Legislature(2005 - 2006)BUTROVICH 205

04/25/2005 03:30 PM RESOURCES

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03:33:51 PM Start
03:36:18 PM SB113
03:45:11 PM Confirmation Hearings: || Department of Environmental Conservation (dec) Commissioner-select:
04:13:23 PM Alaska Department of Fish and Game (adf&g) - Commissioner-select
04:51:51 PM HB256
05:05:45 PM Alaska Natural Gas Development Authority (angda) Presentation by Harold Heinze
05:41:13 PM HJR9
05:43:19 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Confirmation Hearing: TELECONFERENCED
Commissioner Select:
ADEC - Kurt Fredriksson
ADF&G - McKie Campbell
+ ANGDA Presentation - Mr Harold Heinz TELECONFERENCED
-- Testimony <Invitation Only> --
Moved SB 113 Out of Committee
-- Testimony <Invitation Only> --
Moved HB 256 Out of Committee
Moved HJR 9 am Out of Committee
                    ALASKA STATE LEGISLATURE                                                                                  
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                         April 25, 2005                                                                                         
                           3:33 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                                                                                                             
OTHER MEMBERS PRESENT                                                                                                         
Senator Gary Stevens                                                                                                            
COMMITTEE CALENDAR                                                                                                            
SENATE BILL NO. 113                                                                                                             
"An Act relating to entry into and management of Gulf of Alaska                                                                 
groundfish fisheries."                                                                                                          
     MOVED SB 113 OUT OF COMMITTEE                                                                                              
CONFIRMATION HEARINGS:                                                                                                        
Commissioners Select:                                                                                                           
-Department of Environmental Conservation (DEC) - Kurt                                                                          
Fredrikkson, Acting Commissioner of DEC                                                                                         
-Alaska Department of Fish and Game (ADF&G) - McKie Campbell,                                                                   
Acting Commissioner                                                                                                             
     CONFIRMATIONS ADVANCED                                                                                                     
HOUSE BILL NO. 256                                                                                                              
"An Act naming the Ruth Burnett Sport Fish Hatchery in                                                                          
     MOVED HB 256 OUT OF COMMITTEE                                                                                              
Alaska Natural Gas Development Authority (ANGDA) presentation by                                                                
Harold Heinze                                                                                                                   
HOUSE JOINT RESOLUTION NO. 9 am                                                                                                 
Urging  the  United States  Congress  to  honor the  process  and                                                               
judgment of  the federal courts in  the case of the  Exxon Valdez                                                               
disaster  and to  refrain from  enacting  legislation that  would                                                               
affect the outcome of the courts' resolution of the case.                                                                       
     MOVED HJR 9 am OUT OF COMMITTEE                                                                                            
PREVIOUS COMMITTEE ACTION                                                                                                     
BILL: SB 113                                                                                                                  
SHORT TITLE: GULF OF ALASKA GROUNDFISH FISHERY                                                                                  
SPONSOR(s): SENATOR(s) STEVENS B BY REQUEST                                                                                     
02/23/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
02/23/05       (S)       RES, FIN                                                                                               
03/09/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/09/05       (S)       Heard & Held                                                                                           
03/09/05       (S)       MINUTE(RES)                                                                                            
03/16/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/16/05       (S)       Scheduled But Not Heard                                                                                
03/23/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
03/23/05       (S)       -- Meeting Canceled --                                                                                 
04/01/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/01/05       (S)       -- Meeting Canceled --                                                                                 
04/18/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
04/18/05       (S)       Heard & Held                                                                                           
04/18/05       (S)       MINUTE(RES)                                                                                            
04/23/05       (S)       RES AT 10:00 AM BUTROVICH 205                                                                          
04/23/05       (S)       Work Session to take <Public Testimony>                                                                
04/25/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: HB 256                                                                                                                  
SHORT TITLE: RUTH BURNETT SPORT FISH HATCHERY                                                                                   
SPONSOR(s): REPRESENTATIVE(s) RAMRAS                                                                                            
04/06/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/06/05       (H)       FSH, RES                                                                                               
04/11/05       (H)       FSH RPT 4DP                                                                                            
04/11/05       (H)       DP: HARRIS, WILSON, ELKINS, THOMAS                                                                     
04/11/05       (H)       FSH AT 8:30 AM CAPITOL 124                                                                             
04/11/05       (H)       Moved Out of Committee                                                                                 
04/11/05       (H)       MINUTE(FSH)                                                                                            
04/11/05       (H)       RES AT 1:00 PM CAPITOL 124                                                                             
04/11/05       (H)       Moved Out of Committee                                                                                 
04/11/05       (H)       MINUTE(RES)                                                                                            
04/12/05       (H)       RES RPT 6DP 1NR                                                                                        
04/12/05       (H)       DP: GATTO, ELKINS, CRAWFORD, SEATON,                                                                   
                        RAMRAS, SAMUELS;                                                                                        
04/12/05       (H)       NR: OLSON                                                                                              
04/14/05       (H)       TRANSMITTED TO (S)                                                                                     
04/14/05       (H)       VERSION: HB 256                                                                                        
04/15/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/15/05       (S)       RES                                                                                                    
04/25/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
BILL: HJR  9                                                                                                                  
SHORT TITLE: URGE CONGRESS HONOR EXXON VALDEZ JUDGMENT                                                                          
SPONSOR(s): REPRESENTATIVE(s) LEDOUX                                                                                            
02/14/05       (H)       READ THE FIRST TIME - REFERRALS                                                                        
02/14/05       (H)       RES, JUD                                                                                               
03/30/05       (H)       RES AT 1:00 PM SENATE FINANCE 532                                                                      
03/30/05       (H)       Moved Out of Committee                                                                                 
03/30/05       (H)       MINUTE(RES)                                                                                            
04/01/05       (H)       RES RPT 6DP                                                                                            
04/01/05       (H)       DP: OLSON, ELKINS, LEDOUX, CRAWFORD,                                                                   
                        RAMRAS, SAMUELS                                                                                         
04/11/05       (H)       JUD AT 1:00 PM CAPITOL 120                                                                             
04/11/05       (H)       Moved Out of Committee                                                                                 
04/11/05       (H)       MINUTE(JUD)                                                                                            
04/12/05       (H)       JUD RPT 4DP 3NR                                                                                        
04/12/05       (H)       DP: GRUENBERG, ANDERSON, COGHILL, GARA;                                                                
04/12/05       (H)       NR: KOTT, DAHLSTROM, MCGUIRE                                                                           
04/19/05       (H)       TRANSMITTED TO (S)                                                                                     
04/19/05       (H)       VERSION: HJR 9 AM                                                                                      
04/20/05       (S)       READ THE FIRST TIME - REFERRALS                                                                        
04/20/05       (S)       RES, JUD                                                                                               
04/25/05       (S)       RES AT 3:30 PM BUTROVICH 205                                                                           
WITNESS REGISTER                                                                                                              
KURT FREDRIKKSON                                                                                                                
Department of Environmental Conservation                                                                                        
410 Willoughby                                                                                                                  
Juneau, AK 99801-1795                                                                                                           
POSITION STATEMENT:  Confirmation candidate.                                                                                  
MCKIE CAMPBELL                                                                                                                  
Department of Fish & Game                                                                                                       
PO Box 25526                                                                                                                    
Juneau, AK  99802-5226                                                                                                          
POSITION STATEMENT: Confirmation candidate.                                                                                   
REPRESENTATIVE RAMRAS                                                                                                           
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Sponsor of HB 256.                                                                                        
HAROLD HEINZE, Executive Director                                                                                               
Alaska Natural Gas Development Authority (ANGDA)                                                                                
Anchorage AK                                                                                                                    
POSITION STATEMENT: Gave ANGDA presentation.                                                                                  
SUZANNE HANCOCK                                                                                                                 
Staff to Representative LeDoux                                                                                                  
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Presented HJR 9 for the sponsor.                                                                          
ACTION NARRATIVE                                                                                                              
