Legislature(2015 - 2016)HOUSE FINANCE 519

01/29/2016 07:30 AM House LEGISLATIVE BUDGET & AUDIT

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07:30:45 AM Start
07:31:53 AM Approval of Minutes
07:32:45 AM Enalytica, Inc. Contract Renewal
08:16:44 AM Other Committee Business
08:35:23 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
- enalytica Contract Renewal
- Other Committee Business
-- Testimony <Invitation Only> --
                    ALASKA STATE LEGISLATURE                                                                                  
             LEGISLATIVE BUDGET AND AUDIT COMMITTEE                                                                           
                        January 29, 2016                                                                                        
                           7:30 a.m.                                                                                            
MEMBERS PRESENT                                                                                                               
Representative Mike Hawker, Chair                                                                                               
Representative Kurt Olson                                                                                                       
Representative Lance Pruitt                                                                                                     
Representative Steve Thompson                                                                                                   
Representative Sam Kito                                                                                                         
Senator Anna MacKinnon, Vice Chair                                                                                              
Senator Lyman Hoffman                                                                                                           
Senator Cathy Giessel                                                                                                           
Senator Bert Stedman                                                                                                            
Senator Click Bishop                                                                                                            
MEMBERS ABSENT                                                                                                                
Representative Mark Neuman (alternate)                                                                                          
Senator Pete Kelly (alternate)                                                                                                  
COMMITTEE CALENDAR                                                                                                            
APPROVAL OF MINUTES                                                                                                             
ENALYTICA~ INC. CONTRACT RENEWAL                                                                                                
OTHER COMMITTEE BUSINESS                                                                                                        
PREVIOUS COMMITTEE ACTION                                                                                                     
No previous action to record                                                                                                    
WITNESS REGISTER                                                                                                              
RENA DELBRIDGE, Staff                                                                                                           
Representative Mike Hawker                                                                                                      
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Offered details for the proposed renewal of                                                              
the contract with enalytica, Inc.                                                                                               
ACTION NARRATIVE                                                                                                              
7:30:45 AM                                                                                                                    
CHAIR  MIKE  HAWKER  called  the  Legislative  Budget  and  Audit                                                             
Committee meeting to order at  7:30 a.m.  Representatives Hawker,                                                               
Thompson, and  Kito and Senators MacKinnon,  Giessel, Bishop, and                                                               
Stedman  were present  at  the call  to  order.   Representatives                                                               
Olson and Pruitt  and Senator Hoffman arrived as  the meeting was                                                               
in progress.                                                                                                                    
^Approval of Minutes                                                                                                          
                      Approval of Minutes                                                                                   
7:31:53 AM                                                                                                                    
CHAIR HAWKER announced that the  first order of business would be                                                               
approval of the minutes.                                                                                                        
SENATOR  MACKINNON  made  a  motion to  approve  the  minutes  of                                                               
November  17,  2015,  and  December  7, 2015.    There  being  no                                                               
objection, the  minutes from the  meetings of November  17, 2015,                                                               
and December 7, 2015, were approved.                                                                                            
^enalytica, Inc. Contract Renewal                                                                                             
                enalytica, Inc. Contract Renewal                                                                            
7:32:45 AM                                                                                                                    
CHAIR HAWKER announced  that the next order of  business would be                                                               
discussion regarding the renewal  of the contract with enalytica,                                                               
7:34:41 AM                                                                                                                    
RENA DELBRIDGE,  Staff, Representative Mike Hawker,  Alaska State                                                               
Legislature,  shared that  she had  discussed a  contract renewal                                                               
with both  Mr. Mayer  and Mr.  Tsafos from  enalytica, Inc.   She                                                               
explained that the past contracts  had been with each individual,                                                               
but, since formation  of the corporation, enalytica,  Inc., a new                                                               
contract  had  now been  negotiated  with  enalytica, Inc.    She                                                               
reported  that the  new  contract was  "essentially  on the  same                                                               
terms" and the  current dollar amount reflected a  doubling up of                                                               
the two  individual contracts  into one  contract.   She detailed                                                               
that  the  services  of  both  men would  be  available  for  the                                                               
upcoming year, at a retainer of  $20,000 per month for 10 days of                                                               
work each month.                                                                                                                
7:36:31 AM                                                                                                                    
CHAIR  HAWKER  asked  whether  the  retainer  services  had  been                                                               
utilized in the last billing cycles.                                                                                            
