Legislature(2001 - 2002)

03/27/2001 06:05 PM Senate FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                                                                                                                                
     SENATE BILL NO. 136                                                                                                        
     "An Act relating to  resource development and to grants for the                                                            
     purpose of  promoting resource development from  appropriations                                                            
     of  a portion of  the revenue  derived from  the extraction  of                                                            
     certain state natural resources."                                                                                          
                                                                                                                                
                                                                                                                                
This  was the first  hearing  for this  bill in  the Senate  Finance                                                            
Committee.                                                                                                                      
                                                                                                                                
PAT  CARTER, staff  to  Senator  Drue Pearce,  testified  that  this                                                            
legislation  establishes the  Resource Development  Board, which  is                                                            
tasked primarily  with facilitating  public education and  promoting                                                            
responsible resource  development. He suggested, "If  you begin with                                                            
the premise that Alaska  is going to be largely dependent on natural                                                            
resource extraction  for the foreseeable future to  fuel our state's                                                            
economy, it would  therefore make sense to invest  in that future by                                                            
providing financial support to most of those activities."                                                                       
                                                                                                                                
Mr. Carter pointed out  recent studies show that resource extraction                                                            
and the tourism  industry play a significant  role in the  workforce                                                            
and therefore  the economy. He noted  the majority of jobs  from the                                                            
tourism industry  are low paying and seasonal, and  that the studies                                                            
show diversified  jobs are necessary  to sustain a healthy  economy.                                                            
However,  he  charged  that  the  majority  of  the  "environmental                                                             
community"  does not support  this concept  since "they continue  to                                                            
oppose  nearly  all  development  of  our  natural  resources  while                                                            
offering no economical alternative plan."                                                                                       
                                                                                                                                
Mr. Carter  stated the intent  of this legislation  is to "strike  a                                                            
balance" between  development and protection of the  environment and                                                            
"avoid the extreme positions."  He suggested the best way to protect                                                            
the environment is through a strong diversified economy.                                                                        
                                                                                                                                
Mr. Carter asserted that  Alaska's environmental protection laws are                                                            
among  the strongest  in the  world. However,  he  stressed that  by                                                            
opposing natural  resource extraction,  the environmental  community                                                            
continues  to "push development  offshore  to third world  countries                                                            
assuring  the exploitive  development  in  the absence  of  adequate                                                            
environmental protection laws."                                                                                                 
                                                                                                                                
Mr. Carter emphasized  the approximate $6.5 million  investment made                                                            
in the tourism  industry and additional  financial support  provided                                                            
to  the  seafood  industry  through  the  Alaska  Seafood  Marketing                                                            
Institute (ASMI).  He stressed these  efforts are to strengthen  the                                                            
state's economy. He added  that the promotion of the diverse mineral                                                            
resources,  timber and  oil and  gas development  would  be a  "wise                                                            
investment".                                                                                                                    
                                                                                                                                
Mr. Carter concluded the  creation of the Resource Development Board                                                            
would  further  the   constitutional  mandate  to  develop   natural                                                            
resources   by  making  them  available   for  maximum  use   in  an                                                            
environmentally responsible manner.                                                                                             
                                                                                                                                
Senator Austerman noted  the language in the bill does not appear to                                                            
contain perimeters on how the money would be expended.                                                                          
                                                                                                                                
Mr.  Carter responded  the  intent is  that the  seven-member  board                                                            
would  create perimeters  regarding  what  is deemed  worthy of  the                                                            
grants this legislation  would also provide. He suggested accounting                                                            
methods  would be  established.  He noted  that if  the legislature                                                             
wanted  allocation restrictions  in  statute, the  sponsor would  be                                                            
willing to amend the legislation to reflect these.                                                                              
                                                                                                                                
Senator Austerman reminded  that the Committee has recently passed a                                                            
fast  track  supplemental  appropriation  for  FY 01  granting  $1.5                                                            
million  to Arctic  Power to  promote oil  and gas  development.  He                                                            
asked  if  the  $2.6  million  proposed  for  distribution  in  this                                                            
legislation could be entirely  allocated to Arctic Power if that was                                                            
the board's desire.                                                                                                             
                                                                                                                                
Mr. Carter  affirmed it could  if that were  the board's desire.  He                                                            
qualified that  this is not the intention, but that  it is possible.                                                            
He assumed  that the board would require  a follow-up accounting  of                                                            
how the money was spent.                                                                                                        
                                                                                                                                
Senator Hoffman asked if  the board could award grants to non-profit                                                            
organizations   that  would  support   or  oppose  initiatives   for                                                            
constitutional amendments or candidates for public office.                                                                      
                                                                                                                                
Mr. Carter  responded that  the issue of  supporting candidates  had                                                            
not been  considered. He noted  it is not  the intended use  for the                                                            
grants to promote  one candidate over  another, but that  the intent                                                            
is to provide  a "balanced  message."  He  shared, "We feel  that we                                                            
are lacking  in that regard today  where we have what seems  to be a                                                            
ever-expanding   amount  of   money  coming   in  to  environmental                                                             
organizations from Lower  48 groups. They are unfamiliar with issues                                                            
in Alaska. We think that they skew the message."                                                                                
                                                                                                                                
