Legislature(2005 - 2006)BUTROVICH 205
04/20/2006 08:30 AM Senate JUDICIARY
| Audio | Topic |
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| Start | |
| SB316 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 316 | TELECONFERENCED | |
| + | SB 313 | TELECONFERENCED | |
| + | SB 48 | TELECONFERENCED | |
| + | HB 446 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE JUDICIARY STANDING COMMITTEE
April 20, 2006
8:52 a.m.
MEMBERS PRESENT
Senator Ralph Seekins, Chair
Senator Charlie Huggins, Vice Chair
Senator Gene Therriault
Senator Hollis French
Senator Gretchen Guess
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 316
"An Act amending the Alaska Stranded Gas Development Act to
eliminate the opportunity for judicial review of the findings
and determination of the commissioner of revenue on which are
based legislative review for a proposed contract for payments in
lieu of taxes and for the other purposes described in that Act;
and providing for an effective date."
HEARD AND HELD
SENATE BILL NO. 313
"An Act relating to scheduling Salvia divinorum as a controlled
substance."
SCHEDULED BUT NOT HEARD
SENATE BILL NO. 48
"An Act relating to recommending or refusing psychotropic drugs
or certain types of evaluations or treatments for children."
SCHEDULED BUT NOT HEARD
CS FOR HOUSE BILL NO. 446(JUD)
"An Act relating to the amount of a civil penalty for an
unlawful act or practice in the conduct of trade or commerce;
and eliminating mandatory continuances in these matters after
issuance of an injunction."
SCHEDULED BUT NOT HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 316
SHORT TITLE: COURT REVIEW OF STRANDED GAS DECISION
SPONSOR(s): JUDICIARY
04/13/06 (S) READ THE FIRST TIME - REFERRALS
04/13/06 (S) JUD
04/19/06 (S) JUD AT 8:30 AM BUTROVICH 205
04/19/06 (S) Heard & Held
04/19/06 (S) MINUTE(JUD)
04/20/06 (S) JUD AT 8:30 AM BUTROVICH 205
WITNESS REGISTER
Larry Ostrovsky, Chief Assistant Attorney General
Oil and Gas Section
Department of Law
PO Box 110300
Juneau, AK 99811-0300
POSITION STATEMENT: Answered questions regarding SB 316
Steve Porter, Deputy Commissioner
Department of Revenue
PO Box 110400
Juneau, AK 99811-0400
POSITION STATEMENT: Answered questions regarding SB 316
Lori Backes, Executive Director
All Alaska Alliance
Anchorage, Alaska
POSITION STATEMENT: Testified on SB 316
Bill Walker, General Counsel
Alaska Gasline Port Authority
Fairbanks, Alaska
POSITION STATEMENT: Testified in opposition to SB 316
ACTION NARRATIVE
CHAIR RALPH SEEKINS called the Senate Judiciary Standing
Committee meeting to order at 8:52:09 AM. Present were Senators
Hollis French, Charlie Huggins, Gretchen Guess, and Chair Ralph
Seekins.
SB 316-COURT REVIEW OF STRANDED GAS DECISION
8:52:53 AM
CHAIR RALPH SEEKINS announced SB 316 to be up for consideration.
LARRY OSTROVSKY, Chief Assistant Attorney General, Oil and Gas,
Department of Law (DOL) and STEVE PORTER, Deputy Commissioner,
Department of Revenue (DOR) introduced themselves for the
record.
8:54:16 AM
Senator Gene Therriault joined the meeting.
CHAIR SEEKINS asked Mr. Ostrovsky to explain what a "final
agency decision under this chapter" means.
MR. OSTROVSKY replied "chapter" refers to Chapter 82, which is
the Stranded Gas Development Act (SGDA). Once the commissioner
goes through the process set out in the SGDA, he issues a "final
finding" and those words are the trigger for an appeal.
CHAIR SEEKINS asked Mr. Ostrovsky whether it is the final agency
decision is what is appealable.
MR. OSTROVSKY said yes because courts like to deal with final
decisions.
Chair Seekins asked him to explain the process of an appeal.