CHAIR  THOMAS  WAGONER  called   the  Senate  Resources  Standing                                                             
Committee meeting to  order at 3:33:51 PM.  Present were Senators                                                             
Ben Stevens, Stedman, Seekins, Dyson, Elton and Chair Wagoner.                                                                  
            SB 113-GULF OF ALASKA GROUNDFISH FISHERY                                                                        
CHAIR WAGONER announced SB 113 to be up for consideration.                                                                      
SENATOR SEEKINS related that he  had received a response briefing                                                               
on  the constitutional  questions he  had asked  for in  the last                                                               
3:36:18 PM                                                                                                                    
SENATOR   BEN  STEVENS,   sponsor,   recapped   that  this   bill                                                               
establishes  a tool  to help  the Alaska  Department of  Fish and                                                               
Game (ADF&G)  ADF&G to meet  management goals and  he appreciated                                                               
the latitude the chairman has given people to testify on it.                                                                    
3:37:16 PM                                                                                                                    
SENATOR  BEN STEVENS  moved to  pass SB  113 from  committee with                                                               
individual recommendations  and attached fiscal note.  There were                                                               
no objections and it was so ordered.                                                                                            
3:37:33 PM - 3:38 - At ease                                                                                                   
3:38:08 PM                                                                                                                    
SENATOR GUESS joined the committee.                                                                                             
3:39:47 PM                                                                                                                    
CHAIR  WAGONER called  the meeting  back to  order and  said they                                                               
would next take up confirmation hearings.                                                                                       
^CONFIRMATION HEARINGS:                                                                                                       
^DEPARTMENT  OF  ENVIRONMENTAL CONSERVATION  (DEC)  COMMISSIONER-                                                             
KURT  FREDRIKKSON,  Commissioner-select  for  DEC,  reviewed  his                                                               
qualifications, extensive  environmental schooling  and training.                                                               
He  said  the DEC  needs  to  reinforce  its core  programs.  The                                                               
department  is entrusted  by the  Legislature to  do two  primary                                                               
things  - to  set environmental  standards and  enforce pollution                                                               
control. The  other major area  is with sanitation  and basically                                                               
protecting human health from unsanitary practices.                                                                              
MR.  FREDRIKKSON noted  a  bill  in the  legislature  for DEC  to                                                               
assume NPDES primacy under the Clean Water Act. He said:                                                                        
     That's a very important bill  and it speaks to the very                                                                    
     core  mission  of  our  department,   which  is  to  be                                                                    
     responsible   for  environmental   protection  and   to                                                                    
     control pollution to our waters.                                                                                           
The reason he would like to  be commissioner of DEC is because he                                                               
believes  in  environmental  conservation  and  believes  in  the                                                               
people who work in the department.                                                                                              
3:45:11 PM                                                                                                                    
MR. FREDRIKKSON  said he  would like to  move forward  in several                                                               
areas  - one  is succession  planning.  The department's  average                                                               
tenure for its 470 employees is a little over nine years.                                                                       
     We  have   a  workforce  that  is   graying.  I'm  very                                                                    
     interested in seeing  what we can do to  not only bring                                                                    
     the people who  are in the department up  into the jobs                                                                    
     that will  be vacated in the  not-too-distant future by                                                                    
     old timers,  people who have  long years tenure  in the                                                                    
     department,  but I'm  also interested  in how  we might                                                                    
     reach out to the university  system...to see how we can                                                                    
     bring Alaska  kids in through  the university  into the                                                                    
     department  through  internship  programs -  make  sure                                                                    
     that  the  course work  offered  by  the university  is                                                                    
     relevant   for   the    Department   of   Environmental                                                                    
     Conservation and  hopefully give the Alaskan  kids that                                                                    
     are going  through the school system  an opportunity to                                                                    
     get  employed   with  the  State  of   Alaska  and  the                                                                    
     Department of Environmental Conservation.                                                                                  
3:46:10 PM                                                                                                                    
MR.  FREDRIKKSON said  he intends  to reach  out to  the affected                                                               
parties  and to  the  stakeholder  public to  see  what more  the                                                               
department can do  to educate them about what it  is intending to                                                               
do before it's a completed deal. "I  want to bring them in at the                                                               
front end of the  process and not wait until the  tail end of the                                                               
3:48:43 PM                                                                                                                    
SENATOR SEEKINS  asked his  opinion of  the state  taking primacy                                                               
for environmental regulations.                                                                                                  
MR.  FREDRIKKSON  replied that  the  state  has a  constitutional                                                               
mandate  to be  in control  of  its own  affairs and  it must  be                                                               
responsible for its environmental quality.                                                                                      
3:51:02 PM                                                                                                                    
SENATOR  DYSON  said  he  heard   concerns  about  DEC  personnel                                                               
thwarting  development  and  asked  how  he  has  persuaded  this                                                               
administration  that  he  will  not  impede  development  of  the                                                               
state's natural resources.                                                                                                      
MR. FREDRIKKSON responded:                                                                                                      
     I think my  record speaks for itself. I've  served - in                                                                    
     fact  for 12  years  [and]  I've been  in  a number  of                                                                    
     exempt  positions.   I  think  had  I   been  too  pro-                                                                    
     environment,  too  anti-development  or vice  versa,  I                                                                    
     think, I  probably would  have been  weeded out  a long                                                                    
     time ago. Where I focus my  attention is on the law and                                                                    
     is on the elected governor.  I serve at the pleasure of                                                                    
     the governor. I have a  great deal of respect for state                                                                    
     government   and  how   it  operates   and  the   state                                                                    
SENATOR DYSON  asked how the  department's performance  should be                                                               
measured  in terms  of state  health  concerns. The  department's                                                               
former commissioner, Ernesta Ballard, said:                                                                                     
     Nice theory won't work. Basically  we need to grade our                                                                    
     performance based  on how many  of all  those variables                                                                    
     you bring other management. Is  that a fair synopsis of                                                                    
     that conversation?                                                                                                         
3:55:36 PM                                                                                                                    
MR.  FREDRIKKSON  replied  that  he   thought  that  was  a  fair                                                               
synopsis. He  said performance measures are  critically important                                                               
to the department and:                                                                                                          
     I do  think we need  to strive to have  better measures                                                                    
     that are  reflective of real  environmental conditions,                                                                    
     real health  conditions. So, I  know we are  working on                                                                    
     that and  I know  we are going  to have  discussions in                                                                    
     the future along those lines.                                                                                              
3:56:23 PM                                                                                                                    
SENATOR DYSON asked  how he intends to streamline  the process so                                                               
that  it's  easier  for  development  to  go  forward  with  more                                                               
MR.  FREDRIKKSON replied  that  he thought  the  key to  resource                                                               
development in this  state is to be aggressive about  it in terms                                                               
of environmental protection. The governor  has put steps in place                                                               
to bring that about and not by cutting environmental standards.                                                                 
     That's  not the  answer. We  believe the  answer is  to                                                                    
     move   forward   aggressively  on   the   environmental                                                                    
     protection standards.  For example  (National Pollutant                                                                    
     Discharge  Elimination System)  NPDES  -  it is  taking                                                                    
     control over  the process.  It is  getting down  on the                                                                    
     site getting site-specific  information that applies to                                                                    
     the questions at hand....                                                                                                  
