Legislature(2003 - 2004)

03/31/2003 03:39 PM RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         March 31, 2003                                                                                         
                           3:39 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Scott Ogan, Chair                                                                                                       
Senator Thomas Wagoner, Vice Chair                                                                                              
Senator Fred Dyson                                                                                                              
Senator Ralph Seekins                                                                                                           
Senator Ben Stevens                                                                                                             
Senator Kim Elton                                                                                                               
Senator Georgianna Lincoln                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 139                                                                                                             
"An  Act repealing  the  termination date  of  the Alaska  salmon                                                               
price report program; and providing for an effective date."                                                                     
     MOVED SB 139 OUT OF COMMITTEE                                                                                              
                                                                                                                                
SENATE BILL NO. 122                                                                                                             
"An Act relating to an  annual wildlife conservation pass and the                                                               
fee for that pass; relating  to nonresident and nonresident alien                                                               
big game tag fees; and providing for an effective date."                                                                        
     HEARD AND HELD                                                                                                             
                                                                                                                                
CS FOR HOUSE BILL NO. 16(FIN) am                                                                                                
"An  Act  amending,  for  purposes of  the  Alaska  Stranded  Gas                                                               
Development Act, the standards  applicable to determining whether                                                               
a proposed  new investment constitutes  a qualified  project, the                                                               
standards used to  determine whether a person  or group qualifies                                                               
as a project  sponsor or project sponsor group,  and the deadline                                                               
for  applications relating  to the  development of  contracts for                                                               
payments in  lieu of taxes  and for royalty adjustments  that may                                                               
be  submitted for  consideration,  and  modifying the  conditions                                                               
bearing  on  the  use  of  independent  contractors  to  evaluate                                                               
applications or  to develop contract terms;  providing statements                                                               
of  intent  for  the  Act   relating  to  use  of  project  labor                                                               
agreements and  to reopening of  contracts; and providing  for an                                                               
effective date."                                                                                                                
     HEARD AND HELD                                                                                                             
                                                                                                                                
PREVIOUS ACTION                                                                                                               
                                                                                                                                
SB 139 - No previous action to record.                                                                                          
                                                                                                                                
SB 122 - See Resources minutes dated 3/28/03.                                                                                   
                                                                                                                                
HB 16 - No previous action to record.                                                                                           
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mr. Ian Fisk                                                                                                                    
Staff to Representative Ogg                                                                                                     
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Presented SB 139                                                                                          
                                                                                                                                
Mr. Bruce Schactler                                                                                                             
United Salmon Association                                                                                                       
PO Box 2399                                                                                                                     
Kodiak, AK                                                                                                                      
POSITION STATEMENT: Supports SB 139                                                                                           
                                                                                                                                
Mr. Jerry McCune                                                                                                                
United Fishermen of Alaska                                                                                                      
211 4th Street, Suite 110                                                                                                       
Juneau, Alaska  99801-1172                                                                                                      
POSITION STATEMENT: Supports SB 139                                                                                           
                                                                                                                                
Mr. Gordy Williams                                                                                                              
Special Assistant                                                                                                               
Department of Fish & Game                                                                                                       
PO Box 25526                                                                                                                    
Juneau, AK  99802-5226                                                                                                          
POSITION STATEMENT: Presented SB 122 for the Administration                                                                   
                                                                                                                                
Ms. Michelle Sydeman                                                                                                            
Assistant Director                                                                                                              
Division of Wildlife Conservation                                                                                               
Department of Fish & Game                                                                                                       
PO Box 25526                                                                                                                    
Juneau, AK  99802-5226                                                                                                          
POSITION STATEMENT: Answered questions about SB 122                                                                           
                                                                                                                                
Representative Hugh Fate                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Sponsor of HB 16                                                                                         
                                                                                                                                
Ms. Wendy King                                                                                                                  
Conoco Phillips Alaska, Inc.                                                                                                    
P.O. Box 100360                                                                                                                 
Anchorage, Alaska  99510                                                                                                        
POSITION STATEMENT: Supports HB 16                                                                                            
                                                                                                                                
Mr. Mark Myers, Director                                                                                                        
Division of Oil and Gas                                                                                                         
Department of Natural Resources                                                                                                 
550 W. 7th Ave. Ste 800                                                                                                         
Anchorage AK 99501-3560                                                                                                         
POSITION STATEMENT: Supports HB 16                                                                                            
                                                                                                                                
Mr. Dan Dickinson                                                                                                               
Tax Division                                                                                                                    
Department of Revenue                                                                                                           
550 W 7th Ave.                                                                                                                  
Anchorage, AK  99501-3566                                                                                                       
POSITION STATEMENT: Answered questions about HB 16                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 03-20, SIDE A                                                                                                            
                                                                                                                                
CHAIR SCOTT  OGAN called the Senate  Resources Standing Committee                                                             
meeting  to  order  at  3:39   p.m.  Senators  Wagoner,  Stevens,                                                               
Seekins,  Elton and  Ogan were  present. Senator  Lincoln arrived                                                               
momentarily.  The committee took up SB 139.                                                                                     
                                                                                                                                
             SB 139-AK SALMON PRICE REPORT PROGRAM                                                                          
                                                                                                                                
MR. IAN  FISK, staff to  Representative Ogg, told members  he has                                                               
been working  with Senator Dyson  on SB  139 and presented  it to                                                               
the committee as follows.                                                                                                       
                                                                                                                                
SB 139 repeals  the sunset date of a Department  of Revenue (DOR)                                                               
program called the  Alaska Salmon Price Report  (ASPR). Under the                                                               
ASPR,  processors  who  sell  over 1  million  pounds  of  salmon                                                               
products in one year are required  to report to DOR the wholesale                                                               
prices they receive for those  products. This report is due three                                                               
times per year: January 31, May  31, and September 30. It details                                                               
monthly  and annual  average wholesale  prices  sorted by  salmon                                                               
species, by product  form, and by the eight regions  in which the                                                               
salmon  are produced.  The ASPR  allows  government agencies  and                                                               
industry analysts to  estimate inventory of Alaska  salmon and it                                                               
provides data that is helpful  in negotiations between harvesters                                                               
and processors.  DOR issues an  annual report to  the legislature                                                               
to enable  legislators to see  what is  being done with  a public                                                               
resource.  The  statute sunsets  on  July  1, 2003.  The  sponsor                                                               
believes the ASPR  program should be a permanent  function of DOR                                                               
so SB 139 repeals the sunset date.                                                                                              
                                                                                                                                
CHAIR OGAN asked if SB 139 will make this law permanent.                                                                        
                                                                                                                                
MR. FISK said that is correct.                                                                                                  
                                                                                                                                
CHAIR OGAN pointed  out that the bill has no  fiscal note because                                                               
the  program is  currently funded  with federal  money. He  asked                                                               
what will happen if the federal  money dries up and the state has                                                               
an obligation to fund it with general fund monies.                                                                              
                                                                                                                                
MR. FISK  said that is  a good  question. He noticed  today, when                                                               
the  fiscal  note  was  delivered,  that  the  Tax  Division  has                                                               
proposed changing  the funding source to  [federal] salmon treaty                                                               
fund  money appropriated  to the  Alaska Department  of Fish  and                                                               
Game  (ADF&G). He  said to  his understanding,  that is  a stable                                                               
source  of funding  but  he has  not spoken  with  anyone in  the                                                               
department about it.                                                                                                            
                                                                                                                                
CHAIR  OGAN  pointed  out  that  if  the  federal  money  is  not                                                               
received, the cost to the state would be $50,000 per year.                                                                      
                                                                                                                                
MR. FISK said that is correct, according to DOR.                                                                                
                                                                                                                                
