Legislature(2005 - 2006)BUTROVICH 205

01/26/2005 03:30 PM RESOURCES

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* first hearing in first committee of referral
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= bill was previously heard/scheduled
Moved SJR 2 Out of Committee
Moved CSSB 32(RES) Out of Committee
Heard & Held
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        January 26, 2005                                                                                        
                           3:37 p.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Senator Thomas Wagoner, Chair                                                                                                   
Senator Ralph Seekins, Vice Chair                                                                                               
Senator Ben Stevens                                                                                                             
Senator Fred Dyson                                                                                                              
Senator Bert Stedman                                                                                                            
Senator Kim Elton                                                                                                               
Senator Gretchen Guess                                                                                                          
MEMBERS ABSENT                                                                                                                
All members present                                                                                                             
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 32                                                                                                              
"An Act permitting grants to certain regulated public utilities                                                                 
for water quality enhancement projects and water supply and                                                                     
wastewater systems."                                                                                                            
     MOVED CSSB 32(RES) OUT OF COMMITTEE                                                                                        
SENATE JOINT RESOLUTION NO. 2                                                                                                   
Urging the United States Congress to pass legislation to open                                                                   
the coastal plain of the Arctic National Wildlife Refuge,                                                                       
Alaska, to oil and gas exploration, development, and production.                                                                
     MOVED SJR 2 OUT OF COMMITTEE                                                                                               
SENATE BILL NO. 69                                                                                                              
"An Act making special appropriations to promote the opening of                                                                 
the Arctic National Wildlife Refuge for oil and gas exploration                                                                 
and development; and providing for an effective date."                                                                          
     HEARD AND HELD                                                                                                             
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB  32                                                                                                                  
SHORT TITLE: WATER/SEWER/WASTE GRANTS TO UTILITIES                                                                              
SPONSOR(s): SENATOR(s) THERRIAULT                                                                                               
01/11/05       (S)       PREFILE RELEASED 12/30/04                                                                              
01/11/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/11/05       (S)       RES, FIN                                                                                               
01/26/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: SJR  2                                                                                                                  
SHORT TITLE: ENDORSING ANWR LEASING                                                                                             
SPONSOR(s): RESOURCES                                                                                                           
01/11/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/11/05       (S)       RES                                                                                                    
01/26/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: SB  69                                                                                                                  
SHORT TITLE: APPROP: GRANT TO ARCTIC POWER FOR ANWR                                                                             
SPONSOR(s): RESOURCES                                                                                                           
01/21/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
01/21/05       (S)       RES, FIN                                                                                               
01/26/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
Senator Gene Therriault                                                                                                         
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of SB 32.                                                                                         
Commissioner Jim Strandberg                                                                                                     
Regulatory Commission of Alaska                                                                                                 
701 W Eighth Ave Ste 300                                                                                                        
Anchorage, AK  99501                                                                                                            
POSITION STATEMENT: Commented on SB 32.                                                                                       
Ms. Kara Moriarty, President and CEO                                                                                            
Fairbanks Greater Chamber of Commerce                                                                                           
Fairbanks, AK 99707                                                                                                             
POSITION STATEMENT: Supports SB 32.                                                                                           
Ms. Mary Jackson                                                                                                                
Staff to Senator Wagoner                                                                                                        
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SJR 2 and SB 69 for the                                                                      
Ms. Debbie Miller                                                                                                               
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposes SJR 2 and SB 69.                                                                                  
Mr. Fran Mauer                                                                                                                  
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposes SJR 2 and SB 69.                                                                                  
Ms. Luci Beach, Executive Director                                                                                              
Gwichen Steering Committee                                                                                                      
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Opposes SJR 2 and SB 69.                                                                                  
Mr. Al Adams, former Alaska State Senator                                                                                       
Volunteer, Arctic Power                                                                                                         
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SJR 2.                                                                                           
Mr. Mike Navarre                                                                                                                
Arctic Power Board                                                                                                              
Fairbanks AK                                                                                                                    
POSITION STATEMENT: Supports SB 69.                                                                                           
Mr. Joe Mathis                                                                                                                  
Montana Creek Campground                                                                                                        
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 69.                                                                                           