Senator Hoffman  asked why the seafood  industry is not represented                                                             
as a member of this board.  He stressed that the seafood industry is                                                            
one of  the largest  industries in  the state.  He listed  by-catch,                                                            
interception, trans-boundary issues and other pertinent issues.                                                                 
                                                                                                                                
Mr. Carter  assured there was no intent  to "cast disparage"  to the                                                            
seafood  industry,  only  that  it  would  be  redundant  given  the                                                            
existence of ASMI.  He suggested that the legislature  could instead                                                            
appropriate  general  funds directly  to ASMI,  in  addition, or  in                                                            
place of, the  revenues generated  from industry taxation.  He noted                                                            
that  the tourism  industry  was excluded  for similar  reasons  and                                                            
emphasized  that  all these  industries  are important  to  Alaska's                                                            
economy.                                                                                                                        
                                                                                                                                
Senator Austerman  assumed  the timber industry  is omitted  for the                                                            
same reasons.                                                                                                                   
                                                                                                                                
Mr. Carter  informed  that the timber  industry  is included  in the                                                            
board make-up.                                                                                                                  
                                                                                                                                
Senator Austerman understood  the proposed $2.6 million in royalties                                                            
is otherwise deposited into the general fund.                                                                                   
                                                                                                                                
Mr. Carter affirmed  this is not new revenue, but  rather taken from                                                            
the general fund and used as an investment.                                                                                     
                                                                                                                                
AT EASE 7:05 PM / 7:09 PM                                                                                                       
                                                                                                                                
The Committee next took public testimony.                                                                                       
                                                                                                                                
SFC 01 # 54, Side B 07:09 PM                                                                                                    
                                                                                                                                
                                                                                                                                
HUGH BROWN,  Alaska Conservation Voters,  testified that  he saw the                                                            
bill as an investment in  Alaska, which he agreed is required by the                                                            
constitution, but noted  he shared Senator Austerman's concerns with                                                            
the vagueness  of the legislation.  Mr. Brown stressed the  need for                                                            
"a balanced message  to all segments of the community."  He proposed                                                            
amending the bill to insert  direction to the board that the message                                                            
the  board  sends  is  developed  by  a  diverse  group  of  people,                                                            
including   minorities,   women,   those  representing    non-profit                                                            
organizations and local  advocates. He indicated that the recipients                                                            
of the grants should also  be diversified. He stressed that many are                                                            
unaware that  timber and mining are  resources and that this  should                                                            
be conveyed through the  board's action.  He spoke of the importance                                                            
of  educating  youth to  the  importance  of  science and  math.  He                                                            
understood this  would increase the cost and suggested  an increased                                                            
fiscal note.                                                                                                                    
                                                                                                                                
SUSAN SCHRADER,  Alaska Conservation Voters, testified  in Juneau to                                                            
read a statement into the record as follows.                                                                                    
                                                                                                                                
     Alaska  Conservation  Alliance and Alaska  Conservation  Voters                                                            
     are  sister nonprofit  organizations  dedicated  to  protecting                                                            
     Alaska's  environment  through public  education and  advocacy.                                                            
     Our  44 member  organizations  and  businesses  represent  over                                                            
     35,000 registered  Alaskan voters, who, as most  Alaskans, work                                                            
     hard  to support their  families.  Conservationists  throughout                                                            
     the state  are committed to maintaining  a healthy economy  for                                                            
     the benefits  it provides all  Alaskans. We agree with  Senator                                                            
     Torgerson, the bill's  sponsor, that we can promote responsible                                                            
     development of our  resources while protecting the environment.                                                            
     And we believe resource  development industries can prosper and                                                            
     meet shareholders'  expectations while complying with state and                                                            
     federal environmental laws.                                                                                                
                                                                                                                                
     The  concept of  the state using  general funds  for grants  to                                                            
     non-profits to promote  for-profit industries, many of whom are                                                            
     huge,  trans-national  corporations   that  employ significant                                                             
     numbers  of  nonresidents,  is  nonsensical.  We  believe  most                                                            
     Alaskans  will not endorse  the idea  of taking state  revenues                                                            
     that  could go to  improving education,  social services,  road                                                            
     maintenance,  or  any number  of  other significant  needs  and                                                            
     using  those monies to  do the promotion  and advertising  work                                                            
     that the  resource industry can  easily accomplish themselves.                                                             
                                                                                                                                
     Instead,  we would encourage the legislature  to fully fund the                                                            
     outreach  activities of  existing state  agencies and  programs                                                            
     that facilitate  responsible resource development,  such as the                                                            
     Division  of  Community  and  Business   Development  at  DCED.                                                            
     Further, we would  encourage resource industries and businesses                                                            
     to  enhance  their  financial  support of  local  and  regional                                                            
     economic  development councils  and similar organizations.  The                                                            
     large  corporations doing the  business of extracting  Alaska's                                                            
     resources  are clearly able to  contribute to the promotion  of                                                            
     development that will  benefit the smaller players in our state                                                            
     economy.                                                                                                                   
                                                                                                                                
