Legislature(2005 - 2006)

2006-05-31 House Journal

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2006-05-31                     House Journal                      Page 4095
                                                                                                    
                               HOUSE JOURNAL                                                     
                                                                                                    
                         ALASKA STATE LEGISLATURE                                                
                                                                                                    
                         TWENTY-FOURTH LEGISLATURE                                               
                                                                                                    
                          SECOND SPECIAL SESSION                                                 
                                                                                                    
Juneau, Alaska                  Wednesday                   May 31, 2006                          
                                                                                                    
                             Twenty-second Day                                                 
                                                                                                    
                                                                                                    
                                                                                                    
The House was called to order by Speaker Harris at 3:06 p.m.                                        
                                                                                                    
Roll call showed 34 members present.  Representative Cissna was                                     
absent.                                                                                             
                                                                                                    
Representative Coghill moved and asked unanimous consent that                                       
Representatives Anderson, Foster, McGuire, Moses, and Rokeberg be                                   
excused from a call of the House today.  There being no objection, it                               
was so ordered.                                                                                     
                                                                                                    
                                                                                                    
The invocation was offered by the Chaplain, Representative Coghill.                                 
Representative Dahlstrom moved and asked unanimous consent that                                     
the invocation be spread on the journal.  There being no objection, it                              
was so ordered.                                                                                     
                                                                                                    
     Almighty God,                                                                                  
                                                                                                    
     We bow in deep reverence before You and acknowledge our                                        
     need of divine guidance in our deliberations.  We also                                         
     remember that You have promised to help those who trust in                                     
     You.                                                                                           
                                                                                                    
          We remember that we have been chosen by people from all                                  
         over Alaska to serve and represent them. So with whatever                                 
     humility we can muster, we are ready to do our best.                                           
                                                                                                    

2006-05-31                     House Journal                      Page 4096
       Please help and guide us and those in our government as well                                
     as our people at home.                                                                         
                                                                                                    
       These series of decisions leading to a gas pipeline will have                               
       such a large impact on us and to our next generations, we ask                               
     that Your wisdom lead us and our people.                                                       
                                                                                                    
      We are thankful for the privilege and duty as representatives.                               
                                                                                                    
     I pray in the name of Jesus Christ.  Amen.                                                     
                                                                                                    
The Pledge of Allegiance was led by Representative Kohring.                                         
                                                                                                    
                       CERTIFICATION OF THE JOURNAL                                              
                                                                                                    
Representative Coghill moved and asked unanimous consent that the                                   
journal for the 13th through 21st legislative days of the Second Special                            
Session be approved as certified by the Chief Clerk.  There being no                                
objection, it was so ordered.                                                                       
                                                                                                    
                                                                                                    
                        MESSAGES FROM THE GOVERNOR                                               
                                                                                                    
HB 13                                                                                             
A message dated May 30, 2006, was read stating the Governor has                                     
signed the following bill May 25 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     SENATE CS FOR CS FOR HOUSE BILL NO. 13(FIN)                                                    
     "An Act relating to reimbursement of municipal bonds for school                                
     construction; increasing the base student allocation used in the                               
     formula for state financing of public education; relating to the                               
     district cost factors for state funding of public education; relating                          
     to school improvement funding; and providing for an effective                                  
     date."                                                                                         
                                                                                                    
     Chapter No. 41, SLA 2006                                                                       
     Effective Date:  See Chapter                                                                   
                                                                                                    

2006-05-31                     House Journal                      Page 4097
HB 109                                                                                            
A message dated May 30, 2006, was read stating the Governor has                                     
signed the following bill May 25 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     SENATE CS FOR CS FOR HOUSE BILL NO. 109(FIN)                                                   
     "An Act relating to establishing a screening, tracking, and                                    
     intervention program related to the hearing ability of newborns                                
     and infants; providing an exemption to licensure as an audiologist                             
     for certain persons performing hearing screening; relating to                                  
     insurance coverage for newborn and infant hearing screening; and                               
     providing for an effective date."                                                              
                                                                                                    
     Chapter No. 43, SLA 2006                                                                       
     Effective Date:  See Chapter                                                                   
                                                                                                    
HB 133                                                                                            
A message dated May 30, 2006, was read stating the Governor has                                     
signed the following bill May 27 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
      CS FOR SPONSOR SUBSTITUTE FOR HOUSE BILL NO.                                                  
     133(JUD) am                                                                                    
     "An Act relating to incorporation of boroughs, to annexation by                                
     local action, and to regulations of the Local Boundary                                         
     Commission to provide standards and procedures for municipal                                   
     incorporation, reclassification, dissolution, and certain municipal                            
     boundary changes; and providing for an effective date."                                        
                                                                                                    