MS. DELBRIDGE, in response, said that  there were only one or two                                                               
months  during the  past year  in which  enalytica, Inc.  did not                                                               
have work  from the Alaska  State Legislature to fill  those five                                                               
days  of contractual  work from  each individual.   She  reported                                                               
that in  the other months the  requests for reports to  help with                                                               
policy  decisions or  the presentations  in  Juneau for  specific                                                               
analysis resulted in full use of  the retainer.  She relayed that                                                               
the retainer  contract had been slightly  restructured, and would                                                               
now allow for the rollover of  any unused days to the next month,                                                               
which would be  capped quarterly.  She noted  that this [rollover                                                               
structure] was  a negotiated  benefit to the  state.   She shared                                                               
that the only other changes were technical word choices.                                                                        
7:38:29 AM                                                                                                                    
REPRESENTATIVE   KITO  asked   if   enalytica,   Inc.  was   paid                                                               
regardless, or was work required in order to be paid.                                                                           
MS. DELBRIDGE replied  that the retainer would be  paid as agreed                                                               
in  the  contract,  regardless of  whether  the  Legislature  has                                                               
specific work requests  for them.  She detailed  that the monthly                                                               
retainer  included  ten days  of  work  product, not  charged  in                                                               
addition to the  retainer.  She opined that  the framework seemed                                                               
to  be working  fairly well,  and  had allowed  for enalytica  to                                                               
maintain  a work  readiness  for any  special  items that  arose,                                                               
including educational  symposiums.  She  shared that there  was a                                                               
risk with a  no retainer relationship as without  a retainer they                                                               
may need to pursue other clients.                                                                                               
CHAIR HAWKER  stated that there  was nothing about  this retainer                                                               
relationship that  was, in  any way, unusual  or not  in ordinary                                                               
business practice.  He explained  that enalytica. Inc. would make                                                               
the commitment of time and be on call with this retainer.                                                                       
7:40:11 AM                                                                                                                    
SENATOR  STEDMAN   offered  his  belief   of  a  need   for  more                                                               
consultants,  noting  that historically  there  had  been "a  few                                                               
more."  He mentioned past contracts  with Roger Marks.  He opined                                                               
that the Legislature needed "to be  careful with our tool box, we                                                               
don't end up with no tools in it."   He pointed out that it would                                                               
take any consultant time to come  up to speed for the mechanisms,                                                               
the complexity, and  the history of the structure, as  it was not                                                               
clear cut.   He  suggested that  it was a  good practice  to keep                                                               
people on  retainer, instead of a  two to three month  wait while                                                               
they built a model of cash flow and tax structure.                                                                              
CHAIR  HAWKER expressed  his agreement  with those  concerns, and                                                               
asked that  this be  addressed during a  discussion later  in the                                                               
meeting  for   additional  resources  that  were   necessary  and                                                               
appropriate, an  "essential spend for  the State of Alaska."   He                                                               
reiterated his agreement:                                                                                                       
     We're  looking  at  one of  the  world's  largest  mega                                                                    
     projects, in  the gas  line, and  we're looking  at the                                                                    
     lifeblood of  the State  of Alaska in  our oil  and gas                                                                    
     tax system.   These are  critical issues, and  I firmly                                                                    
     believe we owe it to the  public of the State of Alaska                                                                    
     that adequate,  qualified resources [are]  available to                                                                    
     us as we need them.                                                                                                        
7:42:10 AM                                                                                                                    
SENATOR BISHOP  asked for clarification  that the unused  days of                                                               
consultation could be carried forward.                                                                                          
MS. DELBRIDGE  replied that  Representative Hawker  had requested                                                               
this in  order to make full  use of every retainer  day possible,                                                               
and  enalytica,  Inc.  was  accommodating  and  agreeable.    She                                                               
pointed out that this was capped  quarterly in order to avoid too                                                               
much of an accrual of days.                                                                                                     
CHAIR  HAWKER  explained  that,   although  this  agreement  paid                                                               
enalytica,  Inc. monthly,  the  hours in  the  contract would  be                                                               
reconciled  quarterly.     He   allowed  that,   although  future                                                               
projections  were dangerous,  consistency with  the previous  use                                                               
patterns, minimized the "risk of  leaving any money laying on the                                                               
table  with  the  quarterly  retainer."    He  acknowledged  that                                                               
enalytica,  Inc. had  rolled  some unused  hours  forward in  the                                                               
SENATOR BISHOP  expressed his appreciation for  this negotiation.                                                               
He concurred  with the earlier  comments by Senator Stedman.   He                                                               
noted that enalytica, Inc. was being  quoted in other oil and gas                                                               
