02/18/2014 01:30 PM Senate LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB159 | |
| SB99 | |
| SB140 | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| *+ | SB 159 | TELECONFERENCED | |
| *+ | SB 99 | TELECONFERENCED | |
| *+ | SB 140 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE LABOR AND COMMERCE STANDING COMMITTEE
February 18, 2014
1:33 p.m.
MEMBERS PRESENT
Senator Mike Dunleavy, Chair
Senator Peter Micciche, Vice Chair
Senator Donald Olson
Senator Bert Stedman
Senator Johnny Ellis
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 159
"An Act relating to air ambulance service providers, air
ambulance membership agreements, and regulation of air ambulance
service providers and air ambulance membership agreements by the
division of insurance; and providing for an effective date."
- HEARD & HELD
SENATE BILL NO. 99
"An Act correcting a reference to the Alaska Industrial
Development and Export Authority revolving fund; limiting the
use of the Alaska Industrial Development and Export Authority
sustainable energy transmission and supply development fund for
certain loans and loan guarantees and allowing the development
fund to be used as security for a bond guarantee; and amending
the definition of 'qualified energy development.'"
- HEARD & HELD
SENATE BILL NO. 140
"An Act creating the Arctic infrastructure development program
and fund in the Alaska Industrial Development and Export
Authority."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: SB 159
SHORT TITLE: AIR AMBULANCE SERVICES
SPONSOR(s): SENATOR(s) STEDMAN
02/05/14 (S) READ THE FIRST TIME - REFERRALS
02/05/14 (S) L&C
02/18/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 99
SHORT TITLE: AIDEA: DEVELOPMENT LOANS
SPONSOR(s): SENATOR(s) MCGUIRE
04/05/13 (S) READ THE FIRST TIME - REFERRALS
04/05/13 (S) L&C
02/18/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
BILL: SB 140
SHORT TITLE: AIDEA: ARCTIC DEVELOPMENT PROGRAM/FUND
SPONSOR(s): SENATOR(s) MCGUIRE
01/27/14 (S) READ THE FIRST TIME - REFERRALS
01/27/14 (S) L&C, FIN
02/18/14 (S) L&C AT 1:30 PM BELTZ 105 (TSBldg)
WITNESS REGISTER
CHRISTIE JAMIESON, Staff
Senator Bert Stedman
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 159 on behalf of the sponsor.
MARTY HESTER, Acting Director
Division of Insurance
Department of Commerce, Community and Economic Development
Juneau, Alaska
POSITION STATEMENT: Answered questions and provided information
related to SB 159.
SHELLY DEERING, Regional Manager
Airlift Northwest
Juneau, Alaska
POSITION STATEMENT: Testified in support of SB 159.
CHRIS MARTIN, Executive Director
Airlift Northwest
University of Washington
Seattle, Washington
POSITION STATEMENT: Testified in support of SB 159.
JESSE LOGAN, Staff
Senator Lesil McGuire
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Introduced SB 99 and SB 140 on behalf of the
sponsor.
MARK DAVIS, Deputy Director
Alaska Industrial Development and Export Authority (AIDEA)
Anchorage, Alaska
POSITION STATEMENT: Provided supporting testimony on SB 99.
SENATOR LESIL MCGUIRE
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of SB 99 and SB 140.
KEN COLLISON, Chief Operating Officer
Ucore Rare Metals
POSITION STATEMENT: Provided supporting testimony on SB 99.
STEPHEN TRIMBLE, President
Trimble Strategies, LLC
POSITION STATEMENT: Stated support for SB 140.
STEPHEN KLINE, Managing Principle
First Infrastructure Inc.
POSITION STATEMENT: Provided supporting testimony on SB 140.
CHRIS HLADICK, Manager
City of Unalaska
Unalaska, Alaska
POSITION STATEMENT: Testified in support of SB 140.
RON LONG, Assistant City Manager
City of Seward
Seward, Alaska
POSITION STATEMENT: Testified in support of SB 140.
ACTION NARRATIVE
1:33:12 PM
CHAIR MIKE DUNLEAVY called the Senate Labor and Commerce
Standing Committee meeting to order at 1:33 p.m. Present at the
call to order were Senators Stedman, Micciche, Olson, and Chair
Dunleavy. Senator Ellis arrived soon thereafter.
