HOUSE FINANCE COMMITTEE APRIL 13, 1995 8:40 A.M. TAPE HFC 95 - 84, Side 2, #000 - end. TAPE HFC 95 - 85, Side 1, #000 - end. TAPE HFC 95 - 85, Side 2, #000 - #217. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:40 A.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Kelly Representative Navarre Representative Brown Representative Parnell Representative Therriault Representative Mulder and Representative Grussendorf were not present for the meeting. ALSO PRESENT Rod Mourant, Staff, Representative Pete Kott; Catherine Reardon, Director, Division of Occupational Licensing, Department of Commerce and Economic Development; Randy Welker, Legislative Auditor, Legislative Affairs; Representative Norman Rokeberg; Patrick Coughlin, Assistant Attorney General, Oil and Gas, Mining Section, Civil Division, Department of Natural Resources; Ken Boyd, Acting Director, Division of Oil and Gas, Department of Natural Resources. SUMMARY HB 207 An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; relating to the depositing of royalties and royalty sale proceeds in the Alaska permanent fund; and providing for an effective date. CS HB 207 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Revenue dated 3/22/95, the Department of Natural Resources dated 3/8/95 and a 1 zero fiscal notes by the Department of Revenue dated 2/27/95. HB 233 An Act extending until 1999 the termination date of the Board of Clinical Social Work Examiners, Board of Marital and Family Therapy, State Medical Board, Board of Nursing, Board of Nursing Home Administrators, Board of Psychologist and Psychological Associate Examiners, Real Estate Commission, and Hazardous Substance Spill Technology Review Council; extending until 1996 the termination date of the Board of Marine Pilots and the Correctional Industries Commission; and providing for an effective date. CS HB 233 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Commerce and Economic Development and zero fiscal notes by the Department of Administration dated 3/20/95 and the Department of Transportation and Public Facilities dated 3/20/95. HOUSE BILL 233 "An Act extending until 1999 the termination date of the Board of Clinical Social Work Examiners, Board of Marital and Family Therapy, State Medical Board, Board of Nursing, Board of Nursing Home Administrators, Board of Psychologist and Psychological Associate Examiners, Real Estate Commission, and Hazardous Substance Spill Technology Review Council; extending until 1996 the termination date of the Board of Marine Pilots and the Correctional Industries Commission; and providing for an effective date." Co-Chair Hanley indicated that HB 233 would extend the existence of numerous boards and commissions which are either in their sunset or wind-down year. The affected boards and commissions perform regulatory and licensure services for the State of Alaska. A work draft #9-LS0682\R, Lauterbach, 4/12/95, was distributed to Committee members. [Copy on file]. The draft extends the boards and commissions to the dates recommended by the audit. ROD MOURANT, STAFF, REPRESENTATIVE PETE KOTT, testified that the sunset dates on all sections match the recommendations made by Legislative Audit. Representative Navarre asked if complaints had been registered regarding the board process. Mr. Mourant did not know of any. Representative Navarre noted that he supported the board changes, although, he pointed out that there currently exists a process 2 established for a final year audit. Discussion followed between Representative Martin and Representative Navarre regarding the audit process. Representative Foster MOVED that the work draft be the version before the Committee. Representative Therriault OBJECTED, noting that he had introduced an amendment adopted at a previous meeting [Amendment #1] which deleted the Hazardous Technology Review Council. He remarked that material remained in the work draft currently before the Committee. Representative Brown noted the letter on file from RCAC in support of the Council. She pointed out that the Council resulted from a recommendation from the Oil Spill Division, following Exxon Valdez and the lack of oil spill technology. Representative Therriault countered, through action taken on the operating budget, their funding has been deleted from the budget thus negating the need for the council. Co-Chair Hanley recommended deleting Section 10 which would include the appropriate change to the title before moving the work draft. Representative Therriault WITHDREW his MOTION. There being NO OBJECTION, it was withdrawn. Representative Foster MOVED the work draft excluding Section Representative Navarre MOVED to delete Section #9. There being NO OBJECTION, it was deleted. Co-Chair Hanley asked when the audits would begin. RANDY WELKER, LEGISLATIVE AUDITOR, LEGISLATIVE AFFAIRS, stated that the audits are required by statute and are scheduled routinely. CATHERINE REARDON, DIRECTOR, DIVISION OF OCCUPATIONAL LICENSING, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, explained Section #2, the Board of Marine Pilots. She asked the Committee to consider extending that board until 1999. There currently exists legislation in both the House and the Senate to change the statute regarding marine pilots which could extend the marine pilot