3:58:06 PM                                                                                                                    
CHAIR WAGNER asked  about the proposed changes to  the food codes                                                               
and what he  is going to do to assure  the people who participate                                                               
from the  food industry that  their concerns are  addressed prior                                                               
to implementing those regulations.                                                                                              
MR.  FREDRIKKSON replied  that he  would demonstrate  that he  is                                                               
accountable and is taking their comments into consideration.                                                                    
     I  think   the  end  product  will   demonstrate  that.                                                                    
     Ultimately the  recourse to a concerned  public is back                                                                    
     through  the executive  branch as  well as  through the                                                                    
     legislative  branch.... Trust  is  not  just earned  by                                                                    
     words; it's earned by  demonstration.... You will trust                                                                    
     me when I can demonstrate that I am trustworthy....                                                                        
He said that he would record the  public record and put it in the                                                               
library so that everyone can have access to it.                                                                                 
4:00:55 PM                                                                                                                    
CHAIR  WAGONER  asked  him  if  recent  legislation  directs  the                                                               
department to reduce its costs.                                                                                                 
4:01:06 PM                                                                                                                    
MR. FREDRIKKSON replied that the  actual legislation directed the                                                               
department to train, test and certify food workers.                                                                             
     That's  what we're  attempting to  do.... I  expect the                                                                    
     regulations we  put out for  public review  will garner                                                                    
     that public  review - that  there will be  comments out                                                                    
     there  that will  cause us  to  change the  regulations                                                                    
     that  we public  notice.  I will  not rubber-stamp  any                                                                    
     regulation that  comes to me  that is just the  same as                                                                    
     the public review draft.                                                                                                   
4:02:10 PM                                                                                                                    
SENATOR SEEKINS asked him to  comment on the concept that planned                                                               
orderly growth and development of  the State of Alaska consistent                                                               
with the modern principles of  stewardship is what they should be                                                               
looking for. He always thought that stewardship meant wise use.                                                                 
MR. FREDRIKKSON  responded that the  primary tool  the department                                                               
uses to  regulate is called a  permit, not a prohibition,  and it                                                               
must follow quality standards for air, food and water.                                                                          
4:03:20 PM                                                                                                                    
SENATOR  SEEKINS said  he  sees  part of  the  objectives of  the                                                               
department to  be eliminating  confusion as  to what  the process                                                               
is,  so  that  someone can  come  in  and  have  some kind  of  a                                                               
reachable objective without having to  revisit it - that there is                                                               
a process that has an eventual exit.                                                                                            
     That's probably  one of the  things that  most concerns                                                                    
     people  when  they talk  to  me  about the  process  of                                                                    
     permitting  - that  you can  get to  the point  where a                                                                    
     permit is  issued or denied  and if it's denied  with a                                                                    
     plausible  reason  why....  How  are we  doing  in  the                                                                    
     department on that?                                                                                                        
4:04:37 PM                                                                                                                    
MR.  FREDRIKKSON replied  that the  department has  suffered from                                                               
that problem  for many  years - some  projects don't  know what's                                                               
required  of  them  and  the   process  is  too  burdensome.  The                                                               
department  has  no easy-to-follow  guidance  on  its website  on                                                               
whether a permit  is needed or not. "We need  to correct that....                                                               
And I think we are making inroads into that."                                                                                   
4:05:26 PM                                                                                                                    
He has  been impressed  with the  basic materials  the department                                                               
now sends to people in sanitation guidance, for instance.                                                                       
     I  think we  need to  work particularly  on our  permit                                                                    
     procedures,  what  is  required   to  comply  with  the                                                                    
     state's  environmental  laws. We  need  to  do more  to                                                                    
      reduce that burden and to make it a little more user-                                                                     
4:07:48 PM                                                                                                                    
MR.   FREDRIKKSON  said   it's   important   to  recognize   that                                                               
environmental  protection  and  resource  management  don't  have                                                               
clear  divisional lines  and his  department  works closely  with                                                               
ADF&G  and DNR  to  try to  not  get in  each  other's ways  when                                                               
permitting  projects.  In   many  cases  the  DNR   is  the  lead                                                               
coordinating agency that helps to avoid snafus.                                                                                 
4:08:34 PM                                                                                                                    
SENATOR SEEKINS  moved to forward  Mr. Fredrikkson's name  to the                                                               
full body for consideration. There  were no objections and it was                                                               
so ordered.                                                                                                                     
4:08:59 PM - 4:10:54 PM - At ease                                                                                           
^ALASKA  DEPARTMENT  OF FISH  AND  GAME  (ADF&G) -  Commissioner-                                                             
MCKIE CAMPBELL, Commissioner-select for  the Alaska Department of                                                               
Fish and  Game (ADF&G), reviewed  his resume' for  the committee.                                                               
He said he lived in Alaska for  26 years, has worked for both the                                                               
state  and the  legislature and  has worked  for himself  for the                                                               
last 10 years.                                                                                                                  
4:13:23 PM                                                                                                                    
He said his job  with ADF&G was the best job he  has ever had and                                                               
the number  and complexity of  issues that  he dealt with  is the                                                               
soul of Alaska. He  has not had one hint of  boredom since he has                                                               
been back.                                                                                                                      
     For  me  when  I  think  about the  role  of  fish  and                                                                    
     wildlife in Alaska, it is  so much more important to us                                                                    
     by orders of  magnitude than it is to  the residents of                                                                    
     any other states  that it just naturally  follows to me                                                                    
     we  should  have  the  very   best  fish  and  wildlife                                                                    
     management  agency in  the country.  And I  think there                                                                    
     was a  time that we could  say that. I also  think that                                                                    
     there are  parts of  the department  we could  say that                                                                    
     about now,  but I  also will say  very frankly  to you,                                                                    
     the department is  a little beaten down right  now - in                                                                    
     funding,  in recruitment  and a  variety  of issues.  I                                                                    
     noticed  with interest  -  Curt and  I  had not  talked                                                                    
     about  this -  but when  he  talked about  some of  the                                                                    
     things  he was  doing it  was interesting.  One of  the                                                                    
     things I've asked all directors to  do is I want to see                                                                    
     recruitment efforts,  I want to see  career ladders and                                                                    
     I want to  see succession plans. I  was very interested                                                                    
     to  hear him  say  that. Because  what's  been sort  of                                                                    
     startling  to me  is  how many  folks  are still  there                                                                    
     [from] when  I was there before.  The agency definitely                                                                    
     has great - we have  a few very bright young people....                                                                    
     But  we  don't have  near  enough  bright young  people                                                                    
     coming  up  into the  agency  and  that's something  we                                                                    
     absolutely have to change.                                                                                                 
4:15:45 PM                                                                                                                    
MR.  CAMPBELL  said   he  wanted  to  work   with  the  governor,                                                               
legislature and all  constituencies. He noted one  thing that has                                                               
changed is where funding comes  from and a much higher percentage                                                               
used to come from the general  fund. Now, other than the fish and                                                               
game  fund,  almost  all  the  department's  funding  comes  from                                                               
federal funds. "And that's not  an entirely healthy situation for                                                               
a department.  I look forward  to many a series  of conversations                                                               