publications, and  that "they're  a known  commodity, I  like 'em                                                               
personally.  I think they're good."   He further stated:  "I like                                                               
a big tent with all the knowledge I can get."                                                                                   
7:45:32 AM                                                                                                                    
SENATOR  GIESSEL  acknowledged  that  the  two  consultants  from                                                               
enalytica,  Inc.  had  been  consulting  with  the  Alaska  State                                                               
Legislature for  "a long  time, so  getting up  to speed  isn't a                                                               
problem with  them."  She  expressed her concern to  the possible                                                               
need  for  more   consulting  days,  and  she   asked  about  the                                                               
likelihood of exceeding the contracted number of days.                                                                          
MS. DELBRIDGE replied that "the  not to exceed contract amount of                                                               
$400,000,  based on  our past  use history,  should be  more than                                                               
adequate to  take care of  that."   She explained that  any extra                                                               
days would be billed  at a daily rate of $3000  per day [for each                                                               
of Tsafos/Mayer].                                                                                                               
7:46:46 AM                                                                                                                    
SENATOR GIESSEL  expressed her  concern that she  did not  have a                                                               
copy of the contract.                                                                                                           
CHAIR  HAWKER replied  that  the long  standing  process [in  the                                                               
Legislative  Budget and  Audit Committee]  was for  the committee                                                               
chair to be  authorized to negotiate a contract "with  the not to                                                               
exceeds."   He  stated that  this specific  contract was  not yet                                                               
completed,   as  the   ministerial  aspects   were  still   being                                                               
negotiated  between the  attorneys  for enalytica,  Inc. and  the                                                               
Alaska State Legislature.                                                                                                       
7:47:28 AM                                                                                                                    
MS.  DELBRIDGE  acknowledged that  nearly  all  the contract  was                                                               
complete, and there  was nothing material left  to be negotiated.                                                               
She stated that there was only a "fairly immaterial change."                                                                    
7:48:00 AM                                                                                                                    
SENATOR GIESSEL expressed  her desire to read  the contract prior                                                               
to her agreement.                                                                                                               
CHAIR  HAWKER offered  the  option for  Senator  Giessel to  vote                                                               
against the motion  to approve the contract.  He  stated that, in                                                               
his 14  years on the  Legislative Budget and Audit  Committee, he                                                               
had  "never  seen  this  committee  get  into  the  specifics  of                                                               
contract negotiations."                                                                                                         
7:48:35 AM                                                                                                                    
REPRESENTATIVE THOMPSON  offered his belief that  enalytica, Inc.                                                               
was "some  of the best in  the world."  He  stated that, although                                                               
he  did  not have  a  need  to  review  the contract,  he  wanted                                                               
clarification on  some specifics.   He asked  if the  agreed upon                                                               
payment of $3000 per day was  for each consultant, to total $6000                                                               
per day.                                                                                                                        
MS.  DELBRIDGE replied  that the  terms  were the  same as  prior                                                               
contracts, and the payment of $3000  per day was per person.  She                                                               
added  that  "travel was  at  half  of  that."   In  response  to                                                               
Representative Thompson,  she relayed that the  necessity for the                                                               
services  of  both  men  was  dependent "on  the  nature  of  the                                                               
specific request."                                                                                                              
REPRESENTATIVE  THOMPSON asked  if  expenses  above the  contract                                                               
price were included.                                                                                                            
MS. DELBRIDGE replied that  reasonable travel expenses, including                                                               
airfare, lodging, and  per diem for meals,  were also reimbursed.                                                               
She noted that  these were included in the overall  not to exceed                                                               
cap on  the contract, but  were not  included in the  daily rate.                                                               
In  response,  she relayed  that  the  "not  to exceed  cap"  was                                                               
CHAIR HAWKER  reiterated that "there is  no change in the  not to                                                               
exceed number."  He reminded  the committee that it was necessary                                                               
for the  Legislative Budget  and Audit  Committee to  continue or                                                               
extend a contract.                                                                                                              
7:50:33 AM                                                                                                                    
REPRESENTATIVE  KITO   acknowledged  that  enalytica,   Inc.  had                                                               
provided  good  advice, and  asked  if  enalytica, Inc.  had  any                                                               
clients other than the State of Alaska.                                                                                         
MS.  DELBRIDGE replied  "not to  my  knowledge," suggesting  that                                                               
enalytica,  Inc.  would  be  better   able  to  answer  that  for                                                               
REPRESENTATIVE KITO  asked for  clarification that,  although the                                                               
contract  was  for five  days  each  month, was  enalytica,  Inc.                                                               
expected  to  be   available  full  time  to   the  Alaska  State                                                               
MS.  DELBRIDGE stated,  "Not exactly."   She  explained that  the                                                               
