Legislature(2001 - 2002)

03/28/2001 03:35 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                    SENATE RESOURCES COMMITTEE                                                                                
                          March 28, 2001                                                                                        
                             3:35 p.m.                                                                                          
MEMBERS PRESENT                                                                                                               
Senator John Torgerson, Chair                                                                                                   
Senator Drue Pearce, Vice Chair                                                                                                 
Senator Rick Halford                                                                                                            
Senator Pete Kelly                                                                                                              
Senator Robin Taylor                                                                                                            
Senator Kim Elton                                                                                                               
Senator Georgianna Lincoln                                                                                                      
MEMBERS ABSENT                                                                                                                
All Members Present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 156                                                                                                             
"An Act amending  the Alaska Land Act to clarify the  requirement of                                                            
a  single written  Best  Interest  Finding  required for  the  sale,                                                            
lease, or other  disposal of state land or resources  or an interest                                                            
in them,  and relating  to certain disposals  involving multiphased                                                             
development; and providing for an effective date."                                                                              
     MOVED CSSB 156(RES) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 158                                                                                                             
"An Act directing  the commissioner  of revenue to prepare  a report                                                            
to the legislature  relating to the state's participation  in owning                                                            
or financing a gas pipeline  project; and providing for an effective                                                            
     MOVED CSSB 158(RES) OUT OF COMMITTEE                                                                                       
SENATE BILL NO. 164                                                                                                             
"An Act  prohibiting leases  under the Right-of-Way  Leasing  Act on                                                            
state land in or adjacent  to the Beaufort Sea; and providing for an                                                            
effective date."                                                                                                                
     MOVED SB 164 OUT OF COMMITTEE                                                                                              
PREVIOUS COMMITTEE ACTION                                                                                                     
SB 156 - No previous action to record.                                                                                          
SB 158 - No previous action to record.                                                                                          
SB 164 - No previous action to record.                                                                                          
WITNESS REGISTER                                                                                                              
Ms. Judy Brady, Executive Director                                                                                              
Alaska Oil and Gas Alliance                                                                                                     
121 W Fireweed #207                                                                                                             
Anchorage AK 99508                                                                                                              
POSITION STATEMENT: Supported SB 156.                                                                                         
Ms. Marty Rutherford, Deputy Commissioner                                                                                       
Department of Natural Resources                                                                                                 
550 West 7th Ave. Ste 1400                                                                                                      
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Supported SB 156.                                                                                         
Mr. Mark Meyers, Director                                                                                                       
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
550 West 7th Ave.                                                                                                               
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Commented on SB 156.                                                                                      
Ms. Mary Lundquist, Assistant Attorney General                                                                                  
Department of Law                                                                                                               
100 Cushman St., Suite 400                                                                                                      
Fairbanks, AK 99701                                                                                                             
POSITION STATEMENT: Commented on SB 156.                                                                                      
Mr. Ken Boyd (former Director, Division of Oil and Gas)                                                                         
No address provided                                                                                                             
POSITION STATEMENT: Commented on SB 156.                                                                                      
Mr. Jim Eason                                                                                                                   
No address provided                                                                                                             
Anchorage AK                                                                                                                    
POSITION STATEMENT: Commented on SB 156.                                                                                      
Mr. Patrick Coughlin                                                                                                            
Consultant to the Senate Resources Committee                                                                                    
Senator Torgerson                                                                                                               
State Capitol Bldg.                                                                                                             
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Commented on SB 156.                                                                                      
Mr. Darwin Peterson                                                                                                             
Staff to Senator Torgerson                                                                                                      
State Capitol Bldg.                                                                                                             
Juneau AK 99811                                                                                                                 
POSITION STATEMENT: Commented on SB 158.                                                                                      
Mr. Wilson Condon                                                                                                               
Department of Revenue                                                                                                           
PO Box 110400                                                                                                                   
Juneau, AK  99811-0400                                                                                                          
POSITION STATEMENT: Commented on SB 158.                                                                                      
Mr. Michael Hurley                                                                                                              
North American Natural Gas Pipeline Group                                                                                       
P.O. Box 100360                                                                                                                 
Anchorage AK 99510                                                                                                              
POSITION STATEMENT: Opposed SB 164.                                                                                           
Mr. Bill Britt                                                                                                                  
Pipeline Coordinator                                                                                                            