board until 1999. She repeated that it would be easiest for the Department if all the legislation had the same date. Also, the Board of Marine Pilots is in it's wind-down year, so at the time that the audit was prepared in 1993, Legislative Budget and Audit had recommended a four year extension. She thought changing the date to 1999 would not be against the general advice of the audit group. Mr. Welker agreed. Representative Navarre MOVED to amend Page 1, Line 13, 3 deleting "1998" and inserting "1999". There being NO OBJECTION, it was adopted. Representative Martin MOVED to report CS HB 233 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTIONS, it was so ordered. CS HB 233 (FIN) was reported out of Committee with a "do pass" recommendations and with fiscal notes by the Department of Commerce and Economic Development, the Department of Education and zero fiscal notes by the Department of Administration dated 3/20/95 and the Department of Transportation and Public Facilities dated 3/20/95. HOUSE BILL 207 An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; relating to the depositing of royalties and royalty sale proceeds in the Alaska permanent fund; and providing for an effective date." Representative Therriault MOVED to adopt the work draft #9- GH0039\H, Chenoweth, 4/12/95 as the version before the Committee. There being NO OBJECTION, it was adopted. Representative Therriault summarized the changes made at the Subcommittee level. KEN BOYD, ACTING DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES, commented that the change made to Page 3, Section B was the only one that the Administration was not in support of. The Knowles Administration wants the floor for the reduction to be established at 75%. REPRESENTATIVE ROKEBERG appreciated the Subcommittee's effort, although noted concern with the oversight provision indicated in Section #3. Representative Brown echoed her concern with the lack of oversight proposed in the legislation. Representative Brown explained that Amendment #1 [Attachment of the preliminary decision. Representative Brown MOVED to adopt Amendment #1. Representative Therriault recommended a conceptual amendment deleting "written" each time it appears in the amendment. There being NO OBJECTION to the conceptual amendment, it was adopted. Representative Rokeberg recommended that consideration of Amendment #2 precede Amendment #1. 4 Representative Brown remarked that the Amendment #1 would give the Legislature access to the "meat" of decisions and underlining data. She pointed out, that information, as the bill is currently written would be kept confidential. Representative Brown urged the Committee to adopt the amendment. There being NO OBJECTIONS, Amendment #1 was adopted. Representative Brown MOVED to adopt Amendment #2. She spoke to the amendment in relationship to the "far reaching" aspects of the legislation. The bill would provide more discretion than had previously been given to the Department of Natural Resource's Commissioner. She commented on the merit of providing oversight by a separate branch of government (Legislature) to prevent corruption. Co-Chair Hanley questioned the legislative recourse proposed under the amendment. Representative Brown explained that recourse would be to allow public comment by individual legislators. She acknowledged that the ultimate authority would rest with the Commissioner of the Department of Natural Resources. Representative Therriault thought that Amendment #2 would create more frustration for the commissioner while at the same time would provide information to the Legislature on the findings and determination. Representative Martin suggested that it would be difficult for some legislators to keep private information confidential. He supported continuing with the status quo. Representative Parnell agreed, stating that he voted against the amendment in Subcommittee for reasons of confidentiality. He felt that there would be no incentive to keep important information confidential. (Tape Change, HFC 95-85, Side 1). Representative Rokeberg concurred that public oversight was needed. He pointed out that he supported Amendment #2, although recommended deleting "the committee shall give notice to all members of the legislature of the committee's meeting in executive session with the commissioner...." He felt with the removal of that language would protect the confidentiality of the material while continuing to allow Legislative Budget and Audit Committee (LBA) to call an Executive Session. Representative Rokeberg spoke strongly in favor of the removal of the sunset provision. He indicated that there has been significant testimony that the sunset provision would not be workable for the bill. The process of applying for a royalty reduction and receiving investment commitment 5 from the private sector would take years. He thought that time frame would be detractive and with a five year sunset, destroy the intent of the bill. Co-Chair Hanley asked if there had been oversight provisions in the Oil and Gas or House Resource Committee versions. Representative Rokeberg stated there were. Before the bill moved from Committee, the conflict of interest between the Conservation Commission and the commissioner was addressed. He noted that he supported the