Legislature(1995 - 1996)
03/18/1996 08:13 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
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+ teleconferenced
= bill was previously heard/scheduled
HB 388 - OIL AND GAS LEASING; BEST INT. FINDINGS Number 510 CO-CHAIRMAN GREEN announced that committee would hear CSHB 388(O&G), Version K, "An Act revising laws relating to oil and gas leasing as related to land previously the subject of a written best interest finding; amending provisions setting out exceptions to sales, leases, or other disposals for which a revised written best interest finding is not required; authorizing annual offer of land for oil and gas leases if the land, or adjacent land, was the subject of a best interest finding and if preparation of a supplement to the best interest finding for that land is not justified; and modifying the statement of purpose in the Alaska Land Act as it applies to oil and gas leasing." He asked Representative Rokeberg to explain the version before them. Number 522 REPRESENTATIVE NORMAN ROKEBERG, Sponsor of HB 388, stated the bill is known as the areawide leasing bill. This is, for the information of everybody here, a House Majority priority bill for the year. REPRESENTATIVE ROKEBERG stated, "This bill has been combined with HB 389 which is known as `areawide best interest findings.' So, we have a hybrid bill that is the work of a substantial effort on the part of the AOGA, the Alaska Oil and Gas Association, working in conjunction with the director of Oil and Gas in DNR (Department of Natural Resources) to come up a compromise bill that will accomplish the purposes that we set out to do so. Early on, even last year in the interim, we have had a number of work sessions and hearings on this bill in the Oil and Gas Committee. And I am really pleased to be able to bring this bill forward in front of the Resources Committee and I'd like just briefly describe what it does." Number 590 REPRESENTATIVE ROKEBERG said, "Number one, the bill - and this is the Version K, provides specific legislative intent language which stipulates annual areawide lease sales. Now the director of Oil and Gas indicates, and I agree, that presently he has the authority to conduct these types of sales under the exempt and reoffered provisions of the Title 38 statute. But what we've done here is gone on step further and stipulated to that fact in statute. Because what we've done - we've stipulated that the director may conduct such sales annually. And the `may' or the permissiveness in the statutory language is done intentionally to give the director some flexibility. For example, the market conditions for price were to be in a very low side, it may not be in the state's best interests to pursue a lease sale on the annual basis. There are provisions in this bill that allow for the flexibility to meet the conditions that are in the discretion of the commissioner and the director. I think that's a positive note." Number 633 REPRESENTATIVE ROKEBERG pointed out that the provisions of this bill in no way alter the five year leasing schedule, lease plans, that the state presently conducts their oil and gas leases under. REPRESENTATIVE ROKEBERG felt that one of the key components of this bill is that we look at the best interest findings. The life span of a best interest finding, which is a major document that has to be prepared by the department before acreage is offered for sale, under the exempt and reoffered provisions of Title 38 there is a limitation on the life of these documents to five years. This bill makes them ten years. I think this is a major step forward because what this does should have a positive impact on the fiscal responsibilities of the department and the need to reinvent the wheel every five years when you want to offer this acreage out and that is a very important factor. Number 685 REPRESENTATIVE ROKEBERG said, the bill also sets up a new supplemental process which is somewhat different than the word "revision." It means a revision, but there is a supplemental process if there is only new substantial information that would require a supplement to the existing best interest finding (BIF). So, in other words, if new major information comes forward, the process that is stipulated in the bill to provide for a modification of the existing BIF so that it can be brought up to speed in terms of any technical or other necessary information that is brought forward. Representative Rokeberg said the director uses the "red headed owl" example that moves in and creates new habitat within that area. There are clearly provisions for that and they are somewhat more expedited. This is a very positive thing for the state. The fact that this is just substantial new information to create somewhat of a higher standard for the reopening of supplementing the existing best interest findings. REPRESENTATIVE ROKEBERG pointed out that only acreage that has a best interest finding can be offered on this annualized basis. Representative