Mr. Matt Fagnani                                                                                                                
NANA Development Corporation                                                                                                    
Anchorage AK                                                                                                                    
POSITION STATEMENT: Supports SB 69.                                                                                           
ACTION NARRATIVE                                                                                                              
CHAIR  THOMAS   WAGONER  called  the  Senate   Resources  Standing                                                            
Committee meeting  to order at  3:37:50 PM. Present  were Senators                                                            
Elton, Dyson,  Ben Stevens, Stedman  and Chair Wagoner.  The first                                                              
order of business to come before the committee was SB 32.                                                                       
          SB  32-WATER/SEWER/WASTE GRANTS TO UTILITIES                                                                      
SENATOR THERRIAULT, sponsor of SB 32, said it was introduced to                                                                 
correct a problem that manifested itself with the sale of the                                                                   
Fairbanks Municipal Water System.                                                                                               
He said The State of Alaska provides a water system grant                                                                       
program specifically to keep water utility rates affordable and                                                                 
     The  program  is authorized  through  AS  46.03.030  and                                                                   
     available   funds    are   accessible    through   grant                                                                   
     applications. However,  because of changing  patterns of                                                                   
     ownership,  not  all state  regulated  public  utilities                                                                   
     under  the Regulatory  Commission  of  Alaska (RCA)  are                                                                   
     now  eligible  for  those state  grants.  The  Fairbanks                                                                   
     water  utility  became  ineligible to  apply  for  these                                                                   
     grants  when it  was sold  to  a private  entity. SB  32                                                                   
     amends current  law to accommodate the growing  trend of                                                                   
     publicly  regulated,  privately-owned,  utility  systems                                                                   
     while  remaining  consistent  with  the  law's  original                                                                   
     intent of keeping  safe water affordable to  the public.                                                                   
     With  the changes  to AS 46.03.030  made  in SB 32,  all                                                                   
     public utilities  subject to the burdens  and associated                                                                   
     costs imposed  by the state RCA regulations  will now be                                                                   
     eligible  to apply for  grants as currently  established                                                                   
     under AS 46.03.                                                                                                            
3:39:13 PM                                                                                                                    
SENATOR SEEKINS arrived.                                                                                                        
3:39:24 PM                                                                                                                    
SENATOR THERRIAULT iterated that the Fairbanks water utility                                                                    
sale into private ownership made the City of Fairbanks                                                                          
ineligible to apply for the grants.                                                                                             
     The  policy question  for us  as legislators  is if  the                                                                   
     federal  government  makes  money  available  to  assure                                                                   
     that  the broadest  number  of  people possible  have  a                                                                   
     safe  and  affordable  source of  drinking  water,  then                                                                   
     should   the   ownership  structure   of   the   utility                                                                   
     determine  whether  the  people   can  apply  for  those                                                                   
     grants  or  not.  My  contention  to  you  is  that  the                                                                   
     ownership  structure shouldn't  automatically make  that                                                                   
     group of citizens in the State of Alaska ineligible.                                                                       
3:40:15 PM                                                                                                                    
     I know there  is some question with regard  to 'Well, if                                                                   
     a privately held  entity is able to seek a  grant, get a                                                                   
     grant,  expand facilities  or  update equipment,  should                                                                   
     that private  entity be able  to enrich the  pocketbooks                                                                   
     of its  owners through  the future  sale of the  entity,                                                                   
     then,  to somebody  else?'  But the  way  that the  rate                                                                   
     structure looks,  RCA would not allow a  rate that would                                                                   
     allow  a new owner  to recoup  the cost  of buying  that                                                                   
     transparent  asset. So, when  a grant  is given and  the                                                                   
     money  is invested  into the  system that  is placed  on                                                                   
     the  books as  a transparent  asset. If  the utility  is                                                                   
     then sold to  somebody else, the buyer is  only going to                                                                   
     pay a  price that he  can then charge  a rate to  recoup                                                                   
     his money.  If RCA does not  allow you to charge  a rate                                                                   
     for  that part  of the  infrastructure that  was put  in                                                                   
     place  through a grant,  then the  owner's not going  to                                                                   
     pay  that  price. He  is  only  going  to pay  for  that                                                                   
     portion  of the  assets that  he can  actually charge  a                                                                   
     rate for to recoup his purchase prices.                                                                                    
SENATOR  THERRIAULT   noted  correspondence  from   Nan  Thompson,                                                              
former RCA chairperson, that supported his statement.                                                                           
CHAIR WAGONER asked how that would be tracked.                                                                                  
SENATOR  THERRIAULT replied  that  he wasn't  sure. Department  of                                                              
Environmental  Conservation  (DEC) might  be  able  to answer  how                                                              
utilities indicate equity ownership on the books.                                                                               
3:42:54 PM                                                                                                                    
He said  an inadvertent problem  with the wording was  created for                                                              
the  City of  Ketchikan and  that proposed  Amendment 1  addresses                                                              
3:43:12 PM                                                                                                                    
SENATOR  SEEKINS  asked  if  there  was  an  accounting  when  the                                                              