oversight capacity. Co-Chair Hanley voiced his concern in deleting the executive session portion. Representative Navarre spoke against the sunset provision, and in particular regarding information not made available to legislators from the executive session. He felt that the responsibility of the audit and the Legislature would be to provide a check and balance for each body of government. Representative Parnell asked what access the Legislature had when the original royalty contracts were negotiated. Representative Brown responded that the original royalties were not negotiated. The original royalty was acquired in an competitive sale. The competitive sale process provides a great protection for the interests of the State. She emphasized that a situation would be established through the proposed legislation which would allow negotiations to determine that royalty. Representative Therriault asked if in the current royalty process could be adjusted. Representative Brown responded that royalties could only increase. Mr. Boyd agreed with Representative Brown. He added that the legislation would provide clear authority to the commissioner to lower the royalty. Representative Martin asked about past experience in competitive sales. Mr. Boyd responded once a lease sale exists, a provision then exists clarifying that royalties could be reduced at some point. He added, a protection within that concern, specifies that before one can receive a reduction on a new field, the field must be delineated. That process is time consuming and would consist of drilling wells. Mr. Boyd concluded that the Department would not object to having the legislative oversight. A roll call was taken on the MOTION to adopt Amendment #2. IN FAVOR: Navarre, Brown, Kelly OPPOSED: Kohring, Martin, Parnell, Therriault, Foster, Hanley 6 Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (3-6). Representative Brown MOVED to adopt Amendment #3. [Attachment #3]. She stated that the amendment would clarify the actual situation with respect to appeals received by the court. She added that Amendment #3 would provide a standard of review. Mr. Boyd responded that an appeal would be available with or without the recommended language. Co-Chair Hanley questioned if the precedence of appeal had been established and if so, the language would cover all the circumstances which could occur. PATRICK COUGHLIN, ASSISTANT ATTORNEY GENERAL, OIL AND GAS, MINING SECTION, CIVIL DIVISION, DEPARTMENT OF NATURAL RESOURCES, responded that the language of the proposed amendment accurately reflects what the court had previously established: "The limited right to review agency decisions, the court would apply where there is a provision which is not appealable". Discussion followed between Representative Parnell and Representative Therriault regarding the need for the language change. A roll call was taken on the MOTION to adopt Amendment #3. IN FAVOR: Brown OPPOSED: Martin, Navarre, Parnell, Therriault, Kelly, Kohring, Hanley, Foster. Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (1-8). Representative Brown MOVED to adopt Amendment #4. [Attachment #4]. Representative Brown explained that Amendment #4 would provide a clear standard of what the commissioner's goals were. She felt that current language establishes a "vague" concept of the "best interest" for the State as the standard, whereas, the amendment would provide that the natural resources be managed for their maximum economic value. Co-Chair Hanley OBJECTED. Mr. Boyd stressed that a standard could not be met, and that consequently it could not be proven as met. He added that language on Page 2, Line 8, 7 would clarify the existing law for older and newer fields. That section explains that "the field or pool would not be otherwise economic feasible". Representative Brown pointed out that Page 4, Line 20 establishes the standard in law at this time. She did not agree with Mr. Boyd, that the standard would be compatible in order to provide the State a reasonable rate of return. She pointed out that the Subcommittee members did not agree that a rate of return could be determined. Representative Navarre MOVED to amend Amendment #4 by deleting "maximum" and inserting "best". There being NO OBJECTION, it was changed. A roll call was taken on the MOTION to adopt amended Amendment #4. IN FAVOR: Navarre, Brown OPPOSED: Parnell, Therriault, Kelly, Kohring, Martin, Foster, Hanley Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (2-7). Representative Brown spoke to Amendment #5. [Attachment adding language to Line 5, following "shall" inserting "with the applicants consent". She thought that the amendment would provide the Legislature information regarding the decision made by the commissioner. Representative Martin OBJECTED. Representative Rokeberg interjected that the language would be a redundancy that the findings and the determination be made public. Mr. Boyd agreed with Representative Rokeberg although pointed out that the amendment would provide additional information requiring the applicant to demonstrate to the public confidential data. A roll call was taken on the MOTION to adopt Amendment #5. IN FAVOR: Brown OPPOSED: Parnell, Therriault, Kelly, Kohring, Martin, Hanley, Foster Representatives Mulder, Grussendorf and Navarre were not present for the vote. The MOTION FAILED (1-7). 