SB 159-AIR AMBULANCE SERVICES
1:33:36 PM
CO-CHAIR DUNLEAVY announced the consideration of SB 159."An Act
relating to air ambulance service providers, air ambulance
membership agreements, and regulation of air ambulance service
providers and air ambulance membership agreements by the
division of insurance; and providing for an effective date."
1:33:55 PM
CHRISTIE JAMIESON, Staff, Senator Bert Stedman, sponsor of SB
159, introduced the bill on behalf of the sponsor. She read the
following sponsor statement into the record: [Original
punctuation provided.]
Since January 2009, Airlift Northwest, the Seattle
based provider of lifesaving air medical transport
services, has offered the popular AirCare membership
program to residents of Southeast Alaska. Over 1,600
Southeast households are enrolled in the program. Air
medical transportation is expensive and insurance may
not cover all the costs. The purpose of the AirCare
program is to cover all out-of-pocket expenses such as
deductibles and coinsurance amounts that may not be
covered by the primary payer. As an AirCare member,
only your insurance company receives a bill. Airlift
Northwest is secondary to all payers and works
directly with your insurance company for claims
processing. The AirCare program directly helps fund
Airlift Northwest so they can transport critically ill
or injured patients to hospitals with levels of care
not locally available.
Since its inception, the AirCare program was offered
to Alaskans under a regulatory exemption it received
from the Alaska Division of Insurance. However, after
an organizational restructuring, the Division of
Insurance deemed the program no longer exempt from
insurance regulation as stated in AS 21.87.010 under
which Airlift Northwest was providing the program. As
a result, the Division of Insurance ordered Airlift
Northwest to cease enrolling new members. Airlift
Northwest is allowed to honor their existing
memberships but is not allowed to renew expired
memberships.
If Airlift Northwest wants to continue offering the
AirCare program, then the program must either be fully
insured by a health insurer authorized by Alaska or
Airlift Northwest must obtain a certificate of
authority pursuant to AS 21.09 to transact health
insurance in Alaska. Since Airlift Northwest operates
under the umbrella of University of Washington's
medical system, becoming a licensed insurer in Alaska
is not an option for them.
Senate Bill 159 will exempt air ambulance services
from the state's insurance code, thereby allowing
Airlift Northwest to continue offering the AirCare
program to Alaskans.
1:37:33 PM
SENATOR OLSON asked the reason for the restructuring that
eliminated the regulatory exemption.
SENATOR STEDMAN suggested the Division of Insurance answer the
question.
SENATOR OLSON asked what other medevac services in the state
would be affected by this legislation.
MS. JAMIESON offered her understanding that Apollo [MT] from
Fairbanks would also be affected and they haven't voiced an
opinion on the legislation.
SENATOR OLSON asked if Apollo MT is owned by an Alaskan company
or an outside entity.
MS. JAMIESON said she didn't know.
SENATOR OLSON asked if Airlift Northwest and Guardian are
ineligible to receive a certificate of insurance in Alaska
because they're owned by outside entities.
MS. JAMIESON said she didn't know.
l1:39:19 PM
SENATOR ELLIS joined the committee.
SENATOR OLSON
MARTY HESTER, Acting Director, Division of Insurance, introduced
himself.
SENATOR OLSON asked why the division undertook a regulatory
change that eliminated the exemption.
MARTY HESTER clarified that it wasn't the division that changed
regulations. The division was approached by another company that
wanted to offer similar membership agreements and operate under
the same exemption as Airlift Northwest. The division deemed
that the new company did not meet the Title 21 exemption. After
inquiry, the division subsequently determined that Airlift
Northwest no longer qualified for the exemption that was offered
in 2008, because in 2010 the company restructured to become a
nonprofit under the University of Washington.
Airlift Northwest is considered a municipality under Washington
statute and they petitioned the Division of Insurance to be
considered a municipality under Alaska statute or a nonprofit
medical service corporation under AS 21.87.010. After
discussions with Department of Law, the division deemed that
Airlift Northwest neither qualified as a municipality under
Alaska statute nor as a nonprofit medical service corporation
because they weren't offering a medical service. The company was
in fact offering a benefit by waiving deductibles and
coinsurance of members that purchased the agreements. Thus, the
Division of Insurance contacted Airlift Northwest and asked the
company to cease and desist.
SENATOR OLSON commented that it sounds as though it was a
reinterpretation of AS 21.87.010.
