HOUSE RESOURCES STANDING COMMITTEE March 13, 1996 8:10 a.m. MEMBERS PRESENT Representative Joe Green, Co-Chairman Representative William K. "Bill" Williams, Co-Chairman Representative Scott Ogan, Vice Chairman Representative Alan Austerman Representative Ramona Barnes Representative John Davies Representative Pete Kott Representative Don Long Representative Irene Nicholia (via teleconference) MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL 394 "An Act authorizing a program of natural gas and coal bed methane development licensing and leasing; relating to regulation of certain natural gas exploration facilities and coal bed methane exploration facilities for purposes of preparation of discharge prevention and contingency plans and compliance with financial responsibility requirements; amending the duties of the Alaska Oil and Gas Conservation Commission as they relate to natural gas exploration activities and coal bed methane exploration activities; and amending the exemption from obtaining a waste disposal permit for disposal of waste produced from coal bed methane drilling." - PASSED CSHB 394(RES) OUT OF COMMITTEE *HOUSE JOINT RESOLUTION 62 Requesting the federal government to purchase surplus 1995 Alaska canned pink salmon. - PASSED HJR 62 OUT OF COMMITTEE HOUSE BILL 511 TITLE: "An Act relating to deposits into the fish and game fund." - PASSED HB 511 OUT OF COMMITTEE HOUSE BILL 447 "An Act providing that state land, water, and land and water may not be classified so as to preclude or restrict traditional means of access for traditional recreational uses." - PASSED CSHB 447(RES) OUT OF COMMITTEE HOUSE JOINT RESOLUTION NO. 54 Encouraging the lessees of Alaska's vast North Slope natural gas reserves to reach agreement to market gas, expressing the legislature's support for an Alaska North Slope (ANS) gas transmission pipeline, and requesting the President of the United States and the Governor of the State of Alaska to publicly support and take action that will help expedite the construction of that system. - HEARD AND HELD *HOUSE BILL 469 "An Act relating to the University of Alaska and to assets of the University of Alaska; authorizing the University of Alaska to select additional state public domain land, designating that land as `university trust land,' and describing the principles applicable to the land's management; and defining the net income from the University of Alaska's endowment trust fund as `university receipts' subject to prior legislative appropriation." - HEARD AND HELD *HOUSE JOINT RESOLUTION NO. 63 Opposing the proposed expansion of the United States Environmental Protection Agency's toxics release inventory program. - SCHEDULED BUT NOT HEARD *HOUSE BILL NO. 539 "An Act changing the name of the Alaska Soil and Water Conservation Board." - SCHEDULED BUT NOT HEARD *HOUSE BILL NO. 537 "An Act renaming the division of geological and geophysical surveys in the Department of Natural Resources as the department's division of mining and geology, and revising the duties of the state geologist within that division; and providing for an effective date." - SCHEDULED BUT NOT HEARD HOUSE JOINT RESOLUTION NO. 60 Relating to Revised Statute 2477 rights-of-way. - SCHEDULED BUT NOT HEARD HOUSE BILL NO. 118 "An Act relating to seafood marketing, to the definition of 'seafood' for purposes of the Alaska Seafood Marketing Institute, and to an aquatic farm product marketing tax; and providing for an effective date." - SCHEDULED BUT NOT HEARD (* First Public Hearing) PREVIOUS ACTION BILL: HB 394 SHORT TITLE: GAS & COAL METHANE LICENSES & LEASES SPONSOR(S): REPRESENTATIVE(S) OGAN, ROKEBERG, James, Kohring JRN-DATE JRN-PG ACTION 01/05/96 2369 (H) PREFILE RELEASED 01/08/96 2370 (H) READ THE FIRST TIME - REFERRAL(S) 01/08/96 2370 (H) O&G, RESOURCES, FINANCE 02/08/96 (H) O&G AT 10:00 AM CAPITOL 124 02/08/96 (H) MINUTE(O&G) 02/13/96 (H) O&G AT 10:00 AM CAPITOL 124 02/13/96 (H) MINUTE(O&G) 02/21/96 2846 (H) COSPONSOR(S): JAMES 02/27/96 (H) O&G AT 10:00 AM CAPITOL 124 02/27/96 (H) MINUTE(O&G) 02/28/96 2909 (H) O&G RPT CS(O&G) NT 2DP 4NR 1AM 02/28/96 2910 (H) DP: ROKEBERG, OGAN 02/28/96 2910 (H) NR: BRICE, B.DAVIS, G.DAVIS, WILLIAMS 02/28/96 2910 (H) AM: FINKELSTEIN 02/28/96 2910 (H) FISCAL NOTE (DNR) 02/28/96 2910 (H) ZERO FISCAL NOTE (DEC) 02/28/96 2910 (H) REFERRED TO RESOURCES 02/29/96 2972 (H) COSPONSOR(S): KOHRING 03/08/96 (H) RES AT 8:00 AM CAPITOL 124 03/08/96 (H) MINUTE(RES) 03/11/96 (H) RES AT 8:00 AM CAPITOL 124 03/11/96 (H) MINUTE(RES) 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HJR 62 SHORT TITLE: FED PURCHASE SURPLUS '95 CANNED SALMON SPONSOR(S): RESOURCES JRN-DATE JRN-PG ACTION 03/11/96 3061 (H) READ THE FIRST TIME - REFERRAL(S) 03/11/96 3061 (H) RESOURCES 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 511 SHORT TITLE: DEPOSITS INTO FISH AND GAME FUND SPONSOR(S): REPRESENTATIVE(S) OGAN JRN-DATE JRN-PG ACTION 02/12/96 2728 (H) READ THE FIRST TIME - REFERRAL(S) 02/12/96 2728 (H) RESOURCES, FINANCE 03/08/96 (H) RES AT 8:00 AM CAPITOL 124 03/08/96 (H) MINUTE(RES) 03/11/96 (H) RES AT 8:00 AM CAPITOL 124 03/11/96 (H) MINUTE(RES) 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 447 SHORT TITLE: CAN'T CLOSE LAND TO TRADITIONAL REC. USES SPONSOR(S): REPRESENTATIVE(S) MASEK, Toohey, Kohring JRN-DATE JRN-PG ACTION 01/24/96 2524 (H) READ THE FIRST TIME - REFERRAL(S) 01/24/96 2524 (H) RESOURCES 01/26/96 2548 (H) COSPONSOR(S): WILLIAMS 01/31/96 (H) RES AT 8:00 AM CAPITOL 124 01/31/96 (H) MINUTE(RES) 02/05/96 (H) RES AT 8:00 AM CAPITOL 124 02/05/96 (H) MINUTE(RES) 02/16/96 (H) RES AT 8:00 AM CAPITOL 124 02/16/96 (H) MINUTE(RES) 02/19/96 2812 (H) COSPONSOR REMOVED: WILLIAMS 02/26/96 2890 (H) COSPONSOR(S): TOOHEY 02/28/96 2944 (H) COSPONSOR(S): KOHRING 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HJR 54 SHORT TITLE: FAVOR TRANS-ALASKA GAS SYSTEM & LNG SALES SPONSOR(S): REPRESENTATIVE(S) KUBINA, Green, Barnes, Navarre, Mackie, Grussendorf, Phillips, B.Davis, Willis, Sanders, Davies, Robinson, Rokeberg, Ogan JRN-DATE JRN-PG ACTION 01/16/96 2453 (H) READ THE FIRST TIME - REFERRAL(S) 01/16/96 2453 (H) O&G, RESOURCES, FINANCE 02/05/96 2633 (H) COSPONSOR(S): ROBINSON 02/07/96 2666 (H) COSPONSOR(S): ROKEBERG 02/09/96 2707 (H) COSPONSOR(S): OGAN 02/13/96 (H) O&G AT 10:00 AM CAPITOL 124 02/13/96 (H) MINUTE(O&G) 02/13/96 (H) MINUTE(O&G) 02/14/96 2749 (H) O&G RPT CS(O&G) 3DP 3NR 1AM 02/14/96 2749 (H) DP: B.DAVIS, OGAN, FINKELSTEIN 02/14/96 2749 (H) NR: BRICE, G.DAVIS, WILLIAMS 02/14/96 2749 (H) AM: ROKEBERG 02/14/96 2749 (H) FISCAL NOTE (DNR) 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 BILL: HB 469 SHORT TITLE: INCREASE LAND GRANT TO UNIV. OF ALASKA SPONSOR(S): REPRESENTATIVE(S) THERRIAULT, Toohey, Kelly, Davies JRN-DATE JRN-PG ACTION 02/02/96 2610 (H) READ THE FIRST TIME - REFERRAL(S) 02/02/96 2610 (H) HES, RESOURCES, FINANCE 02/09/96 2708 (H) COSPONSOR(S): DAVIES 02/28/96 2943 (H) HES REFERRAL WAIVED 02/28/96 2943 (H) REFERRED TO RESOURCES 03/13/96 (H) RES AT 8:00 AM CAPITOL 124 WITNESS REGISTER JAMES HANSEN Leasing/Evaluations Division of Oil and Gas Department of Natural Resources 3601 C Street, Suite 1380 Anchorage, Alaska 99503-5948 Telephone: (907) 269-8804 POSITION STATEMENT: Provided department's position and answered questions regarding HB 394. CHERYL SUTTON, Legislative Assistant to Representative William K. "Bill" Williams Alaska State Legislature Capitol Building, Room 128 Juneau, AK 99801 Telephone: (907) 465-3715 POSITION STATEMENT: Introduced HJR 62. JANICE ADAIR, Director Division of Environmental Health Department of Environmental Conservation 555 Cordova Street Anchorage, AK 99501 Telephone: (907) 269-7644 POSITION STATEMENT: Provided department's position in support and answered questions regarding HJR 62. LAURIE H. OTTO, Deputy Attorney General Criminal Division Department of Law P.O. Box 110200 Juneau, Alaska 99811-0300 Telephone: (907) 465-3428 POSITION STATEMENT: Provided department's position and answered questions regarding HB 511. DEAN PADDOCK Bristol Bay Driftnetters Association P.O. Box 21951 Juneau, Alaska 99802 Telephone: (907) 463-4970 POSITION STATEMENT: Supported HB 511. JEFF LOGAN, Legislative Assistant to Representative Joe Green Alaska State Legislature Capitol Building, Room 24 Juneau, Alaska 99801 Telephone: (907) 465-4931 POSITION STATEMENT: Provided information on status of HB 447. BEVERLY MASEK, Representative Alaska State Legislature Capitol Building, Room 418 Juneau, Alaska 99801 Telephone: (907) 465-2679 POSITION STATEMENT: As sponsor of HB 447, supported committee substitute and new amendment. SARA HANNAN, Executive Director Alaska Environmental Lobby P.O. Box 22151 Juneau, Alaska 99802 Telephone: (907) 463-3366 POSITION STATEMENT: Testified on HB 447. NICO BUS, Acting Director Division of Support Services Department of Natural Resources 400 Willoughby Avenue Juneau, Alaska 99801-1724 Telephone: (907) 465-2406 POSITION STATEMENT: Responded to question on HB 447. GENE KUBINA, Representative Alaska State Legislature Capitol Building, Room 406 Juneau, Alaska 99801 Telephone: (907) 465-4859 POSITION STATEMENT: Provided sponsor statement on HJR 54. MORGAN SOLOMON P.O. Box 589 Barrow, Alaska 99723 Telephone: (907) 852-7674 POSITION STATEMENT: Supported HJR 54. CLIFF EAMES Alaska Center for the Environment 519 West Eighth, Suite 201 Anchorage, Alaska 99501 Telephone: (907) 274-3621 POSITION STATEMENT: Opposed HB 469. GENE THERRIAULT, Representative Alaska State Legislature Capitol Building, Room 