8 Representative Brown MOVED to adopt Amendment #6. [Attachment #6]. She stated that Amendment #6 would change the floor from 75% to 60%. (Tape Change, HFC 95-85, Side 2). Representative Brown summarized that 75% would provide a royalty of 3.25% floor and would then set the floor at 5% for those fields not previously producing. She thought that would be in the best interested for the royalty owners. Representative Therriault OBJECTED stating that the price should be negotiable and would depend on new information when made available. Representative Rokeberg agreed with Representative Therriault. A roll call was taken on the MOTION to adopt Amendment #6. IN FAVOR: Brown OPPOSED: Parnell, Therriault, Kelly, Kohring, Martin, Navarre, Foster, Hanley Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (1-8). Representative Parnell advised that he had planned to offer a sunset amendment, but based on Representative Rokeberg statement, he would hold that proposal in order to gather more information, and then offer it on the House floor. Representative Therriault MOVED to report CS HB 207 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown asked if the bill had a fiscal note from the Department of Natural Resources. Mr. Boyd stated that the fiscal note had been removed in the House Resources Committee which amounted to $105.6 thousand dollars. That amount would pay for a Petroleum Engineer to provide the required in-house work. Representative Brown referenced the reduction to the Oil and Gas Division's budget in the Lease Sale Analysis component. She asked how that reduction would affect the level of professional staff in the Division in order to review applications. Mr. Boyd explained that cuts would cause the loss of at least one person from the team. Representative Brown asked the Committee's reconsideration of the fiscal note originally requested by the Department. Representative Therriault MODIFIED THE MOTION to move only the bill from Committee with individual recommendations. There being NO OBJECTION, it was so ordered. 9 Representative Brown MOVED the original fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 207 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Revenue dated 3/22/95, the Department of Natural Resources dated 3/8/95, and a zero fiscal note by the Department of Revenue dated 2/27/95. ADJOURNMENT The meeting adjourned at 10:15 A.M. HOUSE FINANCE COMMITTEE APRIL 13, 1995 8:40 A.M. TAPE HFC 95 - 84, Side 2, #000 - end. TAPE HFC 95 - 85, Side 1, #000 - end. TAPE HFC 95 - 85, Side 2, #000 - #217. CALL TO ORDER Co-Chair Mark Hanley called the House Finance Committee meeting to order at 8:40 A.M. PRESENT Co-Chair Hanley Representative Kohring Co-Chair Foster Representative Martin Representative Kelly Representative Navarre Representative Brown Representative Parnell Representative Therriault Representative Mulder and Representative Grussendorf were not present for the meeting. ALSO PRESENT Rod Mourant, Staff, Representative Pete Kott; Catherine Reardon, Director, Division of Occupational Licensing, Department of Commerce and Economic Development; Randy Welker, Legislative Auditor, Legislative Affairs; Representative Norman Rokeberg; Patrick Coughlin, Assistant Attorney General, Oil and Gas, Mining Section, Civil Division, Department of Natural Resources; Ken Boyd, Acting Director, Division of Oil and Gas, Department of Natural Resources. 10 SUMMARY HB 207 An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; relating to the depositing of royalties and royalty sale proceeds in the Alaska permanent fund; and providing for an effective date. CS HB 207 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Revenue dated 3/22/95, the Department of Natural Resources dated 3/8/95 and a zero fiscal notes by the Department of Revenue dated 2/27/95. HB 233 An Act extending until 1999 the termination date of the Board of Clinical Social Work Examiners, Board of Marital and Family Therapy, State Medical Board, Board of Nursing, Board of Nursing Home Administrators, Board of Psychologist and Psychological Associate Examiners, Real Estate Commission, and Hazardous Substance Spill Technology Review Council; extending until 1996 the termination date of the Board of Marine Pilots and the Correctional Industries Commission; and providing for an effective date. CS HB 233 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Commerce and Economic Development and zero fiscal notes by the Department of Administration dated 3/20/95 and the Department of Transportation and Public Facilities dated 3/20/95. HOUSE BILL 233 "An Act extending until 1999 the termination date of the Board of Clinical Social Work Examiners, Board of Marital and Family Therapy, State Medical Board, Board of Nursing, Board of Nursing Home Administrators, Board of Psychologist and Psychological Associate Examiners, Real Estate Commission, and Hazardous Substance Spill Technology Review Council; extending until 1996 the termination date of the Board of Marine Pilots and the Correctional Industries Commission; and providing for an effective date." Co-Chair Hanley indicated that HB 233 would extend the existence of numerous boards and commissions which are either in their sunset