with you all about those."                                                                                                      
He said he  sent an E-mail to every member  of the department the                                                               
first day he was there asking  them three questions - what things                                                               
are being done  now that could be done better  and how, are there                                                               
new initiatives and directions it  should be taking and are there                                                               
things it should  not be doing. He said the  department is making                                                               
course corrections although somewhat slowly.                                                                                    
4:18:47 PM                                                                                                                    
MR. CAMPBELL concluded:                                                                                                         
     Overall I  believe in my  bones that fish  and wildlife                                                                    
     are  both  the soul  of  Alaska  and a  major  economic                                                                    
     engine  for  Alaska and  that  run  properly, fish  and                                                                    
     game, in effect,  can be a profit center  for the state                                                                    
     and  enhance the  use  of those  things  that are  most                                                                    
     important to all of us.                                                                                                    
4:18:57 PM                                                                                                                    
SENATOR  STEDMAN asked  how  he  would respond  to  PERS and  TRS                                                               
rehire issues "if the guillotine does fall."                                                                                    
MR.  CAMPBELL replied  that  he  has given  it  a  great deal  of                                                               
thought. The department has 37  employees under the retire rehire                                                               
category. He  has looked at each  of them individually and  a few                                                               
stretched the intent of the law  as it was originally drafted. He                                                               
has asked  each director to  have a list by  the end of  the next                                                               
week of each  person detailing when they would leave.  He has not                                                               
advocated for extension of the use  of any new retire rehire, but                                                               
has advocated fairly strongly for  some temporary continuation of                                                               
     Our issue  - the way I've  described this is -  we have                                                                    
     bleeding  within  the  department. The  source  of  the                                                                    
     bleeding,  quite frankly,  is  the  30 percent  greater                                                                    
     differential   that   the   federal   government   pays                                                                    
     biologists  than we  can, but  the retire  rehire we've                                                                    
     used as a tourniquet. I'm  very aware that the reliance                                                                    
     on the use of a tourniquet  for too long can, in and of                                                                    
     itself,  be  very dangerous.  It  leads  to this  whole                                                                    
     drain issue that I discussed,  but there are times when                                                                    
     that  tourniquet can  be real  helpful. So,  the bottom                                                                    
     line I  think to  your question, what  are we  going to                                                                    
     do. We  are looking  at a fishery-by-fishery  basis. In                                                                    
     some cases -  and I don't have the full  answer for you                                                                    
     yet - we  will have other people from  other areas step                                                                    
     in and try to take care  of it and in other areas we'll                                                                    
     have some people down below  trying to take care of it.                                                                    
     I'm trying to convince anybody  I can to at least stick                                                                    
     with us  through the season  and let us deal  with that                                                                    
     over the winter, but...                                                                                                    
4:22:11 PM                                                                                                                    
SENATOR SEEKINS  asked him to  reiterate the mission plan  of the                                                               
Department of Fish and Game.                                                                                                    
MR.  CAMPBELL replied  that  the core  mission  statement of  the                                                               
department is:                                                                                                                  
     To  provide core  services, to  provide opportunity  to                                                                    
     use   fish   and    wildlife   resources,   to   insure                                                                    
     sustainability  and  harvestable  surplus of  fish  and                                                                    
     wildlife  resources,  to  provide  information  to  all                                                                    
     customers, to involve the public  in management of fish                                                                    
     and  wildlife  resources  and to  protect  the  state's                                                                    
     sovereignty to manage fish and wildlife resources.                                                                         
     Then, it has three  goals to optimize economic benefits                                                                    
     from fish  and wildlife  resources -  and I  think I've                                                                    
     spoken  here about  the  economic  engine, to  optimize                                                                    
     public participation in fish  and wildlife pursuits and                                                                    
     I would have to expand  on that. And to increase public                                                                    
     knowledge and confidence that  wild populations in fish                                                                    
     and wildlife are responsibly managed.                                                                                      
4:23:45 PM                                                                                                                    
SENATOR SEEKINS asked  Mr. Campbell what he thought  the goals of                                                               
the department should be in  terms of restoration and enhancement                                                               
of depleted populations.                                                                                                        
4:24:09 PM                                                                                                                    
MR.  CAMPBELL  replied that  the  department's  goals talk  about                                                               
optimizing economic  benefits and public  participation. Depleted                                                               
species  in  fish  stock  or  game  population  reduces  economic                                                               
benefit and public participation and:                                                                                           
     Frankly, you're making the public  doubt whether or not                                                                    
     things are  being responsibly managed. So  I think that                                                                    
     speaks to all  three goals. It then follows  to me that                                                                    
     where we  do have depleted  resources, we have  to look                                                                    
     at are there ways that we  can bring them up. You know,                                                                    
     I think we're  very fortunate in Alaska  being the only                                                                    
     state that  I'm aware  of in  the nation  that actually                                                                    
     has a  separate section in its  constitution on natural                                                                    
     resources   with  some   very  specific   language  and                                                                    
     guidance to us. That  provides the background framework                                                                    
     for this.  I'd be  happy to continue  to expand  if you                                                                    
     like me to be more specific.                                                                                               
4:25:34 PM                                                                                                                    
SENATOR  SEEKINS said  that  currently  non-resident hunting  has                                                               
been shut down in  many of the most popular areas  in the state -                                                               
not because  of an increase  in hunting pressure  from residents,                                                               
but  because of  the decrease  in  the populations.  Unit 13  had                                                               
27,000 moose  in its reproductive  base and  now it has  7,000 to                                                               
8,000.  He  said  the  size  of the  guide  industry  is  a  good                                                               
indicator  of non-resident  hunting economic  opportunity and  he                                                               
sees that  it's on the ropes.  Then he sees Texas  that brings in                                                               
over $9 billion a year from non-resident hunting.                                                                               
     It   seems   over   time  the   department   has   gone                                                                    
     backward....  Our  answer is  simply  to  cut back  the                                                                    
     opportunity for  humans to  harvest. While  the mission                                                                    
     statement  talks about  pursuit, the  people who  buy a                                                                    
     license want to  end with a successful  harvest. And it                                                                    
     seems like that is slipping  away from us in many parts                                                                    
     of the  state. How do you  intend to turn some  of that                                                                    
     around in the department?                                                                                                  
4:27:01 PM                                                                                                                    
MR.   CAMPBELL  replied   that   he  is   happy   to  take   full                                                               
responsibility  for  everything that  has  happened  in the  last                                                               
three  weeks, but  given the  current situation,  he is  speaking                                                               
specifically   of  game   populations   that  through   intensive                                                               
management and  specifically through  predator control  there may                                                               
be  an opportunity  to  bring  up. In  addition,  other types  of                                                               
management can  be used like  habitat manipulation such  fire and                                                               
brush crushing.                                                                                                                 
     I  think   strongly  it  is  within   the  department's                                                                    
     interests  and   all  users'   interests  to   look  at                                                                    
     possibilities where  in the state it  is appropriate to                                                                    
     use   better  predator   control   and   where  it   is                                                                    