421 Juneau, Alaska 99801 Telephone: (907) 465-4797 POSITION STATEMENT: Provided sponsor statement on HB 469. CHARLIE BODDY, Representative Resource Coalition Usibelli Coal Mine, Inc. 122 First Avenue, Suite 302 Fairbanks, Alaska 99701 Telephone: (907) 452-2625 POSITION STATEMENT: Testified on HB 469. ACTION NARRATIVE TAPE 96-32, SIDE A Number 0001 CO-CHAIRMAN JOE GREEN called the House Resources Committee meeting to order at 8:10 a.m. Members present at the call to order were Representatives Green, Williams, Ogan, Austerman, Davies, Kott, and Long. Representative Barnes arrived late and Representative Nicholia joined the meeting via teleconference. HB 394 - GAS & COAL METHANE LICENSES & LEASES Number 0089 REPRESENTATIVE SCOTT OGAN, sponsor of HB 394, offered to answer any questions before addressing amendments. The committee was working from version M, dated 3/7/96. Representative Ogan moved Amendment1 to CSHB 394, which read: Page 2, line 24: Delete "at the drill site" Page 3, line 27: Delete "at the drill site" Page 5, line 26: Delete "at the drill site" REPRESENTATIVE OGAN explained this was a technical amendment recommended by the Department of Natural Resources, Division of Oil and Gas. He said, "They felt that `at the drill site' was not appropriate language because right before that, it talks about ... within 3,000 feet of the surface at the drill site. The problem is sometimes that the casing doesn't go straight down. If they deviate the casing somewhat, it could be interpreted that 3,000 feet from the drill site might not be 3,000 feet down." CO-CHAIRMAN GREEN asked if there were any comments about the proposed amendment. There being none, Amendment 1 passed. Number 0231 REPRESENTATIVE OGAN moved Amendment 2 to CSHB 394, which read: Page 9, line 5 & 6: Delete "of the facility" line 5: Insert "owner or" following "the" Page 9, line 11: Delete "of the facility" line 11: Insert "owner or" following "the" Page 10, line 7: Delete "of the facility" line 7: Insert "owner or" following "the" REPRESENTATIVE OGAN believed this was a recommendation of the Oil and Gas Conservation Commission. "Of the facility", which was not clear language, was being changed to "owner or operator". Basically a technical amendment, it would cover anybody associated with the drilling operation, Representative Ogan said. CO-CHAIRMAN GREEN asked if there were questions or objections. There being none, Amendment 2 passed. Number 0320 REPRESENTATIVE OGAN offered Amendment 3 to CSHB 394, which read: Page 3, line 19: Substitute "more" for "less" He explained, "What we'd like to do is put a very linear process in the public comment period, here. This was a drafting mistake, a request of the drafter to change this. ... We'd like the public comment period not to exceed 60 days, so when an operator will know, for example, that if he applies for a lease in the fall of one year, that in so many days, by the spring of next year, he'll be able to go into the area and set up and operate." CO-CHAIRMAN GREEN asked if there were questions or objections to Amendment 3. REPRESENTATIVE JOHN DAVIES objected. He asked: "Would you object to just making it 60 days, period?" REPRESENTATIVE OGAN replied 60 days would be fine. Number 0443 REPRESENTATIVE DAVIES moved to amend Amendment 3 to read, "a comment period of 60 days". CO-CHAIRMAN GREEN said, "Just deleting `not less than'." REPRESENTATIVE DAVIES concurred. CO-CHAIRMAN GREEN noted that was a friendly amendment to Amendment3. REPRESENTATIVE OGAN agreed he perceived it as a friendly amendment. Number 0479 REPRESENTATIVE GREEN stated, "We're making it a 60-day specific, rather than `more' or `less'." He asked if there was an objection. There being none, Amendment 3 passed. Co-Chairman Green noted that it would read, "comment for a period of 60 days." REPRESENTATIVE OGAN moved Amendment 4 to CSHB 394, which read: Page 5, Lines 26-29: Delete: "If the lessee's operation under the lease results in the production of oil or of gas in violation of this subsection, the director shall immediately suspend the lessee's operation under the lease and may terminate the lease." Insert: following "surface" ". If an onshore well drilling for natural gas under a lease authorized by AS 38.05.177 penetrates a formation capable of producing gas below 3,000 feet of the surface, the owner or operator (1) shall notify the department and the Alaska Oil and Gas Conservation Commission; and (2) may not conduct further operations in the drilled well until the facility complies with all applicable laws and regulations relating to oil and gas production; however, this paragraph does not prevent the owner or operator from conducting activities that may be required by the Alaska Oil and Gas Conservation Commission to plug or abandon a well." Number 0489 REPRESENTATIVE OGAN explained there was a similar provision in the bill that when an operator entered a formation capable of producing oil, that operator had to cease operation and notify the department. Further operations could not be conducted until the facility complied with applicable laws and regulations. Representative Ogan said, "What we're attempting to do with this is to put some further parameters. The legal experts and DNR [have] shared some concern about ... who owns the gas below 3,000 feet. And if the operator enters into a gas formation [where] gas is possibly produced below 3,000 feet, ... we would like them to cease operations and enter into the normal oil and gas lease process." REPRESENTATIVE OGAN mentioned there had been subsequent discussion, not reflected in Amendment 4, where someone would possibly be able to plug the well at 3,000 feet and produce the gas above that. He said he would not put that on the table currently. REPRESENTATIVE OGAN stated, "What I've been told by the experts is if a person enters a formation, ... for example, if its a gas cap on an oil formation, the pressures will be much greater and they'll be able to tell that they're into this formation that possibly produces gas from below 3,000 feet. Because we're making a lot of accommodations to put this program in place, we'd like to make this as bullet-proof as possible, so we don't end up in litigation and problems further on down the line." Number 0642 CO-CHAIRMAN GREEN referred to page 2, line 20, and said "SHALLOW NATURAL GAS LEASES" applied to a lease within 3,000 feet of the surface. He asked: "How, then, would a well produce gas below 3,000 feet in this amendment?" REPRESENTATIVE OGAN replied, "Only if ... the gas that they hit above 3,000 feet ... possibly comes from below 3,000 feet. In other words, if they hit the top of a gas cap that extends below 3,000 feet, we'd like them to enter into a conventional oil and gas lease." Number 0777 REPRESENTATIVE ALAN AUSTERMAN indicated there was no competitive leasing at that point in time, as would normally occur. He asked what prohibited people from drilling 3,000-foot wells without having to get permits until they found a gas pocket. Representative Austerman understood that an operator could complete the paperwork afterwards, without going through a competitive bid. He asked if that was how it was set up, with the amendment. Number 0828 REPRESENTATIVE OGAN suggested someone on teleconference might be better qualified to answer that. CO-CHAIRMAN GREEN asked: "Is your question that they can go anywhere and punch holes? They're only going to be drilling holes on their lease. Their lease is just limited to 3,000 feet. Or are you thinking maybe there'll be some 3,000-foot leases and not anything leased below that?" REPRESENTATIVE AUSTERMAN replied, "Well, obviously, this bill is for everything above 3,000 feet. And everything above your demarcation line ... is a competitive-type leasing, whereas this new bill is not a competitive-type leasing program." He suggested a person could pick a place to drill; if everybody said it was all right, that person could go ahead and drill there above 3,000 feet. Representative Austerman asked if that was correct. CO-CHAIRMAN GREEN responded, "If a lease is granted." REPRESENTATIVE OGAN agreed. CO-CHAIRMAN GREEN said, "So, it's what's happened below that, in this area that has not been leased, below 3,000 feet." REPRESENTATIVE AUSTERMAN concurred. CO-CHAIRMAN GREEN stated, "It's my understanding there would be nothing to preclude the driller of the 3,000-foot well, who had special compensation because he doesn't have to have as big a bond and all these other ramifications for the likelihood it's not there. If he then says, `hey, I think there's a mother lode below here, I'm going to go get a lease of a different kind', then he would be subject to all the other ramifications of a lease, the big bond, the whole nine yards, just as he would be now." Number 0937 REPRESENTATIVE AUSTERMAN asked if that would have eliminated the competition that would normally occur. CO-CHAIRMAN GREEN replied, "Well, no, he has to get the lease. And the owner of the land, if it's Native land or if it's state land, may say, `I'm sorry, Charlie, that's not going to be on the lease schedule for five more years.' So, you ... can't drill in the lower until you get a lease, and that's not going to be up for awhile. The only exception that I can think of is if there was [an] exploration licensing area, that the shallow gas entity wanted to come in and say, `look, there's a Native village on this large, sub-surface lease and we think we can find some shallow gas', that might