Department of Natural Resources                                                                                                 
411 W 4th Ave., 2nd Floor                                                                                                       
Anchorage AK 99501                                                                                                              
POSITION STATEMENT:  Supported SB 164                                                                                         
Mr. Jack Griffin, Assistant Attorney General                                                                                    
Department of Law                                                                                                               
1031 W 4th Ave., Suite 200                                                                                                      
Anchorage AK 99501                                                                                                              
POSITION STATEMENT: Commented on SB 164.                                                                                      
ACTION NARRATIVE                                                                                                              
TAPE 01-24, SIDE A                                                                                                            
Number 001                                                                                                                      
          SB 156-BEST INTEREST FINDING UNDER AK LAND ACT                                                                    
CHAIRMAN  JOHN  TORGERSON  called  the  Senate  Resources  Committee                                                          
meeting  to order at  3:35 p.m. and  announced SB  156 to be  up for                                                            
SENATOR  PEARCE said  that  SB 156  amends the  Alaska  Land Act  to                                                            
clarify  the requirement  that the Department  of Natural  Resources                                                            
prepare  a single, written  Best Interest  Finding for multi-phased                                                             
development  projects.  In 1994, the  Legislature  passed SB 308  to                                                            
amend the Alaska Land Act  in response to several unfavorable Alaska                                                            
Supreme  Court  decisions   that  threatened  the  state's   leasing                                                            
program. She explained:                                                                                                         
     We  have a "catch-22"  situation with  offshore leases  on                                                                 
     the North  Slope where the court  tried to require a  Best                                                                 
     Interest  Finding to discuss  or lay out what the impacts                                                                  
     would  be on onshore animals  as a result of the offshore                                                                  
     sale. This is when they  instituted phasing, because there                                                                 
     was really  no way to guess what  those might be, because                                                                  
     they didn't  know if and where  the development might  be.                                                                 
     The  legislation explicitly  allowed  project phasing  and                                                                 
     precisely  defined the scope of the Best Interest  Finding                                                                 
     determination.  Since its passage, recent court  decisions                                                                 
     have  continued to  threaten  the program  and the courts                                                                  
     have said  that the Department  is obliged, at each  phase                                                                 
     of    development,    to   issue    a    best   interests                                                                  
     finding…relating   to  that  phase  before  the  proposed                                                                  
     development may proceed.                                                                                                   
     Under  SB 308, the original legislation,  the Legislature                                                                  
     intended  that a Best Interest  Finding would be prepared                                                                  
     for the  first phase, the disposal  and subsequent phases                                                                  
     would  be subject  to  the Department's  approval  and  to                                                                 
     separate  reviews by extensive  permitting processes  that                                                                 
     include public  input and scrutiny of other agencies.  The                                                                 
     Legislature  did not intend the approval to be  defined as                                                                 
     a Best Interest  Finding determination as the  courts have                                                                 
     misinterpreted.  The Legislature  intended the Department                                                                  
     to exercise  their discretion to impose conditions  in the                                                                 
     Best  Interest  Finding  determination,   issued  for  the                                                                 
     disposal,    which   would   minimize   future   impacts.                                                                  
     Preparation  of a Best Interest Finding determination  for                                                                 
     every  phase would  be a  very costly  and time-consuming                                                                  
     SB  156 elaborates  the legislative  findings for phasing                                                                  
     under  the Alaska Land Act and  amends AS 38.05.035  so it                                                                 
     becomes  clear  that DNR  is required  to issue  a single                                                                  
     written  Best Interest Finding  for the disposal of  state                                                                 
     land.  It  also ensures  the  public  the  opportunity  to                                                                 
     comment at the exploration,  production and transportation                                                                 
     phases  of  a project.  By  clarifying  the Legislature's                                                                  
     original   intent,  SB  156  will  overturn  the  courts'                                                                  
     erroneous  interpretation. It  provides clear guidance  to                                                                 
     the courts  regarding the e legislature's policy  and will                                                                 
     result  in  the avoidance  of  protracted  litigation  and                                                                 
     associated  delays or disruptions  of the state's leasing                                                                  
     program and development of already leased acreage.                                                                         
SENATOR PEARCE explained that the concern is if a Best Interest                                                                 
Finding  is required at  every phase,  the cost  and time delay  for                                                            
both the  state and  the industry  would be enormous.  They  want to                                                            
make sure that doesn't happen.                                                                                                  
SENATOR  KELLY  asked if  a  public meeting  was  part  of the  Best                                                            
Interest Finding.                                                                                                               
SENATOR  PEARCE said it  is a very  long and  involved process.  The                                                            
permitting  processes in  later phases also  have opportunities  for                                                            
public comment.                                                                                                                 
MS. JUDY  BRADY, Executive  Director, Alaska  Oil and Gas  Alliance,                                                            
supported SB 156.  It makes it clear what the Department  of Natural                                                            
Resources'  obligation is to prepare  one Best Interest Finding  for                                                            
disposal of oil and gas  lease lands. The only problem they see with                                                            
the bill  is on page 5,  lines 21 - 25,  the public notice  section.                                                            
They don't understand what  that section is trying to accomplish and                                                            
that would be important.                                                                                                        
MS. MARTY  RUTHERFORD, Deputy  Commissioner,  Department of  Natural                                                            