     appropriate to do so in  an effective manner. As you're                                                                    
     aware...  we're a  big state.  We manage  for different                                                                    
     things in different areas of  the state. I think that's                                                                    
     right.  In one  area we  may very  appropriately manage                                                                    
     for a maximum  number of moose or caribou.  Out on, for                                                                    
     instance,  the Aleutian  Peninsula in  some places,  we                                                                    
     manage  for  trophy  bears  and  I  think  that  that's                                                                    
     appropriate. There  are places on the  Kenai, we manage                                                                    
     not for maximum  number of moose, but  for largest size                                                                    
     of trophy moose.                                                                                                           
     Alaska has,  and I  think this  is usually  a strength,                                                                    
     but it has its drawbacks.  We have 82 separate advisory                                                                    
     committees plus  the Board of  Game and Board  of Fish,                                                                    
     an  extraordinarily  democratic  management  system  in                                                                    
     which the people of  Alaska are intimately involved....                                                                    
     What we  seek to do is  find -each area -  what type of                                                                    
     fish  and  game  management  is  most  appropriate  and                                                                    
     provide that for the residents of Alaska.                                                                                  
4:29:27 PM                                                                                                                    
SENATOR SEEKINS  asked his  opinion on  what role  the department                                                               
might  play in  providing  access to  natural  resources for  the                                                               
people who own them.                                                                                                            
4:30:03 PM                                                                                                                    
MR. CAMPBELL replied that the  department would see a substantial                                                               
shift  because  he  believes  in  access  and  optimizing  public                                                               
participation.  Protection  through  limiting access  leaves  the                                                               
natural resources for the people  who live closes to the resource                                                               
or to those who are  wealthy enough to afford extraordinary means                                                               
of transportation.                                                                                                              
4:31:19 PM                                                                                                                    
SENATOR  SEEKINS said  his opinion  is  that the  level of  trust                                                               
between the department and people  who buy hunting licenses is at                                                               
an  all-time low.  He  asked what  he would  do  to restore  that                                                               
MR. CAMPBELL said he didn't know  if that is true, but it doesn't                                                               
matter in terms of what the department needs to do.                                                                             
     We need to reach out to all our public to, one - to be                                                                     
     listening to them, to be talking to them to make sure                                                                      
     they understand they are being heard.                                                                                      
He said that one of the  courses that is generally not offered in                                                               
wildlife  or fisheries  management school  is customer  relations                                                               
and  he thought  that  was  an extremely  important  part of  the                                                               
department's job.  He has  begun to develop  outreach to  all the                                                               
department's constituencies.                                                                                                    
4:34:11 PM                                                                                                                    
SENATOR SEEKINS said a couple of  years ago he looked at a couple                                                               
of numbers.  He noticed  that 70,000 Alaskans  picked up  a moose                                                               
tag and about 7,000 actually  harvested a moose. Sweden harvested                                                               
100,000 moose  in the  same year.  At the  same time  the numbers                                                               
looked  like Alaska  was harvesting  less than  3 percent  for of                                                               
harvestable surplus,  the rest  were dying  of natural  causes or                                                               
predation.  In that  same year,  70 percent  of the  moose calves                                                               
that were  born were estimated  to be  dead before the  time they                                                               
were  four weeks  old.  He  asked if  that  was  a reflection  of                                                               
management style and could he do anything about it.                                                                             
MR. CAMPBELL replied  that he had not seen those  figures, but he                                                               
would follow up on them.                                                                                                        
4:36:02 PM                                                                                                                    
SENATOR  STEDMAN asked  how he  thought biomass  should be  split                                                               
between sport and commercial fishermen.                                                                                         
4:36:41 PM                                                                                                                    
MR. CAMPBELL  replied that he  would keep allocation  issues with                                                               
the Board  of Fisheries as  much as  he could. He  uses emergency                                                               
order authority in  two sets of circumstances. One  is within the                                                               
framework of a  fisheries management plan passed by  the Board of                                                               
Fisheries. There  are times  when some  new information  comes to                                                               
the fore where  if the board had  had it at the time  it made the                                                               
fisheries  management plan  with  the regulation,  it would  have                                                               
done something different. He explained:                                                                                         
     I have already  talked with the Board  of Fisheries and                                                                    
     told them what my expectations  are that in such cases,                                                                    
     I expect  to consult with  them, but I do  not normally                                                                    
     expect  to call  them back  into session  to make  that                                                                    
     allocative decision.                                                                                                       
He was  actually in the process  of making that kind  of decision                                                               
on Chinooks in Southeast.                                                                                                       
4:39:58 PM                                                                                                                    
SENATOR STEDMAN  asked if there  isn't a large enough  biomass to                                                               
facilitate a  commercial fishery, did  he feel part of  it should                                                               
be allocated to sport fishermen.                                                                                                
MR.  CAMPBELL  replied  that  the first  question  is  given  the                                                               
biomass  that is  there,  is  there any  portion  or  any way  to                                                               
allocate that  among the commercial fishery.  He couldn't imagine                                                               
a situation in  which he would say not enough  for commercial, so                                                               
we'll give it all to sport.                                                                                                     
SENATOR STEDMAN asked him what his views are on subsistence.                                                                    
MR.  CAMPBELL replied  that the  subsistence  priority exists  in                                                               
both  state and  federal law.  Alaska  is governed  by both  laws                                                               
under  dual   management  and  he  finds   there  is  substantial                                                               
unnecessary duplication.                                                                                                        
In some  limited instances  subsistence provisions  have deprived                                                               
other  commercial and  sport  opportunity  without providing  any                                                               
increase for  subsistence users. He hoped  to work constructively                                                               
with  federal  authorities to  look  at  both state  and  federal                                                               
subsistence regulations to minimize  duplication. He advised them                                                               
that  it is  almost  impossible to  provide  enforcement on  many                                                               
subsistence issues right  now. He wanted to make  sure that those                                                               
decisions are based on sound science, not emotion.                                                                              
4:42:40 PM                                                                                                                    
SENATOR STEDMAN said  the state has some issues  with the federal                                                               
government, especially with the mean  high tide to the three-mile                                                               
limit.  "It  appears  that  on  occasions they  like  to  try  to                                                               
restrict or  dictate or  control out  access to  what some  of us                                                               
feel  is state  jurisdiction."  Excluding Glacier  Bay, he  asked                                                               
what his opinion was.                                                                                                           
MR.  CAMPBELL replied  that he  strongly feels  that the  federal                                                               
government's   headland-to-headland  interpretation   of  federal                                                               
waters is  wrong as  a policy issue  and as a  matter of  law. He                                                               
believes that those are state waters under state control.                                                                       
4:44:21 PM                                                                                                                    
SENATOR  ELTON asked  how he  perceives his  role in  interacting                                                               
with  Washington, D.C.  to  protect the  state.  What assets  and                                                               
resources does  he have to  make sure that the  state's interests                                                               
are best  protected as  a resolution is  crafted that  applies to                                                               
all coastal states.                                                                                                             
MR. CAMPBELL  replied that  one of the  major differences  he was                                                               
surprised to  see in  coming back  to state  service is  the real                                                               