SENATOR BEN STEVENS  explained that the Pacific  Salmon Treaty is                                                               
an international  treaty that has  been in effect for  many years                                                               
and is likely to be funded for  many years to come. He noted that                                                               
as long as the treaty is in  effect, Alaska will continue to be a                                                               
recipient  of  funds. He  also  said  the original  salmon  price                                                               
report contained price  information and was funded  by the Alaska                                                               
Seafood Marketing Institute (ASMI).                                                                                             
                                                                                                                                
MR. FISK  said he believes that  was the case with  the wholesale                                                               
price report,  which was changed to  the ASPR when more  data was                                                               
required.  He understands  the funding  no  longer comes  through                                                               
ASMI,  it comes  through the  salmon market  information service,                                                               
which is provided by ASMI.                                                                                                      
                                                                                                                                
CHAIR OGAN  pointed out if there  is a question about  the fiscal                                                               
note, it  is more appropriate  that the Senate  Finance Committee                                                               
examine it. He then took public testimony.                                                                                      
                                                                                                                                
In response to a question by  Chair Ogan about whether there is a                                                               
compelling  need  to  continue  the ASPR,  MR.  BRUCE  SCHACTLER,                                                               
testifying  from  Kodiak, told  members  that  he would  question                                                               
whether the report actually costs  $50,000 per year. He noted the                                                               
only reason  fishermen are as  informed as they are  about prices                                                               
for different  products is because of  the ASPR. The ASPR  is the                                                               
only database close to real  time that provides this information.                                                               
The price  report is authored by  the McDowell Group and  is used                                                               
by ASMI, the National Marine  Fisheries Services (NMFS), the U.S.                                                               
Departments  of  Agriculture  and  Commerce,  the  University  of                                                               
Alaska,  the  University  of  Washington,   a  host  of  academic                                                               
entities, the legislature and hundreds of individuals.                                                                          
                                                                                                                                
MR. JERRY McCUNE,  Executive Director of the  United Fishermen of                                                               
Alaska  (UFA),  stated  support  for  SB  139  because  the  ASPR                                                               
provides a good snapshot of what products are going where.                                                                      
                                                                                                                                
CHAIR OGAN asked if the ASPR  is an appropriate state function or                                                               
whether it should be supported by UFA.                                                                                          
                                                                                                                                
MR. McCUNE  said that would  be difficult  for UFA to  do because                                                               
DOR gathers  the information, most  of which is  confidential. He                                                               
added that  UFA does not have  the staff or funds  to produce the                                                               
report.                                                                                                                         
                                                                                                                                
SENATOR  WAGONER moved  SB  139  and its  zero  fiscal note  from                                                               
committee  with individual  recommendations.  With no  objection,                                                               
CHAIR OGAN announced the motion carried.                                                                                        
                                                                                                                                
         SB 122-NONRES.GAME TAG FEES/WILDLIFE TOUR PASS                                                                     
                                                                                                                                
MR. GORDY WILLIAMS, special assistant,  Alaska Department of Fish                                                               
and Game (ADF&G),  explained to members that SB  122 contains two                                                               
parts.  The first  part establishes  a $15  wildlife conservation                                                               
pass for  certain visitors  who use  a commercial  opportunity to                                                               
view  wildlife. The  second part  raises  non-resident alien  big                                                               
game  tag fees  for certain  species. He  provided the  following                                                               
statement:                                                                                                                      
                                                                                                                                
     The  Administration believes  it is  appropriate for  a                                                                    
     broad  range   of  visitors  to   the  state   to  make                                                                    
     contributions  to   the  management  of   our  wildlife                                                                    
     resources.   Historically,   hunters,   fishermen   and                                                                    
     trappers have provided  the bulk of the  funding and we                                                                    
     think it  is appropriate that  those who are  coming to                                                                    
     the state  - visitors  - help out  in that  regard when                                                                    
     they're  viewing   our  wildlife.  About   1.5  million                                                                    
     visitors come  to Alaska  annually and  the opportunity                                                                    
     to  view   wildlife  is  an  important   part  of  that                                                                    
     experience for many of them.                                                                                               
                                                                                                                                
     The  wildlife conservation  pass  will  raise a  little                                                                    
     over $7 million annually  at the beginning. As provided                                                                    
     in the  bill, those revenues  will be deposited  into a                                                                    
     separate account  in the general fund  and appropriated                                                                    
     for  various  wildlife  management programs  and  other                                                                    
     uses.                                                                                                                      
                                                                                                                                
     The  pass establishes  a  requirement for  nonresidents                                                                    
     who  use a  commercial  provider of  an opportunity  to                                                                    
     view wildlife to  have one of these  passes unless they                                                                    
     qualify for one  of the exemptions in  the bill. Alaska                                                                    
     residents  are   exempt  from  this   requirement;  all                                                                    
     persons under  16 are  exempted; disabled  veterans are                                                                    
     exempted; travelers  on the  marine highway  system are                                                                    
     exempted; and any visitor who  holds a hunting, fishing                                                                    
     or trapping  license good for  that year would  also be                                                                    
     exempt. We  believe that people  who come to  the state                                                                    
     should make  a contribution to wildlife  management. If                                                                    
     they're making it through the  purchase of a hunting or                                                                    
     fishing  license, than  that is  a contribution  enough                                                                    
     [so] that showing that license  will allow them to take                                                                    
     the commercial tours.                                                                                                      
                                                                                                                                
MR.  WILLIAMS said  ADF&G believes  a portion  of the  additional                                                               
revenue   raised  can   assist  the   state  in   reaching  match                                                               
requirements  for  the   federal-state  wildlife  grant  program.                                                               
Alaska receives about  $3.9 million under that  program. ADF&G is                                                               
currently in a planning phase  with that funding, which means the                                                               
state is  only matching it  at a rate  of 1:3. Once  the programs                                                               
are implemented, the match rate will increase to 1:1.                                                                           
                                                                                                                                
He explained  that the  second part  of the  bill will  raise tag                                                               
fees  for  non-residents  and non-resident  aliens  for  caribou,                                                               
moose,  sheep, and  goat in  varying  amounts from  $50 to  $100.                                                               
Alaska's tag  fees fall  in the mid-range  when compared  to fees                                                               
charged  by other  Western states.  The Governor  believes it  is                                                               
appropriate  to increase  these fees  for non-residents  and non-                                                               
resident aliens. He offered to answer questions.                                                                                
                                                                                                                                
SENATOR  ELTON asked  Mr.  Williams why  programs  like fish  and                                                               
wildlife protection  or the promotion  of tourism  were precluded                                                               
as  appropriate  uses  of  the  fund that  these  fees  could  be                                                               
deposited into.                                                                                                                 
                                                                                                                                
MR. WILLIAMS said nothing has been  excluded as the money will be                                                               
deposited  into   the  general  fund  and   the  legislature  has                                                               
appropriation powers.                                                                                                           
                                                                                                                                
SENATOR  ELTON noted  that SB  122 specifies  three purposes  for                                                               
which the legislature intends to use those funds.                                                                               
                                                                                                                                
MR. WILLIAMS said  that ADF&G believes it can make  good use of a                                                               
portion  of these  funds  but it  will be  under  the purview  of                                                               
future legislators to decide exactly how the funds are spent.                                                                   
                                                                                                                                
CHAIR OGAN stated the separate  accounting language really pushes                                                               
the limits but will have no  effect due to the constitutional ban                                                               
on  dedicated funds.  He added  if  the legislature  is going  to                                                               
raise taxes,  he believes  the money should  go into  the general                                                               
fund to be used to offset the budget gap.                                                                                       
                                                                                                                                