Fairbanks utilities  were sold  to a private  entity that  said it                                                              
couldn't sell the assets that were granted to it.                                                                               
SENATOR THERRIAULT  replied that he didn't know, but  the rate the                                                              
purchasing entity  applied for couldn't include repayment  for any                                                              
money it used to buy the grant portion of the asset.                                                                            
SENATOR SEEKINS  mused, "So,  if it goes  from public  to private,                                                              
they couldn't  do it. So,  we can assume  that going  from private                                                              
to public they couldn't, as well."                                                                                              
3:44:44 PM                                                                                                                    
SENATOR THERRIAULT  replied  he understands  that as ownership  of                                                              
transparent assets  float along,  no one can  put together  a rate                                                              
that recoups  money for infrastructure  that has been paid  for by                                                              
a grant.                                                                                                                        
3:45:07 PM                                                                                                                    
SENATOR SEEKINS responded  that the grants are for  the benefit of                                                              
the  end users,  the  citizens of  the state.  He  asked if  Power                                                              
Equalization   Program  funds   are   channeled  through   private                                                              
utilities for the benefit of the end user.                                                                                      
SENATOR THERRIAULT  replied that he  didn't know how  those grants                                                              
SENATOR SEEKINS said  it appears to him that the  intent is to try                                                              
to lower  the cost for the  end user whether  it is a public  or a                                                              
private utility.                                                                                                                
3:45:47 PM                                                                                                                    
SENATOR STEDMAN offered Amendment 1.                                                                                            
                       A M E N D M E N T                                                                                    
OFFERED IN THE SENATE                     BY SENATOR THERRIAULT                                                                 
     TO:  SB 32                                                                                                                 
Page 1, line 1:                                                                                                                 
     Delete "regulated"                                                                                                       
Page 2, line 17, following "if":                                                                                                
     Insert "(1)"                                                                                                               
Page 2, line 18, following "AS 42.05":                                                                                          
     Insert "; or                                                                                                               
               (2)  the utility is owned and operated by a                                                                      
     political subdivision of the state that is a municipality"                                                                 
He   explained   that  it   doesn't   modify  the   ability   that                                                              
municipalities  currently  have from  entering  this program,  but                                                              
keeps  the playing  field  level  by including  private  utilities                                                              
that were once public and then sold into the private sector.                                                                    
3:47:19 PM                                                                                                                    
SENATOR   ELTON  objected   to  ask  more   about  the   Ketchikan                                                              
situation. He  also asked if  deleting "regulated" from  the title                                                              
expanded the pool of potential applicants for the grant program.                                                                
3:48:06 PM                                                                                                                    
SENATOR STEDMAN  responded that  Ketchikan is included  with other                                                              
municipalities that  have enterprise funds. This  bill would allow                                                              
a lot  more communities  to become eligible  to apply  for grants.                                                              
He thought Juneau has an enterprise fund for its utilities.                                                                     
3:48:53 PM                                                                                                                    
SENATOR THERRIAULT  said he understands that the  problem comes up                                                              
with  the   word  "regulated"  and   asked  if  that   meant  just                                                              
regulation  by  the  RCA.  Ketchikan   is  regulated  by  its  own                                                              
separate  public utility  board.  He didn't  intend for  it to  be                                                              
precluded and this legislation clarifies that.                                                                                  
3:49:40 PM                                                                                                                    
SENATOR ELTON  asked if deleting  "regulated" expands the  pool of                                                              
new applicants who want access to the grant funds.                                                                              
3:50:20 PM                                                                                                                    
SENATOR   THERRIAULT  replied   yes,  the   group  that   requests                                                              
regulation  could expand,  but this  amendment  was structured  to                                                              
specifically  take care  of  those entities  that  have their  own                                                              
public  utility   board.   Presently  there   are  23  water   and                                                              
wastewater  utilities in  the state.  That number  could go  up to                                                              
170, but  he didn't  expect that many  real small utilities  would                                                              
3:51:28 PM                                                                                                                    
SENATOR  ELTON asked  if  adopting Amendment  1  would change  the                                                              
fiscal note.                                                                                                                    
3:51:53 PM                                                                                                                    
SENATOR  THERRIAULT replied  that  Amendment 1  doesn't solve  the                                                              
department's  potential fiscal problem  of having  a flood  of new                                                              
grant   applications.   He   was   willing  to   work   with   the                                                              
administration to control the fiscal impact.                                                                                    
3:52:34 PM                                                                                                                    
SENATOR  ELTON asked  how much  money has  been available  through                                                              
the grant program over the years?                                                                                               
3:53:02 PM                                                                                                                    
SENATOR  THERRIAULT replied  that  the FY'06  budget  appropriates                                                              
$11  million to  the  grant program.  The  bill doesn't  guarantee                                                              
