Legislature(2013 - 2014)BARNES 124
04/14/2014 03:15 PM House LABOR & COMMERCE
| Audio | Topic |
|---|---|
| Start | |
| SB99 | |
| SB140 | |
| SB194 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | SB 99 | TELECONFERENCED | |
| + | SB 140 | TELECONFERENCED | |
| + | SB 194 | TELECONFERENCED | |
| + | TELECONFERENCED |
SB 140-AIDEA: ARCTIC DEVELOPMENT PROGRAM/FUND
4:01:15 PM
CHAIR OLSON announced that the next order of business would be
CS FOR SENATE BILL NO. 140(FIN), "An Act creating the Arctic
infrastructure development program and fund in the Alaska
Industrial Development and Export Authority; and relating to
dividends from the Alaska Industrial Development and Export
Authority."
4:01:20 PM
JESSE LOGAN, Staff, Senator Lesil McGuire, Alaska State
Legislature, stated that SB 140 represents one of the principal
elements of the Alaska Arctic Policy Commission's legislative
packet. The AAPC was created by the legislature to prepare an
Arctic policy and implementation plan for Alaska and to return
the plan to the full body for consideration. The purpose of
this bill would be to attract investment in Arctic
infrastructure to pair with private investment from Alaska's
AIDEA. Although AIDEA has the authority to invest in many
areas, it does not have a specific program to attract private
investment for infrastructure.
CHAIR OLSON reported that the House Labor and Commerce Standing
Committee heard the companion bill, HB 288, but SB 140 will be
the vehicle.
4:02:28 PM
MR. LOGAN provided a section-by-section analysis of the bill.
Section 1 would establish AIDEA's ability to adopt a policy for
payment of a dividend. He characterized Sections 1-3 as
"boilerplate" provisions that would establish definitions for
"net income" and "unrestricted net income" as well as
establishing a means for this fund to return dividends back to
the general fund. Sections 4-8 would make conforming changes to
include loans from the Arctic Infrastructure Development Fund
(AIDF) regarding interest rates and other requirements for loans
from funds managed by AIDEA, such as the SETS fund. Section 9
would add the AIDF to the types of programs to pay borrowers of
loan participation that the authority can establish. Section 10
would establish the Arctic Infrastructure Development Program
fund to promote and provide financing for Arctic infrastructure
development.
4:03:27 PM
MR. LOGAN referred to page 6 lines 2-16, which lists what the
fund consists of, including direct appropriation made by the
legislature, money or assets transferred to the fund by AIDEA,
unrestricted loan repayments, interest, and other income earned.
It would also make certain that this account is separate from
other accounts and accounts can be established within this fund.
He referred to page 6, lines 17-19, which clarify that the fund
will be used for Arctic infrastructure development. He referred
to page 6, lines 20 through page 7, line 21, which would
establish the powers and duties of the authority regarding the
AIDF. This section would mirror the powers and duties of the
SETS fund. It would allow AIDEA to use this fund for Arctic
infrastructure development, insure project obligations,
guarantee loans or bonds, establish reserves, and acquire real
or personal property by purchase, transfer, or foreclosure. It
would also defer principal payments on capitalized interest on
Arctic infrastructure development, as well as to enter into
lease agreements, sales-lease-back agreements, build-operate-
transfer and operate-transfer agreements or similar financing
agreements. It would also allow AIDEA to enter into agreements
with government entities for the transfer and control of
infrastructure facilities, rights-of-way, and studies. It would
allow for services to be contracted and bonds to be issued.
This section would also allow for loan guarantees to be provided
for purchase and repair of vessels in federally managed
fisheries or purchase of quota shares or individual fishing
quota used in federally managed fisheries in the Arctic. He
said the loan guarantees would be $7 million and the cap would
be no more than one-third of the capital cost of the projects.
4:04:56 PM
MR. LOGAN referred to page 7, line 22 to page 8, line 2, which
would establish limitations on the financing for infrastructure
development. It would consist of loans for not more than one-
third of the capital cost of the development, limiting the loan
guarantee to not exceed $20 million. It would also allow
financing for up to 40 years and establish that the fund can be
used as security for a bond guarantee. He referred to page 8,
lines 2-19, Section 11, which defines the "Arctic" in a
geographical boundary and page 8, lines 7-19, defines "Arctic
infrastructure development."