8:56:25 AM
MR. OSTROVSKY said someone might ask for reconsideration of a
decision. Usually they would present facts and circumstances
that the commissioner hadn't considered. Normally an appeal is
filed with the superior court and superior court would then
order the agency record assembled. The court would order
briefing. After that it depends on the type of appeal.
8:58:40 AM
CHAIR SEEKINS asked the timeframe it normally takes.
MR. OSTROVSKY replied in his experience where there is a complex
issue with a large record supporting it, it could take six
months to a year. The Supreme Court process would take another
year and so it would be roughly two years.
CHAIR SEEKINS asked whether the record would be catalogued
during the commissioner's decision-making process.
MR. OSTROVSKY said yes. The decision is usually extensive and
would comprise of a couple hundred pages. It would generally be
a distillation of perhaps 1,500 pages. Under state law the court
has to be able to understand the reason for an agency decision.
When the law calls for a best interest finding, a commissioner
cannot simply state that he finds it in the best interest.
MR. PORTER agreed that the commissioner's finding would be a
thorough analysis of the contract and many reports.
9:02:32 AM
CHAIR SEEKINS referred to the SGDA and asked what motivated the
bill to come down. Currently the final agency decision would go
de facto with the contract to the governor and would be
forwarded to the Legislature along with the contract if the
governor chose to do so. He asked the responsibility of the
Legislature.
MR. OSTROVSKY advised it was to look at the contract, the
finding, and all documents supporting the finding and deliberate
with experts. The Legislature would look at all the data to
verify that the commissioner's finding that the contract is in
the best interest of the state.
MR. PORTER said during the preliminary finding the Legislature
has a responsibility to review the contract and a preliminary
finding and to comment to the commissioner.
MR. PORTER based on the review the commissioner will review all
the comments, determine whether the contract needed amending and
if so, renegotiate the amendments with the applicant. Based on
that he will issue a new and final finding and submit a new
contract to the Legislature for ratification. Without the final
authorization from the Legislature, the governor could not sign
the contract.
9:06:43 AM
MR. OSTROVSKY added if after the review by legislative budget
and audit, if the commissioner changes the contract he must
renegotiate and secure agreement under AS 43.82.430(b).
CHAIR SEEKINS said the final decision on whether the contract
should be executed is the Legislature's. He asked what legal
channels someone could pursue to challenge the Legislature. The
Legislature has to now prepare and pass the Act. The Act has to
be signed by the governor to become law before the governor can
execute the contract.
SENATOR GUESS agreed and said there is nothing in 435 that
addresses the finding. The Legislature could give the governor
authority to execute the contract without even seeing the
contract.
CHAIR SEEKINS said the Legislature has to pass a law in order to
accept the contract but they don't have any affirmative
responsibility under any law to make sure that the contract
meets the terms of the SGDA.
MR. OSTROVSKY countered that there were constitutional
provisions that somebody could challenge to assert that the
contract doesn't maximize the state's interest, for example.
9:09:55 AM
CHAIR SEEKINS said the only basis would be a constitutional
basis.
MR. OSTROVSKY said that is correct.
SENATOR THERRIAULT pointed out that there is reportedly a whole
package of changes to the SGDA coming down from the
administration and they are not sure that the Legislature would
pass them or what the standard would be for review. He asked
whether there was a way to stop the process to make sure the
court could look at the constitutional issue as well as the best
interest finding.
CHAIR SEEKINS said as he looks at the original SGDA the
administration has an affirmative responsibility to make sure
the contract meets all of the requirements of the Chapter and
that it is in the long-term best interest in the state. Since
amending the SGDA in 1998, the administration no longer has that
responsibility except in an advisory capacity.
9:14:18 AM
MR. OSTROVSKY said it seems that the statute now is a process
that the Legislature wants the administration to present a
contract that address all of the factors of the Act. The effect
is that the Legislature, after looking at the contract, could
propose changes to it.
CHAIR SEEKINS countered there is nothing that says the
Legislature has any bargaining power. In effect, the law
approves the contract.
MR. PORTER advised the way the Act was designed it gives the DOR
the responsibility to negotiate a contract under specific terms
and to report the preliminary finding to the public. After the
public comment period, the Legislature at that time can give the
Department the direction to change it. The commissioner would
review the public comments and renegotiate the contract and
present a final findings and determination along with the
contract. After that, the Legislature determines whether or not
to ratify the contract. That is the process, he stated.
