Legislature(1995 - 1996)
04/07/1995 03:43 PM RES
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE April 7, 1995 3:43 P.M. MEMBERS PRESENT Senator Loren Leman, Chairman Senator Drue Pearce, Vice Chairman Senator Rick Halford Senator Robin Taylor Senator Georgianna Lincoln Senator Lyman Hoffman COMMITTEE MEMBERS ABSENT Senator Steve Frank COMMITTEE CALENDAR CS FOR SPONSOR SUBSTITUTE FOR HOUSE JOINT RESOLUTION NO. 25(RES) Relating to a ban on trawling in the eastern Gulf of Alaska east of 140 degrees west longitude. SENATE BILL NO. 147 "An Act relating to a municipal river habitat protection tax credit." SENATE BILL NO. 114 "An Act relating to high cost marginal oil wells." SENATE JOINT RESOLUTION NO. 20 Relating to the Western Alaska Community Development Quota Program, the inshore/offshore allocation process, and the North Pacific Fishery Management Council Comprehensive Rationalization Program. CS FOR HOUSE BILL NO. 169(RES) "An Act defining the scope of the responsibility of the Department of Natural Resources for regulating the mineral resources of the state." PREVIOUS SENATE COMMITTEE ACTION HJR 25 - No previous action to record. SB 147 - No previous action to record. SB 114 - See Resources minutes dated 3/8/95 and 3/17/95. SJR 20 - See Resources minutes dated 3/27/95. HB 169 - See Resources minutes dated 3/22/95. WITNESS REGISTER Katherine Buchanan, Legislative Aide Representative Ben Grussendorf State Capitol Juneau, AK 99801-1182 POSITION STATEMENT: Sponsor of HJR 25. Jerry McCune United Fishermen of Alaska 211 Fourth Street, #112 Juneau, AK 99801 POSITION STATEMENT: Supported HJR 25. Don Gilman, Mayor Kenai Peninsula Borough 144 N. Binkley Soldotna, AK 99669 POSITION STATEMENT: Supported SB 147. Richard Fappiano OXY U.S.A. Texas POSITION STATEMENT: Supported SB 114. Dale Bondurant HC 1, Box 1197 Soldotna, Ak 99669 POSITION STATEMENT: Supported SB 147. Jules Tileston, Director Division of Mining Department of Natural Resources 3601 C Street, Ste 800 Anchorage, AK 99503-5935 POSITION STATEMENT: Opposed amendment to SB 169. Mr. Richard Fineberg Anchorage, AK POSITION STATEMENT: Spoke regarding SB 114. ACTION NARRATIVE TAPE 95-38, SIDE A Number 001 HJR 25 BAN TRAWLING IN EASTERN GULF OF ALASKA CHAIRMAN LEMAN called the Senate Resources Committee meeting to order at 3:43 p.m. and announced HJR 25 to be up for consideration. KATHERINE BUCHANAN, Legislative Aide to Representative Grussendorf, testified that HJR 25 requests a ban on trawling in the eastern Gulf of Alaska. It is hoped the resolution can be used at the North Pacific Fisheries Management Council meetings in Anchorage on April 19. Southeast Alaska has a long history of long line fishing off shore and the economy is threatened by the activities of factory trawlers. There is no economic benefit derived from factory trawlers since they are self contained. There is concern not only for the economy, but for the viability of the fisheries in Southeast. SENATOR LEMAN said it was his intent to move this bill as soon as there was a quorum. JERRY MCCUNE, United Fishermen of Alaska, said the resolution basically protects the small boat fleet that is in direct competition with the highly capitalized fleet of factory trawlers. It would protect well over 10,000 license holders and crew members in the southeast region that depend on healthy fisheries. SB 147 MUNICIPAL RIVER HABITAT TAX CREDIT SENATOR LEMAN announced SB 147 to be up for consideration. SENATOR TORGERSON, sponsor, said SB 147 was introduced to correct and change part of the original legislation established in 1994 to allow for tax credits for improvements along the Kenai River as long as the improvements would protect or enhance the fish habitat. The current law requires ADF&G to establish criteria by regulation on how the improvements and credits would be taken. It also requires the Department to review and certify the improvements for the tax credits. These credits are only available when certified by ADF&G, he explained. SB 147 gives ADF&G more of an oversight role and has them work more directly with the Kenai Peninsula Borough. The Municipality would be required to establish the criteria by ordinance. This revised process would allow improvements to go forward so that habitat can be protected and land owners would receive their credit. Number 122 MAYOR DON GILMAN, Kenai, noted that he had sent a position paper to the committee. SENATOR LEMAN acknowledged receipt of that paper. MAYOR GILMAN said that SB 147 tries to limit what the Commissioner of ADF&G could review, because there needs to be more criteria. SENATOR TAYLOR said he wasn't sure why the legislature should be mandating back to a taxing entity the standards by which they will choose to either grant or deny a tax exemption nor does he think it is appropriate for the legislature to place an executive level bureaucrat in charge of either approving or disapproving an area for which they may wish to grant a tax credit for. It seems they are authorized to grant credits just as they are authorized to impose taxes. Let them establish