4:05:39 PM
REPRESENTATIVE JOSEPHSON asked what exactly is being envisioned.
He has seen the map that extends to Kamchatka and the Mackenzie
River. He asked for an example of projects would be developed
with these loans.
MR. LOGAN answered that he couldn't give any examples but the
purpose is to attract projects from private investment in the
state or outside the state. For example, one project could be a
deep water draft port the United States Army Corps of Engineers
(USACE) has currently been working on. Several sites have been
identified, with Port Clarence often discussed. This fund would
allow the U.S. Department of Defense or the U.S. Department of
the Interior to partner with the state on financing options. He
recalled that this has previously happened to establish the U.S.
Coast Guard's permanent presence in Anchorage. Using AIDEA
saved the U.S. Coast Guard considerable money and was part of
their decision-making, he said.
4:07:11 PM
REPRESENTATIVE JOSEPHSON recalled SB 99 would give specific
authority to issue new bonds in substantial amounts, but he
asked whether projects would compete with other projects for the
$67 million corpus of the fund under this bill.
MR. LOGAN answered that this fund would not be capitalized. He
explained that under SB 99, the issuance of bonds would be
outside the SETS fund, and would fall under the general AIDEA
authority. This bill would allow the fund to be created and
allow other assets that AIDEA controls to be transferred to this
fund if the board of directors deemed it. Additionally it could
be used in the future as a repository for earmarked projects.
4:08:01 PM
REPRESENTATIVE JOSEPHSON recalled an earlier question asked how
all of these things can be done if the other body plans to use
some of the SETS funds to pay for the power plant for the
University of Alaska Fairbanks (UAF). He asked for the
viability of this or if it would rely on a separate
appropriation at a later date.
MR. LOGAN answered that this would rely on a separate
appropriation or a transfer from other funds within AIDEA.
CHAIR OLSON suggested that this one is lagging about a year or
two behind the other bill.
4:08:48 PM
REPRESENTATIVE SADDLER referred to page 8 lines 16-18, and asked
what is envisioned in terms of the construction, improvement,
rehabilitation, or expansion of a shore-based plant, facility or
equipment used in support of a fishery in the Arctic. He
suggested the language is fairly broad. He asked how closely
affiliated the project would need to be to Arctic fisheries for
it to qualify.
MR. LOGAN answered it may be that a dock needed to be built to
house vessels that fish primarily in the federally-managed
fisheries. He said it might not be located in the Arctic. He
offered his belief that these provisions are designed to allow
projects in the state to be eligible for these funds if they
support development in the Arctic.
4:09:53 PM
REPRESENTATIVE SADDLER said, "There was discussion about the
community development quota corporation that home ports outside,
and they could use a port in Seward if we're available." He
asked whether this bill is aimed at that.
MR. LOGAN answered that the fisheries provisions in the bill are
designed to repatriate some of the vessels and quotas that
currently reside outside Alaska. He emphasized that there isn't
any specific mention of eligibility of any specific group, but
AIDEA has authority to operate only in Alaska, so if a vessel
wanted to participate, it would need to relocate to Alaska.
4:10:32 PM
REPRESENTATIVE SADDLER pointed out he did not see any specific
restriction limiting it to Alaska-based businesses.
CHAIR OLSON clarified that projects were eligible if engaged in
business in Alaska.
4:10:58 PM
REPRESENTATIVE REINBOLD asked who the responsible agency within
the federal area would be if a conflict arose between mining and
fishing.
MR. LOGAN asked for further clarification on the question.
REPRESENTATIVE REINBOLD asked who would be the governing body to
resolve any disputes if multiple resources were in the area.
MR. LOGAN answered it would be the same agencies that currently
resolve those disputes. In further response to a question, he
said he didn't know, possibly the National Marine Fisheries
Service, Alaska Department of Fish & Game, or any agency that
resolves disputes in federal and state managed fishery areas.