9:18:48 AM
CHAIR SEEKINS said the Legislature would have the option to not
ratify the contract.
MR. PORTER agreed. That is a prerogative of the Legislature.
CHAIR SEEKINS said it appears that the Legislature has assumed
the responsibility to ratify the contract but it lacks the
affirmative responsibility to meet any kind of checklist. That
is what makes some people nervous, he said.
MR. PORTER agreed.
9:20:48 AM
SENATOR THERRIAULT noted that there is also no requirement that
the administration take action on the comments.
MR. PORTER said the administration would do that at its own
peril. The Legislature has the right not to ratify the contract.
SENATOR THERRIAULT commented that the discussion continues
whether or not the Legislature has the constitutional right to
say no to the contract.
MR. PORTER said he did not understand.
MR. OSTROVSKY replied there is a presumption of
constitutionality but regardless the governor's intention is to
follow the statute.
SENATOR THERRIAULT said clearly when the original bill was
introduced it had no legislative approval.
9:22:58 AM
SENATOR GRETCHEN GUESS said the transmittal letter on the bill
says, "Any contract negotiated by the administration would be
subject to legislative review and public hearing. Additionally I
would encourage the Legislature to require legislative approval
of a contract because of the appropriate role of the Legislature
in such a unique and significant decision. Furthermore if such
contract in lieu of taxes was considered a tax, the Legislature
may well be required to approve such action by law." That
statement makes it seem like there was discussion between the
governor and Legislature at the time, she said.
MR. OSTROVSKY speculated the letter was due to some concern
about the authority of the administration to set taxes.
CHAIR SEEKINS noted the importance of allowing the public the
opportunity and the right to challenge the assumptions on which
the contract was based.
MR. PORTER commented that the public has full opportunity to
review all the documents and to comment during the public
comment period.
9:27:35 AM
SENATOR GUESS argued that as the bill is written now, the public
could comment but could not challenge the findings in court.
MR. PORTER said that is correct and explained the reason for
that is because the Legislature has inserted itself into the
decision-making process.
SENATOR GUESS disagreed. She said if that were the reason then
the Legislature would have the final decision and authority.
9:30:16 AM
SENATOR FRENCH said if it were just a statute-to-statute
conflict, the court would reconcile the two. They would look to
see whether the authorization to execute conflicted with the
SGDA.
CHAIR SEEKINS said he was conceivably correct if the situation
were that the Legislature authorized a contract that they knew
didn't meet the conditions of the Chapter. He reiterated earlier
statements regarding proposed amendments to the SGDA.
CHAIR SEEKINS noted the Legislature could always amend the
Chapter or send the contract back.
9:34:15 AM
CHAIR SEEKINS said when the Legislature amended the SGDA in
1998, they "left a wide-open path." He asked when the documents
that the commissioner considers become public.
MR. OSTROVSKY assumed that would be when the commissioner
transmits his final findings to the governor.
CHAIR SEEKINS said there wouldn't be any disagreement if
subsection (c) stated that the commissioner should make the
documents available to the public when submitting the contract
to the governor.
9:37:42 AM
MR. PORTER understood that would be the process.
CHAIR SEEKINS said he was looking at it from a public standpoint
and wants to make sure there is nothing stuck "in the dark." He
asked whether the Legislature is required to pay attention to
the chain of possession of the contract.
MR. OSTROVSKY said he did not believe there was a requirement.
9:39:50 AM
SENATOR HOLLIS FRENCH said he keeps coming back to the roll of the
Legislature in authorizing the contract and some legislators could
vote on the contract without even reading it.
CHAIR SEEKINS expressed concern of the lack of affirmative
responsibility to pay attention to the contract even though
legislatures have an implied responsibility under the
Constitution. If the Legislature were to ignore their duty to
ensure that the contract meets the best fiscal interest of the
state it would seem that would be a cause for challenge.
MR. OSTROVSKY speculated that there might be. Nothing precludes
someone from bringing a constitutional challenge, he stated.
9:42:25 AM
SENATOR FRENCH added that the morning's discussion illustrates
the importance of the final finding and determination as the
guidepost. The right of the public to challenge the final
finding should be a check and balance that ensures that the
Legislature has done its job.
