Legislature(2009 - 2010)SENATE FINANCE 532
04/06/2010 09:00 AM Senate FINANCE
| Audio | Topic |
|---|---|
| Start | |
| HB162 | |
| SB208 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| HB 162 | |||
| + | SB 208 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| += | SB 230 | TELECONFERENCED | |
| + | SB 203 | TELECONFERENCED | |
SENATE FINANCE COMMITTEE
April 6, 2010
9:09 a.m.
9:09:36 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:09 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Charlie Huggins, Vice-Chair
Senator Johnny Ellis
Senator Dennis Egan
Senator Donny Olson
Senator Joe Thomas
MEMBERS ABSENT
None
ALSO PRESENT
Chris Maisch, Director, Division of Forestry, Department of
Natural Resources; Senator Bill Wielechowski, Sponsor;
Kevin Banks, Director, Division of Oil & Gas, Department of
Natural Resources
PRESENT VIA TELECONFERENCE
Erin McLarnon, Board of Forestry, Willow; Carl Portman,
Deputy Director, Resource Development Council; Dick Coose,
Retired Forester, Ketchikan
SUMMARY
HB 162 SOUTHEAST STATE FOREST
HB 162 was heard and HELD in Committee for further
consideration.
SB 208 DNR STUDY ON NATURAL GAS
SB 208 was heard and HELD in Committee for further
consideration.
9:10:36 AM
HOUSE BILL NO. 162
"An Act establishing the Southeast State Forest and
relating to the Southeast State Forest; and providing
for an effective date."
CHRIS MAISCH, DIRECTOR, DIVISION OF FORESTRY, DEPARTMENT OF
NATURAL RESOURCES, addressed the Senate Committee
Substitute for HB 162, which establishes the Southeast
State Forest. He said he would go through a sectional
analysis of the bill.
9:11:34 AM
Co-Chair Stedman suggested explaining the bill so the
people listening at home could understand it. Mr. Maisch
agreed to do so.
Mr. Maisch read the sectional analysis:
This bill would establish a new Southeast State Forest
(SESF). The SESF would be managed as part of the State
Forest System under AS 41.17.200.230. Lands in the
State Forest would continue to be open for multiple
uses, including wildlife habitat and harvest and
recreational activities. The State Forest designation
would not affect the Wrangell Borough municipal
entitlement, nor would it affect calculation of
entitlement acreage for future municipalities in
southeast Alaska.
Section 1 - Southeast State Forest
Legal descriptions. Section 1, subsections (a) and (d)
provide legal descriptions for the lands to be
designated as the Southeast State Forest (SESF).
Designated lands include 20 parcels totaling
approximately 25,291 acres (see chart) on Prince of
Wales, Tuxekan, Kosciusko, Heceta, Revilla, and
Gravina islands, and on the mainland at Crittenden
Creek. These parcels are an important part of the
state timber base, but are classified as General Use
land, which may be sold in the future. Legislatively
designating a State Forest would ensure that some land
will remain available for long-term forest management,
and enable thinning to increase timber volumes.
Designated lands exclude areas identified as important
sites for future state land disposals.
Management plan and transportation corridor.
Subsection (b) directs DNR to prepare a management
plan for the Southeast State Forest. Under AS
41.17.230 a management plan is required within three
years after a State Forest is established. State
Forest management plans must consider and permit
multiple uses, include recreation and tourism, mining,
use of fish and wildlife, and other traditional uses,
unless the Commissioner issues a site-specific written
finding that a use in incompatible with one or more
other uses. Public, interagency, and Board of Forestry
review is required prior to adoption of a State Forest
management plan. As in other state forests, Subsection
(c) states that the DNR Commissioner may also
establish transportation corridors within the State
Forest.
Municipal entitlements. Subsection (e) clarifies the
relationship of the Southeast State Forest to current
and potential municipal entitlements. State Forests
can affect the amount of land a municipality is
entitled to select, and the land available for
selection. The amount of land a municipality may
select is based on the maximum total acreage of
vacant, unappropriated, unreserved (VUU) land in the
borough boundaries within two years after the date of
incorporation (AS 29.65.030). Municipal selections are
limited to VUU land. Land classified as General Use
land is VUU land, but State Forests are not.
