Legislature(1995 - 1996)

03/08/1995 03:45 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SENATE RESOURCES COMMITTEE                                  
                         March 8, 1995                                         
                           3:45 P.M.                                           
 MEMBERS PRESENT                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice Chairman                                            
 Senator Steve Frank                                                           
 Senator Rick Halford                                                          
 Senator Robin Taylor                                                          
 Senator Georgianna Lincoln                                                    
 Senator Lyman Hoffman                                                         
  COMMITTEE MEMBERS ABSENT                                                     
 All members present                                                           
  COMMITTEE CALENDAR                                                           
 CS FOR SENATE BILL NO. 56(RES)                                                
 "An Act allowing the Department of Natural Resources to quitclaim             
 land or interests in land, including submerged or shore land, to a            
 municipality to correct errors or omissions of the municipality               
 when inequitable detriment would result to a person due to that               
 person's reliance upon the errors or omissions of the municipality;           
 relating to conveyance of certain tide and submerged land to                  
 municipalities; and providing for an effective date."                         
 SENATE BILL NO. 112                                                           
 "An Act establishing a discovery royalty credit for the lessees of            
 state land drilling exploratory wells and making the first                    
 discovery of oil or gas in commercial quantities."                            
 SENATE BILL NO. 113                                                           
 "An Act authorizing a reduction in coal, oil, and gas royalty for             
 the producers of those minerals used in certain projects."                    
 SENATE BILL NO. 114                                                           
 "An Act relating to high cost marginal oil wells."                            
  PREVIOUS ACTION                                                              
 SB 56 - See Community & Regional Affairs minutes dated                        
     See Resources minutes dated 3/6/95.                                       
 SB 112 - No previous action to record.                                        
 SB 113 - No previous action to record.                                        
 SB 114 - No previous action to record.                                        
  WITNESS REGISTER                                                             
 Geron Bruce, Legislative Liaison                                              
 Department of Fish and Game                                                   
 P.O. Box 25526                                                                
 Juneau, AK 99802-5526                                                         
  POSITION STATEMENT:   Commented on SB 56.                                    
 Nico Bus, Legislative Liaison                                                 
 Department of Natural Resources                                               
 400 Willoughby Ave.                                                           
 Juneau, AK 99801-1796                                                         
  POSITION STATEMENT:   Commented on SB 56.                                    
 Jack Chenoweth, Attorney                                                      
 Legislative Affairs Agency                                                    
 130 Seward St., Suite 409                                                     
 Juneau, AK 99801-2105                                                         
  POSITION STATEMENT:   Commented on SB 112, SB 113, and SB 114.               
  ACTION NARRATIVE                                                             
  TAPE 95-21, SIDE A                                                           
 Number 001                                                                    
 SRES 3/08/95                                                                  
              SB  56 RIGHTS IN TIDE/SUBMERGED LAND                             
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:40 p.m. and announced CSSB 56 (Res) to be up for                   
 GERON BRUCE, Department of Fish and Game, said he had reviewed the            
 fiscal note with staff and that it is reflective of the true                  
 workload that would be associated with this bill.                             
 SENATOR LEMAN asked him to estimate how many applications they                
 would see on an annual basis.  MR. BRUCE replied that a large                 
 number of communities qualify under this bill and thought the                 
 volume would be large initially, but, he said, the fiscal note was            
 not built on a specific number of applications.  Staffing is needed           
 for the approximately 1.2 million acres of tidelands and submerged            
 wetlands in the legislatively designated areas.  On the Kenai                 
 River, for instance, they have one third of one person per year               
 assigned to it.                                                               
 SENATOR TAYLOR said he thought they were referring to the                     
 Commissioner of Natural Resources, because he is the one who                  
 conveys land.  MR. BRUCE explained that ADF&G becomes involved in             
 the process by providing information to the Commissioner of DNR for           
 his decisions.                                                                
 SENATOR TAYLOR said he was trying to figure out why it took ADF&G             
 seven times as much money to figure out whether or not to sell a              
 piece of land to a municipality as it would the Commissioner who              
 would be selling it.                                                          
 MR. BRUCE pointed out that the language, "or the proposed use of              
 the land is consistent or compatible with the land use plan adopted           
 by the municipality, the department, or the Alaska Coastal Policy             
 Council," listed possibilities about how it could be classified for           
 In response to Senator Taylor's question, he said the ADF&G's job             
 is not to advise about the cost of the sale, the platting, or the             
 kinds of things DNR does, but to advise about the impacts on fish             
 and wildlife habitat, the public use of the fish and wildlife that            
 might occupy that area, and to protect the public access for the              
 use of that fish and wildlife.  It's a different and more complex             
 Number 185                                                                    
 SENATOR TAYLOR said he was confused with language on page 4, lines            
 17 - 18.  He couldn't figure out why they wanted to establish a               
 standard that says they have to meet all these tests, including               
 subtests (seven in all), and then within the third test the use of            
 the land you're requesting has to be consistent with or compatible            
 with a land use plan adopted by a municipality, the department, or            
 the Alaska Coastal Policy Council - all three of which could have             
 absolutely incompatible decisions based on that same chunk of land.           