MR. HESTER clarified that Airlift Northwest changed structure in
2010 to become a nonprofit under the University of Washington.
Responding to further questions, he restated the forgoing
explanation.
SENATOR OLSON asked if Airlift Northwest aircraft are designated
as public use aircraft since they're a municipality under
Washington statute.
MR. HESTER said he wasn't sure.
1:45:01 PM
SENATOR OLSON offered his view that anybody who flies a sick
person to get medical care is offering a service. He opined that
the division did the people of Alaska a disservice by issuing
the cease and desist order. He asked if it's true that medevac
services are no longer available.
MR. HESTER clarified that the division's determination was that
an air ambulance service provider can't offer the membership
agreement. They can still operate, but they can't offer the
benefit to not balance bill the additional cost.
SENATOR OLSON reiterated that this is working against the public
interest and putting some people in dire straits.
MR. HESTER responded that part of the mission statement of the
Division of Insurance is to protect the consumer. In conjunction
with Department of Law, the division determined that the product
that was being offered by Airlift Northwest did not meet the
required exemptions under AS 21.87.010. He also pointed out that
a product was still available to Alaskans when this decision was
made. The division determined that it was protecting consumers
by applying the statute as it was written.
SENATOR OLSON maintained that from a medical standpoint the
decision is working to the detriment of the patient.
1:48:28 PM
SENATOR STEDMAN voiced concern that the lack of competition is
driving the price structure of air ambulance services. He asked
the division's opinion about altering the statute to allow
further competition.
MR. HESTER responded that the division sees that SB 159 would
provide consumer protections and allow additional business for
products that Alaskans have asked for to be written in the
state.
SENATOR STEDMAN said he takes that as a statement of support for
the bill.
1:50:06 PM
MR. HESTER restated the division's mission statement to regulate
the insurance industry to protect Alaskan consumers. He
continued to say that consumers need products in Alaska and the
state needs to be open for business to provide those products to
Alaskans. SB 159 provides the protections that consumers need
and allows the products consumers are asking for, he said.
SENATOR STEDMAN disclosed that he is a licensed life and health
insurance agent.
1:51:14 PM
CO-CHAIR DUNLEAVY asked what happens to a member who needs a
plane and one isn't available.
MR. HESTER said the products that were sold in the past did not
guarantee service and any sold in the future wouldn't either.
Companies may decide to offer reciprocity but he couldn't speak
to the specifics because he hadn't seen those products.
CHAIR DUNLEAVY observed that something could be written into the
agreement.
MR. HESTER agreed.
SENATOR MICCICHE referenced Section 2 subsection (c) on page 2,
lines 6-9, and summarized that a third party isn't required to
provide air ambulance service. He asked if state law requires
somebody who is available to respond to a person who is in
medical need.
MR. HESTER offered to follow up with the answer.
SENATOR MICCICHE asked if other companies currently operate
under the existing exemption.
MR. HESTER answered no, but one underwritten company is offering
the product and it is compliance with Title 21.
1:54:08 PM
SHELLY DEERING, Regional Manager, Airlift Northwest, Juneau,
Alaska, introduced herself.
CHRIS MARTIN, Executive Director, Airlift Northwest, University
of Washington, Seattle, Washington, introduced herself.
MS. DEERING said she is testifying in support of SB 159, which
seeks to provide Alaskans with the ability to participate in
membership programs for air medical transportation. She has been
the regional manager of Airlift Northwest ("Airlift") for 21
years, and the company has been transporting patients from
Southeast and other regions of Alaska for 32 years. She and the
staff of 19 nurses and pilots live in Juneau. She explained that
Airlift sold air care membership in Alaska from 2008 until
November 2013 when the Division of Insurance asked the company
to stop due to a restructure of Airlift Northwest and an
interpretation of the regulations. Airlift currently has 4,066
members in the program that reside in Southeast.
She said the Division of Insurance has been supportive of
getting legislation that would allow Airlift and any other air
ambulance company to sell memberships to Alaskans. SB 159 does
this and also gives important oversight to the Division of
Insurance.
SENATOR MICCICHE observed that Section 1 appears to clarify that
an air ambulance service provider would have to respond if it
was available when there was a medical emergency, even if that
company didn't have an agreement. He asked if his understanding
was correct.
MS. DEERING stated that Airlift Northwest responds to any
emergent request it receives. The question of insurance isn't
raised.
SENATOR MICCICHE asked if she agrees that Section 1 requires
that.