The SESF is designed to have no impact on Wrangell
Borough land selections. The amount of land that
Wrangell Borough may select is already fixed by its
date of incorporation, and this bill specifies that
the Wrangell Borough may select State Forest land
within the borough boundary. Three parcels in the SESF
are within the Wrangell Borough boundary.
If new municipalities are incorporated before June 30,
2019, the SESF will not affect the amount of land that
they can select. The bill specifies that State Forest
lands that were VUU land before establishment of the
State Forest will be included in the calculation of
the entitlement acreage. However, parcels in the SESF
may not be selected. If municipalities form after
2019, the amount and location of their entitlement
would be based on the VUU land at that time.
Section 2. Regulations. This section authorizes DNR to
immediately adopt regulations to implement the bill.
Section 3. Effective date for regulations. Under
Section 3 the authority to adopt regulations (Section
2) takes effect immediately.
Section 4. Effective date for State Forest. Section 4
provides for an effective date of July 1, 2008.
9:16:20 AM
Mr. Maisch explained the process of developing the
legislation. It is a project that has been in the works for
about four years. There has been extensive public
involvement.
Mr. Maisch related that he has spoken at two Southeast
Conference annual meetings about the legislation, and
Southeast Conference has submitted a letter of support. He
also reported speaking to Tongass Futures on numerous
occasions.
Mr. Maisch pointed out that the Board of Forestry has
discussed the legislation. The Board is comprised of eight
members who represent Alaska Native corporations, forest
industry trade associations, non-governmental
organizations, a professional forester, a professional fish
and wildlife biologist, a mining organization, a commercial
fish organization, a recreation seat, and an environmental
organization. He referred to a letter of support from the
Board. He also listed letters of support from the Resource
Development Council, the Society of American Foresters, the
City of Wrangell, Community of Coffman Cove, and the Alaska
Forest Association.
Mr. Maisch said the department has discussed the proposal
in numerous forums throughout the state.
9:18:29 AM
Senator Thomas asked if the RS 2477 trails are preserved.
Mr. Maisch reported that they were. Access will be
maintained.
Senator Olson inquired about an additional selection by the
Wrangell Borough. Mr. Maisch reported on negotiations with
Wrangell through the Division of Mining, Land, and Water
which led to a compromise on the parcels selected. He noted
a parcel near Wrangell that the borough will select as a
part of their entitlement selection.
Senator Olson asked if Wrangell was in favor of the bill.
Mr. Maisch reported a letter of support from Wrangell.
9:20:34 AM
Co-Chair Stedman noted one zero fiscal note by the
Department of Natural Resources.
Co-Chair Stedman asked if there was any opposition to the
bill. Mr. Maisch addressed parcels that were opposed; SEACC
did not want to see two parcels on Gravina Island used for
forest management purposes, and there was opposition to
Crittenden Creek. He said the two parcels were already
owned by the state and had been through an area planning
process in Southeast Alaska. There were extensive public
meetings and the lands were established as general use
lands in the area plan with intent to use them for forest
management.
9:22:16 AM
ERIN MCLARNON, BOARD OF FORESTRY, WILLOW (via
teleconference), spoke in favor of the bill. She emphasized
that not only will the new state forest provide long-term
forest management, it will also provide recreational
activities. As a representative of the Willow Dog Mushers
Association, she appreciated the more accessible trails.
She shared her personal story and listed reasons why she
supports the creation of state forests. She stressed the
importance of the jobs the new state forest would provide.
9:24:38 AM
CARL PORTMAN, DEPUTY DIRECTOR, RESOURCE DEVELOPMENT COUNCIL
(via teleconference), testified in support of HB 162. He
stated that with the establishment of a new state forest in
Southeast Alaska, the Division of Forestry would be able to
manage state lands for a long-term supply of timber to
local processors and retain the land in state ownership for
multiple use. The forest would be managed as part of the
state forest system.