be an exception. But, then, that would already be leased to someone else who has the rights to drill deeper. So, I don't think that would be a problem." REPRESENTATIVE AUSTERMAN asked: "But what if at 2,995 [feet] he finds oil? Then he has to cap it?" CO-CHAIRMAN GREEN said yes. REPRESENTATIVE AUSTERMAN continued: "He can't go any further with it?" Number 1002 REPRESENTATIVE OGAN said that was covered in another portion of the bill. An operator who encountered a formation capable of producing oil had to cease operations and notify the department and the Alaska Oil and Gas Conservation Commission (AOGCC), as well as comply with all applicable laws. Representative Ogan noted that operations would cease except for whatever was instructed by the AOGCC. CO-CHAIRMAN GREEN stated, "Then you get into a correlative rights situation. And that's where the Conservation Commission comes in, because then, in effect, you have a 3,000-foot lease but you're trying to drain ... oil from a 3,001-foot lease, which is a different entity." He added, "You can't drain oil from someone else's lease, unless it's unitized." Number 1072 REPRESENTATIVE OGAN pointed out that Section 7, page 9, relating to onshore well drilling for gas that penetrated a formation capable of producing oil, had the same stipulations. REPRESENTATIVE DAVIES said he understood the concern and noted they were talking about the "hinterlands," where little geophysical exploration had occurred. He wondered how a person would know, at 2,900 feet, where gas was coming from. Number 1138 REPRESENTATIVE OGAN replied he had been told by Tuckerman Babcock of the AOGCC that if they hit a natural gas formation not associated with the characteristics of methane, which was low- pressure and low-volume, chances were it could be associated with another type of gas. Representative Ogan suggested if committee members had reservations about the Amendment 4, he would withdraw it for later discussion. Number 1192 REPRESENTATIVE DAVIES stated the amendment was better than the existing language. However, he was seeking clarification. He asked if an adjacent leaseholder or the AOGCC would trigger it. CO-CHAIRMAN GREEN replied, "In order to drill the well, to get the permit, you have to have an Oil and Gas Conservation Commission permit. And in that permit, the requirements are that you will provide the geological information you find - if you're going to log it, all copies of the logs, any cuttings, any cores that are taken - so that the Conservation Commission engineering and geological staff would be privy to the information that the operator gets on the well. ... Let's assume ... at 2,990 you encounter a gas sand that might be a part of a dome that extends below 3,000 feet, which would come under this operation. At that time, you would have to follow this amendment, as I understand your suggestion." Chairman Green added that the AOGCC would then have authority. "You then get into a situation of either draining unleased or other leased interests below 3,000 feet," he said, indicating that addressed Representative Austerman's question. Number 1384 CO-CHAIRMAN GREEN continued, "So, then, you either have to ... go to a unitization or get permission of the owner of the lower gas- hold," he said. "That gets sticky, and so, I would imagine what would happen is you'd be tangled up in a unitization effort, which would actually work against the concept here, because those things probably take a year, at minimum. But, on the other hand, it might not take that much, because whoever has the sub-surface lease, then, is assured of at least finding some gas." He noted this was all speculative. He suggested it would be handled not in this bill but by the AOGCC and the Department of Natural Resources (DNR), as far as leasing was concerned. Number 1411 CO-CHAIRMAN GREEN noted there were several methods for determining that the condition existed. For an unleased area, the situation would be stickiest, he suggested, because the operator or someone else might want to take out a conventional lease. And the lease for the lower interval would not be on the lease schedule. REPRESENTATIVE AUSTERMAN said that was his question. CO-CHAIRMAN GREEN said, "Then, you get a situation where, at this person's detriment, they have discovered a gas reservoir at the very, very edge of their lease area and that's an unfortunate situation, because they would be in a correlative rights problem." Number 1444 JAMES HANSEN, Leasing/Evaluations, Division of Oil and Gas, Department of Natural Resources (DNR), testified via teleconference from Anchorage. CO-CHAIRMAN GREEN asked: "Would you be willing to take this situation on? Did you understand the concern that was registered?" MR. HANSEN replied he had written down the same concern that morning. "You pretty much have pointed out all the problems," he said. He referred to the question of what would happen if gas were struck that extended below 3,000 feet. He suggested the operator would have to hold back and DNR would have to go through the competitive process in order to lease below 3,000 feet. "That would be a stumbling block to producing any of that gas, even above the 3,000 feet," he said. Number 1484 REPRESENTATIVE DAVIES asked Mr. Hansen, "In a relatively unexplored area, ... how would we know that you'd penetrated a formation capable of producing gas below the 3,000 feet? What kinds of information would be available out of single hole to know that kind of information?" MR. HANSEN replied there were several ways to tell. If a bed was dipping down-slope, away from the well, it was fairly certain that gas existed further down. "If you drill down to 3,000 feet, stop at that point, and you hit gas, and you still have gas at 3,000, chances are pretty good you've got gas below 3,000," he said. "But you're right, without a geophysical survey to be able to `see' what's down there or ... how thick the formation is ..., it would be hard to tell." He said if there were other signs, it could be assumed gas extended further down, however. Number 1546 CO-CHAIRMAN GREEN explained that surface geology would create the desire to drill there in the first place. He asked why a person would want to drill a 3,000-foot well just on speculation. "They're going to try to find that area that gives the most likelihood of finding gas," he said, indicating magnetometers, seismic indications, or surface geology could be used to make that determination. REPRESENTATIVE DAVIES referred to a concern raised by Dave Lappi at an earlier hearing and asked: "Suppose that you encountered gas at 2,000 feet and the well went on down, and then you got into a situation where this paragraph would be triggered and you had to plug it. Within this language, is it possible for AOGCC to allow them to plug the bottom of the hole and back up to the 2,000-foot horizon and just produce the low-pressure methane from that level?" CO-CHAIRMAN GREEN replied, "I would certainly think so." Number 1640 MR. HANSEN agreed it was a definite possibility that the gas could be plugged and left there. REPRESENTATIVE DAVIES asked: "So, when it says `plug the well', that doesn't imply plug the whole thing, but just plug that portion of it. Is that right?" MR. HANSEN replied that the wording may need to be more specific. REPRESENTATIVE DAVIES asked: "So, could we put some language in like `plug a portion or all of', or something like that?" MR. HANSEN agreed that should work. CO-CHAIRMAN GREEN thought it was covered. He said the paragraph did not prevent the owner or operator from activities that may be required by the AOGCC, which had jurisdiction over the well. Number 1659 REPRESENTATIVE DAVIES said, "My concern is that the language says `to plug or abandon the well'. CO-CHAIRMAN GREEN explained, "They will allow plug-backs, partial plug-offs of zones above. You can actually plug off a[n] ... intermediate zone and produce lower, or you can plug the lower zone and produce above it, as required by AOGCC." REPRESENTATIVE DAVIES stated, "I'm just concerned that this line doesn't get read that the only option AOGCC has is to plug or abandon the entire well." CO-CHAIRMAN GREEN thought the language could not be construed to say "you must plug and abandon the well." Number 1689 REPRESENTATIVE OGAN clarified, "The legislative intent, my intent, and maybe the committee's intent we could put on the record, is that it is not for them to plug and abandon, but just simply to give AOGCC the authority to deal appropriately with a situation. I think we all maybe agree that we still would like to see the gas produced from that well to go to that particular village, ... but let AOGCC make the call as [to] what the appropriate steps are to do that." Number 1714 CO-CHAIRMAN GREEN said, "If I could offer a friendly amendment [to Amendment 4] to avoid that possibility: `to plug, plug back or abandon the well'." REPRESENTATIVE DAVIES replied, "I'd be more comfortable with that." REPRESENTATIVE OGAN said, "That would be more than considered a friendly amendment." CO-CHAIRMAN GREEN stated, "And that plug-back is a common vernacular in the oil industry." He asked if there was any objection to the amendment to Amendment 4. There being none, it was so ordered. Co-Chairman Green asked if there were questions, comments, or any objection to Amendment 4, as amended. There being none, Amendment 4, as amended, was adopted. Number 1748 REPRESENTATIVE OGAN moved Amendment 5 to CSHB 394, which read: Page 4, line 20, after "lease;": Insert "if the commissioner determines that the lessee has not diligently developed or continued to operate under the lease, the commissioner, after giving notice and opportunity for hearing to the lessee, may terminate the lease;" REPRESENTATIVE OGAN explained that because of the many accommodations being made to independent companies to facilitate drilling the gas, he was attempting to make this as "bullet-proof" as possible, to prevent speculators from coming in and tying up leases for five years without developing them. "What we want people to do is to lease these leases and be ready, within a year, to do some drilling and some action," he said, adding this was a safe-guard measure to enhance the intent of the bill. Number 1803 CO-CHAIRMAN GREEN asked Mr. Hansen if legal problems might occur with the amendment. He asked if it would be an agreement entered into beforehand, eliminating potential litigation. MR. HANSEN replied he thought the amendment was needed. He suggested changing "commissioner" to "director"; when the annual review was done, the director would have the discretion of terminating the lease if the party was not doing anything. CO-CHAIRMAN GREEN asked: "And you don't feel there's any problem, then, with somebody suggesting that that director might be deleterious or ... arbitrary and capricious?" REPRESENTATIVE AUSTERMAN indicated page 4, line 18, already dealt with that. MR. HANSEN replied that one could always request a reconsideration by the commissioner on the director's decision. Number 1875 REPRESENTATIVE OGAN moved an amendment to Amendment 5 to change "commissioner" to "director". CO-CHAIRMAN GREEN asked if there was any objection to using the word "director". There was none. He asked if there was further concern that, as indicated by Mr. Hansen, there might be other words to help prevent arbitrary capriciousness or whether that was understood. REPRESENTATIVE DAVIES commented, "I would think that this kind of language would be part of the lease. It should be able to be known, going into this situation, that this is part of the deal, ... that if the director isn't happy with your operation, then he has this power to make the decision." CO-CHAIRMAN GREEN asked Mr. Hansen if he had indicated that. Number 1917 MR. HANSEN replied yes and said, "We do have appeal regs in effect in which anybody, for any decision by the director, ought to appeal. They have that right to appeal to the commissioner. So, if someone thinks they're being unfairly treated by the director, they do have legal standing." CO-CHAIRMAN GREEN asked if there was further discussion or any objection to adopting Amendment 5. There being none, Amendment5, as amended, was adopted. Number 1965 REPRESENTATIVE DAVIES offered Amendment 6 to CSHB 394, which read: Page 10, line 15-18: Delete all material He explained that Amendment 6 deleted Section 11, the prohibition against using the 470 Fund. Number 1906 REPRESENTATIVE OGAN said he did not object. He indicated his concerns about deleting the language had been alleviated. CO-CHAIRMAN GREEN asked if there was indication that suppliers of the 470 Fund would object. REPRESENTATIVE OGAN replied that he had spoken with three major suppliers. While they had some reservations that the 470 Fund was being expanded, Representative Ogan thought they understood that the possibility of the 470 Fund being used would probably be mitigated by this bill. If the bill was effective, there would be less handling and shipping of diesel fuels in the bush. " And we've also addressed some of the concerns by providing some financial responsibility for incidental operational spills," Representative Ogan said. "So, because of that, they don't have an objection to it." CO-CHAIRMAN GREEN asked if there were further comments about Amendment 6. REPRESENTATIVE OGAN asked anyone in the audience who objected to please speak up. Number 2065 CO-CHAIRMAN GREEN noted there were no objections and stated that Amendment6 was adopted. He asked if there was further discussion on HB 394. REPRESENTATIVE DON LONG recalled a concern at a past meeting about page 2, lines 25-32, and page 3, on existing leases. He asked if anything was being done about that. REPRESENTATIVE OGAN explained there had been a meeting between himself and Representatives Long, Davis and Austerman to discuss those issues. He said, "I know what your concerns are about the North Slope. I remain committed to work with you between now and the next committee of referral to see if we can get some language that would help your situation. It's got to be a concerted effort between the [Department of] Natural Resources and myself, and I'd be happy to work with you on that." He explained that the short notice had precluded the ability to draft language for the present committee. REPRESENTATIVE LONG said he had no problem with that. Number 2135 REPRESENTATIVE DAVIES expressed concern about that issue, as well. His office had contacted Mr. Hansen the previous day to try to work out language. "The department's concerns are sufficiently complicated that it's not easy to draft some language in the short period of time," he said. Number 2161 MR. HANSEN responded that his concern was over how complicated it would be. Legal problems needed to be addressed and he wanted to run it by the Attorney General's office to see what could happen if leases were allowed to overlap. He was unsure what problems there might be, but he foresaw there would be some. CO-CHAIRMAN GREEN said, "Wouldn't it be, since that is a lease-hold entity to whoever has the deeper lease - they go from the surface down - that the only way you could accomplish, I think, what Representative Long wants would be a sublease, if the lease itself does not preclude that. I think if you try and file lease-on-top- of-lease, you'll hang both leases up." MR. HANSEN thought that was correct. CO-CHAIRMAN GREEN continued, "But I think it's not without reason to think that you might be able to get a sublease, from a deep lease owner, for the shallow rights." Number 2211 MR. HANSEN said, "I believe that's right, Mr. Chairman. I think Mr. Lappi said that it's actually done in the Lower 48. So, that's why I'm saying it's not impossible. I'm just saying we need to look at it closely to see what legal ramifications there might be." REPRESENTATIVE LONG suggested that in the interest of time, the bill would be the instrument to start with. Another amendment could be made later. CO-CHAIRMAN GREEN submitted that it would not be part of the current bill in any regard. "It would have to be an agreement with the other leaseholder," he said. "The state could not retroactively take back a portion of that lease by itself." Number 2239 REPRESENTATIVE DAVIES referred to page 2, line 26 and said he had a corollary concern because that wording excluded everything in the North Slope and Cook Inlet, whether or not it was currently leased. "And the reason for that is to avoid the possibility of an overlapping lease," he said. He thought the bill should be modified to allow for that possibility, although it would be complicated. He believed it was possible to amend the language at line 26, for example, to allow for the possibility where no lease currently existed. "In other words, the lease sale could be offered subject to whatever existing shallow leases may be in place and whatever language would have to be around it would have to be developed," he said. "That would take care of Representative Long's concern in a number of instances," he concluded. REPRESENTATIVE AUSTERMAN moved that CSHB 394(RES), version M, as amended, move from the House Resources Committee with accompanying fiscal notes and individual recommendations. There being no objection, it was so ordered. HJR 62 - FED PURCHASE SURPLUS '95 CANNED SALMON Number 2326 CO-CHAIRMAN WILLIAM K. "BILL" WILLIAMS accepted the gavel from Co- Chairman Green to preside over the testimony on HJR 62. He said his intent was move the resolution from committee today. Number 2348 CHERYL SUTTON, Legislative Assistant to Representative Bill Williams, read the sponsor statement for HJR 62 into the record: MS. SUTTON said, "The Alaska canned pink salmon industry is facing a serious crisis caused by record harvests in 1995. The record pack of nearly four million cases on a 48 tall basis is seriously affecting the industry's ability to move these surpluses. MS. SUTTON continued, "The pink salmon harvest forecast for 1995 was 76.1 million but actually turned out to be 128 million. This was 51.9 million over forecast. The strength is attributed to good ocean survival. MS. SUTTON proceeded, "USDA has traditionally required that canned salmon be processed under NMFS "Type 1" Continuous Inspection, even though neither the commercial marketplace nor the U.S. Food and Drug Administration (FDA) makes this requirement. The canned salmon industry does not normally contract NMFS inspectors to oversee the processing operation unless there is an indication that there will be a USDA purchase program. In 1995, a letter was sent by USDA to the salmon industry indicating that, based on the harvest level forecasts at the time, a purchase was not warranted. Consequently, the bulk of the industry did not assume the additional expense of NMFS inspection. When the size of the run became apparent, it was too late to bring inspectors to the plants. MS. SUTTON said, "The industry is prepared to have the National Marine Fisheries Service (NMFS) Inspection