expansion of  the federal government  in many issues. But  he has                                                               
been  pleased  how  the  administration has  been  able  to  work                                                               
internally  together  on  a  number  of  issues  -  the  Magnuson                                                               
reauthorization of land  trade issues, for instance.  He wants to                                                               
improve communications between the governor  to all the people in                                                               
the field.                                                                                                                      
     I want all  the folks in the field  to understand where                                                                    
     this  governor wants  to go  and  how he  wants to  get                                                                    
     there and  why. But I also  want to make sure  when the                                                                    
     governor  is   doing  something,   he  has   heard  the                                                                    
     perspective from down in the  field. The reason I bring                                                                    
     that up is  because it sometimes effects  some of these                                                                    
     decisions.  So  far,  there  has  been  nothing  that's                                                                    
     happened in  Washington that I  want to be  involved in                                                                    
     that I  haven't felt I've  had a full voice  and access                                                                    
4:47:24 PM                                                                                                                    
SENATOR SEEKINS moved  to report Mr. Campbell's name  to the full                                                               
body  for confirmation  with the  understanding that  signing the                                                               
report is no indication of  support. There were no objections and                                                               
it was so ordered.                                                                                                              
4:48:06 PM At ease 4:50:02 PM                                                                                               
            HB 256-RUTH BURNETT SPORT FISH HATCHERY                                                                         
CHAIR WAGONER announced HB 256 to be up for consideration.                                                                      
REPRESENTATIVE  RAMRAS, sponsor  of HB  56, said  it is  a naming                                                               
bill for the Fairbanks Sport  fish hatchery and was well received                                                               
by  the folks  in  Fairbanks and  the  Interior delegation.  Ruth                                                               
Burnett who passed  away from cancer a couple of  years ago was a                                                               
former city  mayor and an aide  to Senator Stevens. She  was very                                                               
committed to bettering  her community and among  other things she                                                               
was involved in the dialogue about a hatchery in Fairbanks.                                                                     
4:51:51 PM                                                                                                                    
SENATOR SEEKINS said  Ruth Burnett was more like  a family member                                                               
to him  and his  family than  anything else.  He followed  with a                                                               
story about how she helped him  start the "Young Life Program" in                                                               
Fairbanks, an interdenominational high school  age group that met                                                               
for years in  her home, and then  moved on to meet  in his house.                                                               
He said:                                                                                                                        
     Ruth  was such  an inspiration  because in  growing her                                                                    
     family, she never  forgot the rest of  the young people                                                                    
     in the community.  As mayor she was a  dynamic force in                                                                    
     trying to put Fairbanks on a unified path....                                                                              
REPRESENTATIVE RAMRAS said:                                                                                                     
     She is  one of the  people that define a  community and                                                                    
     she did  that over decades.  So, it's a great  honor to                                                                    
     her and  the legacy  of her family,  as well.  I second                                                                    
     that emotion, Senator Seekins.                                                                                             
4:57:27 PM                                                                                                                    
SENATOR  DYSON  moved  to  report  HB  256  from  committee  with                                                               
individual recommendations  and zero  fiscal note. There  were no                                                               
objections and it was so ordered.                                                                                               
4:57:54 PM                                                                                                                    
            SB 113-GULF OF ALASKA GROUNDFISH FISHERY                                                                        
CHAIR WAGONER announced SB 113 to be up again for consideration.                                                                
SENATOR  SEEKINS moved  to report  the letter  of intent  and the                                                               
memorandum of understanding  (MOU) out of committee  with SB 113.                                                               
There were no objections and it was so ordered.                                                                                 
^Alaska  Natural Gas  Development Authority  (ANGDA) Presentation                                                             
by Harold Heinze                                                                                                              
CHAIR  WAGONER  announced that  the  presentation  by the  Alaska                                                               
Natural  Gas  Development Authority  (ANGDA)  would  be the  next                                                               
order of business.                                                                                                              
MR.  HAROLD  HEINZE,  Executive   Director,  Alaska  Natural  Gas                                                               
Development  Authority (ANGDA),  said he  provided the  committee                                                               
with a power point presentation that he would highlight.                                                                        
He said  that Michael Baker  completed a very  important 150-page                                                               
study for  ANGDA and last  week he distributed a  17-page summary                                                               
of it to the  legislature. He said it is a  reference that is now                                                               
available  to   the  public  electronically  and   contains  size                                                               
diagrams for both an 800-mile  pipeline, which covers Prudhoe Bay                                                               
to everywhere  or a  spur line of  300-miles, which  is basically                                                               
Delta to  Anchorage and provides  information for  questions that                                                               
people  need  to think  about  in  considering  the size  of  the                                                               
project. Some of  the questions are what is gained  by going to a                                                               
large project,  what is  the right  size for  Alaska and  at what                                                               
point do the reserves or the market not support a project.                                                                      
He said the people tend to  focus on gas going down the pipeline,                                                               
but  there is  a huge  amount of  NGLs and  hydrocarbon molecules                                                               
other  than methane  on the  North  Slope that  are valuable  and                                                               
drivers  of other  types of  industry. The  propane numbers  vary                                                               
from 50,000 to  100,000 barrels a day. Where it  goes, where it's                                                               
extracted,  who captures  it, what's  done with  it should  be of                                                               
policy  concern  to  them. The  full  report  provided  technical                                                               
evaluation  of the  alternatives  to extracting  the propane  and                                                               
ethane -  capturing it  and utilizing  it -  here in  Alaska, but                                                               
does not make any specific recommendations.                                                                                     
5:05:45 PM                                                                                                                    
The report  describes a  project that is  a bullet  pipeline that                                                               
would run  directly from the North  Slope to the Cook  Inlet area                                                               
and carry gas  and NGLs to meet the area's  long-term needs.  The                                                               
project  pencils very  nicely and  offers a  perspective that  is                                                               
He  felt that  he could  uphold ANGDA's  position within  the gas                                                               
pipeline negotiations  and make  sure that  the instate  gas uses                                                               
are treated properly.                                                                                                           
5:07:26 PM                                                                                                                    
An  application  for  an  important project  has  an  April  2006                                                               
federal deadline.  But a  filing of  a lawsuit  on a  recent FERC                                                               
ruling in the  Court of Appeals causes him  some consternation in                                                               
terms  of  timelines.  "We  think it's  very  important  that  we                                                               
understand an open season process  here in Alaska and be prepared                                                               
to move forward on it."                                                                                                         
MR. HEINZE  said a third  timeline is  the Cook Inlet  gas supply                                                               
and its demand imbalance is getting worse quickly.                                                                              
     Unless  something  is  done in  the  near  future  that                                                                    
     indicates  the problem  will get  solved in  the medium                                                                    
     term, people are going to  become quite discouraged and                                                                    
     there are a lot of bad consequences.                                                                                       
     The work  we have done  indicates that we need  to have                                                                    
     not  only  the  commercial  or the  heating  and  power                                                                    
     generation  sectors there,  but  we need  to have  some                                                                    
     industrial  customers to  share in  paying the  bill of                                                                    
     bringing gas to the area  whether it's through a bullet                                                                    
     line or some direct line from the North Slope....                                                                          
5:09:06 PM                                                                                                                    
CHAIR  WAGONER  said  the  people  who  are  promoting  the  Port                                                               
Authority line use  its tax status as a promotion  tool and asked                                                               
what ANGDA's tax  status would be compared to its  tax status for                                                               
building a bullet line.                                                                                                         
