02/26/2018 01:00 PM House JUDICIARY

          HB 330-DNR: DISCLOSURE OF CONFIDENTIAL INFO                                                                       
                                                                                                                                
1:59:31 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN announced that the  final order of business would be                                                               
HOUSE  BILL NO.  330,  "An Act  authorizing  the commissioner  of                                                               
natural  resources to  disclose  confidential  information in  an                                                               
investigation  or proceeding,  including a  lease royalty  audit,                                                               
appeal,  or request  for reconsideration  and issue  a protective                                                               
order limiting  the persons who  have access to  the confidential                                                               
information."                                                                                                                   
                                                                                                                                
CHAIR  CLAMAN   advised  that  Legislative  Legal   and  Research                                                               
Services  has permission  to make  any  technical amendments  and                                                               
conforming changes to the bill.                                                                                                 
                                                                                                                                
2:00:12 PM                                                                                                                    
                                                                                                                                
The committee took an at-ease from 2:00 p.m. to 2:01 p.m.                                                                       
                                                                                                                                
2:01:53 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  LEDOUX moved  to adopt  Amendment 2,  Version 30-                                                               
GH2820\A.2, Radford, 2/23/18, which read as follows:                                                                            
                                                                                                                                
                                                                                                                                
     Page 1, lines 2 - 3:                                                                                                       
          Delete "in an investigation or proceeding,                                                                        
      including a lease royalty audit, appeal, or request                                                                     
     for reconsideration"                                                                                                   
          Insert "during a royalty or net profit share                                                                        
     audit or appeal"                                                                                                         
                                                                                                                                
     Page 3, lines 25 - 26:                                                                                                     
          Delete "in an investigation or proceeding of the                                                                
        department, including a lease audit, appeal, or                                                                     
     request for reconsideration"                                                                                         
          Insert "during a royalty or net profit share                                                                      
     audit or appeal"                                                                                                       
                                                                                                                                
     Page 3, line 28:                                                                                                           
          Delete "lease"                                                                                                    
          Insert "royalty or net profit share audit or                                                                      
     appeal"                                                                                                                
                                                                                                                                
     Page 4, line 1:                                                                                                            
          Delete "investigation or proceeding"                                                                              
          Insert "royalty or net profit share audit or                                                                      
     appeal"                                                                                                                
                                                                                                                                
     Page 6, line 20:                                                                                                           
          Delete "lease"                                                                                                    
          Following "royalty"                                                                                               
               Insert "or net profit share"                                                                                 
                                                                                                                                
2:02:08 PM                                                                                                                    
                                                                                                                                
GREG SMITH, Staff, Representative  Gabrielle LeDoux, Alaska State                                                               
Legislature,  advised  that  the  intent of  Amendment  2  is  to                                                               
restrict the disclosures of confidential  information made by the                                                               
commissioner  of  the Department  of  Nature  Resources (DNR)  to                                                               
"royalty  or  net  profit  share   audits  for  appeals."    This                                                               
amendment "kind of tightens in"  the authority the department was                                                               
seeking  because  it  strikes  a  balance  between  the  concerns                                                               
expressed by  the industry  and the needs  of DNR  to efficiently                                                               
process  these cases.   This  language  will still  allow DNR  to                                                               
process  the vast  majority of  its cases  in which  it needs  to                                                               
disclose confidential  information and create  protective orders,                                                               
he said.                                                                                                                        
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS   objected  to  the   adoption  of                                                               
Amendment 2.                                                                                                                    
                                                                                                                                