contract kept enalytica, Inc. under  contract to the Alaska State                                                               
Legislature, and  they had been  very responsive to  these needs.                                                               
She declared that enalytica, Inc.  had "made themselves available                                                               
CHAIR HAWKER explained that this  was the reason for the requests                                                               
to other committee  chairs for advance notice to  their needs, so                                                               
the  consultants could  maintain  availability.   He stated  that                                                               
enalytica,  Inc.  had  always adjusted  their  schedule  to  meet                                                               
committee requirements.                                                                                                         
7:52:41 AM                                                                                                                    
SENATOR STEDMAN  suggested that  a review of  the history  of the                                                               
consultants in the international arena  for mega projects and gas                                                               
proposals would be  beneficial to the committee.   In response to                                                               
Chair Hawker, he  explained that, as this consultancy  was a very                                                               
small marketplace, many of the  firms had conflicts, often having                                                               
preexisting contracts  with the  major oil companies  involved in                                                               
Alaska.   He relayed that  this created  a challenge, and,  as it                                                               
was a competitive  market place, many companies would  tie up the                                                               
consultants  so their  competitors would  not have  the necessary                                                               
analytical  help.   He  emphasized  that  this  put Alaska  at  a                                                               
disadvantage, as the state's sole  existence was not oil and gas.                                                               
Consequently, "we don't have a  smorgasbord of consultants we can                                                               
just dial up and  have 'em beat down our door."   He relayed that                                                               
the two aforementioned consultants came  from the firm with which                                                               
the committee  had previously contracted, which  had subsequently                                                               
merged with  another company so  that they had started  their own                                                               
CHAIR HAWKER  interjected that this previous  consulting contract                                                               
had been with PFC Consultants, one  of the few firms that did not                                                               
have  conflicts.   However, after  the PFC  merger with  a second                                                               
firm,  this reorganization  had resulted  in a  conflict, so  Mr.                                                               
Mayer  and Mr.  Tsafos formed  enalytica, Inc.   He  offered that                                                               
this  was  fortunate  for  Alaska,  as  they  had  been  the  two                                                               
consultants from PFC working with Alaska.                                                                                       
7:55:29 AM                                                                                                                    
SENATOR  MACKINNON  explained that  she  had  been Chair  of  the                                                               
Legislative  Budget   and  Audit   Committee  at  that   time  of                                                               
transition.    She  offered some  background  to  this  contract,                                                               
noting that  the newly merged  company had decided to  retain its                                                               
contracts with  the large  oil companies.   She relayed  that the                                                               
committee  had  reached out  to  a  variety of  consultants,  and                                                               
ultimately, enalytica,  Inc. had  approached the committee.   She                                                               
stated that  the consultants had  been very professional  and had                                                               
provided  information which  was as  political free  as possible.                                                               
She  acknowledged the  challenge and  the difficulty  of relaying                                                               
pending contracts to individual  committee members, especially as                                                               
the  contracts were  usually negotiated  in early  January.   She                                                               
stated  her support  for the  pending contract,  and offered  her                                                               
belief  that  these  contracts  would be  available  to  all  the                                                               
committee members.   She  reported that  the amounts  were within                                                               
the standard parameters of what  had previously been issued.  She                                                               
noted  the value  of Senator  Stedman's comment  for the  need of                                                               
additional contracts.                                                                                                           
7:58:27 AM                                                                                                                    
CHAIR  HAWKER explained  that  procurement  of these  specialized                                                               
contractors in  a very specialized  environment came from  a very                                                               
limited field.  The committee,  after discussion and research for                                                               
alternatives, had determined that  it was an appropriate contract                                                               
without the  formal RFP (Request For  Proposals) solicitation and                                                               
award  process,  because  of the  "unique  services,  the  unique                                                               
knowledge of theirs with the State  of Alaska."  He declared that                                                               
the priority was  a search for quality, noting  that the contract                                                               
was exempt from the solicitation  and contract award requirements                                                               
of legislative  procurement, even  as it  was in  compliance with                                                               
those provisions.                                                                                                               
7:59:48 AM                                                                                                                    
REPRESENTATIVE THOMPSON  expressed his  support for  the contract                                                               
but asked to clarify the total numbers.                                                                                         
MS. DELBRIDGE, in response  to Representative Thompson, clarified                                                               
that  the  contract was  for  a  monthly  payment of  $20,000  to                                                               
enalytica, Inc.   She explained  that the "not to  exceed amount"                                                               
would  cover the  reimbursable travel  expenses,  which had  been                                                               