Resources, said:                                                                                                                
     As Senator  Pearce noted, in  a Supreme Court decision  in                                                                 
     Kachemak  Bay  Conservation   vs. Department   of Natural                                                                  
     Resources  2000, the court spoke to the necessity  for DNR                                                                 
     to take  a continuing hard look  at future development  on                                                                 
     lease sale  lands and to issue a Best Interest  Finding on                                                                 
     each phase  of a project before  the proposed development                                                                  
     may proceed. DNR believes  this interpretation was not the                                                                 
     intent  of the legislature  and this  bill clarifies  that                                                                 
     conclusion  by specifying  that additional  Best Interest                                                                  
     Findings  are  not  required  in subsequent  phases  of  a                                                                 
     project.  Therefore,  the  administration   supports  this                                                                 
     bill. However, we would  propose one amendment. On page 5,                                                                 
     line  21,  add,  "If  the  disposal  is  an  oil  and  gas                                                                 
     disposal."  We  recommend  this  amendment,   because  the                                                                 
     primary  focus of this legislation  is on the oil and  gas                                                                 
     activities.  We believe that  a public notice requirement                                                                  
     should  be focused  upon oil  and gas and  not upon  other                                                                 
     disposal activities  that do not currently require  public                                                                 
Number 800                                                                                                                      
CHAIRMAN TORGERSON noted that an amendment would be offered that                                                                
would take care of the public notice concern.                                                                                   
SENATOR ELTON  asked where they get the most public  involvement and                                                            
does it  come mostly  through the  permit processes  or through  the                                                            
Best Interest Findings.                                                                                                         
MS. RUTHERFORD  answered that it depends on whether  it's an oil and                                                            
gas activity or some other type of disposal.                                                                                    
SENATOR ELTON asked to start with oil and gas.                                                                                  
MR. MARK MEYERS, Director,  Division of Oil and Gas, said he thought                                                            
they  had a good  public  input throughout  the  whole process,  but                                                            
there  is great opportunity  during  the Best  Interest Finding.  He                                                            
said there is public input prior to development, also.                                                                          
SENATOR ELTON asked how  close this bill comes to the constitutional                                                            
provision that  requires public notice  and other safeguards  in the                                                            
public interest in the disposal of state assets.                                                                                
MS.  RUTHERFORD  answered  that  she  believed  it  was  within  the                                                            
constitution  and she believed  that this  amendment would  continue                                                            
what  has  been  the  status  quo  for  the  Department  of  Natural                                                            
Resources' public processes.                                                                                                    
SENATOR  ELTON  asked  if  she  had  gotten  an  analysis  from  the                                                            
Department of Law.                                                                                                              
MS. RUTHERFORD said the  Attorney General told the Director that the                                                            
constitution  requires  public  notice  prior to  a disposal  of  an                                                            
interest  in state  lands  and this  provision actually  deals  with                                                            
public notice of later permitting activities.                                                                                   
SENATOR  ELTON noted language  on page  4, lines  9 - 11, "The  Best                                                            
Interest  Finding   shall  be  based   upon  known  information   or                                                            
information that  is made available to the director."  He asked what                                                            
happens if  there is known information  that the developer  has, but                                                            
doesn't give to the director.                                                                                                   
MS.  RUTHERFORD  answered  that the  director  is only  required  to                                                            
consider known information  or information that is made available to                                                            
him through the public  process. It does not require the director to                                                            
seek out additional information.                                                                                                
SENATOR  ELTON   asked  what  happens   in  a  situation   in  which                                                            
information isn't transmitted  to the director that could affect the                                                            
Best Interest  Finding, specifically  if the developer doesn't  give                                                            
pertinent  information  to the director.  "Does that  void the  Best                                                            
Interest Finding process?"                                                                                                      
MS. MARY LUNDQUIST, Assistant Attorney General, answered:                                                                       
        A failure of industry to provide information to the                                                                     
         director could not void a disposal or void a Best                                                                      
     Interest  Finding.  The requirement  is placed  on DNR  to                                                                 
     consider  known information  or information  that is  made                                                                 
     available  to the director. The  Alaska Supreme Court  has                                                                 
     recognized  that there is no requirement placed  on DNR to                                                                 
     actively go  out and solicit information. A Best  Interest                                                                 
     Finding  would not  be overturned  based  on not actively                                                                  
     going out  and seeking information. However, DNR's  method                                                                 
     of operation  is currently to  widely publicize the  lease                                                                 
     sales or other  disposals and to consider all  information                                                                 
     that is made available to them.                                                                                            
Number 1200                                                                                                                     
MR.  KEN BOYD  said  he  was one  of  the former  directors  of  the                                                            
Division of Oil  and Gas. He explained that a Best  Interest Finding                                                            
is really for  the disposal of state  land and at that phase  of the                                                            
process they are just issuing  a lease. There is a huge process that                                                            
follows  the issuance  of that lease;  the lease  itself is  a paper                                                            
transaction.  This was clearly recognized  by the legislature  in SB
308. The director  has to consider  only those things that  he knows                                                            
at that time. MR. BOYD continued:                                                                                               
     To  me, this  is  an extraordinarily  important  piece  of                                                                 