Services Division conduct lot inspections of product processed in 1995 to certify that the product meets the technical requirements of the Commercial Item Description for canned salmon. NMFS believes these assurances should be deemed adequate for USDA purchases for its various programs. MS. SUTTON said, "House Joint Resolution 62 requests the federal government to purchase 1995 Alaska canned pink salmon surpluses for their domestic and export programs. These programs, managed by the Agricultural Marketing Service, include school lunch programs, export programs, assistance to low income persons and the federal prison system. MS. SUTTON continued, "The resolution asks the Department of Agriculture to waive the National Marine Fisheries Service "Type 1" inspection requirement. The canned salmon industry operates under federal and State of Alaska regulations as well as the guidelines of the "Canned Salmon Control Plan and Container Integrity Program" which were developed in conjunction with the National Food Processors Association and FDA. Alaska canned salmon is traded internationally on the assurances of these programs. MS. SUTTON said, "At present, at least six major Alaska seafood companies have notified fishermen they will not be buying pink salmon for the 1996 season because of the surplus. This situation poses economic disaster for our fishermen and processors. MS. SUTTON concluded, "The canned pink salmon surpluses offer a highly nutritious and healthful product for the federal government's programs. It is imperative that USDA make a decision quickly. Operating plans and commitments to purchase cans and packaging material must be made now to be manufactured and shipped for the 1996 season." MS. SUTTON added that the committee's support would be much appreciated...(CHANGE TAPE) TAPE 96-32, SIDE B Number 0001 REPRESENTATIVE LONG questioned Ms. Sutton about the use of bagged salmon. Would that also require the "Type 1" inspections? Number 0023 MS. SUTTON felt that particular product had not been produced in any volume at this point for the marketplace. REPRESENTATIVE DAVIES asked whether the sponsor had considered adding a resolve to include some specific reference to substituting the other marine fisheries inspections or the ADEC inspections so the resolve did not say that we were asking them to waive the "Type 1" inspections but to utilize the other information that was available in lieu of that requirement. Number 0058 MS. SUTTON replied that numerous industry people and Alaska's federal delegation and others have been working on this issue. She said the National Marine Fisheries Service who conducts both of these inspections, the "Type 1" continuous inspection and the lot inspection, has written to the U.S. Department of Agriculture expressing their concern with the "Type 1" inspection and asking them to waive that requirement and outlining what the lot inspection would cover and why it would suffice. These issues have been dealt with. She referred to page 2, line 10 of HJR 62 and stated she felt that Representative Davies concern was adequately addressed. Number 0108 CO-CHAIRMAN GREEN said if the federal government comes in and buys up copious amounts of excess canned salmon, what they do with that and what sort of price, is it a reduced or competitive price. MS. SUTTON replied that she did not know but informed him that canned salmon is now moving at a low price everywhere in the international and domestic marketplace. She said she expected it to be a comparable price to what is moving and being traded now. There is no doubt that people are going to take losses but it is more important to move that inventory, the costs of warehousing 1.7 million cases are astronomical. Number 0149 CO-CHAIRMAN GREEN stated in the past, there was a concern about botulism, albeit a fake scare; he asked if relieving this kind of inspection would increase that possibility. MS. SUTTON answered in the negative, no it would not increase the threat of that kind of incident. She informed the committee that Janice Adair, Department of Environmental Conservation, would be addressing what the DEC requirements are for inspection. She said the state's canned salmon regulations are so strict that people who can salmon are not allowed to anything that is watermarked. A fish that is watermarked means a fish that comes late in the run or has been milling in area where there is fresh water. MS. SUTTON emphasized that this is wonderful product going into the can. It is not as some people think that because it is in a can it must be low in product. It is very high in product and the industry standards are extremely strict all the way through. She suggested that the regulations in place now exceed what the "Type 1" inspection would be. MS. SUTTON explained that all the "Type 1" inspection would do is have someone from the federal government, an inspector from the National Marine Fisheries Service physically present in the plant on the line when it is being processed. They would process in the same manner whether that person were standing there or not standing there. They do not change anything in their operation. Number 0221 JANICE ADAIR, Director, Division of Environmental Health, Department of Environmental Conservation, testified in support of HJR 62. She said she was encouraged to see canned salmon in the school lunch program. CO-CHAIRMAN WILLIAMS closed testimony on HJR 62 and asked the wish of the committee. Number 0250 REPRESENTATIVE AUSTERMAN moved that HJR 62 move from the House Resources Committee with individual recommendations and attached zero fiscal note. There being no objection, it was so ordered. CO-CHAIRMAN GREEN accepted the gavel from Co-Chairman Williams and announced that HB 118, Seafood Marketing / Aquatic Product Tax, and HB 537, Division of Mining & Geology/State Geologist, would be rescheduled to the continuation of the recessed meeting on March14, 1996, at 1:00 p.m. HB 511 - DEPOSITS INTO FISH AND GAME FUND Number 0282 CO-CHAIRMAN GREEN brought HB 511 before the committee. REPRESENTATIVE OGAN, sponsor of HB 511, explained the bill originated in response to concerns over inadequate protection of wildlife resources in the state. In light of declining revenues, dry-docked equipment, and lack of enforcement from the Department of Law, HB 511 was designed to help with cases involving commercial fishing violations. "Already, civil fines are being deposited into the Fish and Game Fund," he said. "House Bill 511 adds that criminal fines would also be deposited into the Fish and Game Fund. And the legislature each year will still have to approve the budget and reimburse service agreements." He suggested a good example was the Tyson settlement. REPRESENTATIVE DAVIES asked for clarification on how the Fish and Game Fund worked and whether it was a dedicated fund. Number 0402 REPRESENTATIVE OGAN explained that the Fish and Game Fund was the only dedicated fund, other than funds dedicated by federal law, in the state of Alaska. Monies from various sources, including hunting and fishing licenses, tags, and federal monies, went into the fund, he said. REPRESENTATIVE LONG said it appeared that previous legislation had intended that all forfeitures be deposited to the general fund. Now, the legislature was asking that this be deposited into the Fish and Game Fund, which was originally for licenses, fees, and so forth. "I feel that this may be looking toward a need for a proposition that the voters would have to consider, making it a dedicated fund for the forfeitures," he said. Number 0463 REPRESENTATIVE OGAN indicated HB 511 simply clarified existing law. It was not a constitutional issue, he said. He deferred to Laurie Otto for an explanation. LAURIE H. OTTO, Deputy Attorney General, Criminal Division, Department of Law, read language from the Alaska Constitution, explaining that it helped clarify the general prohibition on dedicated funds. The exception to that prohibition said, "this provision shall not prohibit the continuance of any dedication for special purposes existing upon the date of ratification of this section by the people of Alaska". MS. OTTO said if a dedicated fund existed when the constitution was adopted, funds could currently be dedicated for that purpose. "And so, in this bill, what you see is a continuation of the historical practice of dedicating funds that were related to claims or losses caused by damages to fish and game resources to the state," she said, "which is why, if you look at the language of the bill, you will see that it ... only allows deposit into the Fish and Game Fund of fines and forfeitures in cases where there were violations that damaged or present a threat of damage to the fisheries resource. The Fish and Game Fund was not historically used for game, and it was not historically used just to enforce general regulations in the fishing arena. But if it's related to damage or threat of damage to the resource, it's constitutionally permissible to deposit it in the Fish and Game Fund." Number 0576 MS. OTTO continued, "Now, certainly a past legislature has made a decision in the language that you asked about, to have those monies go into the general fund. But this legislature, as in all appropriation areas, is not bound by actions of past legislatures. You can make an independent determination of where you think those monies should be deposited and you can, as Representative Ogan proposes, change the law to allow those monies to go