Legislature(2009 - 2010)

03/09/2010 10:54 AM FIN


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10:54:29 AM Start
10:56:23 AM HB300 || HB302
11:27:51 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                  HOUSE FINANCE COMMITTEE                                                                                       
                       March 9, 2010                                                                                            
                        10:54 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
10:54:29 AM                                                                                                                   
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair Hawker called the House Finance Committee meeting                                                                      
to order at 10:54 a.m.                                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Mike Hawker, Co-Chair                                                                                            
Representative Bill Stoltze, Co-Chair                                                                                           
Representative Bill Thomas Jr., Vice-Chair                                                                                      
Representative Mike Doogan                                                                                                      
Representative Anna Fairclough                                                                                                  
Representative Neal Foster                                                                                                      
Representative Les Gara                                                                                                         
Representative Reggie Joule                                                                                                     
Representative Mike Kelly                                                                                                       
Representative Woodie Salmon                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Representative Allan Austerman                                                                                                  
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Representative Chenault                                                                                                         
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
HB 300    APPROP: OPERATING BUDGET/LOANS/FUNDS                                                                                  
                                                                                                                                
          CSHB 300 (FIN) was MOVED out of Committee with a                                                                      
          "do pass" recommendation.                                                                                             
                                                                                                                                
HB 302    APPROP: MENTAL HEALTH BUDGET                                                                                          
                                                                                                                                
          CSHB 302 (FIN) was MOVED out of Committee with a                                                                      
          "do pass" recommendation.                                                                                             
                                                                                                                                
HOUSE BILL NO. 300                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     loan program expenses of  state government, for certain                                                                    
     programs, and to  capitalize funds; making supplemental                                                                    
     appropriations;  making appropriations  under art.  IX,                                                                    
     sec. 17(c),  Constitution of the  State of  Alaska; and                                                                    
     providing for an effective date."                                                                                          
                                                                                                                                
HOUSE BILL NO. 302                                                                                                            
                                                                                                                                
     "An  Act making  appropriations for  the operating  and                                                                    
     capital    expenses   of    the   state's    integrated                                                                    
     comprehensive mental health  program; and providing for                                                                    
     an effective date."                                                                                                        
                                                                                                                                
10:56:23 AM                                                                                                                   
                                                                                                                                
Co-Chair Hawker MOVED to ADOPT Amendment 32a (26-                                                                               
GH2823\M.11, Bailey, 3/8/10, with hand-written changed                                                                          
numbers: page 1, lines 10, 12, and 14; page 2, lines 2, 4,                                                                      
7, and 9 [copy on file] as listed below):                                                                                       
                                                                                                                                
    Offered by: Representatives Hawker, Doogan, Thomas                                                                        
                                                                                                                                
     Page 65, following line 3:                                                                                                 
          Insert a new bill section to read:                                                                                    
     "*Sec. 19. GAS PIPELINE  DEVELOPMENT. (a) The following                                                                    
     amounts  are  appropriated  from the  general  fund  to                                                                    
     increase the  appropriation in  sec. 1  of this  Act to                                                                    
     the named department,  appropriation, and allocation in                                                                    
     the   amounts   stated   for   work   associated   with                                                                    
     development of  a natural gas  pipeline for  the fiscal                                                                    
     year ending June 30, 2011:                                                                                                 
                                                                                                                                
          DEPARTMENT, APPROPRIATION,                                                                                            
         AND ALLOCATION                     AMOUNT                                                                              
          (1) Law                                                                                                               
               Civil division,               $750,000                                                                           
               oil, gas, and mining                                                                                             
          (2) Natural Resources                                                                                                 
               Resource development,         1,265,250                                                                          
               gas pipeline implementation                                                                                      
          (3) Revenue                                                                                                           
               Administration and support,   465,000                                                                            
               natural gas                                                                                                      
               commercialization                                                                                                
               Taxation and treasury,        150,000                                                                            
               tax division                                                                                                     
                                                                                                                                
          (b) The following amounts are appropriated from                                                                       
     the  general fund  to  increase  the appropriations  in                                                                    
     sec.   1  of   this  Act   to  the   named  department,                                                                    
     appropriation, and allocation  for work associated with                                                                    
     the  development  of a  natural  gas  pipeline for  the                                                                    
     fiscal year ending June 30, 2011:                                                                                          
                                                                                                                                