     legislation.  I believe the courts  have misconstrued  the                                                                 
     meaning of the legislature  by saying that we have to do a                                                                 
     Best  Interest Finding  in every phase.  Truly, the  first                                                                 
     phase,  when you're  just issuing  a lease,  you are  just                                                                 
     doing a paper  transaction. At subsequent phases,  I think                                                                 
     it's important  to realize that the state is,  through all                                                                 
     its  many agencies and  all its many  powers, gathering  a                                                                 
     lot  more information.  All the  agencies,  not just  DNR,                                                                 
     have the  opportunity to have  any questions they need  to                                                                 
     have answered, especially at subsequent phases.                                                                            
MR. JIM EASON,  another former Director for the Division  of Oil and                                                            
Gas, said he was  speaking on behalf of himself today.  He wanted to                                                            
shed some  historical  perspective  on any questions  the  committee                                                            
might  ask.  He was  director  during  the  time  when many  of  the                                                            
lawsuits were  spawned that led to SB 308. He was  also working with                                                            
Senator  Pearce and others  in the  legislature in  1994 to  try and                                                            
correct that problem. He said further:                                                                                          
     I am  embarrassed to  say that we obviously  didn't do  it                                                                 
     well  enough for the  Supreme Court,  but hopefully,  this                                                                 
     time it  will work. It was the  intent of the legislature                                                                  
     originally  to  have  a  Best  Interest  Finding  for  the                                                                 
     disposal of  state interests and that is how the  statutes                                                                 
     read  before we  became involved  in 1994  and that's  how                                                                 
     they  read today.  But the  Court, including  the Supreme                                                                  
     Court,  apparently has  made the judgment  in a couple  of                                                                 
     cases  that  in  their  reading  of  the amendments   that                                                                 
     occurred  in 1994,  (the ones  that are  before you  now),                                                                 
     that there  is an implication that the subsequent  process                                                                 
     after the disposal would  include a detailed Best Interest                                                                 
     Finding at each phase. In  other words, at exploration and                                                                 
     at development, if you're  lucky enough to find something.                                                                 
     Based  upon my experience, we  were trying not to require                                                                  
     additional  Best Interest  Findings and  I believe it  was                                                                 
     the legislature's intent that that not be required.                                                                        
     Under  the  amendments  that are  proposed  in SB  156,  I                                                                 
     believe  that you will  correct that  problem and make  it                                                                 
     clear that  one single Best Interest Finding is  required.                                                                 
     And I believe  that Senator Pearce has pointed  out, and I                                                                 
     agree,  that a number  of things will  be accomplished  if                                                                 
     you  do that. You  will avoid some  extraordinarily  time-                                                                 
     consuming  and very  expensive and  costly processes  that                                                                 
     the state would be required  to undertake if it were to be                                                                 
     required to  do Best Interest Findings at each  phase. You                                                                 
     would  have  additional  delay   and uncertainty   in  the                                                                 
     development of resources  and, important to each of you, I                                                                 
     believe,  delay  in  the  receipt  of  state  revenues  to                                                                 
     support the  programs that are important to all  Alaskans.                                                                 
     I encourage you to take  up SB 156 and pass it. I think it                                                                 
     will be to the state's benefit.                                                                                            
SENATOR  ELTON  said  he appreciated  Mr.  Eason's  and  Mr.  Boyd's                                                            
participation,  because they are nonaffiliated experts.  He asked if                                                            
the words:  "This act is intended  to make clear that public  notice                                                            
and the opportunity  to comment shall  be provided at each  phase of                                                            
the project." on page 4,  line 12 was already covered under existing                                                            
regulations  that govern  permits or  is this going  to require  new                                                            
regulations on the part of the Department.                                                                                      
MR. EASON replied that  he believed all the operations that occur on                                                            
oil and gas leases are in the coastal zone. He elaborated:                                                                      
     First  of  all  in the  preliminary  phase  and  the  Best                                                                 
     Interest  Finding phase, there  certainly is detailed  and                                                                 
     prescribed  public notice and  process for response.  As a                                                                 
     matter  of fact, the  Best Interest  Finding requires  not                                                                 
     only public  notice and meeting, but the preparation  of a                                                                 
     preliminary  finding and  then public  notice of that  and                                                                 
     its  availability   and the  opportunity   for  people  to                                                                 
     comment and  suggest changes, which then produces  a final                                                                 
     Best  Interest  Finding  for  each  disposal.   Since  the                                                                 
     disposals   are  occurring  in   the  coastal  zone,   any                                                                 
     activity,  including geophysical prospecting,  drilling of                                                                 
     wells  or building  of facilities  and structures  if  you                                                                 
     find something,  all go through a review for coastal  zone                                                                 
     consistency which involves a detailed public process.                                                                      
     I think  that, at least  in my reading,  the sponsors  are                                                                 
     trying  to make clear  on page 5, lines  21 - 25, through                                                                  
     some  amendment  language  they  are  proposing,  that  if                                                                 
     there's  any question,  it's reaffirmed  here that public                                                                  
     notice  will  take place  on those  subsequent  phases  in                                                                 
     either of two situations.  Either, if you're proceeding to                                                                 
     the next phase,  the Department will require notice  under                                                                 
     regulations, which it will  adopt, if it is not covered by                                                                 
     noticing  provisions  of  the  Alaska Coastal  Management                                                                  
     Program.  My  perception,   at  least,  is  that  this  is                                                                 