SENATOR  WAGONER asked  whether  vendors who  do  not submit  the                                                               
collected  fees to  the state  will be  subject to  penalties and                                                               
whether any enforcement will be available.                                                                                      
                                                                                                                                
MR. WILLIAMS  said that is  not specifically addressed in  SB 122                                                               
but,  by adding  the wildlife  conservation  fee to  the list  of                                                               
licenses  in the  bill, violators  will  be subject  to the  same                                                               
penalties that  apply to  a vendor who  does not  submit revenues                                                               
raised  from the  sale  of  sport fish  licenses.  He offered  to                                                               
provide specific information at a later date.                                                                                   
                                                                                                                                
SENATOR WAGONER  noted that vendors  will also be  collecting the                                                               
fees, not  just those who  sell hunting and fishing  licenses. He                                                               
asked if  a person who runs  raft trips will sell  the $15 permit                                                               
to his or her customers.                                                                                                        
                                                                                                                                
MR. WILLIAMS said  those business owners will  become vendors. He                                                               
pointed out that  ADF&G has about 1500 vendors who  sell fish and                                                               
game  licenses  statewide.  ADF&G anticipates  that  number  will                                                               
increase  significantly if  this  bill passes  because  a lot  of                                                               
tourist operators will want to sell these licenses.                                                                             
                                                                                                                                
CHAIR OGAN noted the presence of Representative Kohring.                                                                        
                                                                                                                                
SENATOR SEEKINS  asked how  much money SB  122 is  anticipated to                                                               
raise per year.                                                                                                                 
                                                                                                                                
MR. WILLIAMS said about $7.5 million in FY 04.                                                                                  
                                                                                                                                
SENATOR SEEKINS  asked how much  revenue ADF&G receives  from the                                                               
sale of fish and game licenses each year.                                                                                       
                                                                                                                                
MR.  WILLIAMS  did  not  have that  information  and  offered  to                                                               
provide it at a later date.                                                                                                     
                                                                                                                                
SENATOR SEEKINS said it appears to  him that the only new purpose                                                               
for which  this fund would  be used  is for wildlife  viewing. He                                                               
asked if ADF&G is currently using  any fish and game fees that it                                                               
collects for viewing programs.                                                                                                  
                                                                                                                                
MR. WILLIAMS said  the short answer is yes, for  the match of the                                                               
state wildlife grant  funds. He then deferred to  Ms. Sydeman for                                                               
the specifics.                                                                                                                  
                                                                                                                                
MS.  MICHELLE  SYDEMAN, Assistant  Director  of  the Division  of                                                               
Wildlife  Conservation,   told  members   that  ADF&G   does  not                                                               
currently use fish  and game funds to match the  federal funds it                                                               
receives  for  wildlife  viewing  programs.  The  source  of  the                                                               
matching funds  for those programs  are receipts from  the McNeil                                                               
River bear viewing area, Pack  Creek, and the Round Island walrus                                                               
viewing area.                                                                                                                   
                                                                                                                                
SENATOR  SEEKINS asked  if, under  current statute,  the receipts                                                               
from viewing areas can be used as a match for federal funds.                                                                    
                                                                                                                                
MS. SYDEMAN said they can.                                                                                                      
                                                                                                                                
SENATOR SEEKINS  asked if SB  122 will just add  another category                                                               
from the  $7.5 million that  can be  used for matching  funds for                                                               
those same purposes.                                                                                                            
                                                                                                                                
MS. SYDEMAN said the difficulty  that Mr. Williams spoke about is                                                               
due to the  fact that under the statute that  pertains to receipt                                                               
of the federal funds, the state  match rate is 1:3 while wildlife                                                               
viewing programs are  in the planning phase. As  ADF&G moves into                                                               
the implementation  phase, the required match  rate will increase                                                               
to 1:1.  In addition, ADF&G does  not have an adequate  source of                                                               
matching funds  for research or management  of non-hunted species                                                               
or for any of ADF&G's education programs.                                                                                       
                                                                                                                                
SENATOR SEEKINS asked:                                                                                                          
                                                                                                                                
     In  the total  universe of  funding that  comes to  the                                                                    
     department, what percentage would  this add? If we were                                                                    
     to pass  this, let's say,  you know  kind of on  a weak                                                                    
     manner, as  the Chairman said,  that you may  use these                                                                    
     funds for this purpose, how  much as a percentage would                                                                    
     that add  to the  budget that  you are  already getting                                                                    
     from these  various sources of federal  funds - Pittman                                                                    
     Robinson  funds, fish  and game  funds, etcetera,  that                                                                    
     are dedicated now to the department?                                                                                       
                                                                                                                                
MS. SYDEMAN replied  it is her understanding  that the division's                                                               
budget  totals   about  $25  million.  ADF&G's   request  to  the                                                               
administration and to  the legislature would be for  a portion of                                                               
these funds.  ADF&G has stated a  hope that if this  bill passes,                                                               
some of  this money might  be made  available to match  the state                                                               
wildlife grant  money. She  thought the fees  might amount  to $3                                                               
million of the division's total $25 million budget.                                                                             
                                                                                                                                
SENATOR ELTON  referred to page  1, line  10, and asked  what the                                                               
breakdown  is between  state general  funds,  federal, and  other                                                               
funds for the wildlife management program.                                                                                      
                                                                                                                                
MS. SYDEMAN said  the Division of Wildlife  Conservation does not                                                               
receive  any general  funds at  this time.  It receives  about $8                                                               
million  of fish  and  game  funds, primarily  from  the sale  of                                                               
hunting  and  trapping  licenses  and other  tag  fees.  It  also                                                               
receives about $8 million of Pittman Robinson money.                                                                            
                                                                                                                                
SENATOR ELTON  commented that  SB 122  makes it  sound as  if the                                                               
fees will  replace general fund  dollars, while it  will actually                                                               
add  dollars to  a program  that does  not get  any general  fund                                                               
dollars.  He then  noted  that about  800,000  people will  visit                                                               
Alaska on  cruise ships this  year. Those ships have  programs in                                                               
place to collect  receipts for onshore tours, a  portion of which                                                               
is  remitted to  the businesses.  He felt  this legislation  will                                                               
give the cruise  ships the opportunity to collect  up to $500,000                                                               
for  something  they are  already  doing.  He  asked if  that  is                                                               
correct.                                                                                                                        
                                                                                                                                
MR. WILLIAMS  said that  cruise ships  provide an  opportunity to                                                               
view wildlife  so cruise  ship passengers will  have to  pay this                                                               
fee or be exempted when they enter Alaskan waters.                                                                              
                                                                                                                                
SENATOR ELTON asked if those licenses  will be sold by the cruise                                                               
ship operators, who will retain $1 for each license.                                                                            
                                                                                                                                
MR. WILLIAMS said  they would be eligible to do  that should they                                                               
want to become vendors.                                                                                                         
                                                                                                                                
SENATOR   ELTON   noted  their   profit   margin   could  go   up                                                               
significantly.                                                                                                                  
                                                                                                                                
CHAIR OGAN said  that "significantly" is subjective  if they have                                                               
to process 500,000 applications.                                                                                                
                                                                                                                                
SENATOR ELTON  asked Mr. Williams  if he anticipates  any skewing                                                               
whereby  a person  could evade  the $15  wildlife viewing  fee by                                                               
purchasing a fishing license for $10.                                                                                           
                                                                                                                                
MR. WILLIAMS said that possibility  was discussed, but ADF&G does                                                               
not believe that  will be a significant problem. He  said for one                                                               
thing,  he assumes  some folks  who choose  to sell  these passes                                                               
will also  become full  vendors and sell  all licenses.  He noted                                                               
the problem with exempting people  who have a $10 one-day fishing                                                               
license is the  burden it will place on  the commercial operators                                                               
who must verify that passengers have valid licenses.                                                                            
                                                                                                                                