 SENATOR LEMAN explained that you don't have to be consistent with             
 all of them because of the "or."  SENATOR TAYLOR said Ketchikan had           
 been trying to develop a property called Lewis Reef, zoned water              
 front property, and hadn't been able to go anywhere because of                
 total inconsistencies between National Marine Fisheries and Habitat           
 Division of ADF&G.                                                            
 SENATOR HOFFMAN moved to rescind the motion to adopt amendment #1             
 and requested DNR to answer one question before the vote.                     
 SENATOR PEARCE objected.                                                      
 SENATOR HOFFMAN explained that amendment #1 eliminated the best               
 interest finding and asked the department's position on this                  
 NICO BUS, Department of Natural Resources, said the department                
 could not support this legislation with that modification.                    
 Number 269                                                                    
 SENATOR FRANK clarified that the City of Juneau, for instance,                
 could preclude development by acquiring tidelands on Gastineau                
 Channel.  SENATOR LEMAN noted that a certain amount of this has               
 already taken place and it has corrected some inequities.                     
 SENATOR FRANK said it was one thing if it was a city, but there               
 were broader ramifications if it were a borough.  SENATOR LEMAN               
 said it still had to meet one of the four tests.  SENATOR HOFFMAN             
 said it's not even in the best interests of the state without the             
 language that was deleted as amendment #1.                                    
 SENATOR HALFORD asked if the state currently sold tide and                    
 submerged land in any way.  MR. BUS said the department doesn't.              
 SENATOR HALFORD asked if a municipality, under this bill, could               
 sell and alienate title to tide and submerged lands.  MR. BUS                 
 replied that it could.                                                        
 SENATOR LEMAN asked if there was an objection to the motion to                
 rescind the action.  SENATOR TAYLOR objected.                                 
 SENATOR LEMAN asked for the roll to be called.  SENATORS LEMAN,               
 PEARCE, and TAYLOR voted no; SENATORS FRANK, HALFORD, LINCOLN, and            
 HOFFMAN voted yes; and the motion passed.                                     
 Number 412                                                                    
 SENATOR LINCOLN proposed amendment #2 which she passed to the                 
 committee members.                                                            
 SENATOR FRANK asked if a municipality meant boroughs, cities,                 
 city/boroughs, and unified municipalities.  MR. BUS said that was             
 SENATOR FRANK asked which department decides if the use is                    
 compatible with the use proposed by a municipality.  MR. BUS                  
 answered that it depends on which application it is.                          
 SENATOR FRANK asked what happens if there is a conflict between               
 what the borough says as a land use planner and what the state says           
 in their land use plan.  MR. BUS said he didn't know the answer to            
 SENATOR LEMAN asked for a roll call on the amendment.  SENATORS               
 LINCOLN, HOFFMAN, and FRANK voted no; SENATORS LEMAN, PEARCE,                 
 HALFORD, and TAYLOR voted yes; and the motion passed.                         
 Number 438                                                                    
 SENATOR LINCOLN asked what the DNR fiscal notes meant.  MR. BUS               
 explained that the $0 fiscal note is from the Division of Lands               
 with a loss of revenue of $50,000.  The loss is for those areas               
 having revenue producing leases to the state that would be                    
 transferred to the municipality.  He added that the estimate is now           
 $50,000 - $100,000.                                                           
 Regarding the other fiscal note, in order for the state to track              
 all the land conveyed to the municipalities under this bill, the              
 department would have to develop a case type in their computer                
 system.  This would be a one time expenditure for a program change.           
 SENATOR TAYLOR asked what formula they used to determine the price            
 of these lands.  MR. BUS replied that in the case of shore                    
 fisheries, there are regulations to be used as a guideline.                   
 SENATOR LINCOLN moved to adopt amendment #2 which are two                     
 recommendations from ADF&G which would improve this legislation.              
 SENATOR LEMAN noted there was objection to the amendment.  MR.                