     intended  to make clear that  there will be notice and  if                                                                 
     it is not provided for now,  it will be provided for under                                                                 
     this amendment.                                                                                                            
SENATOR ELTON  asked if he  just gave the  long answer of,  "No, you                                                            
don't think that new regulations will be required?"                                                                             
MR. EASON responded, "I  believe today, noticing is occurring on all                                                            
leases in every  instance and it hasn't  required new regulations."                                                             
SENATOR  PEARCE noted  a zero  fiscal note  from  the Department  of                                                            
Natural Resources and that she had two amendments.                                                                              
SENATOR PEARCE  offered a  technical correction  to amendment  #1 on                                                            
page  5, line  18 to  delete "a"  and insert  "to".  She then  moved                                                            
amendment  #1.  There  was  objection  for  an  explanation  of  the                                                            
SENATOR PEARCE explained:                                                                                                       
     This answers  and the second and third piece,  I hope will                                                                 
     help  alleviate Ms.  Brady's and AOGA's  concern. When  we                                                                 
     passed SB  308, it was our intent that the phases  - We do                                                                 
     a disposal  or lease sale; then you've got an  exploration                                                                 
     phase;  you've  got  a  development   phase;  you  have  a                                                                 
     transportation  phase whether  you're building a pipeline                                                                  
     or some  way to get  the product to  market. So those  are                                                                 
     the phases. I understand  Judy's concern that the language                                                                 
     on page 5  might be now interpreted by laws meaning  every                                                                 
     little thing that might  be done might be a new phase. But                                                                 
     that's certainly not the  legislature's intent and I think                                                                 
     this amendment helps clarify  that. That was our intent in                                                                 
     SB 308. The  other pieces of this amendment frankly  speak                                                                 
     to drafting  errors and small  changes we needed to  make.                                                                 
SENATOR LINCOLN  asked the committee to consider the  meaning of the                                                            
proposed language if "or" was deleted on page 5, line 23.                                                                       
MR. PATRICK COUGHLIN, Consultant  to the Senate Resources Committee,                                                            
said he  wanted to  comment on  Senator Elton's  question  regarding                                                            
whether regulations would have to be adopted. He explained:                                                                     
     Today  everything  that  we're  leasing  has been  in  the                                                                 
     coastal  zone  and  therefore,  new  phases  are publicly                                                                  
     noticed  pursuant to  those regulations.  However, we  are                                                                 
     now  issuing leases  outside of  the coastal  zone and  we                                                                 
     have  a lease sale  coming up  in May  for the Foothills.                                                                  
     Some of that acreage is  outside the coastal zone. So, the                                                                 
     purpose of  this was to insure that for leases  that might                                                                 
     fall out of  the coastal zone and, therefore,  wouldn't be                                                                 
     subject   to  public   notice  under   the  coastal   zone                                                                 
     provisions,   there  would  be  public  notice   for  such                                                                 
     activities   and  those  would  be  the  regulations   the                                                                 
     Department would have to adopt.                                                                                            
     The  reason   for  changing  "or"  to  "unless"  [Senator                                                                  
     Lincoln's  question] was because  it's really meant  to be                                                                 
     either or,  not both. When some people read the  "or" they                                                                 
     were confused  and the suggestion  was you either give  it                                                                 
     by the  regulations adopted  by the  agency unless it  was                                                                 
      begin given under the coastal zone management program.                                                                    
SENATOR PEARCE  moved to amend the amendment on page  5, line 23, to                                                            
delete "or, if" and insert "unless".                                                                                            
SENATOR  ELTON  noted  that  the  answer  also  indicated  that  new                                                            
regulations  are going  to be necessary  if this  falls outside  the                                                            
coastal zone. "So, the short answer has changed a little bit."                                                                  
CHAIRMAN TORGERSON  said that amendment #1 had been  noted and asked                                                            
if there was any  further discussion.  There were  no objections and                                                            
amendment #1 was adopted.                                                                                                       
SENATOR PEARCE  said she understands  AOGA's concern that  there not                                                            
be  a new  definition  of what  every  little  piece is  that  might                                                            
require a public notice.  She agrees with Mr. Eason that any leasing                                                            
and further  phases  are happening  now without  public notice.  She                                                            
explained further:                                                                                                              
     However, and I hope I get  a little latitude here, I never                                                                 
     would have  imagined that the Railroad could have  managed                                                                 
     to build a  terminal at the Anchorage Airport  that had no                                                                 
     EIS,  no  environmental   assessment,  no  public  notice                                                                  
     requirements,  because it fell  through all of the cracks                                                                  
     in  all of  the programs…There   was never  public notice                                                                  
     before  the project was actually  happening and so,  there                                                                 
     are situations  out there where we find we don't  have the                                                                 
     blanket that  we think we have. I understand the  interest                                                                 
     of the folks in Cook Inlet  of making sure, and all of the                                                                 
     state,  that they have public  notice as these phases  are                                                                 
     moving forward so they have  an opportunity to testify and                                                                 
     provide comments. I would  like to have that prescribed in                                                                 
     law as  this does as opposed  to have systems such as  the                                                                 
     stake  holders process  that  the governor  followed on  a                                                                 
     previous  Cook  Inlet  lease  sale  that  I  think didn't                                                                  
     accomplish  much and,  on the other  hand, was completely                                                                  
     outside  of the law. So, I'm  happy to see we are calling                                                                  