MS. MARTIN agreed and also confirmed Ms. Deering's statement
that Airlift responds to any request for emergent transport. It
doesn't matter whether the person has an AirCare membership or
insurance. She noted that last year Airlift did over $7 million
in charity care.
SENATOR MICCICHE read Section 1.
1:59:23 PM
SENATOR STEDMAN disclosed that he may be an AirCare member.
SENATOR OLSON asked how Airlift Northwest is able to stay in
business in light of the ruling in Alaska.
MS. MARTIN said the company has four bases in Washington state
in addition to the base in Southeast Alaska, but the issue
really isn't financial. It's the right thing to do for patients.
2:01:49 PM
CHAIR DUNLEAVY opened public testimony. He found none. He
commented that without air ambulance service, his wife and
youngest child wouldn't have survived. He described the service
as crucial to all Alaskans, particularly those in rural regions.
CHAIR DUNLEAVY announced he would hold SB 159 in committee.
2:02:52 PM
At ease.
SB 99-AIDEA: DEVELOPMENT LOANS
2:03:39 PM
CO-CHAIR DUNLEAVY announced the consideration of SB 99."An Act
correcting a reference to the Alaska Industrial Development and
Export Authority revolving fund; limiting the use of the Alaska
Industrial Development and Export Authority sustainable energy
transmission and supply development fund for certain loans and
loan guarantees and allowing the development fund to be used as
security for a bond guarantee; and amending the definition of
'qualified energy development.'" This was the first hearing.
2:03:58 PM
JESSE LOGAN, Staff, Senator Lesil McGuire, introduced SB 99 on
behalf of the sponsor. He spoke to the following sponsor
statement: [Original punctuation provided.]
The Sustainable Energy Transmission and Supply (SETS)
Development Fund was created in 2012, AS 44.88.650-
44.88.690, as a fund within the Alaska Industrial
Development and Export Authority (AIDEA) to promote
and provide financing for energy development in the
state to alleviate unemployment and contribute to the
state's economic welfare, economic diversity, and
economic development. Under this statute AIDEA is
authorized to use money in the SETS fund to assist in
the construction, improvement, rehabilitation, and
expansion of qualified energy developments.
SB 99 provides technical amendments to the SETS
Development Fund within AIDEA. It has been determined
that the statutes, as written last year, created an
ambiguity in the one third capital cost limit as it
relates to loans, loan guarantees and bond guarantees.
The ambiguity arises in the current statutes as to
whether the $20 million loan limitation worked in
conjunction as a one-third limitation on loan
guarantees, or was independent of that limitation.
Additionally, the statute was vague as it relates to
AIDEA's authority to use the fund as a security for a
bond guarantee. These amendments clarify these
ambiguities.
AIDEA has received requests from project components
and banks to utilize the fund in which AIDEA needed
the authority to issue a bond guarantee for more than
one-third of project costs. This bill clarifies the
types of financing and limitations for financing for
qualified energy developments in the state.
2:07:14 PM
MR. LOGAN reviewed the proposed changes to the existing statute.
· On page 2, line 3, the word "loan" was deleted to reflect
the correct name of the revolving fund.
· Page 2, lines 15-17, contains additional language that
specifies that this section only applies to the SETS
program and not any other within AIDEA.
· On page 2, line 17, the words "finance or participate in
financing of" was deleted to clarify that paragraphs (1)
and (2) of AS 44.88.690(a) found on page 2, lines 18-21,
pertain only to loans and loan guarantees, and not general
finance participation. The provision in paragraph (1)
specifies that AIDEA cannot grant a loan for more than one-
third of the cost of a qualified energy development
project. The language in paragraph (2) clarifies that the
loan guarantee cannot exceed $20,000.
· On page 2, line 28, the term "project" was changed to
"development" to clarify that "qualified energy
development" means a development in the state, rather than
a project.
· Section 3 on page 2 specifies that the program can be used
for a security of a bond guarantee.
2:09:40 PM
MARK DAVIS, Deputy Director, Alaska Industrial Development and
Export Authority, (AIDEA), stated agreement with Mr. Logan's
description of SB 99. He added that the bill was requested by
the financial institutions that AIDEA works with.
2:10:33 PM
At ease
2:12:02 PM
CHAIR DUNLEAVY reconvened the meeting and asked Senator Stedman
if he had an amendment to offer.