Rokeberg left the table to refer to maps showing some of the acreage in the North Slope and Cook Inlet. Representative Rokeberg explained that the bill is really an areawide bill, it is a nonspecific area bill. Number 790 REPRESENTATIVE ROKEBERG emphasized, "That the intention of this bill, to overcome any statutory or any other provisions that may be on the books now, to enable em to have more flexibility, offer more land to a way to the industry so they can plan on and conduct their capital budgets for further exploration and development of our very important resource in the state." REPRESENTATIVE ROKEBERG further stated, "One thing I would also point out that this bill is really an areawide bill, it is nonspecific area bill. In the past forms of this legislation, some of it was endeavoring to stipulate as to areas. For example, the Umiat baseline Kenny River Colville or what's called the `box' in the Cook Inlet which was a legal description of an area in the Cook Inlet - was under the, I think exploration licensing bill two years ago defined a box in the Cook Inlet area. There was testimony that there was controversy about this and so forth. There was some reluctance on the part of people involved in the process to be specific like that, but I think we have done artfully in this compromise generated by AOGA and the director, nothing specific about that. So we're taking existing power that the director has, and giving him additional tools, setting up authority to do things annually that he may not have wanted before but there is an expression of legislative intent here that do these things annually because these areas have been offered before." REPRESENTATIVE ROKEBERG continued, "For example, a newcomer, a new independent would come into an area and they could have consultations with the director. Say they have an interest like the nomination factor is now and they could provide for the exempt, the reoffered sales that is done now, but this could be done on a more regular basis. So, it is a real positive thing in that regard." Number 889 REPRESENTATIVE ROKEBERG proceeded, "As I mentioned, this is a compromise bill. There was a memorandum issued to the chairmen of this committee after the Oil and Gas Committee passed out our Version K with some recommendations for some modifications." REPRESENTATIVE ROKEBERG said in the committee member's packets, there should be the amendments that the Oil and Gas Committee is offering to overcome some of items listed in the Alaska Oil and Gas Association memorandum dated March 15, 1996. He said most of the objections in the AOGA memorandum are really technical statutory drafting problems and there are only two substantive areas that he would like to comment on. Number 936 REPRESENTATIVE AUSTERMAN asked if the amendments are being offered to the committee substitute, Version K. REPRESENTATIVE ROKEBERG said that was correct and referred to the specific AOGA amendment: Page 5, lines 6 - 9: Delete: ", together with any tract for which a written best interest finding has not been prepared if the tract is located within and is entirely surrounded by acreage described in this subparagraph for which a best interest finding was issued" REPRESENTATIVE ROKEBERG repeated the proposed language deletion, and walked away from the microphone to refer to map. He referred to the wording in the amendment and said, "Which means, for example, if there is like an inholding or land here that there was, a lot of these may have been leased before. This particular map doesn't necessarily speak to this particular issue, but this is just an example. There might be an inholding within this whole area - want to have an areawide lease sale on it. The language that the Oil and Gas Committee inserted here would provide for that." REPRESENTATIVE ROKEBERG said there was a concern that there may be some reasons that a particular tract of land may not want to be (indisc.), so it has been requested by the Alaska Oil and Gas Association that this language be removed. Representative Rokeberg said that as the bill sponsor, he has agreed to do so. He stated that is one of the major objections that AOGA, in their March 15, 1996, memorandum to the chairmen of this committee. He noted there are a number of other technical questions that we've acceded to. Number 1031 REPRESENTATIVE ROKEBERG directed committee attention to another proposed amendment: Page 6, lines 27-30 Delete: "(1) may annually offer to issue oil and gas leases of the acreage described in AS 38.05.035(e)(6)(G) unless the commissioner determines that substantial new information has become available that justifies preparation of a supplement to the best interest finding for the area proposed to be leased;" Insert: "(2) may annually offer to issue oil and gas leases of the acreage described in AS 38.05.035(e)(6)(G) that is subject to a written best interest finding issued within the previous 10 years unless, under that subparagraph, the commissioner determines that preparation of a