MR. HEINZE  replied that ANGDA is  a part of the  State of Alaska                                                               
and  enjoys  its  tax-free  provisions.  However,  his  financial                                                               
advisors have  realized that ANGDA can  end up with a  lower cost                                                               
of service by being a  utility that issues low-interest debt. The                                                               
non-profit status would make income tax less of a concern.                                                                      
Secondly,  tax issues  become very  tricky if  other parties  are                                                               
involved. Tax advice  he has received indicates  if ANGDA becomes                                                               
involved  with private  taxable entities,  it runs  some risk  of                                                               
jeopardizing its  tax status.  So, his approach  is as  a utility                                                               
using low  interest debt,  not concentrating  too heavily  on his                                                               
tax status  and believing  that it  is important  that industrial                                                               
customers would  be part of  the project  and pay their  share to                                                               
make the project happen.                                                                                                        
     We think  that is  very important  in terms  of getting                                                                    
     financing  and we  think it's  quite impressive  to get                                                                    
     financing  if  we  had,  say,  one  or  two  industrial                                                                    
     partners in the project itself.                                                                                            
5:11:23 PM                                                                                                                    
SENATOR  ELTON asked  what  is  a reasonable  rate  of return  in                                                               
percentages for a gas pipeline and its private partners?                                                                        
MR. HEINZE replied as a  gas transmission utility, ANGDA would be                                                               
a  regulated  entity. Even  though  a  partner like  Enstar,  for                                                               
instance, has a  profit objective, it is also  a regulated entity                                                               
and its rate of return would be  set by the RCA. It is probably a                                                               
lower  number than  most people  think in  terms of  oil and  gas                                                               
ANGDA   has  looked   at  smaller   projects  with   more  modest                                                               
investments,  and he  believes they  would generate  a tremendous                                                               
amount of  benefit to  the state.  He hastened  to add  that they                                                               
would  not  generate  the  level   of  state  revenues  that  are                                                               
associated with 4 to 6 BCF per day.                                                                                             
     You just can't overcome those  kinds of numbers. On the                                                                    
     other  hand in  terms of  economic benefits  to Alaska,                                                                    
     even  a modest  sized  project is  very very  powerful.                                                                    
     We've tended to focus on  a more modest investment if I                                                                    
     can use the words there  with a much lower risk profile                                                                    
     than  $20 billion  or $25  billion. I  think that  risk                                                                    
     profile  is relevant  to  the issues  of  what rate  of                                                                    
     return expectations people have and things like that.                                                                      
5:14:27 PM                                                                                                                    
SENATOR  ELTON asked  how he  would define  a reasonable  rate of                                                               
return looking  at competing proposals  for a  gas transportation                                                               
MR.  HEINZE replied  that there  is no  absolute measure.  If the                                                               
matter were in litigation, he  presumed that any judge would look                                                               
very  strongly on  the  fact  that some  parties  other than  the                                                               
producers  were  interested  in   doing  the  project  as  pretty                                                               
powerful evidence.                                                                                                              
5:15:35 PM                                                                                                                    
SENATOR ELTON said the gas pipeline  component seems to be in the                                                               
$.50 to $2.00  range. He asked how much  the total transportation                                                               
cost  is assuming  there is  an LNG  port someplace  on the  West                                                               
Coast they would deliver to.                                                                                                    
MR.  HEINZE replied  to get  gas 800  miles from  Prudhoe Bay  to                                                               
Valdez  it would  cost as  low as  $1 including  the conditioning                                                               
cost to  the North  Slope. His  work shows that  the high  end of                                                               
that number  even on smaller pipes  that are less efficient  in a                                                               
tariff sense rises to about  $1.50. This is very encouraging. The                                                               
producers have  stated that the  cost of delivering gas  from the                                                               
North Slope to Chicago, a large marketplace, is $2.50.                                                                          
     If  we can  have that  same gas  at that  same wellhead                                                                    
     value  available  in Alaska  for  a  cost of  $1.00  to                                                                    
     $1.50, that  gives us a  $1.00 to $1.50  advantage over                                                                    
     the marketplace  price. That's good for  the consumers;                                                                    
     that's  good for  industry; that's  good for  a lot  of                                                                    
     people.  The  state realizes  the  same  amount at  the                                                                    
     wellhead; it's just we get other benefits out of it.                                                                       
5:17:58 PM                                                                                                                    
SENATOR ELTON  responded that  there is  no possibility  that the                                                               
state  can use  instate production  from the  North Slope.  He is                                                               
trying to figure out  how much it will cost to ship  to get it to                                                               
Valdez versus to getting it to the Midwest.                                                                                     
MR. HEINZE replied that it's 2,500  miles to Chicago and it's 800                                                               
miles  to Valdez.  It's  that simple.  He  said the  conditioning                                                               
costs are about a quarter.                                                                                                      
     So,  basically, you  can deliver  gas  very easily  for                                                                    
     slightly over  a buck to  Valdez. At that  point, then,                                                                    
     you would  have LNG  plant costs  and then,  of course,                                                                    
     tanker costs beyond that point.                                                                                            
     When ANGDA looked  at that, we looked  at those numbers                                                                    
     as  being  very competitive  in  total  with the  $2.50                                                                    
     going to Chicago.  If we were going to  the same market                                                                    
     in  a  shorter  pipeline,   liquefying  and  moving  in                                                                    
     tankers, our  numbers indicated that  it was  about the                                                                    
     same size.                                                                                                                 
5:19:37 PM                                                                                                                    
SENATOR STEDMAN asked if the return  on equity has to be expanded                                                               
or modified  by the capital  structure of the  corporations ANGDA                                                               
deals with.                                                                                                                     
5:20:44 PM                                                                                                                    
MR. HEINZE  responded that generally  pipelines are looked  at as                                                               
being  financed  70  percent  debt and  30  percent  equity.  The                                                               
numbers  would be  affected by  the amount  of risk  involved and                                                               
other factors. The interest rate on  the borrowing has to do with                                                               
who  the players  are  and what  the  circumstances are.  ANGDA's                                                               
brief look  at it  said if  they are talking  $10 billion  or $20                                                               
billion  the  project  financing  that could  be  done,  but  the                                                               
interest rate  might be really  high. In  this case, the  fact is                                                               
that  the  federal  government   has  provided  80  percent  loan                                                               
guarantees  that  is  a  tremendous  advantage.  Those  kinds  of                                                               
factors  definitely enter  the considerations.  The spur  line he                                                               
has focused on is modest and can be financed as a utility.                                                                      
5:23:31 PM                                                                                                                    
SENATOR STEDMAN said there are  other measurements besides return                                                               
on equity like  the return on capital and he  asked if the return                                                               
on equity is the main one.                                                                                                      
5:24:07 PM                                                                                                                    
MR. HEINZE replied that this  technical report was meant for slow                                                               
digestion over  a period of  months. The way it  evaluates things                                                               
is  on two  bases.  One is  on  an investor  basis  or return  on                                                               
investment; the  other is the  cost of  service basis, the  way a                                                               
regulator  would  look at  it.  The  report  shows that  the  two                                                               
answers come  out the same.  "Those things that are  probably the                                                               
best investment  turn out  to have the  lowest cost  of service."                                                               
Selecting the  right size pipe is  going to be a  good investment                                                               
decision and it's going to lead to a good cost of service.                                                                      
5:29:23 PM                                                                                                                    
SENATOR ELTON said  he understands the advantages  of instate use                                                               