     Chapter No. 46, SLA 2006                                                                       
     Effective Date:  May 28, 2006                                                                  
                                                                                                    
HB 334                                                                                            
A message dated May 30, 2006, was read stating the Governor has                                     
signed the following bill May 25 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    

2006-05-31                     House Journal                      Page 4098
     SENATE CS FOR CS FOR HOUSE BILL NO. 334(FIN)                                                   
     "An Act relating to a mandatory exemption for certain residences                               
     owned by a religious organization, to an exemption from and                                    
     deferral of municipal property taxes for certain types of                                      
     deteriorated property, and to an optional deferral of municipal                                
     property taxes on certain primary residences owned and occupied                                
     by individuals with incomes at or below federal poverty                                        
     guidelines for the state."                                                                     
                                                                                                    
     Chapter No. 44, SLA 2006                                                                       
     Effective Date:  August 23, 2006                                                               
                                                                                                    
                                                                                                    
HB 439                                                                                            
A message dated May 23, 2006, was read stating the Governor has                                     
signed the following bill May 22 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     CS FOR HOUSE BILL NO. 439(L&C) am                                                              
     "An Act relating to authorizing the state to join with other states in                         
     entering into the Interstate Insurance Product Regulation                                      
     Compact."                                                                                      
                                                                                                    
     Chapter No. 39, SLA 2006                                                                       
     Effective Date:  August 20, 2006                                                               
                                                                                                    
                                                                                                    
SB 54                                                                                             
A message dated May 23, 2006, was read stating the Governor has                                     
signed the following bill May 18 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     CS FOR SENATE BILL NO. 54(FIN)                                                                 
     "An Act amending protective order statutes for crimes involving                                
     stalking to include crimes involving sexual assault and sexual                                 
     abuse, to provide for other relief ordered by a court, to add the                              
     protective orders to a centralized registry, to prevent denial solely                          
     for a lapse of time, and to require notification of the court of                               

2006-05-31                     House Journal                      Page 4099
     known civil or criminal actions involving the petitioner or                                    
     respondent; relating to notifications to victims of sexual assault                             
     and to mandatory arrest for crimes involving violation of                                      
     protective orders and violation of conditions of release; and                                  
     amending Rule 65, Alaska Rules of Civil Procedure."                                            
                                                                                                    
     Chapter No. 36, SLA 2006                                                                       
     Effective Date:  August 16, 2006                                                               
                                                                                                    
                                                                                                    
SB 55                                                                                             
A message dated May 23, 2006, was read stating the Governor has                                     
signed the following bill May 19 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     CS FOR SENATE BILL NO. 55(FIN)                                                                 
     "An Act instructing the commissioner of natural resources to issue                             
     a patent for the remaining interest in certain state land to the                               
     owner of the agricultural rights to that land."                                                
                                                                                                    
     Chapter No. 37, SLA 2006                                                                       
     Effective Date:  August 17, 2006                                                               
                                                                                                    
                                                                                                    
SB 104                                                                                            
A message dated May 30, 2006, was read stating the Governor has                                     
signed the following bill May 25 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     CONFERENCE CS FOR SENATE BILL NO. 104                                                          
     "An Act relating to the crimes of unsworn falsification in the first                           
     degree involving an application for a permanent fund dividend and                              
     false information or report involving eligibility for a permanent                              
     fund dividend; requiring the establishment of a permanent fund                                 
     dividend fraud investigation unit in the Department of Revenue;                                
     relating to service in the peace corps and as a member of the                                  
     United States Olympic Team as allowable absences from the state                                
     for purposes of eligibility for permanent fund dividends and to the                            

2006-05-31                     House Journal                      Page 4100
     period for filing an application for a permanent fund dividend;                                
     authorizing the Department of Revenue to issue administrative                                  
     orders imposing sanctions for certain misrepresentations or other                              
     actions concerning eligibility for a permanent fund dividend and                               
     providing for administrative appeal of those orders; and providing                             
     for an effective date."                                                                        
                                                                                                    
     Chapter No. 42, SLA 2006                                                                       
     Effective Date:  See Chapter                                                                   
                                                                                                    