SENATOR  WAGONER said  it would  be a  lot simpler  to avoid  the                                                               
ability to do that by raising the one-day license fee to $15.                                                                   
                                                                                                                                
SENATOR LINCOLN  asked where  the entry  point is  for collecting                                                               
the fees.                                                                                                                       
                                                                                                                                
MR. WILLIAMS said it is an  annual pass and will be purchased the                                                               
first  time  a person  avails  him  or  herself of  a  commercial                                                               
opportunity to  view wildlife. The  pass could be  purchased from                                                               
the vendor or from other sources.                                                                                               
                                                                                                                                
SENATOR LINCOLN asked what will happen  if a person does not have                                                               
one.                                                                                                                            
                                                                                                                                
MR. WILLIAMS  said the person would  not be eligible to  take the                                                               
trip.                                                                                                                           
                                                                                                                                
SENATOR LINCOLN asked who will enforce that.                                                                                    
                                                                                                                                
MR. WILLIAMS said because the program  is under Title 16, it will                                                               
be enforced  in the same  way the  Division of Fish  and Wildlife                                                               
Protection  deals   with  other   hunting  and   fishing  license                                                               
violations.                                                                                                                     
                                                                                                                                
SENATOR LINCOLN said the Governor's  budget reduces the number of                                                               
fish  and  game  wildlife   protection  officers.  She  expressed                                                               
concern that  enforcement as proposed  in this bill will  rely on                                                               
an honor  system. She pointed out  that a tour operator  will not                                                               
be required  to sell  these licenses. She  then noted  the Alaska                                                               
Travel  Industry Association  does not  support this  legislation                                                               
and   questioned    whether   the   Administration    asked   the                                                               
Association's opinion of this bill.                                                                                             
                                                                                                                                
MR.  WILLIAMS  said there  are  different  levels of  support  in                                                               
different sectors of the industry. He  said he does not know what                                                               
the level of outreach was  to specific groups. The Governor feels                                                               
this  is an  appropriate contribution.  ADF&G believes  a lot  of                                                               
visitors  will  be  happy  to   make  this  contribution  because                                                               
wildlife viewing  is one  of the reasons  they travel  to Alaska.                                                               
Regarding  enforcement, he  pointed out  there will  be penalties                                                               
for the operator and the person who does not hold a license.                                                                    
                                                                                                                                
SENATOR  LINCOLN asked  where that  provision is  located in  the                                                               
bill.                                                                                                                           
                                                                                                                                
MR.  WILLIAMS repeated  it  falls under  Title 16  so  it is  not                                                               
specifically listed in the legislation.                                                                                         
                                                                                                                                
SENATOR LINCOLN emphasized  that someone will have  to enforce it                                                               
for  a  person  to  be  penalized.  She  suggested  that  with  a                                                               
reduction  in the  number of  wildlife protection  officers, this                                                               
will place  another burden upon  a smaller staff. She  then asked                                                               
if the  Administration has assessed  the impact  this legislation                                                               
will have on  the Alaska Visitors Association. She  noted she has                                                               
not received  one letter  of support  from that  Association. She                                                               
asked what  kind of an  assessment the Administration  did before                                                               
it introduced this legislation.                                                                                                 
                                                                                                                                
MS. SYDEMAN said  she does not know much about  the outreach that                                                               
was  done,  but  she  does   know  that  the  Alaska  Wilderness,                                                               
Recreation  and  Tourism Association  came  forward  and said  it                                                               
supported this  concept. That  organization represents  300 small                                                               
operators.                                                                                                                      
                                                                                                                                
SENATOR  SEEKINS commented  that when  the Governor  provided his                                                               
budget, it appeared to be  targeted toward meeting a certain draw                                                               
down  in  the  Constitutional  Budget Reserve  (CBR)  by  cutting                                                               
expenses   in  one   place  and   providing  additional   revenue                                                               
elsewhere.  In  some respects,  this  fee  was represented  as  a                                                               
source of  additional revenue. He asked  if ADF&G views it  as an                                                               
additional source of revenue for  the department, not necessarily                                                               
as  a budget  balancing mechanism  to provide  revenue to  offset                                                               
other cuts.                                                                                                                     
                                                                                                                                
MR. WILLIAMS  said that ADF&G is  hopeful that with this  kind of                                                               
revenue  generating  mechanism,  it  could make  a  case  that  a                                                               
portion of it should go to  the department for needs he described                                                               
earlier. He stated  it will be a revenue generator  for the state                                                               
and the Governor has stated  support for tourism related wildlife                                                               
experiences.                                                                                                                    
                                                                                                                                
SENATOR  SEEKINS  said  if  some   of  this  money  is  used  for                                                               
additional  matching funds  while the  intent  was to  use it  to                                                               
balance the budget, the legislature  would be rather disingenuous                                                               
about  how it  is earmarked.  He said  he is  supportive of  more                                                               
wildlife management  education programs  for tourists, but  he is                                                               
concerned that legislators don't  misrepresent the facts that the                                                               
funds are  to be earmarked for  ADF&G rather than to  balance the                                                               
draw down on the CBR.                                                                                                           
                                                                                                                                
CHAIR  OGAN noted  that he  shares Senator  Seekins' concern  and                                                               
suggested striking that language from the bill.                                                                                 
                                                                                                                                
SENATOR SEEKINS  noted he is  a wildlife  viewer for all  but the                                                               
one time  he harvests  a moose  each year  so he  appreciates the                                                               
value of  wildlife viewing  and wants  to enhance  it as  much as                                                               
possible. He  repeated his  concern is  about the  impression the                                                               
legislature may leave with SB 122 if not careful.                                                                               
                                                                                                                                
SENATOR  WAGONER questioned  whether the  legislature will  set a                                                               
bad  precedent by  allowing the  separate accounting  language to                                                               
remain  in  the bill.  He  pointed  out that  the  Administration                                                               
already knows  that the wildlife  viewing stamp will  generate so                                                               
much money and it is up  to the Administration to recommend where                                                               
it wants to  budget that money, therefore it is  not necessary to                                                               
keep that language in the bill.                                                                                                 
                                                                                                                                
SENATOR SEEKINS  commented that the  tourism industry  would also                                                               
like to have a slice of this pie.                                                                                               
                                                                                                                                
SENATOR WAGONER noted that he  contacted the tourism industry and                                                               
asked  where the  proposal  is that  they  told legislators  they                                                               
would be submitting.  That proposal was a tax  package that would                                                               
amount  to a  2  percent sales  tax  on certain  tourist-oriented                                                               
activities.  He was  told  two  weeks ago  they  would have  that                                                               
package to the legislature but he  has not received it so he said                                                               
he is not sure how serious they are.                                                                                            
                                                                                                                                
CHAIR OGAN  asked if  SB 122  will be a  "freebie" for  those who                                                               
drive up the highway and never  use a vendor to view wildlife. He                                                               
asked if  passengers would owe the  state $15 each if  they saw a                                                               
moose along the highway.                                                                                                        
                                                                                                                                
MR.  WILLIAMS  said  the  issue  of  how  to  charge  independent                                                               
travelers was raised on the  House side. ADF&G anticipates that a                                                               
large number  of those  folks will purchase  either a  hunting or                                                               
fishing   license  or   avail  themselves   of  some   commercial                                                               
opportunity. He said short of a  tollgate at the border, it would                                                               
be difficult to collect the fee.                                                                                                
                                                                                                                                
CHAIR  OGAN  considered renaming  the  fee  and whether  visitors                                                               
could  file  a class  action  lawsuit  if  they  do not  see  any                                                               
wildlife.                                                                                                                       
                                                                                                                                