2:03:39 PM                                                                                                                    
                                                                                                                                
ED KING,  Legislative Liaison, Commissioner's  Office, Department                                                               
of  Natural  Resources  (DNR), advised  that  Amendment  2  would                                                               
further narrow  the scope of the  commissioner's authority rather                                                               
than being a  general power to adjudicate and  resolve issues and                                                               
resolve audits  or appeals  related to  information that  is held                                                               
confidential.    This  amendment would  restrict  that  authority                                                               
solely to royalty  issues and net profit share issues.   Mr. King                                                               
advised  that the  vast majority  of the  issues requiring  these                                                               
types of  protective orders  are, in fact,  in the  royalty audit                                                               
and net profit share.  However,  he pointed out, there are issues                                                               
outside of royalties  and net profit share that  DNR would prefer                                                               
to also adjudicate  under the protective orders.   The preference                                                               
of DNR is that  Amendment 2 does not pass; however,  if it is the                                                               
will of the committee, DNR appreciates the efforts being made.                                                                  
                                                                                                                                
2:04:40 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KOPP   asked   whether   it   was   Mr.   King's                                                               
understanding that  this would  also protect  the confidentiality                                                               
of geological  data or sensitive  data as  to what a  field might                                                               
contain.                                                                                                                        
                                                                                                                                
MR. KING  responded that  with Amendment 2,  DNR would  no longer                                                               
have that authority  to issue protective orders  to resolve those                                                               
types of  issues.  He explained  that without Amendment 2,  it is                                                               
DNR's  reading of  the bill  that it  would have  the ability  to                                                               
resolve those  issues through  the commissioner's  office without                                                               
going to the court system and obtaining a protective order.                                                                     
                                                                                                                                
2:05:18 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   KREISS-TOMKINS   noted  Mr.   King's   statement                                                               
regarding the strong majority of  instances in which a protective                                                               
order  would be  issued that  would relate  to royalties  and net                                                               
profit share.   He requested examples of those  other issues that                                                               
could  take advantage  of  this  tool were  it  available to  the                                                               
commissioner.                                                                                                                   
                                                                                                                                
MR. KING  answered that a specific  example that DNR had  to deal                                                               
with  is  related  to  private property  owners  with  a  mineral                                                               
interest  surrounding  a  geologic  structure.   For  example,  a                                                               
resource  specifically  in oil  and  gas,  is  when DNR  makes  a                                                               
decision  related to  the  extent  of the  resource  and to  what                                                               
extent it provides revenue to  the resource owner, DNR's decision                                                               
could impact how  much money that individual would  earn from the                                                               
production of those resources.   The department did have a fairly                                                               
rare  issue in  Cook Inlet  approximately 10-years  ago, and  the                                                               
issue could not  be resolved internally because DNR  did not have                                                               
the ability  to disclose that  confidential data to  the property                                                               
owner because  the data was collected  by the operator.   In that                                                               
circumstance, that  audit sat in the  commissioner's office until                                                               
the  appellant finally  went  to  court and  the  court issued  a                                                               
protective  order, at  that point,  DNR was  able to  resolve the                                                               
case, he explained.                                                                                                             
                                                                                                                                
2:06:51 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KREISS-TOMKIN  asked whether  there are  any other                                                               
examples.                                                                                                                       
                                                                                                                                
MR. KING  reiterated that one  is currently being  litigated, and                                                               
he is not aware of any other circumstances.                                                                                     
                                                                                                                                
2:07:10 PM                                                                                                                    
                                                                                                                                
CHAIR CLAMAN  asked whether the  audit is being litigated  or the                                                               
protective order.                                                                                                               
                                                                                                                                
MR. KING  answered that  that is a  different and  separate issue                                                               
related to the  same (audio difficulties) but it  is currently in                                                               
the superior court and the protective  order in that case has not                                                               
yet been issued.                                                                                                                
                                                                                                                                
CHAIR  CLAMAN  asked  whether  that   is  the  main  issue  being                                                               
litigated or was it being litigated over the audit as well.                                                                     
                                                                                                                                
MR. KING responded that the case is not related to an audit.                                                                    
                                                                                                                                
2:07:44 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   REINBOLD   noted   that  the   regional   native                                                               
corporations  own   the  minerals  below  the   surface,  and  if                                                               
Amendment 2  does not  pass, she asked  whether that  would allow                                                               
the  state to  also  obtain information  on  the regional  native                                                               
corporations.                                                                                                                   
                                                                                                                                