                                                                                                    
SB 172                                                                                            
A message dated May 23, 2006, was read stating the Governor has                                     
signed the following bill May 18 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     CONFERENCE CS FOR SENATE BILL NO. 172                                                          
     "An Act relating to election pamphlets and to the presentation of                              
     initiatives and referenda on the ballot; relating to review of                                 
     applications for certification of initiatives; relating to the                                 
     circulation and subscription of recall petitions; and providing for                            
     an effective date."                                                                            
                                                                                                    
     Chapter No. 38, SLA 2006                                                                       
     Effective Date:  May 19, 2006                                                                  
                                                                                                    
SB 261                                                                                            
A message dated May 30, 2006, was read stating the Governor has                                     
signed the following bill May 26 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     HOUSE CS FOR CS FOR SENATE BILL NO. 261(JUD)                                                   
     "An Act relating to the designation of traffic safety corridors;                               
     relating to the bail or fine for an offense committed in a traffic                             
     safety corridor and to separately accounting for such fines;                                   
     relating to the license point penalty; relating to damage claims                               
     regarding a highway work zone; and providing for an effective                                  
     date."                                                                                         
                                                                                                    

2006-05-31                     House Journal                      Page 4101
     Chapter No. 45, SLA 2006                                                                       
     Effective Date:  May 27, 2006                                                                  
                                                                                                    
SB 315                                                                                            
A message dated May 23, 2006, was read stating the Governor has                                     
signed the following bill May 22 and is transmitting the engrossed and                              
enrolled copies to the Lieutenant Governor's office for permanent                                   
filing:                                                                                             
                                                                                                    
     CS FOR SENATE BILL NO. 315(L&C)                                                                
     "An Act relating to the disposition of unredeemed property; and                                
     providing for an effective date."                                                              
                                                                                                    
     Chapter No. 40, SLA 2006                                                                       
     Effective Date:  May 23, 2006                                                                  
                                                                                                    
                                                                                                    
                         MESSAGES FROM THE SENATE                                                
                                                                                                    
A message dated May 23, 2006, was read stating the Senate has passed                                
the following and it is transmitted for consideration:                                              
                                                                                                    
                                                                                                    
                        FIRST READING AND REFERENCE                                              
                              OF SENATE BILLS                                                    
                                                                                                    
SB 2001                                                                                           
CS FOR SENATE BILL NO. 2001(FIN) by the Senate Finance                                              
Committee, entitled:                                                                                
                                                                                                    
     "An Act relating to the production tax on oil and gas and to                                   
     conservation surcharges on oil; relating to criminal penalties for                             
     violating conditions governing access to and use of confidential                               
     information relating to the production tax; amending the definition                            
     of 'gas' as that definition applies in the Alaska Stranded Gas                                 
     Development Act; making conforming amendments; and                                             
     providing for an effective date."                                                              
                                                                                                    
was read the first time and referred to the Finance Committee.                                      
                                                                                                    

2006-05-31                     House Journal                      Page 4102
                INTRODUCTION, FIRST READING, AND REFERENCE                                       
                              OF HOUSE BILLS                                                     
                                                                                                    
HB 2002                                                                                           
HOUSE BILL NO. 2002 by the House Rules Committee by request of                                      
the Governor, entitled:                                                                             
                                                                                                    
     "An Act conferring original jurisdiction on the Alaska Supreme                                 
     Court for the purpose of providing judicial review of a contract                               
     executed under the Alaska Stranded Gas Development Act, and                                    
     setting the time in which a contract developed under that Act, or a                            
     statute of limitations regarding that contract, must be legally                                
     challenged; and providing for an effective date."                                              
                                                                                                    
was read the first time and referred to the Judiciary Committee.                                    
                                                                                                    
The following fiscal note(s) apply:                                                                 
                                                                                                    
1.  Zero, Dept. of Natural Resources                                                                
2.  Zero, Dept. of Revenue                                                                          
                                                                                                    
                                                                                                    
The Governor's transmittal letter dated May 31, 2006, follows:                                      
                                                                                                    
"Dear Speaker Harris:                                                                               
                                                                                                    
Under the authority of art. III, sec. 18, of the Alaska Constitution, I am                          
transmitting a bill conferring original jurisdiction on the Alaska                                  
Supreme Court for the purpose of providing judicial review of a                                     
contract executed under the Alaska Stranded Gas Development Act,                                    
and setting the time in which a contract developed under that Act, or a                             
statute of limitations regarding that contract, must be legally                                     
challenged.                                                                                         
                                                                                                    