TAPE 03-20, SIDE B                                                                                                            
                                                                                                                                
SENATOR ELTON noted  the Governor is not calling it  a tax, he is                                                               
calling it  a user fee, which  means the committee would  want to                                                               
name it for its intended purpose.                                                                                               
                                                                                                                                
SENATOR  WAGONER   suggested  renaming   it  the   "Alaska  State                                                               
Conservation Fee." He said the  word "wildlife" should be removed                                                               
because he agrees  with Chair Ogan that people might  not see any                                                               
wildlife.                                                                                                                       
                                                                                                                                
CHAIR OGAN  informed members that  he did  not intend to  pass SB                                                               
122 from committee today.                                                                                                       
                                                                                                                                
SENATOR  LINCOLN asked  how many  states have  a similar  fee and                                                               
what amount they charge.                                                                                                        
                                                                                                                                
MS. SYDEMAN  said the  notion of  charging to  set up  a user-pay                                                               
system  akin to  the programs  in place  for hunting  and fishing                                                               
licenses has taken a  lot of forms. She said she  is not aware of                                                               
fees  in any  other  states except  Louisiana,  which requires  a                                                               
wildlife stamp to  visit fish and game state  managed lands. Some                                                               
states  have imposed  a sales  tax on  items used  by consumptive                                                               
wildlife  users and  some  use  a portion  of  the proceeds  from                                                               
lotteries.  Some  countries charge a conservation  fee of several                                                               
dollars upon exit.                                                                                                              
                                                                                                                                
CHAIR OGAN  said he thought  there was consensus  among committee                                                               
members to  rename the fee the  "Alaska Wolf Control Tax"  and to                                                               
change the intent  language so that the money will  be used for a                                                               
predator control program.                                                                                                       
                                                                                                                                
SENATOR ELTON  noted that  although he  does not  plan to  make a                                                               
motion today,  he would like  the committee to  consider amending                                                               
the bill  to add, on page  2, line 12, after  the word "viewing,"                                                               
"fish and wildlife protection,  tourism promotion,". He explained                                                               
that the intent  of the amendment would be to  use the balance of                                                               
the  $7  million   that  is  not  used  for   fish  and  wildlife                                                               
conservation for enforcement and  tourism promotion. He felt this                                                               
money might  be an  appropriate source  to replace  those general                                                               
fund dollars.  He said he  would wait  for a response  from ADF&G                                                               
and members of the industry before he offers the amendment.                                                                     
                                                                                                                                
SENATOR  BEN STEVENS  noted that  as a  Senate Finance  Committee                                                               
member, he is  the chair of the subcommittees  on the Departments                                                               
of Fish  and Game  and Public  Safety. He  told members  that the                                                               
wildlife  conservation   portion  of  ADF&G's  budget   is  $29.3                                                               
million, an increase of $1.5  million over last year. It receives                                                               
no general funds. The Division  of Fish and Wildlife Protection's                                                               
budget  [in the  Department of  Public Safety]  is $15.6  million                                                               
with  a   decrement  of  about  $400,000   under  the  Governor's                                                               
proposal.  He noted  the Division  will  lose two  administrative                                                               
positions,   not  enforcement   positions.  He   said  from   his                                                               
perspective, ADF&G is asking for  a fish and wildlife viewing fee                                                               
but the Division of Fish and  Wildlife Protection has not been at                                                               
the table  even though  it has  the responsibility  of protecting                                                               
fish  and game  for  everybody.  He said  he'd  be interested  in                                                               
exploring  the  concept  of  using  the  increased  revenues  for                                                               
existing protection in a department  that is already stretched to                                                               
fulfill  its   current  obligations.  He  said   that  Section  2                                                               
[Separate  accounting   for  wildlife  conservation   pass  fees]                                                               
concerns him because  it says the money will  be appropriated for                                                               
management, viewing and  education programs when the  state has a                                                               
problem protecting the existing game.                                                                                           
                                                                                                                                
CHAIR OGAN  announced that with  no further discussion,  he would                                                               
hold SB 122 in committee and  that the committee would take up HB                                                               
16.                                                                                                                             
                                                                                                                                
The committee took a brief at-ease.                                                                                             
                                                                                                                                
         HB 16-STRANDED GAS DEVELOPMENT ACT AMENDMENTS                                                                      
                                                                                                                                
CHAIR OGAN asked Representative Fate to present the bill.                                                                       
                                                                                                                                
REPRESENTATIVE  HUGH  FATE, prime  sponsor  of  HB 16,  gave  the                                                               
following explanation of the measure.                                                                                           
                                                                                                                                
The Stranded  Gas Act was  enacted in 1997 but  its authorization                                                               
has terminated.  HB 16  reauthorizes the  Stranded Gas  Act until                                                               
March of  2005. The  original Act  was designed  to apply  to LNG                                                               
only. That language was removed from  HB 16 so that it allows for                                                               
any form of gas. It also  allows more businesses to qualify as it                                                               
reduces the  entry fee. In  the past, a corporation  was required                                                               
to have a  net worth of 33 percent of  the estimated construction                                                               
cost of a  project. That percentage was reduced to  10 percent in                                                               
HB  16. The  line  of credit  equal  to the  amount  that is  not                                                               
encumbered to the  project cost was also reduced  from 25 percent                                                               
to 15 percent. The word  "contractor" was made plural because the                                                               
state  often  needs  more  than  one  contractor  to  review  the                                                               
qualified work.  HB 16  also contains  intent language  that will                                                               
not  disturb  the  clause  that  allows  negotiations  between  a                                                               
qualified  sponsor and  the State  of Alaska.  Those negotiations                                                               
are the centerpiece of the legislation.                                                                                         
                                                                                                                                
REPRESENTATIVE FATE  said he worked  with the  Administration and                                                               
industry personnel on HB 16 and  attempted to keep it as clean as                                                               
possible to  allow the negotiations  that take place  between the                                                               
State of Alaska and the  qualified sponsors to be as unencumbered                                                               
as possible. He believes HB  16 achieves that and embodies intent                                                               
language  as  a  reminder  that the  renegotiation  of  contracts                                                               
cannot be  forgotten. He noted  that Senator Ted  Stevens pointed                                                               
out the U.S. Senate may have  another hurdle to clear regarding a                                                               
gas  pipeline.   He  believes   this  legislation   is  extremely                                                               
important  to  show  that  the state  is  responsibly  trying  to                                                               
facilitate  the construction  of a  gas pipeline.  He offered  to                                                               
answer questions.                                                                                                               
                                                                                                                                
CHAIR  OGAN  noted  the  original Stranded  Gas  Act  applied  to                                                               
projects  north of  latitude 64  degrees  and was  specific to  a                                                               
route  that parallels  the TransAlaska  pipeline  system and  the                                                               
Alaska  Highway. He  noted that  HB 16  is silent  on the  Alaska                                                               
Highway  route,  as  well  as  the latitude.  He  asked  why  the                                                               
pipeline route language  was dropped and why it would  be open to                                                               
any pipeline and any gas in the state.                                                                                          
                                                                                                                                
REPRESENTATIVE  FATE  said  specific  legislation  regarding  the                                                               
route  has  already  been  enacted   [AS  38.35.017]  so  it  was                                                               
unnecessary  to duplicate  it.  The removal  of  the latitude  64                                                               
degrees provision  was done to  encourage others to get  into the                                                               
"play." At  the present  time, the  only stranded  gas is  on the                                                               
North Slope.                                                                                                                    
                                                                                                                                
CHAIR OGAN said that  might be true but it sets  a new policy. He                                                               
asked if any other projects have been discussed.                                                                                
                                                                                                                                