     for specific opportunities for that to happen.                                                                             
SENATOR  PEARCE  offered amendment  #2  that  was requested  by  the                                                            
Department  on  page 5,  line  21 which  points  out that  this  new                                                            
section is for those disposals that are oil and gas disposals.                                                                  
SENATOR  LINCOLN  apologized  to Senator  Pearce  with  a  technical                                                            
amendment deleting "if".                                                                                                        
MS. RUTHERFORD said she was comfortable with that change.                                                                       
CHAIRMAN TORGERSON  announced there  were no further objections  and                                                            
the amendment was adopted.                                                                                                      
SENATOR  HALFORD asked  if there was  any limitation  on how  long a                                                            
Best Interest Finding lasts.                                                                                                    
MS. LUNDQUIST  answered  that there  is a provision  in 035(e)  that                                                            
deals with oil and gas lease sales releasing under 180.                                                                         
MR. MEYERS replied Best Interest Findings last for 10 years.                                                                    
MS. LUNDQUIST  added, "Unless  substantive  new information  becomes                                                            
available. Then they would have to do an amendment prior…"                                                                      
SENATOR HALFORD  said at some point you go back and  review the Best                                                            
Interest Finding on the  original gas line or  the application for a                                                            
refining  plant and,  "it's sold  to somebody  else  and it goes  on                                                            
forever." I just  wanted to make sure there was a  limitation on it.                                                            
SENATOR ELTON  noted that Senator Pearce said this  would save a lot                                                            
of time and energy  in the Department for doing this  and the fiscal                                                            
note doesn't  reflect any  savings and he  was assuming it  would be                                                            
potential savings,  because they are  not now doing what  the courts                                                            
suggested they ought to be doing.                                                                                               
MS. RUTHERFORD replied that was a correct interpretation.                                                                       
SENATOR PEARCE  moved to  pass CSSB 156 (RES)  with the fiscal  note                                                            
with individual  recommendations.  There were  no objections  and it                                                            
was so ordered.                                                                                                                 
         SB 158-REPORT:STATE PARTICIPATE IN NAT GAS PIPE.                                                                   
CHAIRMAN TORGERSON announced SB 158 to be up for consideration.                                                                 
MR. DARWIN  PETERSON,  Staff to  Senator Torgerson,  explained  that                                                            
commercialization  of North  Slope natural gas  has been one  of the                                                            
legislature's  top priorities this  session. The potential  benefits                                                            
of  commercialization   include  short  and  long-term  employment,                                                             
additional  state  and municipal  revenues,  opportunities  for  new                                                            
industries  and cheap clean  energy for the  state. This bill  would                                                            
direct the  Commissioner of  the Department  of Revenue to  retain a                                                            
financial expert to examine  whether the state should participate in                                                            
either ownership or financing  of a natural gas pipeline. The expert                                                            
would examine  any benefit or detriment  to a project caused  by the                                                            
state's participation.  In the past the state has retained financial                                                            
experts to advise  it on the possibility of the state  participating                                                            
in such a project. Those  reports need to be updated. The bill would                                                            
insure that the  legislature participates in the preparation  of the                                                            
report by:                                                                                                                      
   · 1. requiring that the chairs of the Senate and House Resources                                                             
     Committees periodically meet with the expert to review data                                                                
     and information about the report, and                                                                                      
   · 2. requiring that the Commissioner provide progress reports to                                                             
     the chairs every 60 days.                                                                                                  
The bill would  require the Commissioner  to prepare a confidential                                                             
report  with  recommendations  addressing  the  state's  options  by                                                            
January 31, 2002 and submit  it to the legislature and the governor.                                                            
SENATOR ELTON  asked why they used  January 31, 2002, when  they are                                                            
anticipating  a report from the producers  at the end of  this year.                                                            
CHAIRMAN  TORGERSON responded  that he  came up  with that date  but                                                            
said, "Maybe we want it quicker."                                                                                               
COMMISSIONER  WILSON CONDON,  Department  of Revenue,  said "I  will                                                            
take the responsibilities  outlined in this bill,  if it becomes law                                                            
and if funds  are appropriated  that will allow  us to enter  into a                                                            
contract  with  a  suitable   party  to  do  the  work.  I  have  no                                                            
recommendations  in terms of changes to the assignment  as reflected                                                            
in the bill."                                                                                                                   
CHAIRMAN  TORGERSON asked  him what  he thought  of the January  31,                                                            
2002 date.                                                                                                                      
COMMISSIONER  CONDON replied that  was his sister's birthday  and it                                                            
will remind him to send her a card.                                                                                             
SENATOR  LINCOLN wanted  to know,  "If that were  not your  sister's                                                            
birthday, would that date be good?"                                                                                             
COMMISSIONER CONDON replied, "Yes, it would."                                                                                   
SENATOR ELTON asked if it could be earlier.                                                                                     
COMMISSIONER  CONDON  replied  that  he,  "didn't  want  to  promise                                                            
anything any earlier."                                                                                                          
SENATOR  LINCOLN  said   on  page  2,  line  29  it  says  that  the                                                            
"Commissioner  of  Revenue   shall  contract  with  a  qualified  or                                                            
suitable firm  or person qualified…..to complete this  job", but the                                                            
fiscal  note   says  the  Commissioner   would  contract   with  and                                                            
investment  banking firm for  the expertise.  She asked if  that was                                                            
the individual they were referring to.                                                                                          
CHAIRMAN  TORGERSON  replied  that it  was his  intent  to give  the                                                            
Commissioner  as much  latitude as  possible and  he had talked  all                                                            