2:12:14 PM
SENATOR STEDMAN moved Amendment 1, labeled 28-LS0741\A.3.
CHAIR DUNLEAVY objected for discussion purposes.
AMENDMENT 1
OFFERED IN THE SENATE BY SENATOR STEDMAN
TO: SB 99
Page 1, line 5, following "guarantee;":
Delete "and"
Page 1, line 6:
Delete "development.'"
Insert "development'; and authorizing the Alaska
Industrial Development and Export Authority to issue
bonds to finance the infrastructure and construction
costs of the Bokan-Dotson Ridge rare earth element
project."
Page 3, following line 4:
Insert a new bill section to read:
"* Sec. 5. The uncodified law of the State of
Alaska is amended by adding a new section to read:
LEGISLATIVE APPROVAL; BOKAN-DOTSON RIDGE RARE
EARTH ELEMENT PROJECT. (a) The Alaska Industrial
Development and Export Authority may issue bonds to
finance the infrastructure and construction costs of
the Bokan-Dotson Ridge rare earth element project. The
Bokan-Dotson Ridge rare earth element project shall be
owned by the authority and financed under AS 44.88.172
- 44.88.177. The principal amount of the bonds
provided by the authority for the Bokan-Dotson Ridge
rare earth element project may not exceed $145,000,000
and may include the costs of issuing bonds considered
reasonable and appropriate by the Alaska Industrial
Development and Export Authority.
(b) This section constitutes legislative
approval required by AS 44.88.095(g)."
SENATOR STEDMAN explained that the amendment authorizes AIDEA to
issue bonds to finance the infrastructure and construction of
the Bokan-Dotson Ridge Rare Earth Element Project. He read the
above amendment.
He highlighted the permissive language giving AIDEA discretion
in its bonding authority, up to $145 million. He also noted that
he had an amendment to clarify some of the language in Amendment
1.
2:15:09 PM
SENATOR OLSON asked if AIDEA has an opinion on the amendment.
SENATOR STEDMAN replied he worked with AIDEA on the amendment,
but would prefer to hear from them directly.
MR. DAVIS said AIDEA has no objection to the amendment, but
would suggest additional clarification that AIDEA could use the
bonds for ownership or financing.
SENATOR OLSON asked if the sponsor has an opinion on the
amendment.
2:16:08 PM
SENATOR LESIL MCGUIRE, sponsor of SB 99, stated support for
Amendment 1.
SENATOR MICCICHE asked the total in the SETS fund.
MR. DAVIS replied the SETS fund total is $67.5 million.
Responding to a further question, he explained that this
authorizes the AIDEA Board, in its discretion, to issue SETS
bonds that would be sold on the private market.
SENATOR MICCICHE referenced AS 44.88.095(g) and highlighted that
this project wouldn't come back before the legislature. It gives
AIDEA the authority to bond up to $145 million.
MR. DAVIS agreed; this is asking for legislative approval for an
upper limit.
SENATOR MICCICHE asked if it's typical that bonding authority at
this level wouldn't come back to the legislature.
MR. DAVIS confirmed this is the process, and explained that the
Skagway ore terminal was a similar project. AIDEA asked for and
received authorization to issue up to $80 million in bonds for
that project, although the full bonding has not been used.
2:18:21 PM
CHAIR DUNLEAVY removed his objection. Finding no further
objection, Amendment 1 was adopted.
2:18:35 PM
SENATOR STEDMAN moved [conceptual] Amendment 2. He explained
that it amends Amendment 1.
CO-CHAIR DUNLEAVY objected for discussion purposes.
AMENDMENT 2
OFFERED IN THE SENATE BY SENATOR STEDMAN
TO: Amendment 1, 28-LS0741\A.3, for SB 99
Page 1, line 17:
Following: "Bokan-Dotson Ridge rare earth element"
Delete: "project shall be owned"
Insert: projects surface complex shall be owned or
financed"
SENATOR STEDMAN described the above amendment.
2:19:36 PM
SENATOR OLSON asked if other projects would be affected by the
amendment.
MR. DAVIS replied that this authority is specific to the Bokan
project. Amendment 2 clarifies that AIDEA has determined that it
can only lend on the surface and could not use bonding for
working capital or underground equipment that might be used in
the mine. He noted that the idea of financing to ownership was
his suggestion.
SENATOR OLSON asked for assurance this wouldn't encumber the Red
Dog Mine and the connecting road.