qualification  for the funds,  but it allows  entities to  turn in                                                              
an  application, to  have  it scored  and  be  evaluated with  all                                                              
other applicants.                                                                                                               
3:53:28 PM                                                                                                                    
SENATOR ELTON  said the  pie doesn't  increase, but "You're  going                                                              
to cut it into more slices is the likely result."                                                                               
SENATOR THERRIAULT agreed that was correct.                                                                                     
3:53:59 PM                                                                                                                    
CHAIR WAGONER asked  if there was further discussion  on Amendment                                                              
1. There were no further objections and Amendment 1 was adopted.                                                                
3:54:14 PM                                                                                                                    
SENATOR GUESS asked  if there might be unintended  consequences by                                                              
having  one   utility  that  serves   multiple  areas   getting  a                                                              
different reimbursement  rate than if  it was getting a  grant for                                                              
one of its  specific areas - in  reference to language  on page 2,                                                              
line 4.                                                                                                                         
3:54:53 PM                                                                                                                    
SENATOR  THERRIAULT  said  he didn't  think  a  grant  application                                                              
could be put  in for a specific  area - neither could  he think of                                                              
a utility  that would fall into  the category of  serving separate                                                              
and distinct areas.                                                                                                             
3:55:07 PM                                                                                                                    
SENATOR GUESS  asked if  there was  a reason  language on  page 1,                                                              
line 13,  refers to  municipalities and  public utilities,  but on                                                            
page  2, lines  4-11  "municipalities  with"  is deleted  so  that                                                              
language  refers   only  to  utilities.   She  was   wondering  if                                                              
"municipality or" should  be deleted in (e) to  be consistent with                                                              
language on page 2.                                                                                                             
SENATOR  THERRIAULT explained  that  language "municipality  with"                                                              
means any ownership that was non-municipal would be excluded.                                                                   
3:56:43 PM                                                                                                                    
SENATOR SEEKINS  moved CSSB 32(RES)  from committee  with attached                                                              
fiscal notes and individual recommendations.                                                                                    
SENATOR  ELTON  objected   to  note  that  the   city  manager  of                                                              
Petersburg,  who has  some experience  with  the program,  opposes                                                              
the  bill.  He  would  be  more  comfortable  with  some  kind  of                                                              
communication from  the Alaska Municipal  League (AML) or  a group                                                              
that recognizes  organized municipalities  on what the  net effect                                                              
may  be  for  them. He  especially  thought  about  the  potential                                                              
diminishment of  grants - their number  and size - that  may occur                                                              
across the board.                                                                                                               
3:58:12 PM                                                                                                                    
CHAIR  WAGONER  responded  that  he  discussed  that  letter  with                                                              
Senator Therriault,  but not with Senator Stedman,  who represents                                                              
Petersburg.  He pointed  out that  this bill  goes to the  Finance                                                              
Committee next and  Senator Stedman has a seat  on that committee.                                                              
The question could be asked there.                                                                                              
3:58:41 PM                                                                                                                    
SENATOR  THERRIAULT  commented that  he  understands  Petersburg's                                                              
concerns,  which are  twofold.  One is  whether  a private  entity                                                              
could make  a profit at  the state's expense  by having  access to                                                              
these grants;  but the  RCA has assured  the Legislature  it would                                                              
not  allow a  rate for  an entity  to repay  itself for  something                                                              
that was constructed using grant fund money.                                                                                    
The  second issue  is more  entities  will potentially  be in  the                                                              
pool to  compete for the  same size pie.  He is proposing  to just                                                              
go  back to  the kind  of participants  that existed  a few  years                                                              
ago. He  feels if government  money (mostly federal)  is available                                                              
to  make a  safe  and affordable  source  of  drinking water,  the                                                              
ownership   structure   shouldn't   preclude  some   people   from                                                              
qualifying and some not.                                                                                                        
4:00:53 PM                                                                                                                    
CHAIR  WAGONER recognized  that James  Keen, RCA,  was on  line to                                                              
answer questions.                                                                                                               
4:01:06 PM                                                                                                                    
SENATOR ELTON  said he  understands adding  the Fairbanks  utility                                                              
back,  but the  fiscal note  says  there are  193 other  potential                                                              
applicants.  "Did  they have  access  to  the  grant fund  in  the                                                              
4:01:38 PM                                                                                                                    
SENATOR  THERRIAULT answered  that  the total  pool of  applicants                                                              
would be  larger under  the new  structure. However, he  seriously                                                              
questioned  whether every small  trailer park  would want  to live                                                              
under  RCA  regulation on  the  off-chance  that  it might  get  a                                                              
4:02:19 PM                                                                                                                    
SENATOR ELTON  said he  didn't have the  comfort level  to support                                                              
the bill at this point.                                                                                                         
4:02:56 PM                                                                                                                    
SENATOR  STEDMAN  said  that  the fiscal  note  would  come  under                                                              