REPRESENTATIVE FATE said no other projects have been discussed.                                                                 
                                                                                                                                
CHAIR OGAN asked where latitude 64 degrees cuts across Alaska.                                                                  
                                                                                                                                
REPRESENTATIVE  FATE  said  it parallels  the  Brooks  Range  and                                                               
includes the  coal bed methane  at Red  Dog but nothing  south of                                                               
that.                                                                                                                           
                                                                                                                                
CHAIR  OGAN asked  if  this  Act could  include  any natural  gas                                                               
projects.                                                                                                                       
                                                                                                                                
REPRESENTATIVE FATE replied that it could. He explained:                                                                        
                                                                                                                                
     ...if  there  were  a  large  natural  gas  find  -  an                                                                    
     exploratory  - and  they delineated  a field  along the                                                                    
     route of  that pipeline, I'm  sure that they  would try                                                                    
     to incorporate that pipeline given  the capacity of the                                                                    
     pipeline. But any find, for  example in the Cook Inlet,                                                                    
     or somewhere that's not on  that route even though it's                                                                    
     certainly  below  the  64th parallel,  it  wouldn't  be                                                                    
     included in that. It's not  stated in this Act but it's                                                                    
     just a matter of common  sense that you're not going to                                                                    
     run  a pipeline  up from  Cook Inlet  to where  the gas                                                                    
     pipeline comes down from Prudhoe Bay.                                                                                      
                                                                                                                                
CHAIR  OGAN asked,  "Whose  got a  dog  in the  fight  on the  10                                                               
percent?"                                                                                                                       
                                                                                                                                
REPRESENTATIVE FATE  said no  one but he  has been  approached by                                                               
individuals   who  suggested   that  a   combination  of   Native                                                               
corporations could get "underneath that  wire." That gave him the                                                               
idea to change  the net worth provision to 33  percent instead of                                                               
placing strict  parameters around  the negotiations at  the back-                                                               
end.  Even  though  that  lowered   the  bar  substantially,  the                                                               
producers had no real objection.  However, there was objection to                                                               
placing language  in the bill  that would set the  parameters for                                                               
the negotiations.   He noted the first figure he  had in the bill                                                               
was 20  percent, which he  changed to  10 percent in  a committee                                                               
substitute to encourage more exploration and to share the risk.                                                                 
                                                                                                                                
SENATOR WAGONER asked Representative Fate  to repeat what he said                                                               
about Cook Inlet.                                                                                                               
                                                                                                                                
REPRESENTATIVE  FATE said  in response  to Chair  Ogan's question                                                               
about  the 64th  latitude,  he  was suggesting  that  if a  large                                                               
enough gas field was found  along the pipeline, the company would                                                               
want to  tap into  the pipeline  if it had  the capacity.  If the                                                               
find is in Cook  Inlet, it would be impractical to  run a line up                                                               
to the other because of the distance.                                                                                           
                                                                                                                                
CHAIR OGAN  noted that the  Joint Natural Gas  Pipeline Committee                                                               
had many  discussions about  open season and  how to  ensure that                                                               
others can  access the gas  line but the  bill is silent  on that                                                               
issue.                                                                                                                          
                                                                                                                                
REPRESENTATIVE  FATE  said  the  bill is  silent  on  that  issue                                                               
because  that  will have  to  be  negotiated  and because  it  is                                                               
unclear whether the regulatory authorities  will weigh in on that                                                               
issue. He said he hopes  the Federal Energy Regulatory Commission                                                               
(FERC)  will issue  an opinion  about which  authorities will  be                                                               
involved,  how  they   conflict  and  how  their   roles  can  be                                                               
coordinated.                                                                                                                    
                                                                                                                                
CHAIR  OGAN  asked  who  will  be involved  in  the  open  season                                                               
negotiations.                                                                                                                   
                                                                                                                                
REPRESENTATIVE  FATE  answered  the   State  of  Alaska  and  the                                                               
qualified sponsors.                                                                                                             
                                                                                                                                
CHAIR OGAN  expressed surprise  and said he  thought that  was an                                                               
internal matter.                                                                                                                
                                                                                                                                
REPRESENTATIVE  FATE said  his understanding  is that  it can  be                                                               
negotiated and that FERC will not determine the open season.                                                                    
                                                                                                                                
SENATOR ELTON  referred to Section  5 on page  3 and called  it a                                                               
"double barreled  edition." He said  the applicant  can reimburse                                                               
the state for  reasonable expenses according to  language on line                                                               
24, but  those expenses  are capped at  $1.5 million.  He pointed                                                               
out that both of those  provisions are additions to existing law.                                                               
He asked  if anyone  has determined that  any expenses  over $1.5                                                               
million would be unreasonable.                                                                                                  
                                                                                                                                
REPRESENTATIVE FATE said the House  labored with that section and                                                               
considered   the    words   "redundant,"    "non-redundant"   and                                                               
"reasonable." The amendment adopted  on the House floor contained                                                               
the  word "reasonable."  The House  does  not want  the state  or                                                               
contractor to duplicate bills and it  wants to make sure that any                                                               
overlap  of costs  is  reasonable, for  example,  in a  situation                                                               
where  one  expert might  be  used  to  corroborate the  work  of                                                               
another one.                                                                                                                    
                                                                                                                                
SENATOR  ELTON  again  asked if  anyone  made  the  determination                                                               
during  those  discussions that  any  expense  over $1.5  million                                                               
would be unreasonable.                                                                                                          
                                                                                                                                
CHAIR  OGAN noted  that  the  maximum is  $1.5  million for  each                                                               
application. He asked if it could apply more than once.                                                                         
                                                                                                                                
REPRESENTATIVE  FATE  responded  that  amount  applies  for  each                                                               
application.                                                                                                                    
                                                                                                                                
SENATOR ELTON  asked, "So  you could have  a series  of expenses,                                                               
each of which would be a separate application?"                                                                                 
                                                                                                                                
REPRESENTATIVE FATE  replied, "Not  to exceed -  correct, through                                                               
the Chair, not to exceed $1.5 million for each application."                                                                    
                                                                                                                                
SENATOR  LINCOLN referred  to Section  1  on page  1, the  intent                                                               
section, and asked  why it was included as  intent language since                                                               
no one can be held accountable to it.                                                                                           
                                                                                                                                
REPRESENTATIVE FATE explained that if  it was included as part of                                                               
the bill and  was not intent language, it would  begin to set the                                                               
sideboards of the negotiations.  He explained the intent language                                                               
is basically  a reminder of something  that is usually done.   He                                                               
stated:                                                                                                                         
                                                                                                                                
     ...To place  that and to  force any type  of sideboards                                                                    
     that  have to  be negotiated  was not  acceptable. Very                                                                    
     frankly,  it [began]  to muddy  the  water because  you                                                                    
     begin -  and this  is what  we're very  good at  in the                                                                    
     Legislature, is  trying to assert our  will into things                                                                    
     rather than  to let the negotiating  process take place                                                                    
     in good faith.                                                                                                             
                                                                                                                                
SENATOR SEEKINS asked  what benefits would accrue  to a qualified                                                               
project.                                                                                                                        
                                                                                                                                
CHAIR OGAN explained that the  original legislation was passed to                                                               
enable the  state to  negotiate a  payment in  lieu of  taxes, an                                                               
approach  recommended  by  a  consultant   named  Van  Meers  who                                                               
cautioned the project  was front-end loaded with  too many taxes.                                                               
A  major  stumbling  block  to   making  a  project  economically                                                               
feasible  was the  requirement to  pay all  of the  upfront money                                                               
before the  project made a  nickel. The  idea was to  negotiate a                                                               
payment in lieu  of taxes to compensate  the communities directly                                                               
affected  by   the  impact  of   the  pipeline.   The  discussion                                                               
surrounding the original  legislation was to pick  up those costs                                                               
at the back-end when the project was amortized and making money.                                                                
                                                                                                                                
