HOUSE BILL NO. 4001 An Act making supplemental appropriations, capital appropriations, reappropriations, and other appropriations; making appropriations to capitalize a fund; and providing for an effective date. Co-Chair Chenault spoke to the bill. He asked if there were questions about the bill. 7:43:52 PM Co-Chair Meyer reminded department heads that some of the changes made will have a fiscal impact, and all fiscal notes would be appreciated. 7:44:14 PM Representative Hawker commented that he would like to see per capita information in the fiscal notes. Supplemental budgets should not be used for capital appropriations. Why would it ever be appropriate to supplement budgets for a capital appropriation? KAREN REHFELD, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, discussion about the reimbursement and identify significant investments to get the gas line construction organized. 7:46:51 PM Representative Hawker inquired about any constitutional or statutory prohibition or authority preventing the use of a supplemental appropriations bill for a capital appropriation. Ms. Rehfeld was not aware of any constitutional prohibition. 7:47:36 PM Representative Gara requested discussion on the AGIA appropriation. 7:49:13 PM FRANK RICHARDS, DEPUTY COMMISSIONER OF HIGHWAYS & PUBLIC FACILITIES, DEPARTMENT OF TRANSPORTATION AND PUBLIC FACILITIES, clarified the question ready to go to bid. Mr. Richards stated that there are three projects: · Reconstruction of the Dalton Highway from milepost 175 to milepost 209. · Reconstruction of the Dalton Highway from milepost 9 to milepost 11. · Culvert replacement on the Dalton Highway from milepost 260 to milepost 321. These projects are bid ready, but because of complications with the STIP funds, they were developed using the Federal Highway Fund Design Efforts. The construction funds have not yet been available to complete the three projects. If the appropriation from the legislature was made available, the projects would be advertised this fall and winter, allowing construction to begin in the spring of 2009. The benefit of starting the projects with an appropriation now is that the money will be available to begin construction, whereas if it is postponed until the next session the construction will not begin until late spring 2009 or possibly as late as August if there are protests in the bidding process. 7:51:50 PM Co-Chair Chenault replied that if federal funds were applied for and then replaced with state funds, the available federal funds could be used for other projects in the state. Would it cost less to use state funds because federal funds usually come with strings attached? There have been bicycle paths constructed on the Dalton that wouldn't have been built without those federal requirements. He asked whether state funding could be used without the extra expense associated with federal requirements. 7:53:17 PM Mr. Richards responded that the projects are already designed and that it is standard to remain consistent with the design. The goal with the projects is to affect alignment, and replace culverts on over 60 miles of highway. Bike paths are not part of the plan, as this is a rural highway. Co-Chair Chenault noted that the Dalton Highway is in poor shape. He asked whether the state had investigated the possibility of mining gravel on federal land along the Dalton Highway instead of hauling it in from other areas of the state. Mr. Richards answered that the Department of Transportation (DOT) is looking for hard aggregate for the Dalton Highway in many areas, but a shortage of gravel is one of the challenges they are facing. A portion of the appropriation is to define those material sites, open them up, and then have them ready for the construction activities, both in current and future projects associated with the gas pipeline. 7:56:32 PM Representative Hawker noted that the bike paths on the Dalton Highway were placed on the old roadbed at very little incremental cost when the road was upgraded. Co-Chair Chenault said he had driven more miles on those bike paths than anyone else in the room. 7:58:22 PM Representative Gara wanted to avoid building roads specifically for hauling the pipeline materials that may need to be rebuilt in order to haul materials for the pipeline. Because of the speed at which roads in Alaska deteriorate, it might not make sense to construct roads over the next couple of years for that purpose. Mr. Richards explained that most of these roads are being designed to come on line at the time the pipeline construction should begin. The projects such as the Dalton Highway upgrade need to happen soon because of the current deterioration of that highway. Grade and alignment features that are appropriate for hauling pipeline materials will be incorporated now. It would be a great challenge to the contracting community to do hundreds of miles of major upgrades right before the line goes in. The goal is to expand these projects out through the six years available until the construction of the gas pipeline. 8:02:19 PM Representative Gara asked what specific projects are being funded in this bill. Mr. Richards repeated the specific Dalton highway sections. The construction would begin next year if the money was appropriated. Representative Gara reiterated that he didn't think those sections would still be in good shape during the pipeline construction. Mr. Richards responded that the challenge of modern design in the Arctic is the creation of roads that can withstand heavy traffic and permafrost issues. 8:04:46 PM Representative Thomas asked what had been done on the Canadian section of the Alaska Highway. Would it be necessary to rebuild and realign that section of the road? Mr. Richards confirmed that he has been in discussions with the Canadians regarding this issue. To upgrade the road, the administration is in contact with those in the Yukon Territory. He will visit Canada next week and will have more information following the visit. Representative Thomas asked about the nature of the upgrades that are required. How many layers of asphalt will be necessary? Mr. Richards answered that there will be injections of asphalt into the existing roadbed and the strength would be greatly increased. 8:07:29 PM Co-Chair Chenault noted that there are Canadian mining companies that want to use the highway to Haines to transport their materials. He wondered whether the mining companies would be willing to contribute to the upgrades. Mr. Richards said that the companies are looking to upgrade the road or build a railroad to Haines where there are better docking facilities. Representative Kelly requested clarification on this appropriation bill and what the immanent priorities were. Co-Chair Chenault answered that the appropriation bill is a wish list. He wanted to find out what needs are out there. The remaining issues can be revisited in the next regular session. 8:10:33 PM Representative Gara asked Commissioner Galvin what amount of money was appropriate for this special session to communicate the intent of the legislature for support of the TransCanada project. PAT GALVIN, COMMISSIONER, DEPARTMENT OF REVENUE, responded that it would be most appropriate for the legislature to allocate the entire $500 million to fully fund the transportation fund. It is imperative to allocate enough money to get the project through the primary season and avoid any bottlenecks that would slow the project down. There would be a risk of delaying the project with an insufficient amount of money. 