This bill would give the Alaska Supreme Court original and exclusive                                
jurisdiction to hear a challenge to a fiscal contract under the Alaska                              
Stranded Gas Development Act (AS 43.82).  This bill would also                                      
shorten from 120 to 60 days the period during which such a challenge                                
must be filed.                                                                                      
                                                                                                    

2006-05-31                     House Journal                      Page 4103
The bill's provisions are intended to allow for prompt and direct                                   
resolution of any challenge to a stranded gas fiscal contract or its                                
authorizing law.  Pending lawsuits cause uncertainty in the minds of                                
project developers.  It is in everyone's interests to have in place a                               
process that expedites ultimate resolution of such challenges and                                   
thereby eliminates uncertainty about the validity and enforceability of                             
an authorizing law or the terms of a fiscal contract.                                               
                                                                                                    
I urge your prompt and favorable action on this measure.                                            
                                                                                                    
                                Sincerely yours,                                                    
                                /s/                                                                 
                                Frank H. Murkowski                                                  
                                 Governor"                                                         
                                                                                                    
                                                                                                    
HB 2003                                                                                           
HOUSE BILL NO. 2003 by the House Rules Committee by request of                                      
the Governor, entitled:                                                                             
                                                                                                    
     "An Act establishing the Alaska Natural Gas Pipeline Corporation                               
     to finance, own, and manage the state's interest in the Alaska                                 
     North Slope natural gas pipeline project and relating to that                                  
     corporation and to subsidiary entities of that corporation; relating                           
     to owner entities of the Alaska North Slope natural gas pipeline                               
     project, including provisions concerning Alaska North Slope                                    
     natural gas pipeline project indemnities; establishing the gas                                 
     pipeline project cash reserves fund in the corporation and                                     
     establishing the Alaska natural gas pipeline construction loan fund                            
     in the Department of Revenue; making conforming amendments;                                    
     and providing for an effective date."                                                          
                                                                                                    
was read the first time and referred to the Judiciary and Finance                                   
Committees.                                                                                         
                                                                                                    
The following fiscal note(s) apply:                                                                 
                                                                                                    
1.  Zero, Dept. of Natural Resources                                                                
2.  Fiscal, Dept. of Revenue                                                                        
                                                                                                    

2006-05-31                     House Journal                      Page 4104
The Governor's transmittal letter dated May 31, 2006, follows:                                      
                                                                                                    
"Dear Speaker Harris:                                                                               
                                                                                                    
Under the authority of art. III, sec. 18, of the Alaska Constitution, I am                          
transmitting a bill that would establish the Alaska Natural Gas Pipeline                            
Corporation (Alaska Pipe) to finance, own, and manage an interest in                                
the Alaska North Slope natural gas pipeline project (project) on behalf                             
of the state.                                                                                       
                                                                                                    
Under the proposed Alaska Stranded Gas Fiscal Contract developed in                                 
accordance with the Alaska Stranded Gas Development Act (SGDA)                                      
(AS 43.82), the state proposes to acquire a 20 percent equity interest in                           
the project with the remainder financed by affiliates of ExxonMobil                                 
Alaska, Incorporated, ConocoPhillips Alaska, Incorporated, and BP                                   
Exploration Alaska, Incorporated, the qualified sponsors of the                                     
project.  The project would include a number of segments, including a                               
large diameter pipeline from the Alaska North Slope to Alberta,                                     
Canada (with the possibility of an extension to the Lower 48), a gas                                
treatment plant, and various gas transmission lines.  The state and the                             
qualified sponsors or their affiliates would establish limited liability                            
companies (LLCs) or other appropriate entities to own each of the                                   
various segments of the project.  Alaska Pipe would finance, own, and                               
manage a proportionate membership interest in these owner entities.                                 
                                                                                                    
Section 1 of the bill proposes that the Legislature make various                                    
findings that describe the critical importance of this project to the                               
people of this state and to the nation, that explain why it is in the                               
state's interest to participate in the project as an equity owner, and that                         
identify the benefits that would accrue to the state from the successful                            
development of the state's enormous gas resources.  These latter                                    
benefits include increases in tax and royalty revenue, stimulation of oil                           
and gas exploration on the Alaska North Slope, and creation of jobs                                 
and opportunities for greater in-state access to natural gas.  It is hoped                          
that these benefits will provide a sound basis for long-term growth of                              
the state's economy.                                                                                
                                                                                                    