 BRUCE clarified that the amendment addresses their concern with               
 legislatively designated areas such as game refuges, critical                 
 habitats, and the 1.2 million acres of tidelands and submerged                
 lands that were designated to be managed with a priority for the              
 protection and maintenance of the fish and wildlife habitat and for           
 the use by people of the fish and wildlife and habitat that was in            
 that area.  The amendment would allow the Commissioner of ADF&G to            
 also have a role in deciding whether or not to convey tidelands or            
 submerged lands out of the legislatively designated areas.                    
 SENATOR TAYLOR said he thought the department forgot who originally           
 designated the areas; and that this bill merely undesignates those            
 SENATOR HOFFMAN said the legislature reviewed all the areas that              
 were designated and they should be left that way to be consistent             
 until they are undesignated at the legislative level.                         
 SENATOR LEMAN asked for the roll call on amendment #2.  SENATORS              
 PEARCE, LEMAN, FRANK, HALFORD, and TAYLOR voted no; SENATORS                  
 LINCOLN and HOFFMAN voted yes; and the motion failed.                         
 SENATOR FRANK said he would like to understand it better before               
 moving it from committee, because it has serious ramifications as             
 far as governmental coordination being increased.  If it were                 
 limited to cities, he wouldn't have a problem with it, he said.               
 Number 526                                                                    
 SENATOR PEARCE moved to pass CSSB 56 (Res) with the appropriate               
 fiscal notes from committee with individual recommendations.  She             
 noted that it would be picking up a Finance Committee referral.               
 There were no objections and it was so ordered.                               
 Number 533                                                                    
 SRES 3/8/95                                                                   
                SB 112 DISCOVERY ROYALTY CREDIT                               
  SENATOR LEMAN said there was not enough time to adequately notify           
 people of a hearing on these bills, so they would just be having a            
 work session.                                                                 
 JACK CHENOWETH, Legislative Affairs Attorney, said SB 112 was a               
 bill putting back a discovery royalty credit which existed in the             
 state's laws up until 1969 and came off the books with extensive              
 redrafting of AS 38.05.180.  He said on the bottom of page 3 he               
 basically cribbed the old language of the old discovery royalty.              
 SENATOR LEMAN asked if it applied only to the discovery well.  MR.            
 CHENOWETH replied that it did, then corrected himself to say that             
 it would apply to the entire lease.  He pointed out on page 1,                
 lines 8 - 10 that it says the commissioner is obligated to convert            
 based upon what the licensee represents.                                      
 SENATOR HALFORD said this bill doesn't have an effective date and             
 asked if it applies to a well that is already in progress if the              
 actual discovery doesn't occur until 90 days from today.  MR.                 
 CHENOWETH replied that if a well is under way, the department has             
 to try to ascertain if that area has oil or gas in commercial                 
 quantities, and after this takes affect, and the holder of the                
 lease determines that it does, yes, that lease would qualify under            
 those circumstances.                                                          
 SENATOR HALFORD asked how many wells there are with decisions                 
 already made.                                                                 
 TAPE 95-21, SIDE B                                                            
 MR. CHENOWETH didn't know that answer.  SENATOR LEMAN said they               
 would ask the Division of Oil and Gas.                                        
 SRES 3/8/95                                                                   
          SB 113 REDUCTION IN ROYALTY FOR CERTAIN USES                        
 MR. CHENOWETH said that SB 113 is also the approach of reducing               
 royalty that is payable.  The changes are divided between coal and            
 oil and gas.  The royalty is reduced if the oil or gas is                     
 developed, produced, and sold to a project that qualifies under               
 (dd) of this section which sets out what a qualifying project is.             
 For example, a project that is intended to make the oil and gas               
 available as an energy resource for use by the public.  It is                 
 supposed to be one that is, in a sense, remote, that is, not tied             
 to the existing pipeline system and that is owned/operated by a               
 municipality or village.                                                      
 There is the same kind of adjustment, as with exploration                     
 licensing, for materials from a well that you obtained as a lessee,           
 because you were the holder of a successful exploration license.              
 MR. CHENOWETH said that Sections 2 and 3 adjust the royalty payable           
 for coal.                                                                     
 SRES 3/8/95                                                                   
              SB 114 HIGH COST MARGINAL OIL WELLS                             
 MR. CHENOWETH said that SB 114 is legislation on high cost marginal           
 oil wells.  It turns over to the Alaska Oil and Gas Conservation              
 Commission (AOGCC) the ability to determine that a producing oil              
 well is, in fact, a high cost marginal oil well and adjusts the               
 royalty as set out.                                                           
 SENATOR LEMAN thanked him very much and said he would schedule                
 hearings on these bills next week.                                            
 SENATOR LEMAN adjourned the meeting at 4:40 p.m.                              

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