the standards for which they wish to grant such taxes in their own community which is what they are hurting or helping. MR. GILMAN responded that he couldn't argue with that at all. SENATOR TAYLOR said he would be willing to grant a much broader authority to people wishing to do projects of this type. Number 222 GERON BRUCE, Alaska Department of Fish and Game, clarified that the Department wants to know exactly what is expected of them. They do support SB 147 with that clarification. Number 244 SENATOR PEARCE explained that, as the sponsor last year of the Senate version of HB 306, the original intent, which she worked closely with Mayor Gilman on, was to allow the borough to give credits for those people who spend their monies trying to do habitat restoration and protection along the Kenai River, as kind of a pilot project. They all thought that was a laudable goal. As the committee process followed, at the request of the Department and some legislators, it was decided that ADF&G would promulgate regulations that would set up other criteria that the borough had to use before the borough could do their tax credit ordinance. Unfortunately, there still aren't regulations under the old bill, but the borough is facing a January 1 deadline to have an ordinance in place or they will not be able to allow any tax credits for the 1996 calendar year. She thought it was clear that it is not up to ADF&G to decide whether the scope of protection and restoration is equal to the value of the tax credit, but it is up to the borough. The only thing they want ADF&G to certify is that the criteria that the borough includes in their ordinance is certified by the commissioner as being helpful and of benefit to the habitat along the stream bed. Number 282 DALE BONDURANT supported SB 147 saying this was an added incentive to get people to save the river. GARY HINKLE said he thought the money and control should be local. He thought the permitting process still left the habitat agencies in control as they ought to be. He said that the permitting process is very involved which is a concern. Every agencies agrees with what they are going to do, but the inconsistencies between the agencies' regulations make it very hard to get them to agree on any one project. The most habitat friendly projects on the river are highly maintenance oriented. The less habitat friendly will last a long time, like putting rock along the bank. Most of the habitat friendly projects need to be reworked. He asked the committee to particularly realize the importance of the tax credit for the on going maintenance. SENATOR TAYLOR asked about the 50% limitation for one year, but then it says that the credit may be given for more than one. He asked if it was contemplated that these tax credits might be on- going for maybe 20, 30, or 40 years. MAYOR GILMAN said he didn't think it would go on for 20 to 40 years, but there is another restriction saying it can't exceed more than 50% of whatever the cost is. It's conceivable that it could go over two or more years. SENATOR TAYLOR said it was a commendable credit, but he was concerned that it was a percentage of 50% of a person's taxes which could very well pay for the whole project each year. MAYOR GILMAN answered that that was correct and it depends on the value that's established on the property. He said they are talking about 50% of the value, not necessarily 50% of the project. SENATOR TAYLOR said he didn't have any objection to that. Number 380 SENATOR PEARCE moved to pass SB 147 from committee with individual recommendations with the accompanying fiscal note. There were no objections and it was so ordered. HJR 25 BAN TRAWLING IN EASTERN GULF OF ALASKA SENATOR LEMAN announced HJR 25 to up again for consideration. SENATOR TAYLOR moved to pass HJR 25 from committee with individual recommendations. There were no objections and it was so ordered. SB 114 HIGH COST MARGINAL OIL WELLS SENATOR LEMAN announced SB 114 to be up before the committee. RICHARD FAPPIANO, Engineer, OXY U.S.A., urged a committee substitute for SB 114 that would address a large potential resource on the North Slope, known as the heavy oil sands. He explained that they are a subsidiary of Occidental Petroleum that has very large interests. They have an 8.8% interest in the Milne Point Unit, the smallest unit on the North Slope which is about 12 miles northwest of Prudhoe Bay. Milne Point produces from the Kuparuk formation and they have no financial interest in TAPS. This unit is only producing about 25,000 barrels a day and about 3,000 of it is from a pilot project called the Shrader Bluff or Tract 14. The heavy oil sands are a prize on the North Slope, he explained. It's an accumulation of heavy oil in shallow sands that is estimated to be in excess of 26 million barrels of oil, actually larger than Prudhoe Bay. It has a huge potential and a number of companies have tried to make an economical project out of producing the heavy oil sands. He said that full development at Milne Point would involve spending half a billion dollars - mostly in Alaska. Using