Section 2 of the bill adds a new chapter to AS 41 that establishes                                  
Alaska Pipe as a "public corporation and instrumentality of the State                               
of Alaska" within the Department of Revenue (AS 41.42).  The                                        

2006-05-31                     House Journal                      Page 4105
corporation is structured to operate as an entity that is exempt from                               
federal income taxation.  AS 41.42 states the purposes and powers of                                
the corporation, and otherwise provides terms that govern the                                       
administration of Alaska Pipe.  Many of these provisions are similar to                             
those of Alaska's other public corporations, including the Alaska                                   
Permanent Fund Corporation and the Alaska Railroad Corporation.                                     
However, other provisions are tailored to the unique role Alaska Pipe                               
is expected to play in facilitating this truly historic project.                                    
                                                                                                    
The board of Alaska Pipe will be comprised of the commissioner of                                   
the Department of Revenue and the commissioner of the Department                                    
of Transportation and Public Facilities, as well as five public                                     
members.  AS 41.42.020(a).  The public members must have                                            
experience and recognized competence in either finance, investments,                                
business management, or the oil or gas industries.  AS 41.42.020(a).                                
Public members would serve six-year terms and may only be removed                                   
for cause.  AS 41.42.020(c); AS 41.42.045.  This combination of                                     
required expertise, extended terms, and restrictions on removal are                                 
intended to help assure that Alaska Pipe is well managed and can                                    
effectively represent the state's interest in the complex commercial                                
environment in which it will have to operate.                                                       
                                                                                                    
AS 41.42.210 provides Alaska Pipe with a broad spectrum of                                          
corporate powers that are necessary, or may be necessary, to carry out                              
its mission.  The corporation is authorized to finance and acquire an                               
ownership interest in the project in the United States or Canada, to                                
issue bonds, to borrow money, and to negotiate with the United States                               
government to secure federal loan guarantees, if appropriate.  The                                  
corporation is authorized to pledge its revenue and assets to secure the                            
payment of bonds or other obligations, and to enter into agreements                                 
necessary to establish entities, e.g., LLCs, that will own portions of the                          
project.                                                                                            
                                                                                                    
AS 41.42.220 would authorize Alaska Pipe to incorporate subsidiaries                                
to carry out the purposes of AS 41.42.  These entities would likely be                              
for-profit corporations organized under the law of Alaska or of another                             
state, or under the applicable laws of Canada.  At this time, it is                                 
contemplated that at least one Canadian corporation would be                                        
established to hold Alaska Pipe's interest in a Canadian limited                                    
liability partnership that would build and own the Canadian segment                                 

2006-05-31                     House Journal                      Page 4106
of the mainline.  If authorized by Alaska Pipe, these subsidiaries                                  
would also be able to borrow money for the project or for their                                     
operations to the same extent as any other private corporation.                                     
                                                                                                    
The state's total equity contribution to the different project LLCs is                              
estimated to be $1.0 billion at this time.  The state currently plans to                            
finance this amount with a combination of appropriations directly or                                
indirectly to Alaska Pipe, and the issuance of revenue bonds by Alaska                              
Pipe.  Article 3 of AS 41.42 contains revenue bonding authority that is                             
fairly typical of other state public corporations, e.g., the Alaska                                 
Housing Finance Corporation and the Alaska Industrial Development                                   
and Export Authority.  Alaska Pipe would have the authority to issue                                
what the market refers to as "moral obligation" revenue bonds.  AS                                  
41.42.320.  Such bonds are supported by the establishment of a capital                              
reserves account, which provides an added measure of security for the                               
debt service on the bonds.  The Alaska Pipe board would annually                                    
notify the Legislature of the status of the capital reserve account.  AS                            
41.42.320(d).  If a deficiency is reported, the Legislature may                                     
appropriate money to restore the capital reserve account but it is not                              
compelled to do so.  This "moral obligation" approach can only be                                   
invoked if the corporation finds that it will enhance the marketability                             
of the bonds.                                                                                       
                                                                                                    
AS 41.42.340 specifies that any bonds issued by the corporation are                                 
not the indebtedness of the state, but are solely payable from the                                  
revenue and assets of the corporation.  The state does pledge to the                                
owners of the bonds that the state will not limit or alter the rights and                           
powers of the corporation and that it will not impair the rights and                                
remedies of bondholders until the bonds are fully paid.  AS 41.42.350.                              
                                                                                                    