agreed upon with  the Legislative Audit Division, as  well as any                                                               
additional days that may become  necessary.  She pointed out that                                                               
this  was reflective  of  the amount  in  the previous  contract,                                                               
which had served well as a dollar value over the past few years.                                                                
CHAIR HAWKER  reiterated that the  two former contracts  had been                                                               
$10,000 each, but these two  contracts had now been merged, which                                                               
became $20,000 for the firm, enalytica,  Inc.  He stated that the                                                               
committee vote  was to  authorize a contract  that could,  if all                                                               
the money was used, spend $400,000.                                                                                             
REPRESENTATIVE THOMPSON  observed that the $400,000  included all                                                               
the extra expenses.                                                                                                             
8:01:59 AM                                                                                                                    
REPRESENTATIVE KITO expressed his  agreement that enalytica, Inc.                                                               
provided a  valuable service  to the  state; however,  noting the                                                               
constraints  to the  current proposed  budget, he  suggested that                                                               
the committee  be careful moving  forward, while asking  the rest                                                               
of  the state  to scale  back.   He asked  if there  had been  an                                                               
effort to negotiate  a lower fee with  enalytica, Inc. especially                                                               
as the State of Alaska was its  only contract.  He asked if there                                                               
was  concern for  enalytica, Inc.  working with  other companies.                                                               
He offered  his belief that  the limited monthly  time obligation                                                               
to  the  State   of  Alaska  would  offer   the  opportunity  for                                                               
enalytica,  Inc. to  search for  other contracts.   He  suggested                                                               
that this was the chance to negotiate a lower fee.                                                                              
8:03:02 AM                                                                                                                    
SENATOR  MACKINNON,  in response,  offered  her  belief that  the                                                               
State  of Alaska  was not  the only  contract held  by enalytica,                                                               
Inc.  She  relayed that enalytica, Inc. had been  in business for                                                               
more than  one year,  and that they  were soliciting  other work.                                                               
She stated  that this  proposed contract  was a  better agreement                                                               
than the original,  as that original did not  include rolling the                                                               
days  forward.   She  expressed  agreement with  the  need to  be                                                               
judicious  in any  spending.   She  offered  to research  whether                                                               
enalytica, Inc. had other contracts.                                                                                            
CHAIR  HAWKER affirmed  that it  was his  understanding that  the                                                               
State  of Alaska  was not  their only  client.   He stated:   "by                                                               
committing to  the State of  Alaska, they do  commit to us  to be                                                               
available."   He  said  that this  was a  criteria  asked of  all                                                               
consultants.   He added that the  country of Greece was  a client                                                               
of enalytica, Inc., adding "these  guys are truly internationally                                                               
recognized  consultants."   He  assured  the  committee that  the                                                               
legislature  of  the  State  of  Alaska  was  "one  of  the  most                                                               
demanding clients  there is," pointing out  that some consultants                                                               
did not want  to work with the legislature because  of the unique                                                               
time demands.  "We ask a lot, we  demand a lot of the people that                                                               
provide these services to us,"  he emphasized.  He suggested that                                                               
a  review of  the contracts  signed by  the administration  would                                                               
indicate  that  the  Alaska State  Legislature  was  receiving  a                                                               
"fair, market driven transaction with these folks."                                                                             
8:05:35 AM                                                                                                                    
SENATOR STEDMAN  opined that there  had been some  problems, some                                                               
competitive   disadvantages  embedded   in  Alaska's   Clear  and                                                               
Equitable  Share (ACES),  which had  needed to  be reviewed,  and                                                               
possibly  restructured.   When the  Legislative Budget  and Audit                                                               
Committee  set  out  to  deal   with  this,  and  tried  to  find                                                               
consultants,  they   kept  coming   up  with  "firms   that  were                                                               
conflicted out."  He shared that  he and the Chair had identified                                                               
some  mechanical problems  within ACES.   He  allowed that  there                                                               
could  be  discussion  for  the   politics  and  policy,  but  he                                                               
underscored that there  were "some issues embedded  in there that                                                               
needed  to be  rectified."   He shared  that they  had difficulty                                                               
finding a  consulting firm  because the  major oil  companies and                                                               
the administration had already contracted  with them, before they                                                               
located PFC Energy and started  the review of the ACES structure.                                                               
He  continued   with  this  history   of  the   involvement  with                                                               
consultants and  pointed out  that, although  Mr. Tsafos  and Mr.                                                               
Mayer  had been  doing the  background work  for the  state, they                                                               
were not the  initial interface people with  whom Senator Stedman                                                               
and Chair Hawker met.  He  expressed his concern with the cost of                                                               
the contracts, but declared that  this was a pittance compared to                                                               