supplement to the best interest finding for the acreage proposed to be leased is justified;" REPRESENTATIVE ROKEBERG repeated the amendment beginning on line 27, he explained that AS 38.05.035(e)(6)(G) references the new provision of this bill which is "the guts of this bill." He said there were concerns raised about the language after that, "Unless the commissioner determines that substantial new information has become available that justifies preparation of a supplement to the best interest finding for the area proposed to be leased." Representative Rokeberg said, "The intention of myself and the legal drafter was that this new language merely indicates that if in fact new substantial information comes to light that there is a need for a supplemental revision modification to the BIF that could delay the annual basis. In other words, if there was a scheduled annual sale under this provision then the commissioner, because there was new information, could delay that." Number 1103 REPRESENTATIVE ROKEBERG explained, "However, AOGA and some people in industry feel that they don't understand the language, so we have offered a new amendment here which basically says that - that's the first page of the amendment that's presented to you for different language which basically says the same thing that if there is a new information that requires a supplement coming forward, then there could be a delay in the annual sale." Number 1129 REPRESENTATIVE ROKEBERG interpreted the word "may" on page 6, line 27. The word "may" is a permissive thing and is really really important to understand. He said that all this bill is doing is providing encouragement and authorization to the commissioner to do this on an annual basis. Representative Rokeberg said we want the commissioner to have that flexibility so that he/she will more land out into the hands of industry. We want to see more "bits" turning to the right and more down hole information. Number 1162 REPRESENTATIVE ROKEBERG referred to remaining amendments proposed by the AOGA and stated that those recommendations are strictly statutory drafting problems where there is either a lack of understanding or comfort just the way the language is drafted. There is nothing substantive there. Number 1192 REPRESENTATIVE ROKEBERG directed attention to the title of the bill where the AOGA recommended addition of language "areawide leasing." He pointed out the problem from a statutory drafting point is notwithstanding the fact that the short title of the bill is "areawide leasing," but because the commissioner presently has the authority to conduct areawide leasing, there is nothing in the bill that says we're doing areawide leasing. So it can't be included in the title. He asked for the committee's consideration of the proposed amendments and expeditious review of this legislative priority. Number 1247 REPRESENTATIVE OGAN noted that the updated fiscal note has been decreased from $290,000 in fiscal year 97 to $8,000. He said he wants to make sure that the $8,000 fiscal note replaces the $290,000 fiscal note. Number 1280 REPRESENTATIVE ROKEBERG explained that the original bill that was brought forward in the House Special Committee on Oil and Gas, in essence, established a new annual leasing program with the statute. With the input of the director and the industry, in the AOGA compromise, we're able to change the entire scope of the bill and reduce its impact, financially, on the division. REPRESENTATIVE ROKEBERG asked committee to keep in mind that the acreage that is being offered, under this bill, is what is called exempt and reoffered acreage which has always been able to be done before, but now it will be done on a more consolidated basis. This is not new frontier wildcat exploration acreage we are talking about that should have a new best interest finding and all the environmental concerns and things of that nature are taken care of. Number 1424 CO-CHAIRMAN GREEN recalled earlier testimony from Representative Rokeberg about the significant drop in the fiscal note and asked what the department would not be able to do now. Number 1468 REPRESENTATIVE ROKEBERG replied that the previous version of the bill set up almost a statutory program which would have required additional manpower, etc. Number 1495 REPRESENTATIVE OGAN said he has worked on a bill that had a similar situation where he was designing a program that was completely outside of the scope of what their job is - whole new program. He said he thinks that what has been done with this bill is that it mirrors existing statute as much as possible, yet it makes the substantive changes within the existing program statute and that is why the fiscal note was reduced. They aren't reinventing the wheel. Number 1560 REPRESENTATIVE ROKEBERG responded to questions from Representative Austerman relating that there are numerous lands that have been leased before. He explained that their terms were typically ten years. Those lease terms have now expired and they are being reoffered. As