MR. DAVIS replied this would not affect that mine; it only gives
authorization for the Bokan project.
SENATOR MICCICHE asked if it's unlikely that a state agency
would operate this project, although it's authorized under AS
44.88.172 - 44.88.177.
MR. DAVIS confirmed that those statutes, particularly AS
44.88.172(a), permit AIDEA to own or partially own or finance a
project. However, AIDEA usually contracts projects out or seeks
private partners so another entity operates the project.
2:23:26 PM
CHAIR DUNLEAVY removed his objection and Amendment 2 was
adopted.
2:24:04 PM
KEN COLLISON, Chief Operating Officer, Ucore Rare Metals,
introduced himself.
SENATOR STEDMAN asked Mr. Collison to describe the Bokan-Dotson
Ridge Rare Earth Project.
MR. COLLISON explained that there are about 16 elements in the
periodic table that are classified as light and heavy rare earth
elements (REEs), but only the heavy REEs are rare and critical
to both green energy and the military. Right now more than 95
percent of the heavy rare earths originate in China, so there is
impetus to create a "Made in the USA" supply of rare earths.
Ucore is part of that effort and has contracts with both the
Department of Defense and the Department of Energy to further
that goal.
MR. COLLISON said that a preliminary economic assessment of the
Bokan-Dotson Ridge Rare Earth Project ("Project") predicts
capital costs of $221 million. Upon review with AIDEA, it was
determined that $191 million could be bonded, but AIDEA is only
authorized to bond 75 percent of that. Thus, the $145 million
provided in Amendment 1.
He explained that the Project is a 1,500 ton/day underground
mine that uses new technology so there will be no tailings left
on the surface when the mine closes. The timeline calls for
permitting to begin late in the first quarter of this year or
soon thereafter. He expressed hope that the mine would be
permitted more quickly than others since it's underground, has a
very small footprint, and will have no tailings on the surface
at closure. The feasibility study and the engineering for some
of the major equipment will run concurrently and should be
finished by year end. Down payments on the major equipment will
be due shortly thereafter so that it doesn't hold up the
project.
MR. COLLISON said this legislation will be a big help in
developing the Project, and it will show the financial markets
and the rest of the mining industry that Alaska is open for
business. The state will also benefit from additional jobs.
During the estimated 1.5 year construction, the onsite workforce
will peak at about 300 employees, which will create about 125
indirect jobs. During operations there will be about 190
employees and that should create about 150 indirect jobs.
Current estimates indicate that about 340 new jobs will be
created in the state. In Alaska, the average income for somebody
in mining is between $80,000 and $100,000 so these are very
good, year around jobs.
CO-CHAIR DUNLEAVY asked the predicted life of the mine.
MR. COLLISON replied it's 11 years but if mines like Greens
Creek and Red Dog are indicative, it will last several times
longer than that. It's promising that the ore body is open at
depth and on strike and that the property has numerous other
rare earth showings.
2:29:30 PM
SENATOR MICCICHE referenced a handout in the packets that
specifically identifies Dy, Tb, and Y as heavy rare earth
elements available at Bokan Mountain. He requested an expanded
discussion of REEs.
MR. COLLISON identified the three REEs as dysprosium, terbium,
and neodymium. He explained that one of their uses is to reduce
the size of magnets, which is critical for things like hybrid
cars and aviation engines. The Department of Energy has
identified these three rare earths and inyttrium as the most
critical for [military equipment]. The Department of Defense has
identified them as "subject to interruption of supply, based on
actions or events outside the control of the government of the
United States."
SENATOR MICCICHE asked if the mine is economically feasible at
the indicated resource quantities or if inferred resources have
to be included.
MR. COLLISON replied the preliminary economic assessment was
done on inferred resources, as is common. Ucore has since done
more drilling and now has both indicated and inferred resources.
Another drill program this coming summer will move the balance
of inferred resources to indicated resources, and add some. It's
necessary to have at least an indicated resource in order to do
a feasibility study, so that's the intent this coming summer, he
said.
CO-CHAIR DUNLEAVY stated that public testimony would remain open
and he would hold SB 99 in committee for further consideration.
2:31:55 PM
At ease
SB 140-AIDEA: ARCTIC DEVELOPMENT PROGRAM/FUND
2:32:48 PM
CO-CHAIR DUNLEAVY reconvened the meeting and announced the
consideration of SB 140."An Act creating the Arctic
infrastructure development program and fund in the Alaska
Industrial Development and Export Authority." This was the first
hearing.
