date.                                                                    
                                                                                                                                
MS. KAREN HEMMINGS stated support for  HB 124 so that drivers can                                                               
be in compliance with their CDL licensing program.                                                                              
                                                                                                                                
MR. MATT LAVECK said he was available to answer questions.                                                                      
                                                                                                                                
There being no further comments, CHAIR BUNDE set the bill aside.                                                                
                                                                                                                                
           HB  64-PURCHASE OF STRUCTURED SETTLEMENTS                                                                        
                                                                                                                              
CHAIR BUNDE announced HB 64 to be up for consideration.                                                                         
                                                                                                                                
MR. PAUL LABOLLE, staff to Representative Foster, sponsor, said                                                                 
this bill sets up oversight for transfers of structured                                                                         
settlements, primarily for three reasons. He explained:                                                                         
                                                                                                                                
     One  is consumer  protection. Factoring  companies have                                                                    
     been purchasing  structured settlements  for as  low as                                                                    
     20  cents on  the  dollar. A  structured settlement  by                                                                    
     definition is  tax-free. Once they have  lump-summed it                                                                    
     out, they  now have to pay  tax on their lump  sum. So,                                                                    
     whatever  the discount  hits them  for, taxes  hit them                                                                    
     for it again.                                                                                                              
                                                                                                                                
     The second reason  is for the good of the  state. A lot                                                                    
     of times a  structured settlement is set  up because it                                                                    
     is  determined that  the payee  isn't equipped  to deal                                                                    
     with a large  lump sum and so they set  him up so there                                                                    
     will be a  continuous flow of cash. Once  they lump sum                                                                    
     it  out, they  spend up  all the  money, they  become a                                                                    
     burden on the state.                                                                                                       
                                                                                                                                
     Also,  for  the good  of  the  state, these  structured                                                                    
     settlements  are  often   set  up  as  non-transferable                                                                    
     agreements,  but since  there is  no oversight  set up,                                                                    
     the  right hand  doesn't  know what  the  left hand  is                                                                    
     doing. So, they're happening illegally.                                                                                    
                                                                                                                                
     Third,  there is  a federal  tax law  currently on  the                                                                    
     books  [that]  passed  last year  which  imposes  a  40                                                                    
     percent prohibitive  tax on any transfer  of structured                                                                    
     settlements unless it has been  approved by a qualified                                                                    
     order, such as  a state statute, state  law or overview                                                                    
     of an administrative body.                                                                                                 
                                                                                                                                
CHAIR BUNDE asked if HB 64 would apply to the legislature and                                                                   
GARVEE bonds. He noted the bill has a zero fiscal note and                                                                      
questioned whether there would be a cost for the court reviews.                                                                 
                                                                                                                                
MR. LABOLLE said he didn't know the ins and outs of the court                                                                   
system or why it submitted a zero fiscal note.                                                                                  
                                                                                                                                
SENATOR FRENCH asked how many structured settlements get                                                                        
arranged in Alaska each year.                                                                                                   
                                                                                                                                
MR. LABOLLE replied that he wasn't sure.                                                                                        
                                                                                                                                
CHAIR BUNDE asked  if he won the lottery and  wanted an immediate                                                               
payout,  whether  the  court  would  have to  decide  if  he  was                                                               
competent to do that.                                                                                                           
                                                                                                                                
MR. LABOLLE said that the  lottery isn't technically a structured                                                               
settlement.                                                                                                                     
                                                                                                                                
MR.  AL   TAMAGNI,  SR.,   Structured  Financial   Associates  of                                                               
Anchorage,  Alaska, said  the  bill addresses  who  will pay  the                                                               
costs, which is the purchaser  of the annuity contract upon court                                                               
approval.  He indicated  that's why  the bill  has a  zero fiscal                                                               
note.                                                                                                                           
                                                                                                                                
MR.  TAMAGNI explained  that  his business  deals  with cases  of                                                               
personal  injury  or  wrongful death  and  workers'  compensation                                                               
where the people and the courts  may have decided they would like                                                               
to get periodic payments in lieu of a cash settlement. He noted:                                                                
                                                                                                                                
     Annuities  are  purchased  [indisc.] and  provide  some                                                                    
     people  with a  lifetime  income, either  on a  monthly                                                                    
     basis or a lump sum  basis or combinations with cost of                                                                    
     living escalators.  As a result of  that, under Section                                                                    
     104  A(2)  of  the  code [indisc.],  all  these  future                                                                    
     payments  are   exempt  from  gross  income.   And  the                                                                    
     payments are  to provide and  to maintain  the people's                                                                    
     style  of living,  provide  medical  expenses and  also                                                                    
     dependent expenses  in a lot  of cases. That's  kind of                                                                    
     what in general a structured settlement is.                                                                                
                                                                                                                                
MR.  RANDY DYER,  Executive Vice  President, National  Structured                                                               
Settlement  Trade Association,  supported Mr.  Tamagni's comments                                                               
but  clarified  that  the  bill  before  the  committee  was  not                                                               
intended to regulate a structured  settlement; it was intended to                                                               
regulate the factoring of them.  Factoring companies arose in the                                                               
mid-1990s for the purpose of  buying streams of payments. He told                                                               
members:                                                                                                                        
                                                                                                                                