SENATOR SEEKINS  said it is  important to reiterate  that because                                                               
many people  do not  understand the  concept. He  then questioned                                                               
the  phrase  in  the  intent section  that  says  "the  qualified                                                               
sponsor  group   may  develop  and   enter  into   project  labor                                                               
agreements     with     appropriate     collective     bargaining                                                               
organizations..." and noted that should be assumed.                                                                             
                                                                                                                                
REPRESENTATIVE  FATE  repeated  the  intent language  is  just  a                                                               
reminder.                                                                                                                       
                                                                                                                                
SENATOR SEEKINS said he wanted  to distinguish that because he is                                                               
not aware  of any legislation  that forbids a sponsor  group from                                                               
entering into a project labor agreement.                                                                                        
                                                                                                                                
SENATOR ELTON said  he is still concerned about  the $1.5 million                                                               
limit. He  pointed out  the Department  of Revenue's  fiscal note                                                               
leads him to believe that the  state agencies are not clear about                                                               
whether  the  limit  is  per   application.  He  asked  that  the                                                               
committee double-check with the Department of Revenue.                                                                          
                                                                                                                                
CHAIR  OGAN  said  that  Department of  Revenue  staff  would  be                                                               
available to answer questions via teleconference.                                                                               
                                                                                                                                
SENATOR  LINCOLN noted  a concern  was raised  on the  House side                                                               
that  this  bill  is  too  broad and  could  give  incentives  to                                                               
projects  that don't  need them,  for example  projects in  areas                                                               
where  the  gas  is  not  stranded.   She  asked  if  that  is  a                                                               
possibility.                                                                                                                    
                                                                                                                                
REPRESENTATIVE  FATE said  he  does not  believe  so because  the                                                               
project must be  qualified and the qualified sponsor  must have a                                                               
certain level  of capitalization.  In addition, the  project must                                                               
produce at least 500 BCF of  gas so it sets benchmarks to prevent                                                               
a "fly-by night" operator to get in on this type of activity.                                                                   
                                                                                                                                
CHAIR OGAN said he shares  Senator Lincoln's concerns because the                                                               
requirement to  produce 500  BCF in  20 years is  so low  that it                                                               
could  provide a  two-year window  for a  project that  might not                                                               
even be  related to  North Slope  gas to  negotiate a  payment in                                                               
lieu of taxes.  He questioned whether the bill may  have a lot of                                                               
unintended consequences.                                                                                                        
                                                                                                                                
REPRESENTATIVE FATE said the  producers have already acknowledged                                                               
that negotiations will have to take  place but at such a level of                                                               
capitalization  that  even  with  the bar  lowered  to  encourage                                                               
others to get  in, very few Alaska companies could  meet it, even                                                               
with this piece of legislation.                                                                                                 
                                                                                                                                
CHAIR OGAN said Representative Fate  is missing the point because                                                               
this legislation is  not specific to the North  Slope anymore. He                                                               
suggested inserting  language on  page 2, line  15 to  read, "the                                                               
transportation of  North Slope natural  gas by a." He  noted that                                                               
would mean  the project has  to be principally,  not exclusively,                                                               
involved in North Slope natural gas.                                                                                            
                                                                                                                                
REPRESENTATIVE FATE said  he would not object to  that change. He                                                               
said HB  16 was his  attempt to clean  up the language  and allow                                                               
and encourage exploration of other hydrocarbon prospects.                                                                       
                                                                                                                                
CHAIR OGAN  said his intent  is to prevent creative  lawyers from                                                               
applying the incentives to projects they were not intended for.                                                                 
                                                                                                                                
SENATOR  ELTON said  nothing in  the  bill compels  the state  to                                                               
enter into a  contract so, if the state  enters into negotiations                                                               
for a  questionable project, the  terms of the contract  would be                                                               
fundamentally different than  they would be with  a major company                                                               
from the  North Slope. Furthermore,  the fact that  the contracts                                                               
will  be  given  to  the legislature  for  confirmation  provides                                                               
additional protection. He asked if his understanding is correct.                                                                
                                                                                                                                
CHAIR OGAN  said he is  correct in  that any contract  would come                                                               
before the legislature for approval.                                                                                            
                                                                                                                                
SENATOR  ELTON  said he  believes  the  legislature needs  to  be                                                               
cautious about opening the door too  wide but, to some extent, it                                                               
has  to rely  on the  good faith  of the  administration that  is                                                               
negotiating the contracts.                                                                                                      
                                                                                                                                
CHAIR  OGAN  pointed out  that  Senator  Elton has  defended  the                                                               
Governor twice today.                                                                                                           
                                                                                                                                
REPRESENTATIVE  FATE noted  the  deadline  for applications  will                                                               
limit the  number of applicants.  That deadline was  extended one                                                               
year from  the original date  to allow other  Alaska corporations                                                               
that could meet the bar to do so.                                                                                               
                                                                                                                                
CHAIR OGAN  said although that is  true, once a precedent  is set                                                               
in legislation, an applicant with  a catch-all project would only                                                               
have to  extend the  date. There being  no further  questions, he                                                               
informed  members  that  he would  hold  this  legislation  until                                                               
Wednesday to give  members time to think  about possible changes.                                                               
He then told members he was  recently in Washington, D.C. and met                                                               
with Senator Murkowski's  chief of staff who has  been asked what                                                               
Alaska is  doing to help  commercialize natural gas.  The staffer                                                               
was not  aware the Legislature  was working on  this legislation.                                                               
He then took public testimony.                                                                                                  
                                                                                                                                
MS. WENDY KING, representing  Conoco-Phillips, stated support for                                                               
HB 16. Conoco-Phillips believes  a three-pronged strategy to make                                                               
a   gas  pipeline   a  reality   is  necessary.   First,  federal                                                               
legislation  should streamline  the  permitting process.  Second,                                                               
federal fiscal  legislation should provide insurance  against the                                                               
risk  of  extreme  price  volatility.  Third,  state  legislation                                                               
should reauthorize  the Stranded  Gas Act. As  currently written,                                                               
the Stranded Gas Act only applies to  an LNG project and not to a                                                               
gas  pipeline. It  also had  a  date of  June 30,  2001 by  which                                                               
companies had to file applications. If  it were not for those two                                                               
limitations, companies  that want to  build a gas  pipeline could                                                               
be negotiating with  the state today under the  Act, creating new                                                               
jobs. She repeated support for HB 16.                                                                                           
                                                                                                                                
CHAIR OGAN  asked why  no one  from BP or  Exxon is  available to                                                               
testify.                                                                                                                        
                                                                                                                                
MS. KING said she could not comment.                                                                                            
                                                                                                                                
SENATOR ELTON  asked the representatives  from the  Department of                                                               
Revenue to  address his  concern about  whether the  $1.5 million                                                               
cap is per application.                                                                                                         
                                                                                                                                
MR. DAN  DICKINSON, Director of  the Tax Division,  Department of                                                               
Revenue,  said  the  language  in  the  statute  is  the  correct                                                               
language. He  pointed out in  the fiscal note analysis  the words                                                               
"the   project  applicant(s)"   should  have   been  "a   project                                                               
applicant."  The  division  believes   there  will  be  only  one                                                               
application, but there could be more.                                                                                           
                                                                                                                                