2:33:04 PM
SENATOR MCGUIRE, sponsor of SB 140, introduced the legislation
speaking to the following sponsor statement:
Globally, all eyes are on the Arctic. The World
Economic Forum has recently identified Arctic
Infrastructure development as one of the top Four (4)
challenges facing the regions. Alaska's future is in
the Arctic, and in order for Alaskans to capitalize on
the incredible opportunities and overcome the
significant challenges that this region presents, we
must begin to build infrastructure now.
Aside from a few areas in Norway and the Russian
Federation the Arctic as a whole remains vastly
underserved by transportation, ports, communication,
emergency response, defense and other critical
infrastructure. For further development to occur,
which Alaskans deserve, both public and private
interests must come together to boost the investment
in the Arctic.
For these reasons I have introduced Senate Bill 140,
Arctic Infrastructure Development Fund ("AIDF"). SB
140 expands AIDEA's tool bag by extending the same
authority for loans, loan guarantees, bonds and bond
guarantees that it currently utilizes in the energy
sector via the SETS fund (AS 44.88.650- 690) in order
to develop Infrastructure in the Arctic. AIDEA used
SETS to facilitate the financing of the Interior
Energy Project. This tool helps to create the public-
private partnerships that are needed to encourage
large investment in capital intensive infrastructure.
Senate Bill 140 extends AIDEA's existing power to
finance, or facilitate the financing of projects to
the realm of Arctic Infrastructure by granting the
Authority the ability to:
1. Insure project obligations and guarantee loans or
bonds for projects.
2. Defer principle payments and capitalize interest.
3. Offer financing terms of up to 30 years.
4. Enter into lease agreements, sales-lease-back
agreements, build-operate-transfer agreements and
other agreements to finance Arctic infrastructure
projects.
These powers already provide flexible terms that can
reduce the ultimate cost of energy (via the SETS
program) to consumers, and if it can work in the
energy realm, it can work for infrastructure. However,
SB 140 also requires legislative approval for
investments that are more than one-third of a
project's capital costs or if a loan guarantee exceeds
$20 Million. By subjecting certain investments to
legislative approval, SB 140 maintains an appropriate
level of due diligence for projects.
By making financing available we can empower
communities and attract a global pool of investment
that is an alternative to the traditional grant model
that too often underfunds projects and leads to
delays. Relying on credit also ensures that sponsors
have some skin in the game and a stake in the
project's success. Most importantly, we expand the
arena of where Alaskan assets are working in order to
grow our own economy. Currently, many of Alaska's
savings accounts are invested in stocks and bonds that
drive economic activity outside of Alaska. SB 140
suggests instead that some of those savings be
invested here in Alaska through AIDEA, not as blank
checks for development, but as investments for our
future in Arctic Infrastructure.
For the purposes of this Act, I propose that this
program and fund focus infrastructure development in
the geographical definition of the Arctic as laid out
in Arctic Research and Policy Act (amended 1990). That
definition includes the area of the State of Alaska
north of the Arctic Circle, north and west of the
boundary formed by the Porcupine, Yukon, and Kuskokwim
Rivers, all contiguous seas, including the Arctic
Ocean, and the Beaufort, Bering, and Chukchi Seas, and
the Aleutian chain.
With AIDF I am proposing that the State expand AIDEA's
existing authority to finance, or facilitate the
financing of, Arctic Infrastructure.
2:43:30 PM
SENATOR STEDMAN agreed with the bill sponsor that Alaska has to
get aggressive in developing infrastructure in the Arctic
because the federal government is lagging.
JESSE LOGAN, Staff, Senator Lesil McGuire, stated that after the
bill was introduced the sponsor worked with AIDEA, the Arctic
Policy Commission, and other stakeholders to identify ways to
strengthen the bill and help the development of Arctic
infrastructure. He noted the packets contain a sectional of the
suggested changes.
SENATOR STEDMAN asked if the process will be to introduce
potential changes and return with a committee substitute.
MR. LOGAN said yes.
CHAIR DUNLEAVY asked Mr. Davis if he had anything to add.
MARK DAVIS, Deputy Director, Alaska Industrial Development and
Export Authority, (AIDEA), agreed with Mr. Logan that AIDEA is
working with the sponsor's office on a possible committee
substitute.