or wind-down year. The affected 11 boards and commissions perform regulatory and licensure services for the State of Alaska. A work draft #9-LS0682\R, Lauterbach, 4/12/95, was distributed to Committee members. [Copy on file]. The draft extends the boards and commissions to the dates recommended by the audit. ROD MOURANT, STAFF, REPRESENTATIVE PETE KOTT, testified that the sunset dates on all sections match the recommendations made by Legislative Audit. Representative Navarre asked if complaints had been registered regarding the board process. Mr. Mourant did not know of any. Representative Navarre noted that he supported the board changes, although, he pointed out that there currently exists a process established for a final year audit. Discussion followed between Representative Martin and Representative Navarre regarding the audit process. Representative Foster MOVED that the work draft be the version before the Committee. Representative Therriault OBJECTED, noting that he had introduced an amendment adopted at a previous meeting [Amendment #1] which deleted the Hazardous Technology Review Council. He remarked that material remained in the work draft currently before the Committee. Representative Brown noted the letter on file from RCAC in support of the Council. She pointed out that the Council resulted from a recommendation from the Oil Spill Division, following Exxon Valdez and the lack of oil spill technology. Representative Therriault countered, through action taken on the operating budget, their funding has been deleted from the budget thus negating the need for the council. Co-Chair Hanley recommended deleting Section 10 which would include the appropriate change to the title before moving the work draft. Representative Therriault WITHDREW his MOTION. There being NO OBJECTION, it was withdrawn. Representative Foster MOVED the work draft excluding Section Representative Navarre MOVED to delete Section #9. There being NO OBJECTION, it was deleted. Co-Chair Hanley asked when the audits would begin. RANDY WELKER, LEGISLATIVE AUDITOR, LEGISLATIVE AFFAIRS, stated that the audits are required by statute and are scheduled routinely. CATHERINE REARDON, DIRECTOR, DIVISION OF OCCUPATIONAL LICENSING, DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT, explained Section #2, the Board of Marine Pilots. She asked 12 the Committee to consider extending that board until 1999. There currently exists legislation in both the House and the Senate to change the statute regarding marine pilots which could extend the marine pilot board until 1999. She repeated that it would be easiest for the Department if all the legislation had the same date. Also, the Board of Marine Pilots is in it's wind-down year, so at the time that the audit was prepared in 1993, Legislative Budget and Audit had recommended a four year extension. She thought changing the date to 1999 would not be against the general advice of the audit group. Mr. Welker agreed. Representative Navarre MOVED to amend Page 1, Line 13, deleting "1998" and inserting "1999". There being NO OBJECTION, it was adopted. Representative Martin MOVED to report CS HB 233 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. There being NO OBJECTIONS, it was so ordered. CS HB 233 (FIN) was reported out of Committee with a "do pass" recommendations and with fiscal notes by the Department of Commerce and Economic Development, the Department of Education and zero fiscal notes by the Department of Administration dated 3/20/95 and the Department of Transportation and Public Facilities dated 3/20/95. HOUSE BILL 207 An Act relating to adjustments to royalty reserved to the state to encourage otherwise uneconomic production of oil and gas; relating to the depositing of royalties and royalty sale proceeds in the Alaska permanent fund; and providing for an effective date." Representative Therriault MOVED to adopt the work draft #9- GH0039\H, Chenoweth, 4/12/95 as the version before the Committee. There being NO OBJECTION, it was adopted. Representative Therriault summarized the changes made at the Subcommittee level. KEN BOYD, ACTING DIRECTOR, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL RESOURCES, commented that the change made to Page 3, Section B was the only one that the Administration was not in support of. The Knowles Administration wants the floor for the reduction to be established at 75%. REPRESENTATIVE ROKEBERG appreciated the Subcommittee's effort, although noted concern with the oversight provision 13 indicated in Section #3. Representative Brown echoed her concern with the lack of oversight proposed in the legislation. Representative Brown explained that Amendment #1 [Attachment of the preliminary decision. Representative Brown MOVED to adopt Amendment #1. Representative Therriault recommended a conceptual amendment deleting "written" each time it appears in the amendment. There being NO OBJECTION to the conceptual amendment, it was adopted. Representative Rokeberg recommended that consideration of Amendment #2 precede Amendment #1. Representative Brown remarked that the Amendment #1 would give the Legislature access to the "meat" of decisions and underlining data. She pointed out, that information, as the bill is currently written would be kept confidential. Representative