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