into the Fish and Game Fund, although, as he said, this legislature, and future legislatures, still retain the ability to decide how Fish and Game Funds will be used. It's an appropriation that you make like every other appropriation." Number 0586 REPRESENTATIVE LONG said, "You're expanding the definition of the original dedication that's happened earlier. That's my concern, is that whatever is relating to a fish product of any kind would be dedicated to this fund." MS. OTTO replied, "You are correct that if it tied it to anything relating to fish and tried to put it in the Fish and Game Fund as a dedicated fund, that would not be permissible, because it is broader than the original dedication." She referred to page 1, line 4, "violations that damage or present a threat of damage", which, she said, was in every section of the bill. "As long as it is narrowed in that way, that is, in fact, what the original pre- statehood fund was used for," she said. "And, therefore, it is a constitutionally permissible action of dedicating those funds in the Fish and Game Fund. You're right, though. If it were anything relating to fish, that would not be acceptable." Number 0700 REPRESENTATIVE DAVIES voiced concerns. For example, there was a certain amount of dedicated motor fuels tax, which he believed to be a nickel, in existence at the time of statehood. He understood that interpretations were that the nickel was dedicated, but that any amount beyond that could not be increased without a vote of the people, as a dedicated fund. "If that understanding and interpretation is correct, it seems like this is a similar sort of a thing," he said, "where we're ... expanding the scope of the amounts of money that would go into the fund. And it would seem like that would require a vote of the people, by analogy of what happened under the motor fuel situation." Number 0714 MS. OTTO responded she did not know about the motor fuel tax. "If, in fact, what happened is that there was a specific amount of money identified in the law as going into the motor fuels tax, I could see that that would be limited," she stated. "But pre-statehood, what happened with [the] Fish and Game Fund, or the predecessor to that, is that any monies were ... dedicated to the furtherance of the protection, rehabilitation, preservation and conservation of the territorial fish and shellfish resources. And any money that came into the state for that purpose could be deposited into the Fish and Game Fund. So, it was not limited by any particular amount of money, as what you're describing with the motor fuels tax. So, pre-statehood, the money that we're talking about would have gone into the Fish and Game Fund." She emphasized that pre- statehood dedicated funds were analyzed by what would have happened, pre-statehood, had the money come into the state. "Pre- statehood, the money that is identified in Representative Ogan's bill would have gone into the Fish and Game Fund," she concluded. Number 0779 REPRESENTATIVE OGAN offered to clarify the intent of the bill. He referred to Section 1, relating to purpose. He said "fisheries law enforcement activities" would include possibly funding equipment to apprehend violators and funding Department of Law personnel who would specialize in such cases. The Tyson case had resulted in a $4.1 million settlement. "There may be other violations of this sort going on, that are not being caught just because we ... don't have the resources to do it," he suggested. Number 0850 REPRESENTATIVE DAVIES said he did not disagree with the purpose. However, he was concerned about the general prohibition against dedication of funds in Alaska's constitution. "And every time we do that, we increase the scope or increase the amount or add another dedication of funds, it makes me nervous," he said, "because the folks that drafted our constitution recognized that ... every time you do that, you limit the scope of a succeeding legislature to have an adequate array of tools to deal with problems that are presented to them at the time. While it is true that the legislature appropriates the money ... out of the fund, the ... purposes for which it can be appropriated are limited by the terms of the dedication of the fund, so they couldn't appropriate it for general public safety on the highways, for example." He emphasized it was a constitutional concern. REPRESENTATIVE DAVIES indicated another way to solve the problem would be to adequately fund the Department of Law and the Division of Habitat and Restoration in the Department of Fish and Game. "While we may disagree on the mechanisms for doing that, I think that that's what needs to be done," he said, voicing his preference to fund it through the operating budget by looking to other revenue sources. Number 0944 MS. OTTO said, "Everybody, I think, who looks at the situation acknowledges that we're not adequately pursuing commercial fishing violations, particularly ones that damage the resource, that there appears to us to be both a significant number of violators who are really damaging one of our really most important renewable resources, very important to the economy of the state, but also, that we're not capturing the fines and forfeitures because we don't have the resources to dedicate to it. And I think that essential to understanding what is trying to be done with this bill is realizing that we are, in fact, creating a new revenue stream into the Fish and Game Fund, money that's not being captured right now, that most of the money isn't money that's being diverted out of the general fund and put into the general fund. It's mostly money that's not being captured right now." Number 1052 DEAN PADDOCK, Bristol Bay Driftnetters Association, testified in support of HB 511, saying, "This association has always supported the conduct of an orderly fishery. We believe strongly in the protection of the resource. But there's another element ... and that is the need to provide a level playing field between the participants in the fishery." He suggested that nowhere else in Alaska was that as important as in Bristol Bay, where large numbers of fishermen competed for large numbers of fish. MR. PADDOCK indicated Bristol Bay enforcement was the single largest operation carried out by the Division of Fish and Wildlife Protection in the Department of Public Safety. Members of his association, wanting to ensure enforcement presence in Bristol Bay, had suggested supplementing funds by instituting a statutory assessment on every license sold there. "As it is now, when the enforcement money runs out, they're gone," Mr. Paddock. "Maybe there'll be a fly-over by a plane, but the boats, the skiffs, the surveillance, it's gone. And then, when that happens, the orderly fishery deteriorates and we've got people fishing further and further outside these lines." He advocated a "user pay" concept. He concluded by saying he thought this situation applied elsewhere in the state, as well. Number 1300 CO-CHAIRMAN GREEN asked if there was further comment and closed the public testimony. REPRESENTATIVE AUSTERMAN mentioned a letter received from Larry VanderLind from the Committee to Prevent Illegal Salmon Fishing in Bristol Bay. Mr. VanderLind indicated that with 1900 drift permits in the Bristol Bay area, the fishermen themselves would like to impose a $250 surcharge, which would total approximately $475,000 per year. That committee had criteria for involvement in setting regulations and policies on how the enforcement would be done, and to ensure it was done correctly, Representative Austerman added. REPRESENTATIVE OGAN closed by saying, "They're not doing an adequate job. I understand people's concerns with this bill." He referred to Section 1 and said to the extent permitted by applicable state and federal law, this would operate within parameters of existing law. "If you look, starting from the East Coast and work your way around, Alaska's one of the last great fisheries in the world, and certainly in North America," he said. "And if we don't do an adequate job of protecting the resource, we will be paying dearly for it in the future." CO-CHAIRMAN GREEN referred to Representative Davies' concern about dedication. He asked if Representative Ogan believed the legislature would be operating within its purview and its constitutional rights. REPRESENTATIVE OGAN replied yes. He added that they had heard qualified testimony that day asserting that fact. Number 1473 REPRESENTATIVE AUSTERMAN moved that HB 511 move from committee with accompanying fiscal notes and individual recommendations. REPRESENTATIVE LONG objected. CO-CHAIRMAN GREEN asked for a roll call vote. Voting for moving HB 511 were Representatives Austerman, Kott, Ogan, Williams and Green. Voting against it were Representatives Davies and Long. Representative Nicholia was present via teleconference and did not vote; Representative Barnes was absent. Co-Chairman Green noted that HB 511 moved from the House Resources Committee. HB 447 - PROTECT ACCESS FOR TRADIT'NL OUTDOOR USES Number 1514 CO-CHAIRMAN GREEN called on Jeff Logan to advise the committee of the status of HB 447, which had been in subcommittee. JEFF LOGAN, Legislative Assistant to Representative Joe Green, stated that the subcommittee on HB 447, chaired by Representative Ogan, had produced a committee substitute. On February 16, 1996, the House Resources Committee met again and heard additional testimony, but there was no quorum present. At that