we step out and offer more lands, we write best interest findings for those parcels and then they are let out, but then there is no bid on them. Under the five year leasing schedule they get out of the loop. You could have a lease, for example, that occurred five years ago and nobody bid on then, three years later there may be some interest in that land, but it won't get back on the schedule until the sale is rescheduled. The intent of the bill is to short circuit that. If there is some interest, the bill would allow the commissioner to put that parcel on a sale that is different than a scheduled five year sale. Number 1643 CO-CHAIRMAN GREEN said, "I might add to that that as Representative Davies talked about the fact that the geological staffs of companies, as well as the state, are looking at areas that maybe are not in the current leasing schedule or not even contemplated, but geologists are out of work and all of a sudden a reinterpretation of the use of 3-D seismic various activities that they do, suddenly they get a different picture, but because this particular land if it were just not asked for in the current leasing procedures, it would take six years because it would have to get on the five year schedule that's already been published. So in order to expedite that, this would cover it. As Representative Rokeberg said, lands that have already been looked at before from a best interest findings standpoint. Number 1695 REPRESENTATIVE ROKEBERG informed that the $8,000 fiscal note is for advertising as required in the statute, if they were to offer leases. All their asking is to spend some more advertising money so they can advertise the land which they are required to do. He said it is a good fiscal note. He noted he could arguable say that it should be a negative fiscal note, it is just common sense. Number 1733 REPRESENTATIVE RAMONA BARNES referred to Representative Rokeberg saying that believes that it should be a zero fiscal note and asked Representative Rokeberg why he won't advocate for it. Number 1770 REPRESENTATIVE ROKEBERG countered that because the fiscal note has been significantly changed from the last fiscal note. He said this is still statutorily required. Number 1790 CO-CHAIRMAN GREEN commented that the $8,000 is merely an estimate. Number 1850 PAT FOLEY, Chairman, Lands Exploration and Operations Committee Alaska Oil and Gas Association, testified via teleconference, in support of HB 388. He said, "The areawide leasing concept is really rather simple. The Division of Oil and Gas must complete a large best interest finding for the Central North Slope and the core area of the Cook Inlet. Once a favorable best interest finding is issued, the division must then offer all unused land in these areas at the annual lease sales. The need to continually review the current issue, the best interest findings in areas of the state, which have repeatedly offered for lease since the 1960s, is eliminated. We believe that regular, certain and predictable schedule of annual lease sales, which offer the acreage of critical exploration interests to the industry, will receive the continued support of the current operators within the state. It may serve to attract new explorers (indisc.) oil and gas operating environment." MR. FOLEY continued, "We applaud the efforts of Representative Rokeberg and the House Oil and Gas Committee to forward this bill for your review. With the few changes, which I am now prepared to discuss, AOGA unanimously supports this bill." Number 1970 MR. FOLEY referred to the distinctive AOGA marked up copy of the bill highlighted in multiple colors and said the highlighted colors are a visual aid to help him walk through the bill. He pointed out that there are four different types of changes, conceptually. The yellow and the blue are each changes that AOGA is recommending in addition to the bill. The orange and the pink are AOGA's recommendations to delete two concepts which appear in Version K for the first time. Number 2027 MR. FOLEY directed attention to the yellow highlighted changes and said, "The first which appears on page 1 and the second is on page 6. (Indisc.) this is an an areawide leasing bill and we proposed that the words `areawide leasing' be (indisc.) throughout the bill to emphasize this point. The words `areawide leasing' do appear in the bill, as it is currently drafted, and they appear on page 6 on line 22 of Section 2. (Indisc.) modified to let you (indisc.) areawide lease sales are in the best interest of the state. So we would simply add language to the title on page 1, at line 8, hoping to make reference to a areawide leasing." Number 2082 REPRESENTATIVE ROKEBERG interjected that he likes this amendment. MR. FOLEY continued, "And then also on page 6, we would insert the language in Section 3. I'm gunna have more comments on Section 3, in fact, I recommend it be deleted entirely, but if your committee feels compelled to leave it in - that language - the yellow block which you see on line 