2:45:30 PM
STEPHEN TRIMBLE, President, Trimble Strategies, LLC and public
member of the Alaska Arctic Policy Commission, stated support
for SB 140, which would create an Arctic infrastructure program
and fund within AIDEA. He described the Arctic as the future of
Alaska and emphasized the importance of investing in
infrastructure now in order to have a meaningful place in this
new global frontier. Industry has responded to the call for
public investment and now is the time to further public/private
investment within Alaska. Enabling AIDEA with the powers
provided by SB 140 is an investment in the future of Alaska.
2:47:11 PM
STEPHEN KLINE, Managing Principle, First Infrastructure Inc., a
consulting firm based in New Jersey, said he is testifying as a
professional in the financial field. He reported that he advises
AIDEA on a number of matters, the regulations and procedures
relating to the SETS fund in particular.
He related that he is a strong proponent of guarantee structures
to stretch relatively scarce public sector dollars for the
benefit of what are deemed to be worthwhile projects. Utilizing
such a structure in support of Arctic infrastructure projects
would be a wise use of the state's scarce public resources, he
said.
2:49:24 PM
CHRIS HLADICK, Manager, City of Unalaska, Unalaska, Alaska,
reported that he served on both the Northern Waters Task Force
and the Arctic Policy Commission and is testifying in support of
SB 140. He said that Unalaska is seeing explosive needs to
accommodate the anticipated arrival of the oil companies.
Infrastructure needs have been identified that will require
public/private partnership and SB 140 provides another tool. He
acknowledged that a lot of places need additional
infrastructure, and pointed out that all the infrastructure
development in places like Kotzebue, Nome or Port Clarence will
have to pass through Unalaska/Dutch Harbor.
CO-CHAIR DUNLEAVY commented that he was impressed when he
visited Unalaska.
SENATOR MICCICHE asked if the changes in Section 8 would include
the ability for LNG storage and infrastructure needs.
MR. HLADICK said he didn't know.
SENATOR MICCICHE asked to hear from the sponsor after public
testimony so she could answer the question.
2:52:10 PM
RON LONG, Assistant City Manager, City of Seward, stated that if
the state is to succeed in the development of the Arctic,
whether it's in fisheries, resource development, tourism, or
response and monitoring capacity for foreign flagged vessels
transiting the Bering Straits, it is critical to have a deep
water port or ports to support the effort. SB 140 helps advance
those goals. AIDEA's track record with Red Dog transportation
infrastructure and Alaska Ship and Dry Dock speaks well of their
ability to help move these projects forward.
He expressed hope that as the bill moves forward it would be
amended to include provisions that will build on existing
capacity within the state to support the staging and logistics
necessary to make a number of port developments successful. He
noted that when he attended an Institute of the North
presentation in Seattle on Arctic opportunities and challenges,
a representative from a Washington state port declared that
Bellingham would be the gateway to the Arctic. He warned that
just as other nations are moving into the Arctic with active
plans and resource commitments while the U.S. is trying to form
an action plan, other states are looking for opportunities that
should remain in Alaska.
SENATOR MICCICHE expressed appreciation for the recent tour of
Seward's breakwater expansion. He observed that there are
communities that are ready to support the Arctic, although all
need a bit of infrastructure boost to ensure the safety of the
services.
2:55:33 PM
CHAIR DUNLEAVY asked Senator Micciche to restate his question
for the sponsor.
SENATOR MICCICHE expressed interest in helping with an amendment
to ensure that the bill will consider energy infrastructure and
projects in western and northwest Alaska.
SENATOR MCGUIRE said that has already been addressed both in SB
140 and the changes to SETS in SB 99. She described where these
changes are found. Section 11, paragraphs (18) and (19) of SB
140 change the way "Arctic" and "Arctic infrastructure
development" is defined so that all of Alaska can benefit from
the new fund. On page 3, lines 1-4, of SB 99 it states that
liquefaction, regasification storage, and natural gas are
included in the definition of "qualified energy development."
2:59:14 PM
CO-CHAIR DUNLEAVY announced he would hold SB 140 in committee
for further consideration. Public testimony would be opened at
the next hearing.
2:59:59 PM
There being no further business to come before the committee,
Chair Dunleavy adjourned the Senate Labor and Commerce Standing
Committee meeting at 2:59 p.m.