          DEPARTMENT, APPROPRIATION,                                                                                            
         AND ALLOCATION                     AMOUNT                                                                              
          (1) Law                                                                                                               
               Civil division,               $1,750,000                                                                         
               oil, gas, and mining                                                                                             
          (2) Natural Resources                                                                                                 
               Resource development,         2,952,250                                                                          
               gas pipeline implementation                                                                                      
          (3) Revenue                                                                                                           
               Administration and support,   1,085,000                                                                          
               natural gas                                                                                                      
               commercialization                                                                                                
                                                                                                                                
          (c) The appropriations made in (b) of this                                                                            
     section are  contingent on a  person submitting  to the                                                                    
     Federal  Energy  Regulatory   Commission  a  "precedent                                                                    
     agreement" for  shipping natural  gas on a  North Slope                                                                    
     natural gas pipeline.                                                                                                      
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 80, line 28:                                                                                                          
          Delete "25, 26, and 28"                                                                                               
          Insert "26, 27, and 29"                                                                                               
                                                                                                                                
     Page 81, following line 2:                                                                                                 
          Insert a new bill section to read:                                                                                    
     "*Sec. 38. CONTINGENCY. The  appropriation made in sec.                                                                    
     19(b)  of this  Act is  contingent as  set out  in sec.                                                                    
     19(c) of this Act."                                                                                                        
                                                                                                                                
     Renumber the following bill sections accordingly.                                                                          
                                                                                                                                
     Page 81, line 3:                                                                                                           
          Delete "Sections 34 and 36"                                                                                           
          Insert "Sections 35 and 37"                                                                                           
                                                                                                                                
     Page 81, line 4:                                                                                                           
          Delete "sec. 37"                                                                                                      
          Insert "sec. 39"                                                                                                      
                                                                                                                                
Co-Chair Stoltze OBJECTED.                                                                                                      
                                                                                                                                
Co-Chair  Hawker  explained  that   Amendment  32a  was  the                                                                    
gasline amendment. He detailed  that in the budget's initial                                                                    
CS, the various  issues connected with the  gasline were set                                                                    
aside  in order  to be  considered together.  He noted  that                                                                    
Amendment 32a  represented a substantial reduction  "at this                                                                    
time" from the governor's initial requests.                                                                                     
                                                                                                                                
Co-Chair  Hawker  continued  that  the  first  page  of  the                                                                    
amendment  addressed  issues  related  to  on-going  gasline                                                                    
development  requests  and would  offer  30  percent of  the                                                                    
administration's  initial  request  for   FY  11,  with  the                                                                    
balance  (70  percent)  contingent   upon  completion  of  a                                                                    
successful  open season.  He added  that  the amendment  was                                                                    
offered  because  of  the  amount of  money  that  had  been                                                                    
committed    in   the    past   without    [accountability].                                                                    
Investigation  had  revealed   accumulated  money  that  was                                                                    
sitting   in  encumbrances   and  non-lapsed   accounts.  He                                                                    
compared the  process of  tightening legislative  control to                                                                    
the  process  that had  been  used  with Medicaid.  He  also                                                                    
wanted balance so that the  legislature could not be accused                                                                    
of  blocking  the  Alaska   Gasline  Inducement  Act  (AGIA)                                                                    
process.                                                                                                                        
                                                                                                                                
Co-Chair Hawker  emphasized that  the core of  the amendment                                                                    
would balance  the funds so  that 30 percent would  be given                                                                    
up front and 70 percent  on delivery. He maintained that the                                                                    
largest  issue  was  in-state gas.  The  administration  had                                                                    
requested  $6.5 million  to  continue  in-state gas  efforts                                                                    
begun the previous year.                                                                                                        
                                                                                                                                
10:59:26 AM                                                                                                                   
                                                                                                                                
Co-Chair Hawker  acknowledged that there was  a "disconnect"                                                                    
between what  had already commenced and  the present status.                                                                    
The  previous  year,  the  money  was  appropriated  at  the                                                                    
request  of  [Governor  Sarah Palin]  to  move  an  in-state                                                                    
gasline  forward separate  from  the  Department of  Natural                                                                    
Resources  (DNR) AGIA  process. He  pointed to  questions in                                                                    
the   legislature  about   the  [Parnell]   administration's                                                                    
commitment to moving the project forward successfully.                                                                          
                                                                                                                                