but wanted to  know what volumes that involves.  He was concerned                                                               
that a smaller pipe reduces the  amount of gas available to other                                                               
MR. HEINZE  referred to  page 6  that has a  dual pie  chart. The                                                               
project put forward in  this scheme is based on 1  BCF per day to                                                               
Cook  Inlet and  that meets  the instate  needs and  provides for                                                               
some level  of export. It  doesn't build a  lot of new  things in                                                               
the state, but  it achieves very good economies.  The building of                                                               
that project  at $2.5 billion  to $3 billion provides  a stimulus                                                               
that  is  very powerful  in  terms  of  the Alaskan  economy  and                                                               
provides a lot of incentive  for bringing gas to market. Probably                                                               
its  strongest  point is  that  it  does  not require  the  total                                                               
commitment  of  the Prudhoe  Bay  gas  reserve. It  requires  the                                                               
state's share and a majority of one owner's share.                                                                              
SENATOR ELTON said he thought:                                                                                                  
     We  greatly expand  the  benefits to  the  state if  we                                                                    
     provide  not just  for instate  use,  but also  provide                                                                    
     that we  get some of  the stranded gas to  markets that                                                                    
     are  willing  to pay  for  it  and a  smaller  pipeline                                                                    
     certainly reduces  the amount of  gas that you  can get                                                                    
     to other markets that are willing to pay for it.                                                                           
MR. HEINZE  replied that he is  correct and this project  isn't a                                                               
project that  will solve all things.  He asked him to  reflect on                                                               
the fact  that known  reserves of  2 BCF  per day  is a  lot. The                                                               
companies have said  that 4.5 BCF requires a discovery  of 15 TCF                                                               
additional gas.                                                                                                                 
     The concept of sizing here is  - the simplest way I can                                                                    
     express it to you is  if it's somebody else's money and                                                                    
     they want  to spend $20  billion to put in  the biggest                                                                    
     project they can conceive of,  we probably ought to let                                                                    
     them do  it. The  only risk  we run is  that we  end up                                                                    
     with  a lower  wellhead value.  If we  are going  to be                                                                    
     involved financially,  I'm just going to  submit to you                                                                    
     I think you  have to look at  'fiduciarially' the other                                                                    
     side of  the coin, which  is what  is the risk  of that                                                                    
     big project.                                                                                                               
     The other aspect  of this and the  reason we've studied                                                                    
     this project based  on instate actions is  that it does                                                                    
     not  involve  a  foreign  country,  which  we  have  no                                                                    
     control  of... and  having control  of our  own destiny                                                                    
     might  become  very  important. In  Cook  Inlet  -  the                                                                    
     situation  there   is  very   grave.  We've   seen  the                                                                    
     situation  deteriorate  even  in  the  last  year  very                                                                    
     rapidly.  There is  legitimate concern  that over  half                                                                    
     the population  of the state  could face some  level of                                                                    
     energy crisis. And if we have  35 TCF of gas sitting on                                                                    
     the North  Slope, that's not  going to go over  well if                                                                    
     we have to bring gas in from Indonesia.                                                                                    
5:32:26 PM                                                                                                                    
SENATOR ELTON referenced  the Agrium component of  the pie charts                                                               
on page  6 and asked  if the assumption  is that North  Slope gas                                                               
would be  available to it at  the same price as  other users that                                                               
may be  located in the Lower  48, for example, "And  could Agrium                                                               
continue on that basis?"                                                                                                        
MR.  HEINZE  replied  that  the assumption  is  if  the  wellhead                                                               
netback value  at Prudhoe Bay is  set by the more  distant bigger                                                               
markets outside of Alaska -  in Chicago, for instance, it's 2,500                                                               
miles away and it is cheaper to come 800 miles to Cook Inlet.                                                                   
     There is some price  differential delivered if you have                                                                    
     the  same   wellhead  value  and  we   just  make  that                                                                    
     assumption - that there would  be some advantage to the                                                                    
     consumers  here  in  Alaska  whether  they  be  private                                                                    
     users,  home  owners, industrial  customers,  whatever.                                                                    
     There is no discount. The  state would realize the same                                                                    
     value at  the wellhead; it's  just we would  be gaining                                                                    
     some  advantage because  we're  closer  to the  source.                                                                    
     That's all....                                                                                                             
     The  other part  of the  chart that's  important is  to                                                                    
     realize  this is  not green  field construction.  These                                                                    
     are plants that exist  that are fully depreciated, that                                                                    
     are very  well understood  operationally and  that with                                                                    
     some  modest price  advantage  over  the world  market,                                                                    
     these plants  may be very attractive  for the companies                                                                    
     that own  them to continue  to operate. And  that's the                                                                    
     only assumption that's made here.                                                                                          
5:35:07 PM                                                                                                                    
SENATOR ELTON  said there is  a much shorter  transportation link                                                               
between existing  gas wells  in Cook Inlet  and Agrium  right now                                                               
and Agrium  has said they can't  compete for that gas  with other                                                               
people in the market.                                                                                                           
MR. HEINZE explained  that as Cook Inlet ran out  of gas, the RCA                                                               
allowed  prices to  rise  to  the world  price  level to  attract                                                               
exploration. It has resulted in  people going out and looking for                                                               
gas, but  they have not  found large quantities. They  have found                                                               
     As that  gas becomes  the dominant  gas in  the system,                                                                    
     our prices have gone up  30 percent. Prices of gas will                                                                    
     double in  two years.  It is  predictable that  in less                                                                    
     than  five years  they will  double under  the scenario                                                                    
     there. The  spur line concept,  the idea of  hooking an                                                                    
     efficient transportation system to  the huge reserve on                                                                    
     the  North Slope  simply drives  prices  back to  about                                                                    
     where they were a year or  two ago and it preserves for                                                                    
     the longer term whatever  advantage there was in having                                                                    
     lower-priced  gas in  Cook Inlet.  It  doesn't make  it                                                                    
     cheap,  but   it  preserves   at  least   some  pricing                                                                    
5:36:59 PM                                                                                                                    
CHAIR WAGONER thanked Mr. Heinze for his presentation.                                                                          
MR.  HEINZE  said  he  intended  to  continue  working  with  the                                                               
legislature on the informational side of these issues.                                                                          
5:38:48 PM                                                                                                                    
       HJR  9am-URGE CONGRESS HONOR EXXON VALDEZ JUDGMENT                                                                   
CHAIR   THOMAS  WAGONER   announced  HJR   9am  to   be  up   for                                                               
consideration and passed the gavel  to Senator Stedman because he                                                               
has a potential  conflict being one of the  litigants involved in                                                               
the Exxon Valdez litigation.                                                                                                    
SUZANNE HANCOCK,  staff to  Representative LeDoux,  sponsor, said                                                               
that  this resolution  urges  the U.S.  Congress  to respect  the                                                               
judicial process and asks it to  not change any of the settlement                                                               
terms.  The litigants  of the  Exxon Valdez  oil spill  are still                                                               
waiting for a resolution 16 years  after it happened and 10 years                                                               
after the original jury verdict.                                                                                                
5:41:13 PM                                                                                                                    
SENATOR  ELTON  moved  to  report HJR  9am  from  committee  with                                                               
individual recommendations  and zero  fiscal note. There  were no                                                               
objections and it was so ordered.                                                                                               
There being  no further  business to  come before  the committee,                                                               
Chair Wagoner adjourned the meeting at 5:43:19 PM.                                                                            

Document Name Date/Time Subjects