scrutiny in the  Finance Committee and the AML would  have time to                                                              
have some  input. He thought it  would be impossible  for entities                                                              
to profiteer off of the grants.                                                                                                 
4:03:32 PM                                                                                                                    
CHAIR WAGONER  asked how  transactions are  accounted for  and how                                                              
that cost  would be  avoided being  passed on to  the user  of the                                                              
utility system at a future date.                                                                                                
4:04:27 PM                                                                                                                    
COMMISSIONER JIM STRANDBERG,  RCA, replied sale of a  utility is a                                                              
commercial  agreement between  two entities.  The regulators  will                                                              
only allow the new  owner to have a rate at a  certain level based                                                              
on  the  depreciated  book  value   of  the  infrastructure,  less                                                              
contributions in  AIDA construction. If the entity  that purchased                                                              
the utility  wanted it bad  enough and paid  a lot more  than what                                                              
the  book  value was,  that's  its  business.  That would  not  be                                                              
allowed in the rate to be charged to the future ratepayer.                                                                      
4:06:40 PM                                                                                                                    
SENATOR  SEEKINS  commented  that  he would  vote  for  this  bill                                                              
because  it appears  that  people  from 96  additional  utilities,                                                              
public  or  private,   will  benefit  without   discrimination  in                                                              
getting  public funding  for safe  water. If  the goal  is to  get                                                              
safe  water to  as many  people in  Alaska as  possible, that's  a                                                              
good public purpose.                                                                                                            
4:07:46 PM                                                                                                                    
MS. KARA  MORIARTY, President and  CEO, Fairbanks  Greater Chamber                                                              
of Commerce,  supported SB 32 and  the concept that  all utilities                                                              
should be  on the same  playing field and  be eligible  to receive                                                              
state grant funds.                                                                                                              
     Currently,  the only  utilities  that  are eligible  for                                                                   
     the  grants are publicly  owned and  are primarily  used                                                                   
     for infrastructure  development  and upgrades. Based  on                                                                   
     regulations  set forward  by  the Regulatory  Commission                                                                   
     of  Alaska,   the  shareholders   and  privately   owned                                                                   
     utilities  cannot generate  a  return  on investment  or                                                                   
     receive  depreciation  expense  credits  for  any  grant                                                                   
     funds they  receive. Because  of those regulations,  the                                                                   
     only beneficiaries,  then, of a privately-owned  utility                                                                   
     to receive  these grants  would be  the ratepayers,  the                                                                   
     citizens of a community.                                                                                                   
     All utilities  in Fairbanks  are either owned  privately                                                                   
     or by  a cooperative.  In essence, Fairbanks  businesses                                                                   
     and residents  are at a  disadvantage compared  to other                                                                   
     Alaska residents.  One of the  first questions  we often                                                                   
     field at  the Chamber  from perspective businesses  that                                                                   
     want  to locate to  Fairbanks or  even those  businesses                                                                   
     that are  here and want to  expand, is what is  the cost                                                                   
     of  doing business  and utility  costs  are certainly  a                                                                   
     major component of a business's operating costs....                                                                        
She concluded  by urging  the committee  to allow privately  owned                                                              
utilities to  be eligible for  grants like other  utilities across                                                              
the state.                                                                                                                      
4:10:53 PM                                                                                                                    
SENATOR  SEEKINS renewed  his  motion to  pass  CSSB 32(RES)  from                                                              
committee  with  individual recommendations  and  attached  fiscal                                                              
note.  Senators   Stedman,  Stevens,  Dyson,  Seekins   and  Chair                                                              
Wagoner  voted yea;  and  Senator Elton  voted  nay. CSSB  32(RES)                                                              
moved from committee.                                                                                                           
4:11:53 PM - 4:13:56 PM Recess                                                                                              
                 SJR  2-ENDORSING ANWR LEASING                                                                              
CHAIR WAGONER announced SJR 2 to be up for consideration.                                                                       
MS.  MARY JACKSON,  Staff to  Senator Wagoner,  said SJR  2 has  a                                                              
companion  bill in  the House adding  that opening  ANWR has  been                                                              
discussed  for  many years.  She  held  up a  commemorative  metal                                                              
sculpture indicating support for ANWR opening this year.                                                                        
4:15:56 PM                                                                                                                    
MS. DEBBIE MILLER,  Fairbanks resident, said she  has explored and                                                              
written  about the  Arctic  National  Wildlife Refuge  (ANWR)  and                                                              
even helped  conduct a wilderness  assessment of the 1002  area in                                                              
the  1980s. She  said it  is scenic  and the  wildlife values  are                                                              
extraordinary.  It is the  only area in  Alaska that  is protected                                                              
for its wildlife  while there is already a lot  of oil development                                                              
in  the  central  Arctic  region and  in  the  National  Petroleum                                                              
Reserve  Alaska  (NPRA). "We  have  no  business going  into  this                                                              
conservation  area.... It  was  not established  for  oil and  gas                                                              
4:17:45 PM                                                                                                                    
MS. MILLER proposed  amending line 6 by inserting  "or not permit"                                                              
after "to permit" further oil and gas exploration.                                                                              