REPRESENTATIVE HERRON said that Mr. Logan has done a good job.
4:12:30 PM
REPRESENTATIVE CHENAULT recalled comments about the City of
Seward. He explained that Seward is also a major marine repair
terminal so it is possible some ships could be in port that have
been involved in oil exploration in the Arctic. He suggested
this could be why this bill could affect Seward.
TED LEONARD, Executive Director, Alaska Industrial Development &
Export Authority (AIDEA), Department of Commerce, Community, &
Economic Development, deferred to Mark Davis.
4:14:04 PM
MARK DAVIS, Deputy Director, Alaska Industrial Development and
Export Authority, Department of Commerce, Community, & Economic
Development, stated that funding would work within Alaska as per
AIDEA's statutes. He anticipated that would be further refined
by regulation. Secondly, with respect to the funding, he
pointed out that the AIDF is an unfunded fund, unlike the
current SETS fund that is funded.
4:14:58 PM
CHAIR OLSON asked whether he anticipated that it would be funded
in the future.
MR. DAVIS said that the funding would be in a manner similar to
the Interior Energy Project and anticipated that the legislature
would focus on a specific port project and it would use this
AIDF as a vehicle to provide AIDEA with some of the funding if
it was using a public-private partnership funding mechanism.
4:15:22 PM
RON LONG, Deputy City Manager, City of Seward, stated a variety
of industries would be in support of development within the
Arctic, including the oil and gas industry port development, in
which the city would provide a staging area for goods and
services that need to do business in the Arctic but must stage
outside the strictest geographic definition as developed by the
Alaska Arctic Policy Council. He emphasized that this should
take place in Alaska, and the City of Seward would want to be
competitive with other ports in Alaska. He said that the state
will want to tilt the development towards Alaska from
development currently being staged outside Alaska. He noted
that the Alaska Arctic Policy Council has identified a number of
needs and opportunities as well as significant private capital
ready to support the development effort, which the state and
municipalities want to attract to Alaska. He compared it to how
other states attract Nike and Boeing corporate industries to
their states. He identified the fisheries as ones conducted in
the Bering Sea, which are large offshore federally managed
fisheries that are not against the coast or in conflict with
state-managed fisheries. He acknowledged that not any one port
could do everything to support development in the Arctic. He
stressed that response agencies must be close to the area, but
moving goods and services might be located at Dutch Harbor or in
Kodiak. He offered his belief that Seward is the right place
for operations that need rail and road access.
4:18:09 PM
REPRESENTATIVE SADDLER asked how he envisioned this financing
tool being used in his community.
MR. LONG suggested that the public-private partnerships have
worked successfully at Red Dog and the North Slope. In terms of
fisheries, such as the Bering Sea fleet, the CDQ groups have
allocated 10 percent of the resource to Alaskans and the
remaining 90 percent is largely being capitalized outside the
state. He suggested that the state could create a new, or
augment an existing, fisheries processing plant. He commented
that if the shoulder seasons could be expanded to bring in new
product by leveraging state guarantees on private capital loans
using this program, it makes that process more viable for the
offshore fisheries and for the state fisheries it also supports.
He suggested that in port development, piles, dock materials,
staging and logistics, and assembly for construction in the
Arctic could be done. He offered his belief that the City of
Seward can be competitive for these projects through this
program and private capital. He envisioned that the pieces
could be assembled in Seward and barged when needed.
4:20:07 PM
REPRESENTATIVE SADDLER asked whether he would have some
advantage over other food processing plants due to the proximity
to the ocean. He asked whether there is anything a port
facility would offer that other Cook Inlet or Gulf of Alaska
fisheries could not access. He further asked if there would be
any limitations on it.
MR. LONG answered no. He related that as Mr. Davis suggested,
it would be done through AIDEA's due diligence process. He said
that each proposal would need to be a good business case and he
anticipated that AIDEA would be doing its due diligence and
measuring the financial aspects to ensure that it is a good and
viable project before "they sign on the bottom line."
4:20:53 PM
SARA LUKIN, Chief Operating Officer, Pt Public Policy, LLC,
stated briefly Pt Public Policy's support of this bill as a
whole, and, more specifically, for the fisheries provision.
