Legislature(2005 - 2006)SENATE FINANCE 532

07/14/2006 09:00 AM Senate SPECIAL COMMITTEE ON NATURAL GAS DEV


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB3001 OIL/GAS PROD. TAX TELECONFERENCED
Heard & Held
+= SB3002 STRANDED GAS AMENDMENTS TELECONFERENCED
Heard & Held
                SB 3002-STRANDED GAS AMENDMENTS                                                                             
                                                                                                                                
JIM CLARK,  Chief Negotiator, Office  of the Governor,  said that                                                               
he  wanted to  talk about  the Stranded  Gas Amendments  that are                                                               
before the committee.                                                                                                           
                                                                                                                                
CHAIR SEEKINS asked if he meant SB 3002.                                                                                        
                                                                                                                                
MR. CLARK replied yes.                                                                                                          
                                                                                                                                
He explained  that the administration  hopes to  incorporate what                                                               
they learn during the public comment  period with the will of the                                                               
committee and the  thoughts of the administration  to formulate a                                                               
more comprehensive Committee Substitute.                                                                                        
                                                                                                                                
10:46:39 AM                                                                                                                   
JIM  BALDWIN,   Outside  Counsel,  Department  of   Law,  briefly                                                               
described sections 1-5 of SB 3002.                                                                                              
                                                                                                                                
Section  1 contains  an amendment  to the  purpose clause  of the                                                               
Stranded Gas Act,  to remove a provision that  would restrict the                                                               
state's ability to propose terms  related to the taxation of oil.                                                               
MR.  BALDWIN   explained  that  Section  2   creates  the  fiscal                                                               
structure  to receive  municipal  impact funds  [$125 million  in                                                               
municipal impact funds]. It relates  to how the money is received                                                               
into  the  state  treasury  and  how it  is  made  available  for                                                               
appropriation  by  the  legislature.  Sections  3,4,  and  5  are                                                               
amendments that  were proposed during the  second special session                                                               
and  were  the  product  of  recommendations  received  from  the                                                               
Municipal Advisory Group.                                                                                                       
                                                                                                                                
He said  that the state  also needs conforming amendments  to the                                                               
Stranded  Gas  Act  in  order to  make  the  contract  provisions                                                               
consistent with the SGDA.                                                                                                       
                                                                                                                                
10:50:55 AM                                                                                                                   
Some  of the  subject matter  included  in the  version that  DOL                                                               
introduced  during  the  last  special  session  related  to  the                                                               
interaction of  the contract  with other  agreements that  are in                                                               
effect by law.                                                                                                                  
                                                                                                                                
10:52:08 AM                                                                                                                   
CHAIR SEEKINS said  that his intent is to hold  the bill and work                                                               
on it after the committee returns on July 24.                                                                                   
                                                                                                                                
MR. CLARK  noted that he hopes  to come back to  the committee at                                                               
that time  with ideas  on how  this might be  fashioned in  a way                                                               
that is consistent with what the committee has already done.                                                                    
                                                                                                                                
CHAIR SEEKINS commented that they  would probably discuss project                                                               
labor agreements.                                                                                                               
                                                                                                                                
MR. CLARK said  that is another point the governor  raised in his                                                               
speech  and an  issue they  will be  discussing as  they put  the                                                               
contract together. He pointed out  that the fiscal agreement with                                                               
the  producers  is  not  the  right  spot  for  a  project  labor                                                               
agreement; the  entity that will  enter into that  agreement will                                                               
be  the  LLC, and  the  appropriate  person(s) to  undertake  the                                                               
negotiations are the contractors to the LLC.                                                                                    
                                                                                                                                
10:55:23 AM                                                                                                                   
CHAIR SEEKINS said  the Alaska hire features in  the Stranded Gas                                                               
Act are very  important to members of the Legislature  and to the                                                               
governor.                                                                                                                       
                                                                                                                                
10:55:56 AM                                                                                                                   
SENATOR  WILKEN referred  to a  memo  from Phillip  C. Gildan  of                                                               
Greenberg Traurig,  dated July 13,  with his initial  reaction to                                                               
SB 3002,  and suggested that might  be a place to  start when the                                                               
committee returns  on July 24.  He asked  Mr. Clark when  the LLC                                                               
might  be available,  as he  does not  see how  the contract  can                                                               
proceed until they have seen the entity agreements.                                                                             
                                                                                                                                
MR. CLARK replied that the  administration thinks the LLC is long                                                               
overdue,  and that  he will  be  talking to  the producers  about                                                               
that.                                                                                                                           
                                                                                                                                
10:59:16 AM                                                                                                                   
CHAIR SEEKINS  said he  also has  concerns about  the integration                                                               
clause  in  the  contract.  This  contract  requires  legislative                                                               
approval  in order  for  the administration  to  execute it;  but                                                               
according to  the reading  of an attorney  in Fairbanks,  once it                                                               
has  been   executed  it  can  be   amended  without  legislative                                                               
approval.                                                                                                                       
                                                                                                                                
11:00:22 AM                                                                                                                   
MR. CLARK replied  that he would make sure that  is clarified. He                                                               
feels that  there are things  in the contract the  executive body                                                               
ought to  be able to  change, but  there are also  key functions,                                                               
like tax  rates, that the  executive body  should not be  able to                                                               
change without legislative approval.                                                                                            
                                                                                                                                
At ease 11:01:42 AM to 11:02:25 AM                                                                                          
                                                                                                                                
SENATOR WILKEN asked Mr. Griffin  if the committee is supposed to                                                               
get an  update on  the Lukens study  [Market Analysis  and Alaska                                                             
Price  Model by  Lukens Energy  Group, October  26, 2004]  on gas                                                             
prices and capacity management issues.                                                                                          
                                                                                                                                
MR. GRIFFIN replied yes, he will check on that and report back.                                                                 

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