time, Representative Ogan presented the committee substitute, version G. MR. LOGAN discussed changes in that committee substitute. First, there was a new title reflected in the bill. In Section 1, the CS added intent language to assure that nothing in the bill affected private property interests. In Section 3, the CS provided for reasonable alternatives for access when conflicts arose and added new means of access for any new activities covered in the bill. In Section 4, the CS established authority for development interests to control access across leased areas when reasonable alternatives were not available to go around them. Mr. Logan noted that versionG had not yet been adopted by the committee. Number 1655 REPRESENTATIVE AUSTERMAN moved to adopt CSHB 447, version G, dated 2/12/96. There being no objection, it was adopted as the work draft. REPRESENTATIVE BEVERLY MASEK, sponsor of HB 447, testified that she had no problem with the manner in which the subcommittee had amended the bill. She stated there was an additional amendment that she supported, Representative Long's suggestion to change "recreational" to "outdoor". REPRESENTATIVE LONG indicated that change was to be made throughout the bill. Number 1760 CO-CHAIRMAN GREEN asked if there was an objection to changing "recreational" to "outdoor". There being no objection, it was so ordered. REPRESENTATIVE DAVIES referred to page 2, line 32, and questioned whether making that line read "outdoor restrictions" was appropriate. CO-CHAIRMAN GREEN asked Representative Long whether he wanted that change throughout the bill. REPRESENTATIVE LONG clarified the change should occur wherever it said "traditional recreational activities". That should be changed to "traditional outdoor activities". He suggested that would preclude page 2, line 32, from being altered. CO-CHAIRMAN GREEN asked if there were further questions or comments and noted that the amendment had been adopted. Number 1857 REPRESENTATIVE AUSTERMAN referred to the first hearing on the bill, in early February, when there had been concern about Title 41 lands. He asked if that would be addressed in the bill. REPRESENTATIVE MASEK said it was not addressed in the bill, nor was there an intention to do so. She restated that she concurred with all the changes in the committee substitute. REPRESENTATIVE OGAN moved that CSHB 447, version G, as amended, move from the House Resources Committee with individual recommendations and attached fiscal notes. REPRESENTATIVE AUSTERMAN asked if there would be public testimony. CO-CHAIRMAN GREEN noted that nobody was signed up to testify. He further noted that Representative Barnes had joined the meeting. Number 1954 REPRESENTATIVE PETE KOTT objected for the purpose of hearing from the Department of Natural Resources about the fiscal note. CO-CHAIRMAN GREEN asked if anyone was present from the Department of Natural Resources to address the fiscal note. Number 2001 REPRESENTATIVE RAMONA BARNES moved that HB 447 be moved from committee with a zero fiscal note. REPRESENTATIVE OGAN withdrew his motion to move the bill with the attached fiscal note. CO-CHAIRMAN GREEN acknowledged a request from Sara Hannan to testify on the bill. Number 2070 SARA HANNAN, Executive Director, Alaska Environmental Lobby, testified that HB 447 transferred authorities that had been available for all state agencies through a process called interagency land management agreements (ILMAs), a Title 37 provision that allowed transfer of authorities between divisions. "Typically, those authority transfers average 97.5 acres each," she said. "Since 1970, 95 ILMAs have occurred, transferring a total of 9,258 acres between agencies. In 86 of these transfers, there has been absolutely no closure, no restrictions of access provisions in those transfers. In eight of the nine other transfers, there were restrictions such as no motorized access in the campground. Most of these transfers of lands are to accommodate a changing purpose, a trailhead, a campground, an airport extension or an airport provision protection that's no longer needed, so the Department of Public Safety, the Department of Transportation no longer wants control over the area outside of the airstrip and they're willing to give that authority back to another division." Number 2158 MS. HANNAN continued, "In one of those transfers, the Blair Lake transfer that occurred in 1995, there was a closure. And the transfer of land [indisc.] authority to regulate Blair Lake to the Division of Parks. There was a closure. Blair Lake has been closed to airplane traffic. Blair Lake is adjacent to Denali State Park. Just near Blair Lake, Princess Cruises is constructing what will become the largest commercial operation in a state park in the state of Alaska. At their request, Blair Lake was closed to airplane access. Now, much like Representative Masek, my constituents are not happy that Blair Lake is closed to access. But the purpose for closing Blair Lake to airplane access was at the request of the commercial operator who is making a multi- million-dollar investment in an in-holding in a state park." MS. HANNAN continued, "An extensive public review process goes into place before state park plans come into place and are approved. This accommodation of a commercial user doesn't please other commercial users; it doesn't please many people who thought that access was guaranteed. But I would indulge you to think about the fact that sometimes there are closures that are there not for the purpose of keeping people out, but providing for commercial development." MS. HANNAN continued, "Most of the closures to access that are accomplished are for public safety protections. We keep airport perimeters, even though it's public multiple-use land; we don't allow snow machines to cross the airport approach, for the safety of the airplane, for the safety of the snow-machiner." Ms. Hannan expressed that the changes to titles under the HB 447 were misdirected, irrelevant, and did not accomplish the desired end. "You heard a lot of testimony from snow-machiners, saying the state parks prevent us from snow-machining where we'd like to recreate," she said. "The titles that this bill affects don't affect the authority that a state park uses to close snow-machine access. I'd also like you to realize that most of Alaska and most state parks are not closed to snow-machines. A few valleys within Chugach State Park, which is the largest state park in Alaska, are closed to snow-machines, but all of the public lands along the Parks Highway and the Glenn Highway are open to snow-machines." Number 2350 MS. HANNAN concluded, "Any time you close lands to access, Alaskans are concerned. And those decisions should be made through a lengthy, public, deliberate process. And I would say that the legislature is not going to have the time to indulge in those kind of closure decisions, that this bill requests that the legislature do directly, instead of its agencies. I'd urge you not to pass [HB] 447 from committee because I don't think that it does anything except for put a large work pile on your desk that you'll never be able to get to." CO-CHAIRMAN GREEN thanked Ms. Hannan and noted that public testimony was closed. REPRESENTATIVE WILLIAMS referred to page 2, line 26, which had been amended to read "traditional outdoor activities means those types of activities that people may utilize for sport, exercise, subsistence". He asked if they were trying to define subsistence. [END OF TAPE] TAPE 96-33, SIDE A Number 0021 CO-CHAIRMAN GREEN indicated they were waiting to hear from Nico Bus from the Department of Natural Resources regarding the fiscal note. REPRESENTATIVE OGAN said he would be happy to move the bill from committee with a zero fiscal note. REPRESENTATIVE KOTT indicated a number of bills had come before the House on the floor with zero fiscal notes for promulgating regulations. He suggested in the current case, there had been a weak analysis of the expense associated with the bill. CO-CHAIRMAN GREEN said he agreed and that fiscal notes were certainly subject to question. REPRESENTATIVE KOTT concurred with moving the bill with a zero fiscal note and pointed out the bill would go to the House Finance Committee. Number 0198 REPRESENTATIVE DAVIES said that without having heard from the Department of Natural Resources, he objected to changing the fiscal note. REPRESENTATIVE BARNES replied, "It is the responsibility of the departments to be here and speak to their fiscal notes." She recalled an occasion in the House Finance Committee when a department had submitted a zero fiscal note that should have been for $14 million. CO-CHAIRMAN GREEN noted there was a motion to move the bill with a zero fiscal note. REPRESENTATIVE DAVIES still objected. He emphasized that Mr. Bus was on his way to testify and that it was just a matter of completing a phone call. CO-CHAIRMAN GREEN indicated they had waited long enough and asked for a roll call vote. Voting to move the bill with a zero fiscal note were Representatives Austerman, Barnes, Kott, Ogan, Williams and Green. Voting against it were Representatives Davies and Long. Representative Nicholia, present via teleconference, did not vote. Therefore, CSHB 447(RES), as amended, moved from the House Resources Committee with individual recommendations and a zero fiscal note. Number 0322 The teleconference operator announced that Nico Bus was on-line. CO-CHAIRMAN GREEN explained to Mr. Bus that concern had been