9:26:28 AM
DICK COOSE, RETIRED FORESTER, KETCHIKAN (via
teleconference), spoke in favor of HB 162. He stated that a
Southeast Forest would maintain some semblance of a forest
industry while practicing multiple-use management on state
lands. He suggested obtaining additional acreage from the
Tongass National Forest and designating it as state forest
in order to build back what has been lost.
9:28:17 AM
HB 162 was heard and HELD in Committee for further
consideration.
SENATE BILL NO. 208
"An Act requiring the Department of Natural Resources
to evaluate current incentives and recommend
additional incentives that would increase gas
exploration, development, and production in the Cook
Inlet sedimentary basin; and requiring the Department
of Natural Resources to evaluate the means by which
the department may explore for, purchase, and sell
natural gas from newly proved gas reserves in the Cook
Inlet sedimentary basin."
9:28:46 AM
SENATOR BILL WIELECHOWSKI, SPONSOR, introduced SB 208 to
the committee:
SB 208 calls on the departments of Natural Resources
and Revenue to complete two tasks by December 1 of
this year.
The first is to evaluate the effectiveness of existing
incentives designed to increase exploration for and
production of natural gas in Cook Inlet.
The second is to identify and evaluate additional
steps the legislature could take to increase
production of gas in Cook Inlet.
It is well known that reserves of natural gas in Cook
Inlet are declining.
You have probably all seen this chart - known as the
"waterfall chart" - which depicts a precipitous
decline in the known reserves of Cook Inlet gas.
The chart and testimony indicate that as early as
2012, homes and businesses in Southcentral Alaska
could be without sufficient supplies of natural gas.
Earlier this year, we received encouraging news about
this looming gas shortage when DNR completed a new
assessment of known, possible, and probably reserves
in the Inlet.
This review concluded that if sufficient investment in
Cook Inlet exploration were made, supplies could last
a great deal longer.
While the new assessment provides welcome news, the
challenge remains - What actions can and should the
state take to encourage producers to invest more in
the Inlet?
Which incentives are likely to work and which simply
transfer revenue from the state treasury to companies
which may already have sufficient incentive to drill,
given proper market conditions.
Are there steps the state can take other than lowering
tax rates or increasing credits which might have a
greater effect on private sector behavior?
This question is particularly compelling in light of
the very modest tax rates and generous tax credits
that producers in the Inlet already enjoy.
The legislature has already gone to lengths to
encourage more production in Cook Inlet. To what
extent are these incentives working?
This bill seeks to answer this question and others.
For example, what are other jurisdictions doing to
promote more investment?
If the small size of the market in Alaska is an
impediment to new exploration and production - which
we have heard - are there steps the state can take to
"enhance" the market to ensure that producers see a
return on their investment in a reasonable timeframe?
For instance, could the state commit to buying a
percentage of newly proven reserves upfront so
investors don't have to wait decades to reap the
benefits of their investment?
Earlier this session, you heard testimony that the
state already reimburses companies for 45-65% of their
exploration costs. Given this, how can the state
partner more effectively with industry to ensure that
the needs of Alaskans for a long-term, affordable and
reliable source of gas are met?
This bill calls for a quick analysis of these
questions.
It asks DNR and DOR to assess the effectiveness of
existing fiscal inducements, propose new incentives it
believes would be useful, and then look broadly at
what other strategies the state might employ to make
sure Alaskans down tumble over the cliff depicted in
DNR's "waterfall chart."
Most importantly, it calls for this work to be done
expeditiously - by December 1 - so that the
legislature can act swiftly next year once the
foundation for a more informed decision has been laid.