27." Number 2100 MR. FOLEY continued explanation of orange highlighted amendments relating that it appeared that Representative Rokeberg's amendments had incorporated all of the orange changes: Page 1, line 5, Title Delete: "or adjacent land," Page 5, line 6, Delete: "together with any tract for which a written best interest finding has not been prepared if the tract is located within and is entirely surrounded by acreage described in the subparagraph for which a best interest finding was issued" Page 6, line 23 Delete: "or that is adjacent to and surrounded by state land that has been the subject of a best interest finding" Number 2169 MR. FOLEY referred to the pink changes and said it is a more subtle issue. He noted Representative Rokeberg touched on it and said he wanted to add some points of clarification. He explained AOGA is concerned that with this language the BIF is required. Mr. Foley directed the committee to Section 3. AS 38.05.180 (d) on page 6: Page 1, lines 6 and 7 Delete: "and if preparation of a supplement to the best interest finding for that land is not justified. Page 6, lines 28 Delete: "unless the commission determines that substantial new information has become available that justifies preparation of a supplement to the best interest finding for the area proposed to be leased." Number 2272 MR. FOLEY discussed the distinctions between AS 38.05.180(b) and (c) and (d). He referred members to page 6, line 25, Section 3, AS 38.05.180(d) which exempts certain lands from the need to appear on a five year lease sale scheduled and said by adding that language it essentially negates the exclusion that created .180(d). Mr. Foley said if you look at .180(b), this establishes the requirements to include the land on a five year sale program. AS 38.05.180(c) says that you cannot offer land which (indisc.) appear on that five year program. AS 28.05.180(d) sets forth the exemption. If you include this language highlighted in pink on page 6, it negated the exclusion created .180(d). Number 2331 CO-CHAIRMAN GREEN asked Mr. Foley if he had received a copy of Representative Rokeberg's proposed amendments. MR. FOLEY acknowledged that he had a copy, but had the same problem with the language that appears in his amendment. Number 2374 REPRESENTATIVE DAVIES did not follow Mr. Foley's explanation that having this language in here negates the whole exception. He said it seem to him that this finding of substantial of new information would be the exceptional case. In most cases, the underlying exception would be in place. In the vast majority of instances, the commissioner could annually offer areawide lease sales as long as they had been subject to best interest finding within the last ten years. MR. FOLEY said, "If you look at the changes that we're making in (G) and (H), which is now just (G), (indisc.) for a supplemental best interest finding, if substantial new information is discovered it throws you into that loop there that requires... [END OF TAPE] TAPE 96-37, SIDE A Number 000 REPRESENTATIVE ROKEBERG said he understands their concerns. He explained it is not the intention of the sponsor, nor the drafter, to create the result that has been brought to his intention. Representative Rokeberg pointed out there is a fix at this stage, particularly given the light to move this legislation along. Representative Rokeberg indicated he is willing to accept the "klink" change without deleting the balance of the statement in Section 3, particularly with the addition of the words, "an areawide lease sale," highlighted in yellow. He said he is more than willing to accept that as a friendly amendment. Representative Rokeberg stated he won't agree to the removal of the first part of that sentence which has also been requested. That is the only thing that authorizes anything about annual and it is the only thing that says anything about areawide lease sales not that it has been modified. CO-CHAIRMAN GREEN asked Mr. Foley if it is still his feeling that he would still have the conflict if just the first sentence and a half was used. MR. FOLEY indicated he wouldn't. He said the suggestion by Representative Rokeberg satisfies his concern. He noted he still believes that all of Section 3 and the amendment to .180(d) is unnecessary. He stated he doesn't have an objection to the change Representative Rokeberg has put forward. Number 158 CO-CHAIRMAN GREEN said as he understands, Section 3 would have the yellow in and the pink out. MR. FOLEY indicated that was correct. CO-CHAIRMAN GREEN noted there was an affirmative nod from the sponsor. Number 183 MR. FOLEY referred the committee to the title of the bill on page 1 and said there is a pink deletion. He said (indisc.) is identical to what was just said. CO-CHAIRMAN GREEN said, "So what I hear so far, I think the committee is with us, that yellow, orange and pink, as proposed by AOGA, is acceptable to the sponsor." REPRESENTATIVE ROKEBERG indicated that is correct. Number 237 MR. FOLEY referred the committee members