Legislature(2005 - 2006)BUTROVICH 205
04/25/2005 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB113 | |
| Confirmation Hearings: || Department of Environmental Conservation (dec) Commissioner-select: | |
| Alaska Department of Fish and Game (adf&g) - Commissioner-select | |
| HB256 | |
| Alaska Natural Gas Development Authority (angda) Presentation by Harold Heinze | |
| HJR9 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| + | TELECONFERENCED | ||
| += | SB 113 | TELECONFERENCED | |
| + | HB 256 | TELECONFERENCED | |
| + | HJR 9 | TELECONFERENCED | |
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
Fairbanks."
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
Commissioner-Select
Department of Environmental Conservation
410 Willoughby
Juneau, AK 99801-1795
POSITION STATEMENT: Confirmation candidate.
MCKIE CAMPBELL
Commissioner-Select
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
meeting.
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-
SELECT:
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
process."
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
constitution....
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
certainty.
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-
friendly....
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-
Select
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
them.
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
trust.
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
to.
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
doable.
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
producers.
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
system.
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
markets.
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
some.
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
advantage.
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.
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