9:32:14 AM
KEVIN BANKS, DIRECTOR, DIVISION OF OIL & GAS, DEPARTMENT OF
NATURAL RESOURCES, explained that a couple months ago, the
sponsor's staff asked if such a project was feasible and if
it could be implemented in a short time. The department's
first recommendation was to make the bill with an immediate
effective date. He informed the committee that there was a
firm already under contract by the department which might
be able to undertake this task. He suggested that Gaffney
Cline & Associates' contract could be modified to provide
the information needed.
9:34:34 AM
Co-Chair Stedman asked if there is any need to change the
time constraint in order to meet the December 1 deadline.
Mr. Banks thought the immediate effective date, along with
using the existing contract, would work.
Co-Chair Stedman spoke of a concern about making good
public policy calls instead of reactionary calls regarding
the natural gas supply in the Railbelt. He said that there
are currently many bills that offer incentives, some of
which seem to be a little "detached" from a public policy
process, which would define the issue and target
governmental action to solve the problem of running out of
gas. He requested an opinion from Mr. Banks about finding a
solution in Cook Inlet.
Mr. Banks believed that most tax policy, with respect to
incentives, either by reducing tax or by providing a credit
is "like pushing a string". He further stated that there
are contractual relationships with lessees that somewhat
limit what the department can encourage producers to do.
This bill asks the department to use creative thinking
about whether the state can have a more active role in the
market place, in exploration, and in the development of
resources in the Cook Inlet. He maintained that it was
worth examining the state's role using a measured approach.
Co-Chair Stedman explained that Cook Inlet does not have a
tax structure like the North Slope does. The credits have
been increased and broadened in the past years. The
legislature ensured that Cook Inlet was not impacted by
ACES. There is no direct connection between the tax
structure in the Arctic and in Cook Inlet. He reported a
concern that the taxes in Cook Inlet were approaching zero.
He stressed that he is encouraged by this legislation.
9:38:51 AM
Mr. Banks said he would consider those comments as the
department moves forward on the study, if it is the will of
the legislature.
Senator Huggins complimented the sponsor for the
legislation. He questioned why it takes legislation to
produce common sense action. He asked what the department
would do if the bill did not exist. Mr. Banks reported on
actions taken in the past. The department has tried to make
sure the markets are sustained. There were discussions
about the sale of royalty-in-kind gas.
9:40:41 AM
Co-Chair Stedman asked if the study would include
regulations and involve the Regulatory Commission of
Alaska. Mr. Banks thought the instructions were broad
enough to consider regulations. "The marketing of" allows
for the inclusion of the Regulatory Commission of Alaska's
involvement.
Co-Chair Stedman suggested looking at a broader view of
Cook Inlet. Mr. Banks agreed.
9:42:40 AM
Co-Chair Stedman noted two fiscal notes; one by the
Department of Natural Resources for $200,000 in general
funds to hire outside consultants to complete the study,
and a zero fiscal note by the Department of Revenue.
Senator Wielechowski commented on the challenge of the
issue. He agreed with Senator Huggins' comments. He thought
the bill would help in the long term.
9:43:54 AM
SB 208 was heard and HELD in Committee for further
consideration.
ADJOURNMENT
The meeting was adjourned at 9:44 AM.
| Document Name | Date/Time | Subjects |
|---|---|---|
| RDC Support of HB 162.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| HB 162 Sectional Analysis.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| HB162SSE State Forest Briefing 1-24-10.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| HB0162A.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| HB162 SSE State Forest Map Packet 2-27-09.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| HB162 SAF State Chapter Support Letter.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| HB162 AFA Support Letter 2010.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |
| AG briefing.pdf |
SFIN 4/6/2010 9:00:00 AM |
SB 208 |
| SB 208 Sponsor Statement.doc |
SFIN 4/6/2010 9:00:00 AM |
SB 208 |
| Cook Inlet Supply and Demand.pub |
SFIN 4/6/2010 9:00:00 AM |
SB 208 |
| Cook Inlet Forecast Chart (exerpt).pdf |
SFIN 4/6/2010 9:00:00 AM |
SB 208 |
| HB 162 Letters of support.pdf |
SFIN 4/6/2010 9:00:00 AM |
HB 162 |