Speaking as the only private equity firm in Alaska,
headquartered in Anchorage, and focused exclusively on building
private equity and investment in Arctic Alaska, she said that Pt
is supportive of the bill and the company is "hugely" supportive
of the fisheries provision. In response to a comment, she said
that Pt Public Policy has worked in partnership with the City of
Seward, the Association of Village Council Presidents, and
[Aleutian Pribilof Island Community Development Association)
(APICDA) with the fisheries portion of this bill. In response
to a question, she clarified that APICDA is the Aleutian
Pribilof Island Community Development Association, which is a
community development quota (CDQ) group.
4:22:53 PM
REPRESENTATIVE SADDLER asked whether APICDA would be the CDQ
organization that would envision taking advantage of these
opportunities to "plus up" the facilities in Seward.
MS. LUKIN answered that the organization doesn't have a project
in mind, but if she would envision a project for this committee
she would suggest it might be a partnership between AVPC as a
majority owner and APICDA as a minority owner, using a loan
guarantee from AIDEA to purchase vessels and quota that are
currently housed in Washington State. The partnership would
bring the quota and vessels back to Alaska, specifically to fish
the Bering Sea fishery. They would be required to house the
boats in a port in Alaska, perhaps in Seward.
4:24:01 PM
REPRESENTATIVE HERRON commented that Pt Public Policy is an
important partner for a lot of western and northern Alaska, but
the issue is that when the Arctic opens up, a lot of resources
will need to be developed. He envisioned that these would be
world class projects, not just "mom and pop" organizations. He
emphasized the importance of sustainable communities and offered
his belief that Seward can help the Arctic by having fleets
stationed there, as well as in Unalaska and some smaller ports
in the Bering Sea. He said it is not just about development of
fisheries, but to have the ability to respond to accidents and
to provide a safe refuge for vessels operating in Alaska's
waters. The communities of Unalaska and Seward are examples of
established ports that will expand due to Arctic development.
CHAIR OLSON remarked that Seward has also been a railhead and an
export facility for coal. He suggested that it could be
activated again pretty easily.
4:25:36 PM
CHAIR OLSON, after first determining no one else wished to
testify, closed public testimony on SB 140.
REPRESENTATIVE SADDLER asked whether the sponsor considered
placing limitations on where funds could be used. He understood
this bill relates to things that will service the Arctic but not
be located in the Arctic. He asked whether the sponsor has
considered any geographical limitation on where facilities would
need to be built.
MR. LOGAN referred to page 8, lines 4-7, that describe the
geographical boundary of the Arctic. He pointed out that other
provisions that will allow Seward to provide support for Arctic
development.
4:26:53 PM
REPRESENTATIVE SADDLER read the definition, in part, which read:
(19) "Arctic infrastructure development" means
(A) the construction, improvement, rehabilitation, or
expansion of a facility
(i) in the Arctic to aid in development or meet
emergency response needs; or
(ii) in the state if the construction,
improvement,
rehabilitation, or expansion supports or furthers the
development of a facility in the Arctic; or
(B) the purchase, construction, improvement,
rehabilitation, or expansion of a shore-based plant,
facility, equipment, or assets used in support of a
fishery in the Arctic.
4:27:04 PM
REPRESENTATIVE SADDLER asked where financing for quota share or
vessel purchasing envisioned in this bill fit in the financial
opportunities of fishing loans, boat loans, and quotas. He
asked whether this was the only financing or if other financing
was available.
MR. LOGAN prefaced his response noting he is not expert on
fisheries financing, but the floor of $7 million and the cap of
one-third was specifically designed to not conflict with other
state or federal programs that provide financing for fisheries.
He referred to page 7, lines 8-15, which provides for loan
guarantee only, but does not provide any direct loans.
4:28:08 PM
REPRESENTATIVE REINBOLD moved to report CSSB 140(FIN) out of
committee with individual recommendations and the accompanying
fiscal notes. There being no objection, the CSSB 140(FIN) was
reported from the House Labor and Commerce Standing Committee.