Article 4 of AS 41.42 establishes a cash reserves fund, which initially                             
will be made up of any appropriations made to Alaska Pipe by the                                    
Legislature.  The money in the fund can be used to meet capital call                                
requirements and otherwise guarantee or secure debt incurred by the                                 
corporation.  AS 42.42.400.  The article also clarifies which laws of                               
general application to state agencies apply to this new public                                      
corporation.  For example, Alaska Pipe is exempted from the State                                   
Procurement Code under AS 41.42.430, its operating budget but not                                   
its capital budget is subject to the Executive Budget Act under AS                                  
41.42.410, and it is largely exempt from laws relating to public works,                             

2006-05-31                     House Journal                      Page 4107
fiscal procedures, and management of public funds under AS                                          
41.42.440.                                                                                          
                                                                                                    
Article 5 of AS 41.42 relates to financial statements, reporting                                    
requirements, and the applicability of the Public Records Act to the                                
corporation.  The corporation is required to provide quarterly and                                  
annual financial statements to the governor and the Legislative Budget                              
and Audit Committee.  AS 41.42.500.  The corporation can be audited                                 
by the committee.                                                                                   
                                                                                                    
In addition to the financial information, the corporation is to prepare                             
an annual report on the operations of the corporation.  AS 41.42.510.                               
Although the corporation is subject to the Public Records Act, AS                                   
41.42.520 provides broad exemptions from disclosure relating to                                     
proprietary and other commercial information.  These broader                                        
exemptions from public disclosure are modeled upon similar                                          
provisions in the Alaska Stranded Gas Development Act (AS 43.82).                                   
The open meetings laws of the state do not apply to the corporation.                                
AS 41.42.530.  However, the corporation is required to conduct at                                   
least one meeting a year in public.  AS 41.42.030.                                                  
                                                                                                    
Section 6 of the bill would establish the Alaska natural gas pipeline                               
construction loan fund in the Department of Revenue.  This fund                                     
would consist of money appropriated to it by the Legislature.  The                                  
Legislature may choose to finance all or part of Alaska Pipe's equity                               
obligations by loans from this fund.  The construction loan program                                 
would be administered by the commissioner of the Department of                                      
Revenue, who is given broad discretion to fashion appropriate terms                                 
and conditions of the loans.  Specifically, depending upon the final                                
ownership structure in Canada, our Canadian advisors have indicated                                 
that there may be tax advantages in Canada if any loans to Alaska                                   
Pipe's Canadian subsidiaries are made directly by the state and not                                 
through Alaska Pipe.                                                                                
                                                                                                    
Sections 12 and 13 of the bill establish a narrow exception to the rule                             
barring indemnification agreements covering a party's own negligence                                
or misconduct in construction contracts and precludes any potential                                 
application of the common law doctrine barring enforcement of                                       
indemnification agreements that might serve to increase the risk of                                 
negligence by a party that owes a duty to the public.  This exception                               

2006-05-31                     House Journal                      Page 4108
would allow an entity that constructs, owns, or operates the project, or                            
any portion of the project, to indemnify an operator and the members                                
of a limited liability company, including Alaska Pipe, for losses                                   
caused by those parties' own negligence or misconduct.  Similar                                     
indemnities are made available to affiliated entities that either lend                              
employees to the operator to work on the project or that provide                                    
technical consulting services to the operator to facilitate the project.                            
The primary reason for such an approach is to hold down the costs                                   
charged by the operator to the owner entity and consequently the                                    
members.                                                                                            
                                                                                                    
Section 7 of the bill clarifies that officers and employees of the                                  
corporation are in the exempt service.  Sections 8 and 9 of the bill                                
specify that the board members and staff of the corporation are public                              
officials for purposes of the financial disclosure laws.  Section 10 of                             
the bill provides that board members of Alaska Pipe will be subject to                              
the Alaska Ethics Act, except that board members of Alaska Pipe's                                   
subsidiaries are not subject to the Act unless they are also members of                             
the board of Alaska Pipe.                                                                           
                                                                                                    
I urge your support of this important legislation.                                                  
                                                                                                    
                                Sincerely yours,                                                    
                                /s/                                                                 
                                Frank H. Murkowski                                                  
                                 Governor"                                                         
                                                                                                    
HB 2004                                                                                           
HOUSE BILL NO. 2004 by the House Rules Committee by request of                                      
the Governor, entitled:                                                                             
                                                                                                    