Co-Chair Hawker referred  to separate legislation addressing                                                                    
the issue  in depth.  He emphasized that  "at this  time" he                                                                    
was not  comfortable making a  definitive commitment  to the                                                                    
operating budget  of any amount  for in-state gas  until the                                                                    
legislature and administration had  had time to dialogue and                                                                    
come to  an agreement about  the route forward.  He believed                                                                    
an in-state  gas appropriation would  be brought  forward in                                                                    
either a  later version  of the operating  budget or  in the                                                                    
capital  budget.  He reiterated  that  there  was no  hidden                                                                    
agenda; the legislature  wanted to be in  alignment with the                                                                    
administration  before committing  the public's  treasury to                                                                    
the process.                                                                                                                    
                                                                                                                                
Co-Chair Hawker  continued that the conversation  on further                                                                    
AGIA  appropriations  was  on-going; he  wanted  to  provide                                                                    
money that  would get through  by the beginning of  the next                                                                    
legislative  session, when  there would  have been  either a                                                                    
successful  open   season  or  the  conversation   would  be                                                                    
revisited. He  underlined that the amendment  did not intend                                                                    
to  obstruct either  in-state gas  or the  AGIA process.  He                                                                    
wanted the  public to  be assured  that the  legislature was                                                                    
being diligent.                                                                                                                 
                                                                                                                                
11:02:34 AM                                                                                                                   
                                                                                                                                
Representative Gara  MOVED to  ADOPT Conceptual  Amendment 1                                                                    
to Amendment 32a:                                                                                                               
                                                                                                                                
     Page 2: Delete lines 9 through 11 and lines 21 through                                                                     
     22, and make conforming amendments.                                                                                        
                                                                                                                                
Co-Chair  Hawker OBJECTED.  He  detailed  that the  language                                                                    
delineated in  the conceptual amendment  was the  removal of                                                                    
the "trigger  point" for the conditional  appropriation (the                                                                    
completion of a  successful open season) and  removal of the                                                                    
further contingency language.                                                                                                   
                                                                                                                                
Representative Gara  asserted that voting "no"  on Amendment                                                                    
32a would  mean he  was voting against  any funding  for the                                                                    
gasline,  which was  not his  intention. He  stated that  he                                                                    
would rather  vote for how  he thought the  amendment should                                                                    
be written.                                                                                                                     
                                                                                                                                
Representative Gara  explained that  the sections  he wanted                                                                    
to  delete stipulated  that the  bulk of  the money  for the                                                                    
gasline  would not  come  in unless  there  was a  precedent                                                                    
agreement. He was  most concerned about funding  for the big                                                                    
gasline, which  he believed was  important to the  future of                                                                    
the state.                                                                                                                      
                                                                                                                                
Representative Gara argued that  there would be no precedent                                                                    
agreement  in   the  current  year.  He   explained  that  a                                                                    
precedent  agreement meant  that  a shipper  would commit  a                                                                    
certain  amount of  gas with  no  conditions. Amendment  32a                                                                    
would mean  that DNR would not  get 70 percent of  the funds                                                                    
it needs  to move forward  with the gasline. He  thought the                                                                    
question was whether  DNR needed the funds  to move forward;                                                                    
he  believed it  did. He  did  not think  the oil  companies                                                                    
would move ahead with a gasline without being pushed.                                                                           
                                                                                                                                
Representative  Gara   pointed  out  that  there   would  be                                                                    
conditional offers  by entities  on May 1 [2010] agreeing to                                                                    
put gas  in a line if  the state does some  things for them.                                                                    
The state  would need to  analyze the offers,  including the                                                                    
tax breaks  requested, the field geology  necessary, and the                                                                    
things DNR  and the Department  of Revenue (DOR) want  to do                                                                    
with the funds.  He did not believe the state  would be able                                                                    
to  negotiate  without the  funds.  He  shared some  of  the                                                                    
concerns put forth in Amendment  32a; the administration had                                                                    
not let  the legislature know  how much money was  needed to                                                                    
push the gasline forward.                                                                                                       
                                                                                                                                
Representative  Gara wanted  a  strong  negotiating team  to                                                                    
push  the gasline  forward, including  the best  consultants                                                                    
and analysts. He  believed DNR need the money  to succeed in                                                                    
the project. He strongly  supported the gasline and believed                                                                    
it  could go  ahead, but  timing was  important. He  did not                                                                    
want  to  miss the  summer's  field  season because  of  too                                                                    
little money  appropriated. He referred to  work that needed                                                                    
to be done soon, such  as surveys of faults existing between                                                                    
Fairbanks  and the  North Slope.  He wanted  the information                                                                    
before TransCanada made its proposal.                                                                                           
                                                                                                                                