to the changes that are blue and said, "(Indisc.) are necessary to clarify some procedure requirements. They're essentially legislative housekeeping, if you will. On page 3, line 23, we've added language `except for sale under (G)(6) of this subsection.' I would like it in this change to (indisc.) put forward in Section 5 of this bill, which (indisc.) AS 38.05.945(A), (indisc.) to clarify on the hearing or lease sales are exempt from certain public notice requirements." Number 300 REPRESENTATIVE ROKEBERG explained he spent substantial time reviewing this and it is statutory drafting. He said, "Everything that Mr. Foley says I agree with. We do not conceptually agree with. It is just the matter if one looks up to the first page, on line 11, there is a little `(e)' there and if you follow the whole section - that subsection down, it's all inside the subsection. And if you go beyond his change - requested blue change now on page 3, and keep going on page 4 and keep going on page 5, you end up with `(G)' and `(H).' We're all in the same subsection, so the statutory draft is you don't have to make the reference back because it's right in the subsection." Number 365 REPRESENTATIVE BARNS explained that sometimes it doesn't have anything to do with the drafters, it has to do with people who read it after you get through drafting it to understand what the intent is. Perhaps that is the reason they want it put in so that it is clearly followed in statute in the future. REPRESENTATIVE BARNES said, "What I would do would entertain a motion. I would move that all this colored language, I don't think it's yellow - I think it's green where they calling it yellow - orange, pink and blue be adopted into the committee substitute we have before us." CO-CHAIRMAN GREEN said he would presume the motion would cover page 1, line 4. REPRESENTATIVE BARNES indicated that is correct. Number 444 CO-CHAIRMAN asked if there was an objection. REPRESENTATIVE DAVIES objected. He said he still doesn't understand why the committee wants to make the change in Section 3 on page 6. Representative Davies indicated he doesn't understand why it is necessary. He asked Representative Rokeberg if that change were to be made, would there still be the requirement that whenever such acreage is being offered and if there is substantial new information, there would be a new best interest finding. REPRESENTATIVE ROKEBERG said the reference to (e)(6)(G), which is the actual operative clause, reviews the whole aspect creation of the supplemental to the BIF. He noted it starts on page 4, line 29, (G) and go to page 5, line 11. He said the point Mr. Foley made is correct. He referred to the language highlighted in pink in Section 3 and said the only reason it was there was it is modifier to indicate that there could be circumstances that would necessitate a delay on the annual sale. Representative Rokeberg said he thinks that by the statement on the record in going forward with the deletion that they've requested should be adequate to cover that because it is included in the new section (G). Number 607 CO-CHAIRMAN GREEN asked Mr. Foley if he agrees with what Representative Rokeberg had just stated. MR. FOLEY indicated he does. REPRESENTATIVE ROKEBERG stated that by putting it on the record, the permissiveness under the new Section 3 is still there in case things happen like the price changes. The director and commissioner can take it into account. He noted it was added by the drafter of the bill as qualification for additional flexibility. CO-CHAIRMAN GREEN asked Representative Rokeberg if he has a problem with the wording on page 1, line 4. REPRESENTATIVE ROKEBERG said that is a matter of statutory drafting. He indicated he doesn't disagree with it and doesn't have an objection. CO-CHAIRMAN GREEN asked Representative Davies if he still maintains his objection. REPRESENTATIVE DAVIES said the bill is fairly complicated. He asked for a brief at ease. CO-CHAIR GREEN called the meeting back to order. REPRESENTATIVE ROKEBERG said he would remove his amendments from the table and would exceed to the ones requested. Number 805 CO-CHAIRMAN asked Representative Davies if he still has an objection. REPRESENTATIVE DAVIES removed his objection. CO-CHAIRMAN GREEN said, "Is there any objection to the motion to move - it was this bill... REPRESENTATIVE BARNES said, "...From the committee as amended." CO-CHAIRMAN GREEN said, "As amended and with the new fiscal note. Is there objection?" An unidentified committee member said he thought the committee was voting on an amendment. CO-CHAIRMAN GREEN said, "Oh, well we can't. We have a motion on the floor to accept these..." REPRESENTATIVE BARNES said, "And you asked if there was any objection and there was none. So the next motion is to move out of committee, as amended, with individual recommendation. CO-CHAIRMAN GREEN asked Representative Barnes if that is her motion. REPRESENTATIVE BARNES indicated it was. CO-CHAIRMAN GREEN asked if there was an objection. REPRESENTATIVE