     There are  companies that  will buy  mortgage payments,                                                                    
     lottery payments, etc., but some  of them ventured into                                                                    
     buying  structured  settlements   and  we  became  very                                                                    
     concerned   because  the   people   who  receive   such                                                                    
     settlements are generally  people who have catastrophic                                                                    
     physical injuries and when represented  by counsel in a                                                                    
     claim  decided the  best  way for  them  to take  their                                                                    
     money  was  in  periodic  payments  so  they  would  be                                                                    
     assured of  never outliving their funds.  The factoring                                                                    
     companies entered  the scene  and started  buying these                                                                    
     payments. We  became concerned that a  number of people                                                                    
     might  lose the  security  of their  payments to  these                                                                    
     companies and end up falling  back on the social safety                                                                    
     net.                                                                                                                       
                                                                                                                                
He explained how it works:                                                                                                      
                                                                                                                                
Assume  you're  getting  $2,000 a  month  tax-free.  A  factoring                                                               
company  would approach  you and  say,  'Listen, we  want to  buy                                                               
payments, but  we only want  to buy  $500 of your  $2,000.' After                                                               
signing a  20-page contract, your  $2,000 a month checks  will be                                                               
transferred  to  the  factoring  company in  your  name.  In  the                                                               
contract you  gave the  factoring company the  right to  cash the                                                               
$2,000 check,  which it  does. It  keeps the  $500 and  sends you                                                               
$1,500. He said this first  transaction is probably the best deal                                                               
it  is going  to  get,  because the  factoring  company knows  if                                                               
you're  talking   to  it,  you're  talking   to  other  factoring                                                               
companies. So this  best deal is 75 percent of  the present value                                                               
of  the payments  that you  sell, which  means you've  suffered a                                                               
discount rate of 25 percent.                                                                                                    
                                                                                                                                
You used  to receive your $2,000  on the first of  the month, but                                                               
now the  factoring company receives  it on that date,  cashes it,                                                               
takes $500 and sends the balance  to you maybe on the second, the                                                               
fifth  or the  eighth  of the  month. Each  month  it delays  the                                                               
payments, which puts  economic pressure on you. You  call and ask                                                               
where  your  payment  is  and  they give  you  some  excuse.  The                                                               
pressure builds  up until  what you  really need  is to  get paid                                                               
another $500 a month. The factoring  company has to sell you that                                                               
payment, because  the contract gives  that factoring  company the                                                               
right of first refusal, plus  the factoring company controls your                                                               
check.  Now  that the  factoring  company  essentially owns  your                                                               
check, it's  only going to give  you half of what  it's worth. If                                                               
there is  a third deal,  they might give  you 25 percent  of what                                                               
it's worth and so on.                                                                                                           
                                                                                                                                
You might realize the problem  is that the factoring company owns                                                               
your check so you contact the  annuity company and tell it not to                                                               
send the  factoring company  the check any  more. Once  the check                                                               
goes back  to you, you'll find  that you're in breach  of another                                                               
portion of the  20-page contract and at that  point the factoring                                                               
company will go  into court in its state, not  in Alaska, and get                                                               
an  order against  you that  gives it  the rights  to all  of the                                                               
payments until their judgment is satisfied.                                                                                     
                                                                                                                                
MR. DYER  said this bill  is important  because it will  end that                                                               
practice. A federal  bill was passed that will put  the hammer on                                                               
these  companies; it  imposes a  40 percent  excise tax  on these                                                               
transactions that  falls on the  factoring companies  unless they                                                               
can  get a  court order  that  allows them  to do  this. In  some                                                               
cases, it will be important for  some people to sell a portion of                                                               
their payments for good reasons  and they shouldn't be denied the                                                               
right to  do that. He  stated, "We want to  make sure that  it is                                                               
done fairly."                                                                                                                   
                                                                                                                                
MR. DYER said this bill  provides important up-front disclosures.                                                               
For example, workers'  compensation payments may not  be sold and                                                               
this bill  provides for disclosures to  other interested parties.                                                               
A person who  owed child support couldn't sell  the child support                                                               
payments. This  legislation has been  enacted in 35 states  and a                                                               
number  of other  states are  considering it  this year.  It will                                                               
probably be enacted by all states in the next two years.                                                                        
                                                                                                                                
CHAIR  BUNDE  asked what  a  typical  cash  payment would  be  to                                                               
purchase that portion of the check.                                                                                             
                                                                                                                                
MR. DYER  replied assuming your  payments were $500 for  the next                                                               
10 years and  your settlement had a value of  $20,000, that first                                                               
deal might  pay $15,000.  The next deal  wouldn't be  so generous                                                               
and you wouldn't have any other place to go.                                                                                    
                                                                                                                                
SENATOR  SEEKINS  asked  where  the  statute  provides  that  the                                                               
parties to this agreement pay to the court.                                                                                     
                                                                                                                                
MR. DYER  said he believed  it was  in the statute,  but couldn't                                                               
find it.                                                                                                                        
                                                                                                                                
CHAIR BUNDE  asked Mr. Dyer to  work with the bill's  sponsor and                                                               
said the committee would bring it up again.                                                                                     
                                                                                                                                
There being  no further  business to  come before  the committee,                                                               
CHAIR BUNDE adjourned the meeting at 2:50 p.m.                                                                                  

Document Name Date/Time Subjects