raised that the bill might not require the amount of money shown in the fiscal note. He asked Mr. Bus to submit a justification and informed him that HB 447 bill had been moved from committee with a zero fiscal note. NICO BUS, Acting Director, Division of Support Services, Department of Natural Resources, agreed to provide the requested back-up. HJR 54 - FAVOR TRANS-ALASKA GAS SYSTEM & LNG SALES Number 0371 CO-CHAIRMAN GREEN brought HJR 54 before the committee and indicated that although the bill would be heard the following day, the sponsor wished to make a statement. REPRESENTATIVE GENE KUBINA, sponsor of HJR 54, explained that the resolution was the culmination of a year's discussions with people throughout the state and private industry, with the goal of encouraging marketing of North Slope natural gas. The resolution specifically asked the legislature to bring together people involved with natural gas, including lessees, the Governor, and the potential buyers. It put the legislature on record as supporting marketing of natural gas. It asked the Governor to bring those involved together, to continue to support the joint pipeline office, to encourage developers to have an Alaska-hire agreement for the construction of any pipeline, and to meet with all parties to try to bring it to fruition. The resolution also asked the President of the United States to make it a trade issue with Asian countries and to demonstrate to the country his support. Number 0526 REPRESENTATIVE KUBINA mentioned there had been talk about a natural gas pipeline for years. "This resolution does not really get into the route that would be taken," he said. "It tried to really skirt around the controversial parts and come into what we can all agree on, and that is that we do want to market our natural gas." Representative Kubina indicated some people suggested there was a 150-year supply of gas; he said there certainly was more than a 25- year supply. "As a legislature, we want to do what we can to encourage this to happen," he said, "so that, obviously, we can have the income into our state for it." He concluded by saying people would testify at the following day's meeting. MORGAN SOLOMON testified via teleconference from Barrow in support of HJR 54, saying the proposal had been on paper for many years and that Alaskans would benefit from the gas line going through the state rather than through Canada. Number 0709 REPRESENTATIVE KUBINA mentioned that HJR 54 had a $10,000 fiscal note from the department and therefore had a House Finance Committee referral. He had talked to the commissioner, who understood the fiscal note would be zeroed out; the commissioner had included a yearly trip to Asia, which Representative Kubina felt was unnecessary, as a lot of things could be done here to get this project moving. Representative Kubina suggested there would be little objection if the House Resources Committee wished to zero out the fiscal note. CO-CHAIRMAN GREEN noted that HJR 54 would be held over to the following day's meeting. HB 469 - INCREASE LAND GRANT TO UNIV. OF ALASKA CO-CHAIRMAN GREEN brought HB 469 before the committee and noted that Cliff Eames was on teleconference to testify. Number 0822 CLIFF EAMES, Alaska Center for the Environment (ACE), testified via teleconference from Anchorage, saying ACE, which had offices in Anchorage and the Mat-Su Valley, opposed HB 469, as they had opposed similar bills over the years. "It's not a question of opposing adequate funding for higher and other education," Mr. Eames said. "In fact, I think it's fairly clear that conservationists as a group are very supportive of education. But it's a question of how do we fund the University of Alaska and other state services. Bills similar to this have been vetoed by two governors for very good reasons. We believe those reasons are still relevant." MR. EAMES believed HB 469 would likely result in an unconstitutional, dedicated fund. However, even if that were not so, the policy against dedicated funds was violated by this bill, he asserted. By transferring 500,000 acres, or another substantial amount, of potentially revenue-generating land to the University of Alaska, a tremendous amount of flexibility would be lost for allocating future state funding to other programs, services or facilities, Mr. Eames said. From a conservation or public use standpoint, the chance to use these public lands in a multiple-use fashion would also be lost. Instead, the lands would be entirely dedicated to revenue generation for the university. Mr. Eames concluded by saying he would submit written comments. Number 1003 CO-CHAIRMAN GREEN apologized to the numerous people waiting to testify via teleconference. He stated his intention had been to take testimony that day only from one person unable to testify the following day. Co-Chairman Green asked that additional testifiers call again the next day at 1:00 p.m., when the hearing would reconvene. Number 1025 REPRESENTATIVE GENE THERRIAULT, sponsor of HB 469, stated that since similar legislation had been passed and vetoed last year, committee members were familiar with what the bill asked for. "Basically, what we're trying to do is follow through on making the University of Alaska a true land-grant college or university system," he said. "At the time of statehood, the university did have a pledge to receive lands from the federal government. However, when lands were given to the state, that pledge from the federal government was extinguished. Basically, the thought was that the state would follow through on the pledge for the land grant out of the state lands, that were given to the state." Representative Therriault explained that Governor Egan had not followed through on that. The land that the state received was managed by DNR, including the 100,000 acres that the university had selected at the time. Over the next 30 years, with DNR managing those lands, the income to the university was estimated to be around $590,000. "So, it's fairly clear that the state Department of Natural Resources was not very aggressive in managing those lands to derive a revenue stream for the benefit of the university, which is what you would want a ... land-grant university to do," Representative Therriault said. REPRESENTATIVE THERRIAULT continued, "House Bill 469 allows the University of Alaska now to select up to 500,000 acres over a 20- year period of time. And there are numerous things that have been worked out with the Administration and different coal miners in the state to try and alleviate some of their concerns." Representative Therriault noted that Ms. Redman from the University of Alaska was available for questions. He also indicated negotiations had continued as late as that morning to try to address concerns of the Administration and resource developers. Number 1188 CHARLIE BODDY, Representative, Resource Coalition, stated he representing a coalition including the Alaska Coal Association, the Alaska Miners Resource Development Council, and the Council of Alaska Producers, which had met via teleconference that week. Mr. Boddy said the resource community had concerns and that the coalition would submit a detailed list of concerns and additional comments, probably by week's end. MR. BODDY indicated the words "trusts lands" in the bill title was of concern. He referred to the Mental Health Trust lands, which had been acquired through the legislative, administrative and superior court processes. Mr. Boddy indicated 175 items were being challenged in that settlement, with briefs due April 20 in the supreme court, and with the possibility that the issues could continue on to the U.S. Supreme Court. MR. BODDY referred again to the Mental Health lands and said, "At one time, we had over 8 million acres hypothecated as part of that settlement. The bill currently has no over-selection or parameters built in around it about how much acreage could be set aside at this time, until such time as a half a million acres were rounded up. That's a major area that we'd like to have looked at." MR. BODDY referred to the land management issue, which he noted had been brought up the previous year in relation to where the management of those lands should lie. "Again, that would be a decision ... that this legislature is well equipped to deal with in setting up that trust," he concluded. Number 1341 CO-CHAIRMAN GREEN referred to "checkerboarding" from state and Native selections, and now the university selections. He asked if the concern of the coalition was that, even after the finality of the Mental Health Trust lands, earlier selections could be impaired because of subsequent selections either blocking access or creating problems. MR. BODDY responded that could be an issue. CO-CHAIRMAN GREEN asked if those were the types of concerns the coalition had, which would be on the list provided by the end of the week. MR. BODDY affirmed that and said they had identified issues but not yet fleshed them out. He indicated the all-inclusive list still needed to be sorted and put into a coherent form to provide to the committee. Number 1435 REPRESENTATIVE AUSTERMAN commented that he had a conflict and could not attend the continuation of the hearing the next day. CO-CHAIRMAN GREEN stated he also had a conflict and would be late. He then recessed the House Resources Committee meeting at 10:07 a.m., noting the committee would reconvene the following afternoon. [MEETING RECESSED UNTIL MARCH 14, 1996, AT 1:00 P.M.]