along  about  a banking  firm  that had  a  lot of  information  and                                                            
expertise in this field. But it could be a person.                                                                              
SENATOR TAYLOR moved amendment #1.                                                                                              
CHAIRMAN  TORGERSON explained  that  the amendment  inserts  another                                                            
section that says,  "The state should participate  in a gas pipeline                                                            
project  by  establishing  a private  corporation,  which  would  be                                                            
composed of Alaska  residents who wish to become shareholders,  that                                                            
would own  a portion of  the project or  assist in the construction                                                             
and operation  of the project." He explained that  it was brought to                                                            
him by  another member  who wanted  the opportunity  to have  shares                                                            
available so that individual Alaskans might be able to buy them.                                                                
TAPE 24, SIDE B                                                                                                               
CHAIRMAN TORGERSON said  he didn't think that would have much impact                                                            
on investment firms or anyone else looking at it.                                                                               
CHIARMAN TORGERSON  noted there were  no objections to amendment  #1                                                            
and it was adopted.                                                                                                             
SENATOR TAYLOR  moved to  pass CSSB 158(RES)  from committee.  There                                                            
were no objections and it was so ordered.                                                                                       
             SB 164-NO GAS PIPELINE OVER BEAUFORT SEA                                                                       
CHAIRMAN TORGERSON  announced SB 164 to be up for  consideration. He                                                            
explained that  SB 164 makes legislative  findings saying,  "We want                                                            
the North Slope  gas for the highest utilization to  be made for in-                                                            
state usage to the maximum  - jobs and opportunities that are within                                                            
the  state for  value-added  opportunities  and  adding significant                                                             
long-term property  base for the state  and the bill concludes  with                                                            
making  a  legislative  Best  Interest  Finding  that  prohibit  the                                                            
Commissioner from issuing  a lease for the right-of-way over the top                                                            
until a line is built south."                                                                                                   
MR. MICHAEL HURLEY, North  American Natural Gas Pipeline Group, said                                                            
the three companies  in the group  are BP, ExxonMobil, and  Phillips                                                            
and they are, "working  diligently to develop an economically viable                                                            
project  to  commercialize  North  Slope  natural  gas  by  pipeline                                                            
through Canada to the Lower 48 markets."                                                                                        
FERC,  before it  issues a  Certificate  of Public  Convenience  and                                                            
Necessity,  requires  them  to analyze  alternative  pipeline  route                                                            
options as  part of the  application process.  This project  has the                                                            
potential  to be the  largest energy  project in  North America  and                                                            
will require  capital  investments in  the billions  of dollars.  He                                                            
said  their  energies   are  used  for  a  thorough  evaluation   of                                                            
alternatives  and  an understanding  of  their  relative  strengths,                                                            
weaknesses,  risks  and  rewards.  Their efforts  are,  "focused  on                                                            
creating   and   understanding   opportunities,    not  prematurely                                                             
discarding them. This legislation would do the later."                                                                          
MR.  HURLEY  said  that  limiting  options  would  discourage  other                                                            
investors in  Alaska projects. Any  Alaskan projects, "must  be able                                                            
to deliver products to  the market at a competitive cost in order to                                                            
succeed.  There  are many  other  competing  sources of  supply  and                                                            
buyers will  go elsewhere if a project  fails in that regard.  While                                                            
our  work  may show  that  a  southern  route does  offer  the  best                                                            
combination of benefits  and economic viability to Alaskans, it must                                                            
be realized  that  efforts to prohibit  the  consideration of  other                                                            
development options, such  as a northern route, may impede an Alaska                                                            
natural gas project from moving forward."                                                                                       
MR. HURLEY  said they  were listening  to the  views of the  Alaskan                                                            
legislature   and  Alaskan   citizens   and  were   evaluating   the                                                            
alternatives on the basis of seven criteria:                                                                                    
     · Overall project economics                                                                                                
     · Alaskan access to gas                                                                                                    
     · Jobs for Alaskans                                                                                                        
     · Revenue to the State                                                                                                     
     · Safety                                                                                                                   
     · Environmental protection                                                                                                 
     · Project timing                                                                                                           
     We do  not feel that we have  enough information, yet,  to                                                                 
     make  a  route  decision.  That  is  the  reason  for  our                                                                 
     aggressive  work  program   this  year.  The  effect  this                                                                 
     legislation  will  have on FERC  and other  agency permit                                                                  
     applications is as yet unknown.                                                                                            
SENATOR TAYLOR  asked how this legislation would preclude  them from                                                            
analyzing all the routes.                                                                                                       
MR. HURLEY  answered  that they don't  think that;  they don't  know                                                            
what FERC will require of them as a result of its passage.                                                                      
CHAIRMAN TORGERSON  said he, "Found it difficult to  believe FERC is                                                            
going to make  you look at options when the President  of the United                                                            
States and Congress has  picked one. FERC doesn't have a dog in this                                                            
fight."  He   thought  not  wanting   the  southern  route   was  an                                                            
intercompany policy.                                                                                                            
MR. HURLEY replied  that they are approaching this  as a green field                                                            
application  that would require an  alternative analysis  as part of                                                            
the backup of the application.                                                                                                  
CHAIRMAN  TORGERSON  asked  if they  were  ignoring  the  authorized                                                            