4:18:43 PM                                                                                                                    
She  also suggested  inserting "some"  before  "residents" of  the                                                              
North  Slope  Borough support  development  on  page 1,  line  14,                                                              
because  some  do  not support  development.  The  entire  Gwichen                                                              
Nation is  against opening up  the Arctic Refuge  for development.                                                              
Nearly  half  of  Alaskans  and Americans  oppose  it.  The  state                                                              
should  not promote  development on  federally protected  wildlife                                                              
refuges  because  "They were  not  set  aside for  that  purpose."                                                              
Since  1964,  there has  been  no  new  oil  and gas  drilling  or                                                              
leasing on any wildlife refuge in the country.                                                                                  
4:20:55 PM                                                                                                                    
On  page 2,  she  urged  the committee  to  delete  lines  1 -  4,                                                              
because they are  not accurate. The estimated 3.2  billion barrels                                                              
of economically  recoverable oil  in the  Arctic Refuge  would not                                                              
significantly reduce  our nations future need for  imported oil or                                                              
increase oil or security.                                                                                                       
4:21:46 PM                                                                                                                    
MS.  MILLER  suggested  deleting  "giant"  on  page  2,  line  16,                                                              
because the United  States Geological Survey (USGS)  ruled out the                                                              
possibility of any super giant fields in the Arctic Refuge.                                                                     
4:22:25 PM                                                                                                                    
Finally, she suggested  deleting "2,000 to 7,000  acres" from line                                                              
23 saying  that Congressman  Don Young introduced  a bill  (HR 39)                                                              
that states  200,000  acres would  be up for  lease. She  surmised                                                              
that the  infrastructure  would not  be limited  to just 2,000  to                                                              
7,000 acres and that pipelines would be all over the place.                                                                     
4:23:54 PM                                                                                                                    
MR. FRAN  MAUER, Fairbanks resident,  said he worked for  24 years                                                              
as a wildlife  biologist on ANWR  and opposed SJR 2 or  any effort                                                              
to open  that area to  drilling and development.  He thinks  it is                                                              
inappropriate  for  any state  to  pursue development  that  would                                                              
jeopardize the integrity of a national conservation area.                                                                       
4:25:16 PM                                                                                                                    
He pointed  out the  inaccuracy in  lines 27  through 29  where it                                                              
says  that oil  and gas  activities  can be  conducted safely  and                                                              
without   adversely   affecting   the  environment   or   wildlife                                                              
population saying, "This is largely not true."                                                                                  
The Environmental  Impact Statement (EIS) prepared  for leasing in                                                              
the 1002  area found a strong  probability that  development would                                                              
have major  effects on caribou,  polar bears, musk  ox, wilderness                                                              
and subsistence.                                                                                                                
4:26:10 PM                                                                                                                    
MR. MAUER  also said  that page  2, lines 30  through 32,  say the                                                              
state will ensure  the continued health of Porcupine  Caribou herd                                                              
and  that is  not  true. Concentrations  of  calving caribou  have                                                              
been  displaced  during the  calving  season  in the  Prudhoe  Bay                                                              
area.  Fortunately, those  caribou  have a  broader coastal  plain                                                              
that accommodates  their displacement.  The Porcupine herd  in the                                                              
Arctic Refuge  has five times as  many caribou using  one-fifth as                                                              
much area  for calving. The  consequences of displacement  are far                                                              
4:27:33 PM                                                                                                                    
MS. LUCI  BEACH, Executive  Director, Gwichen Steering  Committee,                                                              
opposed SJR 2. She  also objected to language on  page 2, line 30,                                                              
saying that protection  of the herd and land is  not possible. The                                                              
Coastal  Plain is known  as the  Sacred Place  Where Life  Begins.                                                              
She explained  that the  Central Arctic Caribou  herd has  a range                                                              
of  100 miles  from  the  Beaufort Sea  to  the foothills  of  the                                                              
Brooks Range,  so it has some  place to go. The  Porcupine Caribou                                                              
herd has only  a 40-mile range up  to the foothills of  the Brooks                                                              
Range and that's where predators live.                                                                                          
4:30:22 PM                                                                                                                    
MR.  AL ADAMS,  former Alaska  State Senator,  said he  represents                                                              
Arctic Power that  advocates opening ANWR. It would  bring jobs to                                                              
Alaskans and energy for Americans.                                                                                              
     People  need  to  understand  as  far  as  the  land  is                                                                   
     concerned there  is about 18.5 million acres  of land in                                                                   
     ANWR.  We  do not  want  to  touch  8 million  acres  of                                                                   
     wilderness  or the 9  million acres  of the Refuge.  The                                                                   
     only area we're  talking about is the 1.5  million acres                                                                   
     that  is   designated  right   here  for  oil   and  gas                                                                   
     development.  You hear  things  that we're  going to  go                                                                   
     there  and ruin  the wilderness  or  the Refuge.  You're                                                                   
     not  touching any of  those.... Basically,  on that  1.5                                                                   
     million acres  we will be  touching areas 64%  less than                                                                   
     Prudhoe  Bay is.  The footprint  will  be much  smaller;                                                                   
     the  technology   for  oil   and  gas  development   has                                                                   
     changed....  We're talking  about maybe  2,000 acres  in                                                                   
     this particular area.                                                                                                      