     "An Act relating to the Alaska Stranded Gas Development Act,                                   
     including clarifications or provision of additional authority for the                          
     development of stranded gas fiscal contract terms; making a                                    
     conforming amendment to the Revised Uniform Arbitration Act;                                   
     relating to municipal impact money received under the terms of a                               
     stranded gas fiscal contract; and providing for an effective date."                            
                                                                                                    
was read the first time and referred to the Resources and Judiciary                                 
Committees.                                                                                         
                                                                                                    

2006-05-31                     House Journal                      Page 4109
The following fiscal note(s) apply:                                                                 
                                                                                                    
1.  Zero, Dept. of Revenue                                                                          
2.  Indeterminate, Dept. of Natural Resources                                                       
                                                                                                    
The Governor's transmittal letter dated May 31, 2006, follows:                                      
                                                                                                    
"Dear Speaker Harris:                                                                               
                                                                                                    
Under the authority of art. III, sec. 18, of the Alaska Constitution, I am                          
transmitting a bill amending the Alaska Stranded Gas Development                                    
Act (AS 43.82) (SGDA) to clarify or provide additional authority for                                
the development of stranded gas fiscal contract terms.                                              
                                                                                                    
When the SGDA was originally passed in 1998, the Legislature had in                                 
mind a very different kind of state involvement than is presently                                   
written into the proposed fiscal contract now under preliminary review                              
by the Legislature.  The original intent was to authorize the                                       
development of a contract that could reduce the tax burdens on a                                    
project.  Under the proposed fiscal contract, the state would become a                              
part owner of a large-diameter gas pipeline with a design capacity to                               
transport approximately 4 billion cubic feet per day of stranded gas                                
from the Alaska North Slope to markets in Canada and the Lower 48                                   
states.  The proposed fiscal contract would create obligations to make                              
payments in lieu of taxes that are roughly equivalent to the taxes in                               
effect for the 2005 tax period.                                                                     
                                                                                                    
After analysis of the economics of the project, it was determined by                                
the state that the best method for inducing the sponsor group to                                    
proceed with development was for the state to agree to take an                                      
ownership interest and to agree to assume financial responsibility for                              
shipping its gas through the pipeline.  It was also considered important                            
that each owner's interest in the project should correspond to the                                  
amount of the owner's gas that would be shipped through the pipeline.                               
By taking payment of certain tax obligations in gas rather than money,                              
the state could establish an ownership interest of approximately 20                                 
percent.  These key terms would increase the potential profitability of                             
the project in a way that would not require the state to materially                                 
reduce public revenue in the future.                                                                
                                                                                                    

2006-05-31                     House Journal                      Page 4110
The legislative history of the SGDA was clear that the original intent                              
was to provide fiscal certainty only on gas taxes.  The sponsor group                               
made a compelling argument that fiscal certainty must extend to taxes                               
on oil as well as on gas.  The production of oil goes hand in hand with                             
the production of gas.  Because of this connection, any fiscal                                      
constraints placed on the exploration or development for oil also have                              
a direct effect on the exploration and development of gas.  For this and                            
other reasons, it was agreed that fiscal certainty should be extended to                            
taxes applicable to oil production.                                                                 
                                                                                                    
The amendments proposed in this bill are intended to provide express                                
authority in the SGDA for the terms in the proposed fiscal contract.                                
To accomplish this intent, the bill would broaden the scope of the                                  
purposes of the SGDA to include fiscal terms relating to oil as well as                             
to gas.  The fiscal terms would also extend to a related party, which                               
may include the mainline entity formed to own and operate the gas                                   
pipeline and related facilities.                                                                    
                                                                                                    
                                                                                                    
The bill would broaden the scope of subjects that may be negotiated                                 
under the SGDA.  These new subjects include equity ownership,                                       
payment of obligations in gas rather than money, and changes in                                     
existing leases and other agreements with the state regarding oil and                               
gas properties.                                                                                     
                                                                                                    
                                                                                                    
The bill would expand the types of terms that may be included in a                                  
contract.  This is accomplished by a provision that would give the                                  
commissioner of the Department of Revenue broad discretion to adopt                                 
terms that are reasonable and promote the purposes of the SGDA.                                     
Terms are also appropriate if they are consistent with the long-term                                
fiscal interests of the state.  The authority granted would cover terms                             
in the fiscal contract now under review by the Legislature and the                                  
public.  These terms include "netting-out" provisions, payment of                                   
interest on obligations, ability to provide fiscal terms to others,                                 
confidentiality of payment-in-lieu records, state acquisition of pipeline                           
capacity, indemnity given by the state, exemption from a reserves or                                
resource tax, Regulatory Commission of Alaska jurisdiction, audits,                                 
and limits on damages.                                                                              
                                                                                                    