current technology it is uneconomical to produce. Something must change for full development. Through the use of incentives, he thought they could economically develop this resource in the Milne Point unit. They propose a five year royalty holiday for new wells drilled. In the lower 48 mostly you see are holidays from severance tax, he explained, because those states are not major land owners like Alaska. He said this incentive needs to be predictable and would be simple to administer and would bring money to the state where it now receives none. This would also give the state an opportunity to pilot the "royalty holiday idea." Number 500 SENATOR TAYLOR commented why wouldn't we be better off with a huge potential like this entering into almost a joint venture situation as opposed to a royalty holiday where we allow full tax credit back for 50% of drilling and exploration costs and then we share from there on out. Number 509 MR. FAPPIANO said that the only concern he had with that idea was that there would need to be allowances for the risk associated with that investment. They needed to be certain of the credit. His experience with other states is that they set a date of expiration so the earlier a company starts, the more benefit it receives. SENATOR TAYLOR said his concern was that there have been great technological break throughs in the oil industry recently. He said he would like us to move into a true equity position and he agreed that there needed to be some way of assessing risk. MR. FAPPIANO said they had been trying a lot of things for 10 years now and they haven't made any money, yet. SJR 20 COMMUNITY DEVELOPMENT FISHING QUOTAS SENATOR LEMAN announced SJR 20 to be up for consideration. SENATOR TAYLOR moved to adopt the committee substitute to SJR 20. There were no objections and it was so ordered. ANNETTE KREITZER, Legislative Aide to Senator Leman, pointed out the changes in the committee substitute. SENATOR TAYLOR said his concern was that "and crab" was still found on lines 22 and 28 and needed to be deleted, because it's an expansion of federal authority. TAPE 95-38, SIDE B SENATOR TAYLOR continued saying that the feds have not been involved in this resource before. The other thing that he was concerned with is that he thought there would be something in the draft encouraging, to some extent, a federal entity to allocate in- state resources that we have jurisdiction over, at this point. SENATOR HOFFMAN responded that earlier it was stated that since we had Americanized the fleet, many of the beneficiaries of the fishery in the Bering Sea are Seattle based. He thought by including other species, the scales would be brought more to Alaskans than to people from Seattle. Adding crab would benefit more Alaskans than the Seattle based fleets. A suggestion by the United Fishermen of Alaska of adding "Bering Sea" on page 2, in front of ground fish and crab would address their concerns, he said. SENATOR TAYLOR said he had a constituent group in Petersburg that doesn't necessarily feel that UFA is representing them on that point. They pioneered most of the crab fishing in the Bering Sea. He would like to see the resolution address pollock as opposed to expanding out to the generic term "ground fish." Number 544 He thought a statement was also needed stating that in our coastal waters we shall make the allocation, period. SENATOR HOFFMAN said that Senator Taylor's concern could be addressed in another resolution dealing with the management of the resources. He is talking about community development quotas and how we support them and crab has already been initiated by the Alaska Crab Association. SENATOR HALFORD commented that on page 3, line 3 he would like to see "addresses" changed to "guarantees." Unless that is the case, these programs aren't worth a hoot to us, he said. SENATOR HOFFMAN moved to change "addresses" to "guarantees." There were no objections and it was so ordered. SENATOR TAYLOR moved on page 2, lines 22 and 28, and on page 3, line 4 to delete "and crab." SENATOR HALFORD objected and asked if this applied only to crab in the Bering Sea. SENATOR TAYLOR said that was correct at this point. SENATOR HALFORD said he didn't mind with regard to the Gulf. SENATOR LEMAN asked about reallocation from existing Alaskan crab fishermen. SENATOR HOFFMAN said he didn't object to excluding that. SENATOR LINCOLN, looking over her notes, said someone said that crab is mostly outside of state waters and in federal waters. SENATOR TAYLOR said he thought a lot of our crab fishery that the state has been regulating for years lies in federal waters. SENATOR HALFORD suggested adding a further resolve saying nothing in this resolution shall be construed as: and then say specifically the things we don't want to do, such as encouraging the IFQ's. SENATOR TAYLOR said that would be fine with him. Number 440 SENATOR HOFFMAN said he was concerned that if this resolution was going to do any good, it still had to go to the other body and we're running out of time. SENATOR TAYLOR moved to withdraw his motion to