"what  we could  face if  we  walked into  these negotiations  at                                                               
all."   He stated that  the administration had  hired consultants                                                               
away   from   the   legislature  through   "politically   tactful                                                               
maneuvers,  sometimes   induced  by  our  own   members  of  this                                                               
committee."    He  declared  a  need  to  be  protective  of  the                                                               
consultants and to build a  consultant team to help the committee                                                               
make  the best  policy decision.   He  suggested the  need for  a                                                               
discussion to  broaden the team  with less  expensive consultants                                                               
who   did  not   require  the   global  market   positioning  and                                                               
international viewpoint  of a gas  structure, but  understood the                                                               
mechanics "of what we're dealing with."                                                                                         
8:09:07 AM                                                                                                                    
SENATOR  HOFFMAN asked  if there  were any  renewal or  extension                                                               
options in this contract.                                                                                                       
MS. DELBRIDGE  opined that this  was simply a  yearlong contract,                                                               
for which  the Alaska State  Legislature could discuss  a renewal                                                               
at its end.                                                                                                                     
CHAIR HAWKER  explained that there  were not any  renewal options                                                               
in the  first contract,  and there  were not  any in  the current                                                               
contract.  He stated that this  was a one year contract extension                                                               
that will, necessarily, be renewed if needed in a year.                                                                         
8:10:13 AM                                                                                                                    
SENATOR  GIESSEL  commented that  she  had  enjoyed working  with                                                               
enalytica,  Inc.  and she  expressed  her  full support  for  re-                                                               
engaging  and  working  with  them.     She  expressed  her  full                                                               
understanding  that there  were  historical  procedures, but,  as                                                               
there were still  questions about the contract and as  it was her                                                               
responsibility to  read the contract before  voting its approval,                                                               
she would not vote for the contract until she had read it.                                                                      
8:11:03 AM                                                                                                                    
SENATOR  MACKINNON moved  and asked  unanimous  consent that  the                                                               
Chair  of   the  Legislative  Budget   and  Audit   Committee  be                                                               
authorized to  enter into  a contract with  enalytica, Inc.  at a                                                               
cost not  to exceed $400,000.   The contract will be  exempt from                                                               
the  solicitation   and  contract   award  requirements   of  the                                                               
Legislative Procurement Procedures.                                                                                             
8:11:47 AM                                                                                                                    
SENATOR HOFFMAN asked for the term of the contract.                                                                             
SENATOR MACKINNON objected for discussion.                                                                                      
8:12:08 AM                                                                                                                    
MS.  DELBRIDGE explained  that  the time  frame  of the  contract                                                               
would begin on February 1, 2016, through January 31, 2017.                                                                      
8:12:25 AM                                                                                                                    
SENATOR MACKINNON removed her objection.                                                                                        
SENATOR GIESSEL objected.                                                                                                       
8:12:38 AM                                                                                                                    
A  roll call  vote was  taken.   Representatives Hawker,  Pruitt,                                                               
Thompson,  Olson,  and  Kito, and  Senators  MacKinnon,  Hoffman,                                                               
Bishop, and  Stedman voted  in favor of  renewal of  the contract                                                               
with  enalytica,   Inc.    Senator  Giessel   voted  against  it.                                                               
Therefore,  the  contract  proposal   with  enalytica,  Inc.  was                                                               
adopted by a vote of 9 to 1.                                                                                                    
CHAIR HAWKER  said the contract,  as soon as completed,  would be                                                               
available as a  public document and that he would  provide a copy                                                               
of the contract to Senator Giessel.                                                                                             
8:13:54 AM                                                                                                                    
SENATOR MACKINNON  offered some background  to her early  time as                                                               
the  Chair  of  Legislative  Budget and  Audit  Committee.    She                                                               
expressed  her  hope  that  the  committee  would  enter  into  a                                                               
contract  at  the  end  of  2016 if  it  was  decided  to  retain                                                               
consultants.   She  acknowledged  that the  contract process  had                                                               
been  completed prior  to her  chairmanship, and  she now  better                                                               
understood   the  difficulty   of   having   all  the   necessary                                                               
information at  a particular point  in time,  and why it  had not                                                               
been left for her to complete.                                                                                                  
CHAIR  HAWKER  agreed that  this  would  be reviewed  during  the                                                               
upcoming fall.                                                                                                                  
SENATOR MACKINNON  recognized that  this was a  great help  to an                                                               
incoming new chair.                                                                                                             
^Other Committee Business                                                                                                     
                    Other Committee Business                                                                                