MR. PORTER reminded the committee that the thorough analysis
would occur during the public process.
SENATOR FRENCH expressed concern that the public comment period
could shrink to 30 days and that the DOR might not make
available the 15,000-30,000 pages that the commissioner used to
come to his determination. For example, if somebody believes
that the finding was issued for political reasons the public
might be hampered in their ability to make their case and to
have access to the modeling, data, and assumptions that went in
to the two hundred page final determination.
MR. PORTER responded it is the intent of the DOR and is
supported by statute that it is their responsibility to provide
the reports and documentations leading to the final
determination.
9:45:50 AM
SENATOR GUESS reminded Mr. Porter that the intent of this
administration might not be the intent of the future
administration and that the committee was still unsure whether
or not the Legislature would be acting under the SGDA this year.
The statute tends to surpass the present, she said. She
supported Senator French's concerns regarding the public's
access to the documents and reiterated Senator Therriault's
suggestion that there is no recourse for the public to challenge
that the contract goes against the law. There is nothing to help
the public compel the Legislature to follow the law.
MR. OSTROVSKY commented it was his belief that the court could
compel the Legislature to follow the law but the court could
compel the DOR to follow the law. The Legislature has the power
to amend the SGA. The check doesn't check the Legislature's
power but it might check the DOR's power.
SENATOR GUESS asked would it then compel the contract to comply
with the law.
MR. PORTER said that was an interesting scenario.
If you assume that oil certainty needs to be a part of
the contract, the way it is currently written, if you
allow the public to appeal to the court at the
findings level before it gets to the Legislature, the
Legislature never gets to make that decision
because... let's assume that you have to amend the
SGDA and you don't amend it until that final time. You
end up in the situation where the public can always
prevent the DOR from presenting the contract to the
Legislature for review and analysis because they
didn't follow every element of the current law if you
know the Act needs to be amended.
9:50:29 AM
SENATOR GUESS asked Mr. Porter the intent of the bill:
Is the intent of this bill a "timing intent," which I
actually agree with, let's make all the legal actions
at one time. Or is the intent a timing and a "we also
want to take off the table any challenges that the
contract doesn't comply with the law." Which this bill
does because it says you only can look at the
constitutionality of the issue.
MR. PORTER replied the difficulty is that the Legislature sits
as the lawmaker. It can ratify the contract and ignore or change
the laws. The final finding means that the agency took an action
that affects the economic interest of somebody. The final report
that the commissioner is making is a recommendation to the
governor and the Legislature, so there is no final finding upon
which an economic issue has been changed until the Legislature
makes a decision, he stated.
SENATOR GUESS countered the final finding is that the proposed
contract and any amendments meet the requirements and the
purpose of this Chapter. It's not a recommendation.
CHAIR SEEKINS interrupted to say that it was a precedent prior
to the execution of the contract by the commissioner but now it
has been relegated to a recommendation by a consultant to the
Legislature. The Legislature, by inserting itself, now stands to
have its decision to be challenged. And the challenge can only
be made as to the constitutional fiscal interest to the state.
SENATOR GUESS asked the reason for the Stranded Gas Act.
9:54:40 AM
MR. PORTER responded the SGDA gave the DOR direction on how to
negotiate the contract.
SENATOR THERRIAULT said the issue is the sticking point. He
suggested there should be a way of removing the sticking point
without extinguishing the entire process.
CHAIR SEEKINS said the way the Act was amended was clumsy but
that he had some suggestions. He asked Mr. Ostrovsky whether
somebody could bring a lawsuit before the contract was signed.
MR. OSTROVSKY said yes.
MR. PORTER added normally after the ratification, the governor
has up to 60 days. The DOR would expect that the agency would
notify the public that they have 30 days with which to file an
appeal with the court and usually they would stay the action
until that 30 days is over.
9:59:09 AM
CHAIR SEEKINS said the bill has to be passed by both legislative
bodies and signed by the governor so there is a period of time
for public notification.
SENATOR FRENCH quipped the SGDA is looking better and better the
way it stands. The process is orderly. The problem is that the
administration has created a contract that conflicts with the
Stranded Gas Act.