MR. KING  reiterated testimony from  a previous  hearing advising                                                               
that the department,  under this bill, does not  have the ability                                                               
to obtain  any new information,  the information is given  to DNR                                                               
by  the  producer.    The  question  is  how  can  DNR  use  that                                                               
information  to adjudicate  when there  is an  appeal, and  under                                                               
Representative Reinbold's  circumstance, the mental  health trust                                                               
or the native  corporation would have a lease  with the producer,                                                               
and  they  would have  to  administer  and adjudicate  their  own                                                               
appeals around that issue.   In the specific case being discussed                                                               
here,  where  DNR  has  this  private  landowner  adjacent  to  a                                                               
resource, there  may or may not  be a lease issued  that needs to                                                               
be  resolved there.   In  those circumstances,  the appellant  is                                                               
bringing  the  appeal  and  has standing  due  to  its  financial                                                               
interest  as an  adjacent landowner.   In  those situations,  DNR                                                               
cannot share the producer's information  with this private third-                                                               
party without  some protections over  that confidential  data, he                                                               
explained.                                                                                                                      
                                                                                                                                
2:09:17 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  EASTMAN  requested  another example  of  how  the                                                               
sponsor  envisions Amendment  2  having a  positive  impact on  a                                                               
particular situation.                                                                                                           
                                                                                                                                
REPRESENTATIVE  LEDOUX  responded  that   she  believes  the  one                                                               
example being litigated today and  another example from ten years                                                               
ago, does  not provide  a compelling  circumstance.   She related                                                               
that  she is  uncomfortable with  the ability  of DNR  to release                                                               
what  otherwise  would  be confidential  information  to  someone                                                               
outside of the department.  While  she realizes the need for this                                                               
legislation, she  would feel far  more comfortable with  the bill                                                               
if  it was  limited to  the circumstances  where it  was actually                                                               
most needed, she said.                                                                                                          
                                                                                                                                
2:10:41 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE REINBOLD commented that  she is supportive of this                                                               
amendment  because  the  legislature   does  not  need  to  chase                                                               
investment out  of this state,  she believes in  private property                                                               
rights and  understands there is  a point where  some information                                                               
is needed.   She pointed out that Amendment 2  narrows the focus,                                                               
and during the previous hearing  the department did not object to                                                               
the change.  She said she would be a yes vote on the amendment.                                                                 
                                                                                                                                
CHAIR CLAMAN  clarified for Representative Reinbold  that DNR was                                                               
not in possession Amendment 2 until today.                                                                                      
                                                                                                                                
REPRESENTATIVE REINBOLD responded that  when people had testified                                                               
previously,  "they said"  the  primary  responsibility was  being                                                               
even with this  issue, and at the time there  was no objection to                                                               
it, which is why she will be supporting the amendment.                                                                          
                                                                                                                                
REPRESENTATIVE KREISS-TOMKINS maintained his objection.                                                                         
                                                                                                                                
2:12:18 PM                                                                                                                    
                                                                                                                                
A roll  call vote  was taken.   Representatives  Eastman, Stutes,                                                               
Reinbold,  Kopp, and  LeDoux voted  in favor  of the  adoption of                                                               
Amendment  2.   Representatives Kreiss-Tomkins  and Claman  voted                                                               
against it.  Therefore, Amendment 2 was adopted by a vote of 5-                                                                 
2.                                                                                                                              
2::19 PM                                                                                                                      
                                                                                                                                
REPRESENTATIVE  KREISS-TOMKINS moved  to report  HB 330,  Version                                                               
30-GH2820\A,  as  amended,  out   of  committee  with  individual                                                               
recommendations and  the accompanying fiscal notes.   There being                                                               
no  objections,  CSHB  330  moved  out  of  the  House  Judiciary                                                               
Standing Committee.                                                                                                             
                                                                                                                                
2:13:53 PM