8:16:44 AM                                                                                                                    
CHAIR HAWKER announced  that the next order of  business would be                                                               
to  begin  a dialogue  for  what  additional resources  might  be                                                               
essential to  the Alaska  State Legislature  as it  moved forward                                                               
with  legislation  regarding oil  and  gas  fiscal systems.    He                                                               
pointed  out that  the  governor  was going  to  insist that  the                                                               
entire  Alaska  LNG  Project  be "papered  and  those  papers  be                                                               
delivered to  the legislature by  the end  of the 90  day session                                                               
and we  are to be acting  upon them and in  an immediately called                                                               
special session."                                                                                                               
CHAIR HAWKER allowed that Senator  Stedman had discussed the need                                                               
for  "other  resources  that  are   on  call,  that  are  not  as                                                               
expensive,  but  they can  satisfy  our  needs for  modeling  and                                                               
technical  work."    He  shared  that  typically  this  level  of                                                               
procurement  had been  done  on the  chair's  authority with  the                                                               
concurrence and  knowledge of  the committee.   He  offered Roger                                                               
Marks, a  former state  petroleum economist, as  an example.   He                                                               
solicited  suggestions  from  Senator Stedman  for  resources  to                                                               
engage for  these more routine matters,  who could be on  call to                                                               
individual  legislators  with   deference  to  committee  chairs,                                                               
especially  those  who  had  bills in  their  jurisdiction.    He                                                               
offered  his belief  that a  more  challenging end  was that  the                                                               
legislature  was facing  a  decision by  the end  of  the 90  day                                                               
session, which would be based  on the entire document package for                                                               
the Alaska LNG Project and could  be feet thick.  He declared the                                                               
necessity to be prepared, and  opined that none of the individual                                                               
legislators had  the experience  in the  complete value  chain of                                                               
"one  of the  largest economic  projects  in the  history of  the                                                               
world,  in  a very  competitive  environment."   He  offered  his                                                               
belief  that  it  was  necessary for  an  additional  high  level                                                               
resource of someone with successful  practice and experience with                                                               
consultation to  a sovereign  for the  development of  a complete                                                               
value  chain  and  the accompanying  business  transaction.    He                                                               
declared  that  it  was  necessary   to  consider  a  significant                                                               
contract by the committee.                                                                                                      
8:20:39 AM                                                                                                                    
SENATOR  STEDMAN, in  response to  Chair Hawker,  reflected that,                                                               
for any  new members  to the committee,  there was  a substantial                                                               
learning curve, as it was a  complicated system.  He allowed that                                                               
the price  of the  contract was significant  and he  would prefer                                                               
not to use  enalytica, Inc. for the mechanical process  of day to                                                               
day operations.   He  reflected that the  committee had  used Dan                                                               
Dickinson  in past  years.    He offered  an  example of  policy,                                                               
dealing  with credits,  and noted  that these  were confidential,                                                               
although they  were co-mingled  for a  total.   He shared  that a                                                               
policy with a  cost needed to be reviewed  for its effectiveness,                                                               
and this became  a problem when it was  dealing with confidential                                                               
information that was  not available.  He offered  his belief that                                                               
the increased complexity of the  system would create a new fiscal                                                               
structure  to embed  in the  current structure,  and that  it was                                                               
important for  legislators to understand the  mechanical process.                                                               
He  expressed  his  concern  for   statutes  and  processes  that                                                               
hindered themselves.   He reiterated  that it was  beneficial for                                                               
new members  to understand at least  "a rough layout" of  the tax                                                               
structure,  noting  that  sometimes  a  policy  change  was  made                                                               
without an  anticipation of  the outcome  until years  later upon                                                               
8:24:21 AM                                                                                                                    
CHAIR HAWKER offered  to discuss this further  and suggested that                                                               
consultants could be available on standby contracts.                                                                            
8:25:03 AM                                                                                                                    
REPRESENTATIVE KITO  opined that  it was  important to  note that                                                               
the  largest  proposed  engineering  project  in  the  world  was                                                               
"sitting  at our  doorstep and  it may  be worthwhile  to have  a                                                               
little  bit of  due diligence  on  the technical  aspects of  the                                                               
engineering of the  project" to ensure that the  proposed cost of                                                               
the project,  $45-$65 billion, was  similar to the  cost proposed                                                               
by the staff.                                                                                                                   
8:25:55 AM                                                                                                                    
SENATOR  MACKINNON suggested  that, as  many areas  needed to  be                                                               
reviewed, engineering  may be  a lower  priority for  her because                                                               