MR. HURLEY replied  that the lack of clarity about  how the old laws                                                            
applied  and  whether they  still  apply  has  caused them  to  push                                                            
forward as if it were a green field application.                                                                                
SENATOR LINCOLN  said that she was  a bit offended by his  testimony                                                            
today. "To  me it suggests  that we  have not  been diligent  in our                                                            
analysis of  the different routes  and what's in the best  interests                                                            
of the  state." She didn't  think there had  ever been any  question                                                            
about the dedication  of Alaskans' access to gas and  jobs, revenues                                                            
to  the  state, safety  and  environmental  protection.  As  far  as                                                            
timing, "We would like to see that done as quickly as possible…"                                                                
SENATOR LINCOLN  continued: "This Chair, I've given  him great kudos                                                            
for  really  taking  the Resources  Committee  through  all  of  the                                                            
routes,  to   hearing  the  public   testimony,  hearing   from  the                                                            
producers,  to  hearing  from  the different  groups  that  have  an                                                            
interest in this."                                                                                                              
MR. HURLEY apologized and said it wasn't intended to offend.                                                                    
MR.  BILL  BRITT,  Alaska   State  Pipeline  Coordinator,   strongly                                                            
supported SB 164. The over-the-top  route is not in the state's best                                                            
interests for  the reasons sighted  nor do they believe it  would be                                                            
cheaper  or  faster  due  to a  variety  of  design  and  permitting                                                            
However, a brief  legal review has revealed some possible  legal and                                                            
constitutional  issues, especially related to separation  of powers.                                                            
He  said they  needed  more  time to  examine  the issue.  They  are                                                            
concerned  about the precedent  of this  very prescriptive  statute.                                                            
They agree with  the policy, but feel that they would  be led to the                                                            
same result without the prohibition in section (b), page 3.                                                                     
CHAIRMAN TORGERSON asked  what the separation of powers issue he was                                                            
concerned with.                                                                                                                 
Number 1800                                                                                                                     
MR. JACK  GRIFFIN, Supervisor  of the  Oil and  Gas Division  in the                                                            
Department of Law, said  their legal review has been cursory, but on                                                            
the face of the bill there is a separation of powers concern.                                                                   
     While  the  legislature  clearly  has the  constitutional                                                                  
     authority  to  establish  land  use policy  in  the  first                                                                 
     instance, as a rule it establishes  that policy on laws of                                                                 
     general  applicability  and leaves the  implementation  of                                                                 
     that policy  to the executive branch. That's the  approach                                                                 
     the  legislature  has  chosen  and  is  reflected  in  the                                                                 
     current Right-of-Way Leasing Act.                                                                                          
     SB 164,  on the other  hand, starts  off with the general                                                                  
     and very  legitimate policy consideration  articulated  by                                                                 
     the  legislature, but  then in subparagraph  (b), directs                                                                  
     the commissioner  to exercise the discretion in  the event                                                                 
     the  commissioner   sees  application  for  a  particular                                                                  
     project  in a  particular area.  The problem  here is  not                                                                 
     really  what the bill  would do, but  how it would do  it.                                                                 
     For  example,  the legislature  clearly  makes  the  state                                                                 
     lands   under  the   Beaufort  Sea  a   state  park.   The                                                                 
     legislature  could clearly  circumscribe  the territorial                                                                  
     reach of the  Right-of-Way Leasing Act so that  it doesn't                                                                 
     reach  submerged lands  and the legislature  could follow                                                                  
     its  legitimate policy  articulating  not only applicable                                                                  
     policy considerations  that must be evaluated  and applied                                                                 
     by the executive  to implement this particular  act. Those                                                                 
     would be much easier to defend.                                                                                            
     It's  possible to put  an interpretive  clause on section                                                                  
     (b)  that would in  effect interpret  it as essentially  a                                                                 
     elucidation  on the territorial scope of the Right-of-Way                                                                  
     Leasing  Act. I  think the  problem with  that particular                                                                  
     interpretation,    though,  is   that   it   ignores   the                                                                 
     specificity  with which the bill identifies the  offending                                                                 
     project. For  example, the commissioner can still  issue a                                                                 
     right-of-way  lease for a gas  pipeline that would follow                                                                  
     the  ANWR  coast to  Kaktovik.  The  pipeline goes  on  to                                                                 
     Canada  and then south  at the commissioner's  discretion                                                                  
     has  been eliminated.   Conditions  are  [indisc.] saying                                                                  
     separation  of powers concerns  that the specificity  with                                                                 
     which  that particular  project is  identified raises,  at                                                                 
     least  potentially,   concerns  under  the  United   State                                                                 
     Commerce  Clause and  under the  U.S. and  State people's                                                                  
     protection clauses.                                                                                                        
He didn't  have enough time  to analyze whether  those concerns  are                                                            
significant, but on the  face of the bill they could be significant.                                                            
CHAIRMAN  TORGERSON  said  those  same  concerns  were also  in  the                                                            
NorthStar  agreement  in which  Kachemak Bay  Reserve  was made  off                                                            
limits  to oil  and gas  drilling,  and that  passed  muster of  the                                                            
Supreme  Court. He advised  Mr. Griffin  to check  it out if  he had                                                            
some free time, but he thought it would be a waste.                                                                             
SENATOR TAYLOR  moved to pass SB 164 from committee  with individual                                                            
recommendations. There were no objections and it was so ordered.                                                                
CHAIRMAN TORGERSON adjourned the meeting at 4:45 pm.                                                                            

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