10:02:43 AM
SENATOR CHARLIE HUGGINS speculated that likely the party that
would file a lawsuit would be some special interest group based
on economic factor.
CHAIR SEEKINS asked Mr. Porter to explain the role of the
Department of Natural Resources in the process.
MR. PORTER directed the committee to AS 43.82.430(2) and said
the commissioners of both departments are relegated to work
together to determine if any amendments are necessary based on
public comments.
10:06:00 AM at ease 10:16:30 AM
CHAIR SEEKINS called the committee back to order. He summarized
the committee's main concern was that when the Legislature
amended the SGDA in 1998 they eliminated the public's right to
challenge whether or not the contract and proposed amendments
met the requirements of the Chapter because the Legislature can
change that.
MR. OSTROVSKY interjected the public would always be able to
challenge a contract whether or not the contract meets the
statute as it's ultimately enacted.
CHAIR SEEKINS said on the other hand the court would side with
the Legislature.
MR. OSTROVSKY replied, "Likely, yes."
10:19:48 AM
CHAIR SEEKINS asserted the intent of the committee is to remove
the point for someone to "high-center" the process. Conceptually
the committee wants to allow for someone to challenge the
contract after the contract is executed. He asked how the
committee should do that.
SENATOR FRENCH distributed his proposed amendment [entitled 24-
LS1842\F.1] to committee members and explained the idea behind
it. The idea is simply to postpone the challenge until you have
something to challenge, which is a ratified contract.
10:23:26 AM
MR. PORTER responded the difficulty with the proposed amendment
was that it "messes up the process and the relationship between
the Legislature and the judiciary." He said it would allow the
judiciary to jump in front of the Legislature after the
Legislature had made a decision.
MR. OSTROVSKY added that there have been discussions regarding
amendments of the Stranded Gas Development Act. The proposed
amendment would prevent the governor from advancing a contract
because it would be inconsistent with the Act as written.
10:25:30 AM
SENATOR FRENCH interrupted to ask him for an explanation of how
the amendment would limit the ability of the governor to
transmit a contract.
MR. OSTROVSKY said it depends on where the amendments to the
SGDA end up.
SENATOR FRENCH referred to AS 43.82.430 and said once the
contract is amended and signed, the contractors must agree to
the changes and at the same time the commissioner would be
making his final finding. That all happens before that big 200-
page document comes out, he said. Everything has to have been
done before that time. The Chairman is concerned about stopping
the review of that contract while the court sorts through the
30,000 pages of background documents.
10:28:40 AM
MR. OSTROVSKY noted there was another issue of whether the
commissioner's finding would be superseded by the legislative
review that occurs after it.
SENATOR THERRIAULT countered that the court would have to
consider the law earlier than the date of the appeal.
CHAIR SEEKINS said the problem was in the timing. The
Legislature by authorizing the signature has in effect approved
the contract regardless of what the Act says.
10:34:18 AM
LORI BACKES, Fairbanks, testified and objected to the amendment
of the SGDA, which she claimed would effectively remove the
right of the people to seek judicial review. The unnecessary
delay in the contract is the governor's insistence that the
Legislature pass a revision of oil taxes before he releases the
contract. She stated that the governor broke the law in
negotiating the contract.
10:36:46 AM
SENATOR THERRIAULT asked Ms. Backes whether she heard Senator
French's proposed amendment that would delay the judicial review
to the end of the process.
MS. BACKES responded that she had the amendment and did not have
an objection except that it has become a reverse process. She
claimed that moving it to the end of the process would be moot
since the contract would already be enacted and the statute
would have been amended to match the contract.
10:40:02 AM
BILL WALKER, General Counsel, Alaska Gasline Port Authority,
testified in opposition to the bill and said he found SB 316 to
be appalling. It allows the commissioner to compile whatever
best interest finding that he sees fit and it does not have to
match the law. That is reverse of the way the law is designed,
he stated. He challenged the governor to release his amendments
to the Stranded Gas Development Act immediately so they can be
debated now. He expressed appreciate to the committee for their
current debate and encouraged the committee to vote against the
bill.
10:43:54 AM
CHAIR SEEKINS recessed the meeting until 9:30 AM tomorrow, April
21, 2006.
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