the three  partners were pushing for  lower costs, as well.   She                                                               
expressed  a  greater  concern  with  the  gas  sales  agreement,                                                               
pointing out  that the  legislature may  not have  any expertise.                                                               
She added  that the  financing realm  was also  a priority.   She                                                               
suggested that  the committee  look at  categories as  the needed                                                               
expertise  would be  for more  than one  field.   She offered  to                                                               
reach out  to former members of  the Alaska LNG Project  board of                                                               
directors  who  had  worked  on  successful  projects  for  their                                                               
recommendations to expert consultants.                                                                                          
CHAIR  HAWKER agreed  that everyone  recognized these  needs, and                                                               
his staff  had anticipated  the conversation.   He  reported that                                                               
his search had found there  were very few qualified resources who                                                               
did not already work with Exxon Mobil.                                                                                          
8:28:54 AM                                                                                                                    
MS. DELBRIDGE, in  response to Chair Hawker, offered  a matrix of                                                               
the  24  different current  agreements  that  would comprise  the                                                               
Alaska LNG  Project package which  the state had shared  with the                                                               
legislature after the recent special  session.  These ranged from                                                               
the commercial and  governance agreements to payments  in lieu of                                                               
taxes (PILT),  all of which  raised concerns.  She  expressed her                                                               
understanding that  it would be  critical for the  legislature to                                                               
look at  the terms and to  fully understand the interface  of all                                                               
the associated  agreements, as well  as the cumulative  effect on                                                               
the project.   She pointed  out the importance for  retaining the                                                               
full value proposition which drove  the state to participation in                                                               
the project.   She  reported that she  was tasked  with assessing                                                               
professional firms  for consulting services to  review this suite                                                               
of project enabling agreements.   She allowed that there could be                                                               
little time before a special  session when due diligence would be                                                               
expected of the legislature to  review and understand the package                                                               
even though the contracts would already have been negotiated.                                                                   
8:30:58 AM                                                                                                                    
CHAIR HAWKER observed that it was  critical to keep in mind that,                                                               
although   the  legislature   was  not   a  negotiator   in  this                                                               
transaction,  its  role was  to  understand  the transaction  and                                                               
approve the  critical documents to  move it forward.   He pointed                                                               
out  that there  was  a big  difference  between negotiation  and                                                               
structure  of   the  agreements  as  opposed   to  understanding,                                                               
reviewing, and passing judgement on those agreements.                                                                           
8:31:25 AM                                                                                                                    
MS.  DELBRIDGE  shared  her  research  of  contractors  with  the                                                               
necessary  integrated project  experience, and  had resources  to                                                               
bear on the entire value  chain, from upstream supply agreements,                                                               
marketing  structure, new  infrastructure agreements,  fiscal and                                                               
governance agreements, and financing  proposals.  She pointed out                                                               
that  this  contract would  be  for  a  review of  due  diligence                                                               
without any negotiation  of the contracts.  She  noted that these                                                               
would need  to be firms  willing to work  in the public  realm to                                                               
provide  written and  verbal testimony  within the  public arena,                                                               
and were  also free of  the aforementioned conflicts.   She added                                                               
that this was a small field, and  she had narrowed this to an in-                                                               
depth look at  12 firms, although most lacked some  of the entire                                                               
value   chain  expertise.     She   had  identified   two  strong                                                               
candidates, with a third candidate  that had a potential conflict                                                               
that could not be navigated.                                                                                                    
CHAIR HAWKER expressed  his desire to reconvene  the committee to                                                               
continue this conversation, in executive  session, to discuss the                                                               
specific candidates in  more depth and determine the  will of the                                                               
committee for procuring  additional support for the  project.  He                                                               
suggested  a  review  of the  contracts  the  administration  had                                                               
signed.    He  declared  that  he  was  not  suggesting  spending                                                               
millions   of   dollars   to  redo   everything   done   by   the                                                               
administration.   He acknowledged that  it would be  expensive to                                                               
hire someone to  "take that capstone view from  our due diligence                                                               
perspective  on  the work  that  is  being  done" by  the  shared                                                               
project sponsors.                                                                                                               
8:35:23 AM                                                                                                                    
There  being  no  further  business  before  the  committee,  the                                                               
Legislative Budget  and Audit Committee meeting  was adjourned at                                                               
8:35 a.m.                                                                                                                       

Document Name Date/Time Subjects
Agenda_LBA_29Jan16.pdf JBUD 1/29/2016 7:30:00 AM