     You  know, the  oil  operations of  the  North Slope  is                                                                   
     probably the  most regulated - efficient -  and uses the                                                                   
     highest of technology....                                                                                                  
     We have caribou  in the state of Alaska. We  have over 1                                                                   
     million  caribou. One  of the largest  western herds  is                                                                   
     450,000   animals.  The   Porcupine   herd  is   129,000                                                                   
     animals.  If  you  want  to   talk  about  polar  bears,                                                                   
     there's 2,700  polar bear up in the district  - bowheads                                                                   
     -  over  9,000   animals  up  there.  So,   animals  and                                                                   
     wildlife get along with that.                                                                                              
     Somebody   mentioned  Prudhoe   Bay.  When  we   finally                                                                   
     finished  that  in  1979,  we  only  had  3,000  animals                                                                   
     there.  In  Prudhoe  Bay  today  -  caribou  -  we  have                                                                   
     32,000.  So,   the  caribou  with  oil   development  is                                                                   
MR. ADAMS said  he understands the Gwichen Nation's  concern about                                                              
caribou, but  in 1984,  it leased  all of its  land -  1.8 million                                                              
acres  for $1.8  million. "Where  was  their concern  in 1984  for                                                              
their  caribou  and  the  sacred  land?  We,  the  Alaskans,  both                                                              
Inupiat people and Alaskans, would like to see that opened."                                                                    
He said that 75%  of Alaskans support the opening  of ANWR; 78% of                                                              
Kaktovik supports  it. He point out  a small purple area  on a map                                                              
of the area that  indicates private land holdings  of about 92,160                                                              
acres. He said  development would bring money to  the general fund                                                              
from royalties  and bonuses;  it will provide  jobs in  Alaska and                                                              
the U.S.                                                                                                                        
MR. ADAMS offered  one amendment - to give the  Native Village and                                                              
Kaktovik  $50,000  a  piece  for  one of  the  sections  on  their                                                              
4:31:02 PM                                                                                                                    
CHAIR  WAGONER asked  if the  Gwichen lease  was for  oil and  gas                                                              
4:35:26 PM                                                                                                                    
MR. ADAMS  replied yes. The consultant  at the time was  Donald R.                                                              
Wright.  He offered  to show  the  contract to  the committee  and                                                              
read the names of some people who signed it.                                                                                    
4:36:21 PM                                                                                                                    
CHAIR WAGONER asked  if the Arctic Slope Corporation  is precluded                                                              
from development of oil or is the oil stranded.                                                                                 
4:36:41 PM                                                                                                                    
MR. ADAMS replied  that under federal law,  congressional approval                                                              
is needed before anything can be done in that section.                                                                          
4:37:05 PM                                                                                                                    
SENATOR  SEEKINS asked  how close  the Gwichens  live to the  1002                                                              
MR.  ADAMS replied  that they  live approximately  150 miles  away                                                              
from that particular area.                                                                                                      
     USGA  estimates  between  5.7  billion  and  16  billion                                                                   
     barrels  in that  particular section.  Remember when  we                                                                   
     first estimated  Prudhoe Bay?  We estimated there  would                                                                   
     only be 10  billion barrels coming from Prudhoe  Bay and                                                                   
     as  of last  year  we have  already  shipped through  14                                                                   
     billion.  So, we estimate  there's going  to be a  large                                                                   
     amount of oil in that particular section.                                                                                  
4:38:08 PM                                                                                                                    
SENATOR  SEEKINS asked  if  he is  intimating  there  may be  some                                                              
economic reason for  the Gwichen people to keep  the Inupiat lands                                                              
closed to oil exploration.                                                                                                      
4:38:28 PM                                                                                                                    
MR.ADAMS replied no; each tribe has a right to its own opinion.                                                                 
4:39:00 PM                                                                                                                    
SENATOR  SEEKINS   moved  to  pass  SJR  2  from   committee  with                                                              
individual recommendations  and attached $0 fiscal  note. Senators                                                              
Stevens,  Dyson, Seekins,  Stedman  and Chair  Wagoner voted  yea;                                                              
and Senator Elton voted nay. SJR 2 moved from committee.                                                                        
4:40:24 PM - 4:43:02 PM Recess                                                                                              
         SB  69-APPROP: GRANT TO ARCTIC POWER FOR ANWR                                                                      
CHAIR WAGONER announced SB 69 to be up for consideration.                                                                       
MS. MARY  JACKSON,  staff to Senator  Wagoner,  sponsor of  SB 69,                                                              
said that the  House has a similar  bill, HB 101, but  the funding                                                              
was for $1.3 million.  Funding in SB 69 is for  $1.2 million; $1.1                                                              
million  of which  goes to  Arctic Power.  The remaining  $100,000                                                              
goes to the Native Village of Kaktovik.                                                                                         
MS. JACKSON  explained that Arctic  Power is a private  non-profit                                                              
entity  that has been  coordinating  the effort  on ANWR for  many                                                              
years.  Historically, the  funding  for promoting  the opening  of                                                              
ANWR is in the supplemental budget.                                                                                             
4:45:36 PM                                                                                                                    
MR.  MIKE NAVARRE,  Executive Board  member,  Arctic Power,  urged                                                              
quick  passage of SB  69. He  said the  opposition has  tremendous                                                              
resources that  it applies  in many ways,  like taking  things out                                                              
of context  and leaving  out important  information. Arctic  Power                                                              