Brown urged the Committee to adopt the amendment. There being NO OBJECTIONS, Amendment #1 was adopted. Representative Brown MOVED to adopt Amendment #2. She spoke to the amendment in relationship to the "far reaching" aspects of the legislation. The bill would provide more discretion than had previously been given to the Department of Natural Resource's Commissioner. She commented on the merit of providing oversight by a separate branch of government (Legislature) to prevent corruption. Co-Chair Hanley questioned the legislative recourse proposed under the amendment. Representative Brown explained that recourse would be to allow public comment by individual legislators. She acknowledged that the ultimate authority would rest with the Commissioner of the Department of Natural Resources. Representative Therriault thought that Amendment #2 would create more frustration for the commissioner while at the same time would provide information to the Legislature on the findings and determination. Representative Martin suggested that it would be difficult for some legislators to keep private information confidential. He supported continuing with the status quo. Representative Parnell agreed, stating that he voted against the amendment in Subcommittee for reasons of confidentiality. He felt that there would be no incentive to keep important information confidential. (Tape Change, HFC 95-85, Side 1). Representative Rokeberg concurred that public oversight was needed. He pointed out that he supported Amendment #2, 14 although recommended deleting "the committee shall give notice to all members of the legislature of the committee's meeting in executive session with the commissioner...." He felt with the removal of that language would protect the confidentiality of the material while continuing to allow Legislative Budget and Audit Committee (LBA) to call an Executive Session. Representative Rokeberg spoke strongly in favor of the removal of the sunset provision. He indicated that there has been significant testimony that the sunset provision would not be workable for the bill. The process of applying for a royalty reduction and receiving investment commitment from the private sector would take years. He thought that time frame would be detractive and with a five year sunset, destroy the intent of the bill. Co-Chair Hanley asked if there had been oversight provisions in the Oil and Gas or House Resource Committee versions. Representative Rokeberg stated there were. Before the bill moved from Committee, the conflict of interest between the Conservation Commission and the commissioner was addressed. He noted that he supported the oversight capacity. Co-Chair Hanley voiced his concern in deleting the executive session portion. Representative Navarre spoke against the sunset provision, and in particular regarding information not made available to legislators from the executive session. He felt that the responsibility of the audit and the Legislature would be to provide a check and balance for each body of government. Representative Parnell asked what access the Legislature had when the original royalty contracts were negotiated. Representative Brown responded that the original royalties were not negotiated. The original royalty was acquired in an competitive sale. The competitive sale process provides a great protection for the interests of the State. She emphasized that a situation would be established through the proposed legislation which would allow negotiations to determine that royalty. Representative Therriault asked if in the current royalty process could be adjusted. Representative Brown responded that royalties could only increase. Mr. Boyd agreed with Representative Brown. He added that the legislation would provide clear authority to the commissioner to lower the royalty. Representative Martin asked about past experience in competitive sales. Mr. Boyd responded once a lease sale exists, a provision then exists clarifying that royalties 15 could be reduced at some point. He added, a protection within that concern, specifies that before one can receive a reduction on a new field, the field must be delineated. That process is time consuming and would consist of drilling wells. Mr. Boyd concluded that the Department would not object to having the legislative oversight. A roll call was taken on the MOTION to adopt Amendment #2. IN FAVOR: Navarre, Brown, Kelly OPPOSED: Kohring, Martin, Parnell, Therriault, Foster, Hanley Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (3-6). Representative Brown MOVED to adopt Amendment #3. [Attachment #3]. She stated that the amendment would clarify the actual situation with respect to appeals received by the court. She added that Amendment #3 would provide a standard of review. Mr. Boyd responded that an appeal would be available with or without the recommended language. Co-Chair Hanley questioned if the precedence of appeal had been established and if so, the language would cover all the circumstances which could occur. PATRICK COUGHLIN, ASSISTANT ATTORNEY GENERAL, OIL AND GAS, MINING SECTION, CIVIL DIVISION, DEPARTMENT OF NATURAL RESOURCES, responded that the language of the proposed amendment accurately reflects what the court had previously established: "The limited right to review agency decisions, the court would apply where there is a provision which is not appealable". Discussion followed between Representative Parnell and Representative Therriault regarding the need for the language change. A roll call was taken on the MOTION to adopt Amendment #3. IN FAVOR: Brown OPPOSED: Martin, Navarre, Parnell, Therriault, Kelly, Kohring, Hanley, Foster. Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (1-8). 16 Representative Brown MOVED to adopt Amendment #4. [Attachment #4]. Representative Brown explained that Amendment #4 would provide a clear standard of what the commissioner's goals were. She felt that current language establishes a "vague" concept of the "best interest" for the State as the standard, whereas, the amendment would provide that the natural resources be managed for their maximum economic value. Co-Chair Hanley OBJECTED. Mr. Boyd stressed that a standard could not be met, and that consequently it could not be proven as met. He added that language on Page 2, Line 8, would clarify the existing law for older and newer fields. That section explains that "the field or pool would not be otherwise economic feasible". Representative Brown pointed out that Page 4, Line 20 establishes the standard in law at this time. She did not agree with Mr. Boyd, that the standard would be compatible in order to provide the State a reasonable rate of return. She pointed out that the Subcommittee members did not agree that a rate of return could be determined. Representative Navarre MOVED to amend Amendment #4 by deleting "maximum" and inserting "best". There being NO OBJECTION, it was changed. A roll call was taken on the MOTION to adopt amended Amendment #4. IN FAVOR: Navarre, Brown OPPOSED: Parnell, Therriault, Kelly, Kohring, Martin, Foster, Hanley Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (2-7). Representative Brown spoke to Amendment #5. [Attachment adding language to Line 5, following "shall" inserting "with the applicants consent". She thought that the amendment would provide the Legislature information regarding the decision made by the commissioner. Representative Martin OBJECTED. Representative Rokeberg interjected that the language would be a redundancy that the findings and the determination be made public. Mr. Boyd agreed with Representative Rokeberg although pointed out that the amendment would provide additional information requiring the applicant to 17 demonstrate to the public confidential data. A roll call was taken on the MOTION to adopt Amendment #5. IN FAVOR: Brown OPPOSED: Parnell, Therriault, Kelly, Kohring, Martin, Hanley, Foster Representatives Mulder, Grussendorf and Navarre were not present for the vote. The MOTION FAILED (1-7). Representative Brown MOVED to adopt Amendment #6. [Attachment #6]. She stated that Amendment #6 would change the floor from 75% to 60%. (Tape Change, HFC 95-85, Side 2). Representative Brown summarized that 75% would provide a royalty of 3.25% floor and would then set the floor at 5% for those fields not previously producing. She thought that would be in the best interested for the royalty owners. Representative Therriault OBJECTED stating that the price should be negotiable and would depend on new information when made available. Representative Rokeberg agreed with Representative Therriault. A roll call was taken on the MOTION to adopt Amendment #6. IN FAVOR: Brown OPPOSED: Parnell, Therriault, Kelly, Kohring, Martin, Navarre, Foster, Hanley Representatives Mulder and Grussendorf were not present for the vote. The MOTION FAILED (1-8). Representative Parnell advised that he had planned to offer a sunset amendment, but based on Representative Rokeberg statement, he would hold that proposal in order to gather more information, and then offer it on the House floor. Representative Therriault MOVED to report CS HB 207 (FIN) out of Committee with individual recommendations and with the accompanying fiscal notes. Representative Brown asked if the bill had a fiscal note from the Department of Natural Resources. Mr. Boyd stated that the fiscal note had been removed in the House Resources Committee which amounted to $105.6 thousand dollars. That amount would pay for a Petroleum Engineer to provide the required in-house work. 18 Representative Brown referenced the reduction to the Oil and Gas Division's budget in the Lease Sale Analysis component. She asked how that reduction would affect the level of professional staff in the Division in order to review applications. Mr. Boyd explained that cuts would cause the loss of at least one person from the team. Representative Brown asked the Committee's reconsideration of the fiscal note originally requested by the Department. Representative Therriault MODIFIED THE MOTION to move only the bill from Committee with individual recommendations. There being NO OBJECTION, it was so ordered. Representative Brown MOVED the original fiscal notes. There being NO OBJECTION, it was so ordered. CS HB 207 (FIN) was reported out of Committee with a "do pass" recommendation and with fiscal notes by the Department of Revenue dated 3/22/95, the Department of Natural Resources dated 3/8/95, and a zero fiscal note by the Department of Revenue dated 2/27/95. ADJOURNMENT The meeting adjourned at 10:15 A.M. 19