DAVIES objected. He said there is a new version and several amendments that the committee hasn't had a chance to digest. He said he would respectfully request the committee be given a day to review the amendments. CO-CHAIRMAN GREEN said, "If there are no other questions of the sponsor, in fairness, we have Sara Hannan to speak on this bill. I would ask you to be as brief as possible, Ms. Hannan." SARA HANNAN, Executive Director, Alaska Environmental Lobby, testified in opposition to HB 388. She said she has sat through several hearings in the Senate and would like to discuss some of the concerns and differentiations that she thinks the policy implies that the committee members need to think about. Areawide leasing, conceptually, is a good idea. Ms. Hannan referred to the best interest finding mechanism and said it is the mechanism in which local communities have input into the oil and gas lease schedule. If a community feels that a lease sale dramatically affects their fishing constituencies or their tourism development, the best interest finding is the place where their testimony can come into play and certain parcels can be exempted from leases and non leases. When talking about areawide sales and the two areas where we do lease sales, they vastly differ. The North Slope's oil and gas leasing area, above the Umiat baseline between the Cannon River and the Colville River, provide an area that is fairly homogeneous in environment and fairly non populated. Conversely, the Cook Inlet Basin is a very diverse area with a lot of different economic interests. There are several communities and a variety of constituencies with different economic concerns ranging from tourism expansion in the area to a fishing constituency. Additionally, most of the oil and gas in Cook Inlet is offshore. All of the North Slope oil and gas leases are onshore leases. Some are offshore with lateral drilling, but the lease sales are held on shore. Ms. Hannan said for that reason, those two areas are vastly different and she would argue that it should be differentiated within the legislation. She said she would urge the committee to evaluate those two areas differently because they are vastly different. The North Slope and the Southcentral Cook Inlet Basin don't look anything alike. Ms. Hannan said if you're taking something that is data five years current, when you're talking about developing fishing and tourism industries, things change substantially in five years. MS. HANNAN explained that when communities work for or against lease sales in their area, if a parcel is not leased and not sold, there should be some assurance to that community that they don't need to spend a substantial amount of their community energy evaluating the pending lease sale every year. What has been provided through a five year sale mechanism is that if lease sale "X," in front of their view shed affecting their fishing development, doesn't sell they know that in five years it could come back and they, again, will have an additional comment period. Ms. Hannan informed the committee that exempting these sales from additional comments creates an ongoing policy problem for local communities. She thanked the committee members for listening to her comments. Number 1122 REPRESENTATIVE DAVIES referred to Ms. Hannan mentioning "five years" several times in her comments and said he would like to make sure Ms. Hannan was aware that the "five" had been changed to "ten" in the bill. MS. HANNAN said she was aware. Currently, it is a five year window and most communities in the Cook Inlet Basin are dealing with a five year mechanism. When that goes to a ten year mechanism, we will be looking at even more changes. REPRESENTATIVE DAVIES indicated Ms. Hannan said her concern was that there could be substantial changes an a unit from one window to the next when a lease sale may be offered. He said under the terms of the bill, if there are substantial changes there would then be a reiteration of the best interest finding process. Representative Davies asked Ms. Hannan if she is not comfortable with that provision. MS. HANNAN indicated she isn't comfortable with the provision. She noted she meant to substitute the word "substantial," as it is her understanding that "substantial" has a legal definition of a certain standard. Ms. Hannan referred to Homer and said if your tourism expansion and growth has been 30 percent, does that meet the legal definition of a substantial change? She pointed out there are mixed opinions, amongst attorneys, as to what substantial new information implies. They say it's a very high standard that most local governments would have a hard time saying that this is substantial new information, yet it is an expansion and the tourism constituency has some concern, but can you prove it is substantial new information or it is just an increase in economic value annually. REPRESENTATIVE DAVIES asked Ms. Hannan if she has another word to substitute for "substantial." MS. HANNAN indicated