has done  an extraordinary  job of  putting educational  materials                                                              
together  to help  educate  Congress, editorial  boards,  interest                                                              
groups and the general public.                                                                                                  
4:46:56 PM                                                                                                                    
MR. NAVARRE  said Arctic Power would  like to coordinate  with the                                                              
congressional  delegation  since  they  are  the  experts  on  the                                                              
ground  regarding the  efforts to  be made.  He said  this can  be                                                              
considered a long-term  investment for the state and  that some of                                                              
the members  of Arctic  Power have  dropped out  for a  variety of                                                              
reasons, but not because they don't support it.                                                                                 
4:48:12 PM                                                                                                                    
He gave  examples of the misinformation  that has  been propagated                                                              
- like the six months supply of gas.                                                                                            
     It's ludicrous,  but it continues to be used.  In all of                                                                   
     their testimony,  there is a failure to  acknowledge the                                                                   
     Inupiat's  from  the  village   of  Kaktovik  that  live                                                                   
     within  the Refuge.  They talk  about  the Gwichens  who                                                                   
     live outside  the Refuge, but  not about the  indigenous                                                                   
     people  who live within  the Refuge....  I believe  that                                                                   
     we do  oil development in  Alaska better than  any place                                                                   
     in the  world and we need  to carry that message  to the                                                                   
     United States and to Congress....                                                                                          
He noted  that regulations  would be passed  this year  that would                                                              
need to  be bird-dogged  over the  course; so,  the lapse  date is                                                              
4:49:59 PM                                                                                                                    
MR. JOE  MATHIS, Montana  Creek Campground  in Anchorage,  said he                                                              
is on the Arctic  Power Board. He has personally  traveled to ANWR                                                              
and agreed  totally with Mr. Navarre's  comments that SJR  2 needs                                                              
to have  a speedy  passage. He  said that  the Legislature  should                                                              
look at its investment  in Arctic Power as part  of Alaska's long-                                                              
term fiscal plan.                                                                                                               
4:51:49 PM                                                                                                                    
MR. MATT FAGNANI,  NANA Development Corporation, said  he has been                                                              
an active member  of the Arctic Power Board of  Directors since it                                                              
began. Each  year it gets  closer to meeting  the goal  of opening                                                              
the Coastal Plain  to responsible oil and gas  exploration. On the                                                              
expected lease  sale, the  state could  earn $2 billion  according                                                              
to  a U.S.  Department  of Interior  forecast.  That represents  a                                                              
222%  return on  investment, which  would occur  within 22  months                                                              
after signing  of the  bill. He said  that Arctic Power's  webpage                                                              
is  receiving over  1  million hits  a month.  He  thought it  was                                                              
happening  because of  two constants  - one  is because  President                                                              
Bush continues  to make the opening  of ANWR part of  the solution                                                              
in addressing  the nation's decline  in oil. The second  is Arctic                                                              
Power educating Congress and the public at large.                                                                               
4:55:08 PM                                                                                                                    
MS.  DEBBIE MILLER,  testified again  noting that  all the  people                                                              
who have testified  in favor of  Arctic Power are on its  Board or                                                              
affiliated with  it. She is a  private citizen and  thinks funding                                                              
Arctic Power is  a misappropriation of state  money and reiterated                                                              
that  she   would  rather  see   alternative  sources   of  energy                                                              
4:57:54 PM                                                                                                                    
MR. FRAN  MAUER opposed  funding Arctic  Power. Many other  people                                                              
do  not  support Arctic  Power.  He  said  two  of the  major  oil                                                              
companies that  are active  on the North  Slope no longer  support                                                              
Arctic Power and  perhaps they know something that  the state does                                                              
not.  He  thought Arctic  Power  funds  would  be better  used  by                                                              
investing   them  in   alternative  energy   projects  like   wind                                                              
generators for remote villages.                                                                                                 
4:59:10 PM                                                                                                                    
MS. LUCI  BEACH, Executive  Director, Gwichen Steering  Committee,                                                              
also opposed  SB 69.   The  Gwichen Nation  has never opposed  all                                                              
oil  development,  just some.  Her  suggestions for  using  Arctic                                                              
Power   money  to   fund   other  worthwhile   programs   included                                                              
assistance  to senior  citizens  who  were adversely  effected  by                                                              
elimination    of   the   Longevity    Bonus   Program,    Village                                                              
Contamination  Cleanup Fund, funding  for Alaska Scholars  Program                                                              
and funding to the University to enhance distance education so                                                                  
remote site students can have better access.                                                                                    
5:02:07 PM                                                                                                                    
CHAIR WAGONER thanked her for her testimony and said that SB 69                                                                 
would not be passed out of committee today.                                                                                     
5:02:36 PM                                                                                                                    
SENATOR ELTON  requested  having the annual  Arctic Power  reports                                                              
added  to  the committee's  packets.  Chair  Wagoner  acknowledged                                                              
that  would  happen.  There  being no  further  business  to  come                                                              
before the committee, he adjourned the meeting 5:03:07 PM.                                                                    

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