2006-05-31                     House Journal                      Page 4111
The bill would expand the scope of authority to adopt contract terms                                
that modify existing law set out in AS 38 concerning oil and gas                                    
property.  Under existing law, authority extends only to timing and                                 
notice requirements applicable to royalties. The bill includes                                      
provisions to allow broader powers to adopt terms resolving conflicts                               
between the terms of the contract and provisions in existing oil and gas                            
leases and unit agreements.  Under the bill, the terms of the contract                              
prevail over contrary provisions in state leases or unit agreements.                                
                                                                                                    
The bill would place a limit of 45 years on the expected term of the                                
contract from the effective date.  It is expected that it will take                                 
approximately 10 years from the effective date to achieve                                           
commencement of commercial operations.  Existing law provides that                                  
the term is 35 years from the commencement of commercial                                            
operations.  The bill also authorizes the contract to provide for a                                 
suspension of the running of the term during periods of force majeure.                              
                                                                                                    
The bill would provide interim authority for the commissioner of the                                
Department of Revenue to negotiate collateral agreements to form                                    
limited liability companies, limited liability partnerships, or any other                           
recognized form of business association that would own or operate any                               
part of the project.                                                                                
                                                                                                    
                                                                                                    
The bill would create an account in the general fund to receive                                     
municipal impact payments from the sponsor group and also a fund                                    
into which the money will be subsequently appropriated by the                                       
Legislature.  Once in the fund, the money will be available for grants                              
to economically affected municipalities and certain nonprofit                                       
organizations serving the unorganized borough; the grants would be                                  
administered by the Department of Commerce, Community, and                                          
Economic Development.                                                                               
                                                                                                    
I urge your prompt and favorable consideration of this bill.                                        
                                                                                                    
                                Sincerely yours,                                                    
                                /s/                                                                 
                                Frank H. Murkowski                                                  
                                 Governor"                                                         
                                                                                                    

2006-05-31                     House Journal                      Page 4112
                        ENGROSSMENT AND ENROLLMENT                                               
                                                                                                    
HB 149                                                                                            
The following was engrossed and enrolled, signed by the Speaker and                                 
Chief Clerk, President and Secretary of the Senate, and the engrossed                               
and enrolled copies were transmitted to the Office of the Governor at                               
11:09 a.m., May 23, 2006:                                                                           
                                                                                                    
     CONFERENCE CS FOR HOUSE BILL NO. 149                                                           
     "An Act relating to controlled substances; relating to the crimes of                           
     manslaughter, endangering the welfare of a child, and misconduct                               
     involving a controlled substance; relating to the manufacture of                               
     methamphetamine and to the sale, possession, and delivery of                                   
     certain substances and precursors used in the manufacture of                                   
     methamphetamine; relating to listing certain anabolic steroids as                              
     controlled substances; and providing for an effective date."                                   
                                                                                                    
                                                                                                    
The following memorandum, dated May 22, 2006, was received from                                     
Patty Rose, Enrolling Secretary, Division of Legal and Research                                     
Services:                                                                                           
                                                                                                    
                                                                                                    
"In accordance with Rule 43, Uniform Rules of the Alaska State                                      
Legislature, I am reporting the following manifest errors in CCS HB
149, which have been corrected in enrolling:                                                        
                                                                                                    
Page 2, line 21, following "particularly":                                                          
     Insert "of"                                                                                    
                                                                                                    
Page 3, line 16:                                                                                    
     Delete "fungus"                                                                                
     Insert "fungi"                                                                                 
                                                                                                    
Page 6, line 2, following "phenylpropanolamine,":                                                   
     Insert "or"                                                                                    
                                                                                                    
Page 12, line 17:                                                                                   
     Delete "a""                                                                                    
                                                                                                    

2006-05-31                     House Journal                      Page 4113
                               ANNOUNCEMENTS                                                     
                                                                                                    
House committee schedules are published under separate cover.                                       
                                                                                                    
                                ADJOURNMENT                                                      
                                                                                                    
Representative Coghill moved and asked unanimous consent that the                                   
House adjourn until 11:00 a.m., June 1, 2006.  There being no                                       
objection, the House adjourned at 3:16 p.m.                                                         
                                                                                                    
                                              Suzi Lowell                                           
                                              Chief Clerk