she didn't. Number 1259 KENNETH BOYD, Director, Division of Oil and Gas, Department of Natural Resources, was next to testify via teleconference from Anchorage. He said he thinks the legislation has gone a long way in the right direction. Mr. Boyd said Representative Rokeberg has done a really nice job of working with the Division of Oil and Gas and AOGA. He explained that he believes that the changes made are valuable. He referred to page 1, line 4, relating to the title of the bill and said there was talk about making changes to the colored language - the yellow, blue, green and pink. The word "authorizing" would be changed to "encouraging. He asked if there was another word change. Number 1310 REPRESENTATIVE BARNES said, "My motion, because we all have this document, incorporated all the coloring and the - the...." CO-CHAIRMAN GREEN said, "...that little blue area. If yours isn't colored, mine is. Just a moment. There was to be the word `encouraging' on line 4 was to be colored blue and the word `encouraging' substituted there." REPRESENTATIVE BARNES agreed. REPRESENTATIVE DAVIES said it was his understanding that Representative Barnes indicated the change on line 4, specifically. He said it was understanding that when the amendment was moved, that was what was being done. CO-CHAIRMAN GREEN said the amendment has passed. Number 1349 MR. BOYD said he is certainly in favor of the change. He said, "We are authorized, as we've discussed many times, to do what we're doing here, but encouraging those annual (indisc.) I think is a very positive (indisc.) of the legislature to get on with it." CO-CHAIRMAN GREEN said there was previous discussion that there was significant changes to the bill and that there would be some time to review the changes. He said those changes have been adopted and he sees no problem with getting another draft of the bill for review at the meeting on Wednesday. He said he would suggest that Representative Rokeberg might want to consider a zero fiscal note. Number 1398 REPRESENTATIVE BARNES made a motion to adopt a zero fiscal note. REPRESENTATIVE DAVIES objected for the purpose of discussion. He asked Mr. Boyd to comment. MR. BOYD said, "If you want to zero it out, go ahead, but that doesn't give (indisc.) that you want more lease sales and those lease sales don't cost a lot of money, but a flight to (indisc.) to do public testimony has a real cost to the division. I'm only recognizing here that those costs are real. But I think Representative Rokeberg was also correct in his earlier testimony that at some point in time I think the cost begins to go down because at some point I think is less necessity to reinvent that wheel, but (indisc.) at some point in time (indisc.) and we have to do public testimony, we have to advertise (indisc.), and it's in addition to what we're doing now. I think it's a small cost to pay for a program that gets an awful lot of land out, you know, potentially in the hands of the (indisc.) user. This truly is an administrative cost, but again, a flight to (indisc.) costs a couple of thousand dollars to get people into that village to deal with the local people. I think it's an important cost. The same thing goes for flying to Kenai or flying to Homer. It's part of the public process that's required and it does have a cost." Number 1479 CO-CHAIRMAN GREEN asked if this is something that he didn't foresee in the division's budget. MR. BOYD said they always try to find things in their budget, but would keep adding things. Mr. Boyd explained he couldn't say whether or not he couldn't find the money. He stated he thinks this is a fair and reasonable additional cost if there is an extra sale, on a yearly basis. Number 1500 REPRESENTATIVE DON LONG said, "I was just going to mention whether or not it goes into the budget because notwithstanding the fact that areawide leasing or a best of finding or whatever -- I mean if there a lease or not a lease that's (indisc.). If there is, then it shouldn't be an additional cost." REPRESENTATIVE DAVIES said he thinks what the bill is intending to do is authorize/encourage more sales. If there is going to be more sales that are going to be offered more frequently, then there will be an additional cost. He said he would also note that the budget proposal is actually to reduce the division's budget by $150,000. He said we can do all the encouraging we want, but nothing will happen if the division doesn't have the fiscal tools to do the job. He indicated he still maintains his objection. Number 1552 CO-CHAIRMAN GREEN asked for a roll call vote on whether or not the committee will submit a fiscal note from the House Resources Committee. Representatives Austerman, Barnes, Kott, Long, Ogan, Williams and Green in favor of the motion. Representatives Davies and Nicholai voted against the motion. So the committee adopted a zero fiscal note. CO-CHAIRMAN GREEN announced the bill would be held over for review of the amendments.
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