SENATOR  ELTON  said  his  concern   is  that  in  the  statutory                                                               
language, the companies are  called "applicants." Therefore, when                                                               
the word "application" is used, he  assumes it would be up to the                                                               
companies to  bundle if they wanted  to. In that case,  the state                                                               
could not be reimbursed for costs over $1.5 million.                                                                            
                                                                                                                                
MR. DICKINSON said  he believes if multiple  companies qualify as                                                               
the  sponsor of  a single  project,  they would  submit a  single                                                               
application. He  noted that  AS 43.82.120  says that  a qualified                                                               
sponsor or qualified sponsor group may submit an application.                                                                   
                                                                                                                                
TAPE 03-21, SIDE A                                                                                                            
                                                                                                                                
SENATOR ELTON said  his concern is that two  thresholds are being                                                               
applied: one a  reasonable threshold; the other  is reasonable up                                                               
to $1.5 million. He  said it sounds as though that  may not be of                                                               
concern to others.                                                                                                              
                                                                                                                                
CHAIR OGAN said  he believes the committee needs  to establish on                                                               
the   record  that   the  legislature's   intent  is   that  each                                                               
application cannot exceed  $1.5 million but it does  not limit it                                                               
to only one application. He stated,  "We may wish to put language                                                               
in there  that there  can be  more than  one application  just to                                                               
make it really clear so creative lawyers don't get creative."                                                                   
                                                                                                                                
SENATOR ELTON suggested getting  that language from Mr. Dickinson                                                               
rather than himself.                                                                                                            
                                                                                                                                
MR.  DICKINSON drew  members' attention  to  AS 43.82.160,  which                                                               
addresses   multiple  applications   for  similar   or  competing                                                               
qualified projects and said HB  16 says the limit per application                                                               
is $1.5 million.                                                                                                                
                                                                                                                                
CHAIR OGAN felt that clarified the issue.                                                                                       
                                                                                                                                
MR.  MARK  MYERS,  Director  of  the Division  of  Oil  and  Gas,                                                               
Department  of  Revenue,  stated  support  of  the  project.  The                                                               
division recognizes,  particularly with the North  Slope project,                                                               
with  over  35  TCF  approved  and over  100  TCF  of  additional                                                               
potential  gas,  the  gas pipeline  will  enable  development  of                                                               
Alaska's  incredible  gas resources  for  at  least the  next  50                                                               
years. He stated  HB 16 sets the stage  for broad-based technical                                                               
negotiations between project sponsors and the administration.                                                                   
                                                                                                                                
CHAIR OGAN  said there is  a noticeable difference in  the number                                                               
of people testifying  today and the number that  testified at the                                                               
last Joint Natural  Gas Pipeline Committee hearing.  He asked Mr.                                                               
Myers his read on that change.                                                                                                  
                                                                                                                                
MR. MYERS  said the state  is looking  at a good  opportunity for                                                               
development of  gas due to higher  gas prices. He noted  the last                                                               
year   has  illustrated   that   supply  in   North  America   is                                                               
problematic.  Overall, people  are  more optimistic  about a  gas                                                               
line, especially  with the war in  the Persian Gulf. He  said the                                                               
three major producers  on the North Slope are  very interested in                                                               
the project,  as are individual  producers. He could  not explain                                                               
why they  were not at today's  meeting, but he believes  they are                                                               
more optimistic  about the project  now than they have  been over                                                               
the last few years.                                                                                                             
                                                                                                                                
CHAIR OGAN pointed out that HB 16  is written so that it grants a                                                               
short-term window  of two years and  makes no mention of  a route                                                               
or the location of the gas. He  reads that to mean a company that                                                               
wants to  build a pipeline  over the  next two years  could apply                                                               
for the incentives  as long as the company could  produce 500 BCF                                                               
over the next 20 years. He asked Mr. Myers if he agrees.                                                                        
                                                                                                                                
MR. MYERS said  he does agree. The standard is  broad; it applies                                                               
statewide and  includes GTL and  LNG projects. He said  he agrees                                                               
with  Representative Fate's  statement that  the state  could not                                                               
permit  an over-the-top  pipeline  under  AS 38.35.017(b),  which                                                               
does not  allow the commission  to issue  a lease for  a pipeline                                                               
across  state  land  in  or  adjacent to  the  Beaufort  Sea  for                                                               
pipeline  right-of-way  purposes  to  authorize  construction  or                                                               
operation of  a natural gas  pipeline.   However, that is  not to                                                               
say fiscal  terms on a pipeline  could not be negotiated  or that                                                               
one could never be permitted under current law.                                                                                 
                                                                                                                                
CHAIR  OGAN  asked   if  that  would  not   prevent  the  federal                                                               
government from  doing it,  although it  can't traverse  ANWR and                                                               
would have to put  a pipeline three miles off of  the coast to be                                                               
in federal water.                                                                                                               
                                                                                                                                
MR. MYERS said that is correct.  The pipeline would have to cross                                                               
state waters  at some  point and  get from  Prudhoe Bay  to Point                                                               
Thompson and over.                                                                                                              
                                                                                                                                
CHAIR OGAN asked if GTLs  would be transported in the TransAlaska                                                               
pipeline.                                                                                                                       
                                                                                                                                
MR. MYERS said under the definition  of the project, a GTL or LNG                                                               
project would qualify.  He referred to subsection (C)  on page 2,                                                               
line 19.                                                                                                                        
                                                                                                                                
CHAIR OGAN asked if a  qualified group could negotiate tax breaks                                                               
on a GTL plant that might affect the North Slope Borough.                                                                       
                                                                                                                                
MR. MYERS said that could be done.                                                                                              
                                                                                                                                
CHAIR OGAN  said it  is his  opinion that  GTLs should  be talked                                                               
about in a  separate discussion. He referred to  language on page                                                               
3, lines 11 and 12, and asked who "has a dog in that fight?"                                                                    
                                                                                                                                
MR.  MYERS said  he believes  Representative Fate  addressed that                                                               
question when  he said  the threshold is  high enough  to require                                                               
parties  to   be  very  serious   about  the  project   and  have                                                               
significant capitalization. He  said the intent was to  try to be                                                               
inclusive to capture more potential sponsors.                                                                                   
                                                                                                                                
CHAIR OGAN asked if Anadarko would qualify.                                                                                     
                                                                                                                                
MR. MYERS said  depending on the project, he  believes that could                                                               
happen.                                                                                                                         
                                                                                                                                
CHAIR OGAN asked if the  North Slope Regional Corporation or Cook                                                               
Inlet Regional Corporation could qualify.                                                                                       
                                                                                                                                
MR.  MYERS replied,  "Mr.  Chairman, I  believe  a consortium  of                                                               
Native  corporations  certainly  would  have  the  net  worth  on                                                               
several potential projects."                                                                                                    
                                                                                                                                
CHAIR OGAN  asked if  Mr. Myers  could think  of anyone  else who                                                               
would qualify.                                                                                                                  
                                                                                                                                
MR. MYERS said that some  of the major pipeline companies outside                                                               
of the state could.                                                                                                             
                                                                                                                                
SENATOR ELTON  said he has  no problem  with the bill  as written                                                               
but the bill  cannot be heard in the Senate  Finance Committee on                                                               
Thursday unless it moves from committee today.                                                                                  
                                                                                                                                
CHAIR OGAN said he would like to  work with the bill sponsor on a                                                               
few details so he will hold it in committee one more day.                                                                       
                                                                                                                                
CHAIR OGAN then told members it is  an honor to work with them as                                                               
he feels the Senate Resources  Committee members have some of the                                                               
brightest minds in the Legislature and ask very good questions.                                                                 
                                                                                                                                
There being  no further  business to  come before  the committee,                                                               
CHAIR OGAN adjourned the meeting at 5:33 p.m.                                                                                   

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