     The mining  industry in Alaska  was valued at $1.12  billion in                                                            
     1999,  while  30.7%  of  their workforce  in  Alaska  was  non-                                                            
     resident.  Should  Alaskan  families  be  helping to  pay  this                                                            
     industry's   advertising   and  marketing   bill?  Should   the                                                            
     legislature  be diverting public  funds to trade organizations                                                             
     that should be funded by the private sector?                                                                               
                                                                                                                                
     Alaska Conservation  Voters urges legislators to oppose SB 136.                                                            
                                                                                                                                
CAROL CARROLL,  Director, Division  of Support Services,  Department                                                            
of Natural  Resources,  testified in  Juneau to  address the  fiscal                                                            
note.  She stated  that $2.6  million would  be  relocated from  the                                                            
general fund to the resource  development fund for this program. She                                                            
noted that most of this  revenue would be generated from oil and gas                                                            
royalties paid to the state.                                                                                                    
                                                                                                                                
Ms. Carroll  expressed  that there would  be a  cost to operate  the                                                            
program  and that  the department  attempted to  be "reasonable"  in                                                            
assessing these. She shared  that it is assumed that the board would                                                            
request  an Executive Director  and an  Administrative Assistant  to                                                            
assist in the  grant activities and  board operations. She  stressed                                                            
the detail required in  this work, which the board would depend upon                                                            
when making  its decisions.  She then  noted indirect  costs  to the                                                            
department,  pointing out that no  new positions would be  added for                                                            
accounting personnel.  She stated that the impact  on the department                                                            
would depend upon the number of grants the board issues.                                                                        
                                                                                                                                
Ms. Carroll  told  the Committee  that the department  supports  the                                                            
legislation.                                                                                                                    
                                                                                                                                
Senator  Leman opined  that  administering  this program  would  not                                                            
require an  Administrative Assistant  and an Executive Director.  He                                                            
suggested  that existing  staff should  be instructed  to  undertake                                                            
these  duties.  He  was  concerned  with  incremental  increases  to                                                            
government.                                                                                                                     
                                                                                                                                
Ms. Carroll  understood, but stressed  that the department  has been                                                            
operating for  several years under  the "do more with less"  theory.                                                            
She stated  that there is insufficient  existing staff to  undertake                                                            
additional  duties.  She admitted  that the  board  could decide  to                                                            
forgo  the Executive  Director  position,  but that  staff would  be                                                            
required  to do  the  administrative  tasks.  She noted  that  other                                                            
expenses  such as  office space  leasing, computer  maintenance  and                                                            
supplies  have not  been  placed in  the fiscal  note  and would  be                                                            
absorbed in the department's existing operating budget.                                                                         
                                                                                                                                
Senator  Leman countered  that it  is "not  that big  of a deal"  to                                                            
administer   grant  funds.   He  stated  his   frustration   by  the                                                            
"continuing creep" of new positions and new expenditures.                                                                       
                                                                                                                                
Senator  Austerman   spoke  to  basic  concerns   he  had  with  the                                                            
legislation.  He cited  language  on page  3 of  the bill  regarding                                                            
promotions,    marketing,    research,    advertising,    education,                                                            
establishing  and operating  a system for  responding to  inquiries,                                                            
publishing  and  distributing  information,   and  establishing  and                                                            
maintaining Internet  sites. He understood the desire  for promotion                                                            
of  resources  to  ensure  the  greatest   value,  but  noted  other                                                            
industries  that  provide  matching  funds like  tourism  and  still                                                            
others, such as the seafood  industry, that has no general funds and                                                            
must provide for  these costs itself. He wanted to  consider whether                                                            
the minerals  industry  should be  required to  contribute  matching                                                            
funds.                                                                                                                          
                                                                                                                                
Co-Chair  Kelly  noted other  questions  that  were raised  at  this                                                            
hearing. He expressed that  these funds should not be utilized for a                                                            
political  candidate  and he did  not think  they could  be used  to                                                            
campaign for or  against a ballot initiative due to  other statutory                                                            
provisions.                                                                                                                     
                                                                                                                                
Mr. Carter noted that he  had researched the matter and learned that                                                            
because  these are  state  grants,  they are  subject  to the  state                                                            
accounting  process, including  an audit  trail.  He added that  the                                                            
funds could  not go to political candidates  or initiatives  because                                                            
no state funds are allowed for these election purposes.                                                                         
                                                                                                                                
Co-Chair Kelly asked Co-Chair Donley if this was correct.                                                                       
                                                                                                                                
Co-Chair  Donley did not  know if there was  a prohibition  on using                                                            
state funds for ballot initiatives.                                                                                             
                                                                                                                                
Co-Chair Kelly requested  the sponsor to meet with Senator Austerman                                                            
to address his concerns.                                                                                                        
                                                                                                                                
The bill was HELD in Committee.                                                                                                 
                                                                                                                                

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