8:14:22 PM Representative Gara asked what the 500 million and the 164 million dollar amounts represented. Commissioner Galvin explained that the $164 million was the suggested amount for reappropriation from the $300 million set aside in the AHFC fund along with the interest that has been generated by those funds, which is approximately $36 million. The remainder will come out of the general fund. Representative Gara noted that he has heard discussion that appropriating small amounts would give the legislature a chance to monitor how DOT is handling the money. But the legislature doesn't really have the opportunity to review receipts, so that approach may not make sense. He asked whether there is any reason to disburse the funds in small amounts. Commissioner Galvin responded that the opportunity is already built into the Alaska Gasoline Inducement Act (AGIA) statute. Any money appropriated into the reimbursement fund can be taken out again by the legislature. He does not see any additional reporting issues that would be raised by fully funding the reimbursement. Co-Chair Chenault noted that no one in the building was talking about slowing the project down with smaller appropriations. TONY PALMER, VICE PRESIDENT, ALASKA BUSINESS DEVELOPMENT, TRANSCANADA, introduced himself. Representative Gara asked about reimbursement of qualified costs up to 50 percent of their expenditures through the Open Season. Mr. Palmer confirmed that once the license was issued, the state would be obligated, subject to TransCanada meeting, to all of the conditions and 50 percent of expenditures. They had that expectation. Representative Gara asked what the company would require to get through the Open Season, noting the legislature's funding cycle. Mr. Palmer answered $54 million worth of expenditures through June 2009 and $84 million total through July 2010. Representative Gara asked how much was necessary. Mr. Palmer responded half of the 84 million dollars. Representative Gara asked how much was required if the legislature was to fully fund the commitment. Mr. Palmer said that it would be one half of the $84 million or $42 million. Representative Gara asked for TransCanada's request of the legislature at this point. Mr. Palmer responded that he preferred that the legislature fully fund the request. 8:22:50 PM Commissioner Galvin answered that there was little risk to the legislature in appropriating the entire amount into the fund, because DOT would be providing detailed reports. The money would not be taken out of the control of the legislature if placed in the reimbursement fund. 8:24:06 PM Representative Crawford asked what the earnings would be on the money sitting in the reimbursement fund. Commissioner Galvin answered that the money would be handled like the money in the general Fund, though accounted for separately. It would be the Commissioner's discretion to try to maximize the return by investing more aggressively than the General Fund. Co-Chair Chenault asked whether the General Fund invests for short term return while the AGIA reimbursement fund would be a long-term investment. Commissioner Galvin responded that with the money in the General Fund, it is available to the legislature at any point. If it were to move into the AGIA fund with the purpose of reimbursing TransCanada, then the money could be invested for a slightly longer term, recognizing that a schedule must be followed. Understanding that the legislature could reappropriate funds would probably prevent this type of investment. 8:28:14 PM Representative Thomas asked what would happen if the 500 million dollars were appropriated and the investments incurred losses. Galvin responded that the funds would not be placed in investment vehicles that were subject to losses due to the nature of the requirements. 8:29:47 PM TOM IRWIN, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES, introduced staff, Marty Rutherford, Deputy Commissioner, Department of Natural Resources and offered a highlight of what they are doing. He reviewed what the accomplishments of the legislature over the past year by funding the AGIA program. They have learned a tremendous amount. The issuance of a license is a major step forward. There will be questions that inevitably come up in the four categories. He wants the state to be prepared when the questions do arise. He is looking at 6.2 million over the next five years. They plan to use a contractor to help with the process, and they will be working with a multitude of companies. The funds will be used to determine the correct paths to follow. He described other needs for the money. They will be looking for more efficient methods as they go. 8:35:12 PM CLARK BISHOP, COMMISSIONER, DEPARTMENT OF LABOR AND WORKFORCE DEVELOPMENT, stated that the department of education and the department of labor have a good relationship that has been fostered for two years. 8:37:47 PM LARRY LEDOUX COMMISSIONER, DEPARTMENT OF EDUCATION AND EARLY DEVELOPMENT, appreciated the opportunity to help young people engage in the construction of a pipeline. He would like to see an Alaska workforce ready when the pipeline is ready for construction. 8:38:36 PM Commissioner Bishop stated that each funding request coincides with the strategy outlined in their training plan. Business, Industry, and Education have all worked together to develop the training plan. Each funding request was identified in the strategies by timeline. Each request has been vetted by the best in the state. Representative Gara wanted as much job training as possible for Alaskans to limit the amount of imported labor. He thought this was the best way to limit dislocation. If the training happens too early, the students may not work for the pipeline, but instead take their training to other job opportunities. If there is inadequate training, then labor will need to be imported. Commissioner Bishop made clear that one guiding principle of the presented document was the industry recommendations that the focus is on current workforce shortages. He did not think that overtraining would be a problem. Representative Gara asked if there was a way to ensure that people trained would be available to work on the pipeline. Commissioner Bishop discussed the variable occupations mentioned in the training document, stating that many are transferable from one industry to the next. 8:44:06 PM Vice-Chair Stoltze asked for comments from Department of Education and Early Development regarding the advertising of technical training versus other methods of higher education. Commissioner Ledoux observed that there will be plans introduced soon. Technical education helps build vision in young people. The real challenge will be to provide experiences to young people throughout Alaska. Vocational programs throughout the state have been reduced substantially. The competitive nature of this program can create innovative partnerships. HB 4001 was HELD in Committee for further consideration. 8:49:38 PM