delete "and crab." There were no objections and it was so ordered. SENATOR HALFORD moved to adopt a conceptual amendment adding a Whereas stating that nothing in this resolution shall be construed as: Senator Taylor's problem of allocation within Alaska waters, the Alaska vs. outside in a positive way, Senator Hoffman's interest, and his feeling that we should not in any way endorse the IFQ process. SENATOR TAYLOR said he would like that one also. He added that he would like another line stating that in no way should this be construed as a grant of jurisdiction to the federal entity by this state. There were no objections and it was so ordered. SENATOR HALFORD moved to pass SCS HJR20 (RES) from committee with individual recommendations. There were no objections and it was so ordered. HB 169 DEPT. NAT RES. IS LEAD AGENCY FOR MINING SENATOR LEMAN announced HB 169 to be up for consideration. ROD MOURANT, Legislative Aide to Representative Pete Kott, said this is recommendation #5 of the Alaska Minerals Commission Report 1995. It designates the Department of Natural Resources as the coordinating lead agency in all regulatory matters relating to mineral exploration, extraction, and development. SENATOR TAYLOR asked if he had reviewed his proposed amendment. MR. MOURANT said that was correct and Representative Kott fully supports the amendment. SENATOR TAYLOR moved to adopt amendment #1 and asked for unanimous consent. Number 413 SENATOR LINCOLN objected so she could understand the bill better and wanted to hear DNR's position on this. SENATOR LEMAN said he thought it meant that DNR would make the final determination, but other departments would participate in the decision. JULES TILESTON, Director, Division of Mining, emphasized that they like the uniform approach that HB 169 has, but their interpretation of coordination, as it is currently being used in the Fort Knox and the Illinois Creek, is not that they have authority to direct, but that it is a cooperative effort between the applicant and all of the permitting agencies including local governments and native corporations. He said that in their view, coordination did not mean that DNR takes on the permitting or regulatory authorities of other entities. On March 22 they suggested clarification language which comes from the reclamation law which simply reads: "This chapter does not alter or diminish the authority of another state agency or state corporation, or the University of Alaska, or a municipality under its laws or regulations." This has worked without difficulty and DNR does not seek to have final determination authority over another agency's, or another government's, existing regulatory authority over mining or mineral resource development activities. SENATOR LEMAN asked him if that is how he interprets this amendment. He answered that that is what he thought. SENATOR TAYLOR said he believed exactly the opposite of that. The buck has to stop someplace. DNR should have the final authority after consulting with those agencies and entities that should be bringing that information to them. Giving complete veto power to all the agencies forces people seeking permits to go through the same process that the Kensington and the A-J are currently caught up in right now. He thought that the bill wouldn't really do anything different without the amendment. MR. TILESTON said that right now there is no consistent approach to mining and he viewed the bill, in any of the versions, as a message that there needs to be a uniform approach which isn't currently happening. Under the amendment, in reality the commissioner of DNR would be the one who would have to defend whatever issue affected a mining venture. Number 287 SENATOR LINCOLN said she appreciated Senator Taylor's comments, but she objects to the amendment, because she thought they were going from one extreme to another. Giving DNR the final say on everything is too dangerous when they earlier made a change saying "may advise." SENATOR LEMAN said he tended to agree with Senator Taylor in that there needed to be some ultimate point at which someone takes charge and he would fully expect that DNR would do that and would not change things, like water quality standards, on its own. SENATOR LINCOLN maintained her objections. The roll was taken as follows: Senators Lincoln and Hoffman voted no; Senators Leman Pearce, Halford, and Taylor voted yes; and the amendment was adopted. Number 221 SENATOR TAYLOR moved CSSB 169 (RES) from committee with individual recommendations. There were no objections and it was so ordered. SENATOR LINCOLN asked if DNR had looked at the fiscal note with the new amendment. SENATOR LEMAN indicated that would be taken care of. SB 114 HIGH COST MARGINAL OIL WELLS SENATOR LEMAN asked Mr. Fineberg if he wanted to testify now or at a later date when the committee formally took up the bill. MR. FINEBERG said there are several points he wanted to respond to, but thought it would be more useful for the committee to have the bill before them at the time. SENATOR LEMAN adjourned the meeting at 5:05 p.m.