11:08:04 AM                                                                                                                   
                                                                                                                                
Representative  Gara expressed  concerns about  delaying the                                                                    
project  another year.  He  stressed the  need  to know  the                                                                    
exact amount of money the  administration wanted. He did not                                                                    
think 30 percent was the  amount needed; he hoped the amount                                                                    
would be forthcoming.                                                                                                           
                                                                                                                                
Co-Chair   Hawker  disagreed   with  Representative   Gara's                                                                    
language  that  the  the  intent  of  the  industry  was  to                                                                    
shortchange  the  people of  Alaska.  He  pointed to  poling                                                                    
numbers  showing only  37 percent  confidence that  the AGIA                                                                    
project   would   move   forward.   He   agreed   that   the                                                                    
administration should  address both the legislature  and the                                                                    
public. He  maintained that the  point of Amendment  32a was                                                                    
to set a beginning point  for a conversation that would take                                                                    
place  over  the  remaining  30   days  of  the  legislative                                                                    
session. He pointed out that  passing Conceptual Amendment 1                                                                    
to  Amendment  32a  would eliminate  all  contingencies.  He                                                                    
asked  whether Representative  Gara  wanted  to continue  or                                                                    
withdraw the amendment to the the amendment.                                                                                    
                                                                                                                                
Representative Gara  stated that ideally an  amendment would                                                                    
require the  administration to give  annual/monthly detailed                                                                    
reporting on expenditures. He understood  that there was not                                                                    
support for the idea.                                                                                                           
                                                                                                                                
Representative   Gara  MAINTAINED   the  amendment   to  the                                                                    
amendment  because  he wanted  to  be  on record  supporting                                                                    
funding  for the  pipeline effort.  He believed  that voting                                                                    
for  Amendment  32a would  put  him  on record  as  opposing                                                                    
funding for the pipeline effort.                                                                                                
                                                                                                                                
Co-Chair Hawker  stated that  he did not  want the  media or                                                                    
anyone to  capitalize on the  amendment to Amendment  32a as                                                                    
representing anyone  being against the development  of AGIA.                                                                    
He maintained that  Amendment 32a would set  a benchmark for                                                                    
continued  conversation   during  the   current  legislative                                                                    
process.                                                                                                                        
                                                                                                                                
Co-Chair  Hawker  MAINTAINED  his  OBJECTION  to  Conceptual                                                                    
Amendment 1 to Amendment 32a.                                                                                                   
                                                                                                                                
A roll call vote was taken on the motion.                                                                                       
                                                                                                                                
IN FAVOR: Foster, Gara                                                                                                          
OPPOSED: Thomas,  Doogan, Fairclough, Joule,  Kelly, Salmon,                                                                    
Stoltze, Hawker                                                                                                                 
Representative Austerman was absent from the vote.                                                                              
                                                                                                                                
The  MOTION   FAILED  (8/2).   Conceptual  Amendment   1  to                                                                    
Amendment 32a was not adopted.                                                                                                  
                                                                                                                                
11:12:45 AM                                                                                                                   
                                                                                                                                
Co-Chair Hawker returned to discussion of Amendment 32a.                                                                        
                                                                                                                                
Representative Doogan stated  his understanding of Amendment                                                                    
32a  for  the  record,   particularly  with  regard  to  the                                                                    
precedent  agreement section.  He  believed  there were  two                                                                    
places where  the legislature might  decide to give  only so                                                                    
much  money  unless  certain   things  happened.  The  first                                                                    
related to  the open season  and an entity that  was willing                                                                    
to put  gas in  the pipeline  pursuant to  listed conditions                                                                    
being  met.   The  second  was  related   to  the  precedent                                                                    
agreement, which would  be an entity contracting  to put gas                                                                    
in the pipeline under certain terms.                                                                                            
                                                                                                                                
Representative  Doogan   stated  that   he  would   be  more                                                                    
comfortable with the first option,  except for the fact that                                                                    
anything an entity brings to  the open season is privileged.                                                                    
For example,  if Exxon Mobile  Corporation came to  the open                                                                    
season and agreed  to do certain things, they  could say the                                                                    
terms of the negotiation  between themselves and TransCanada                                                                    
were private at that point.  The state would have difficulty                                                                    
knowing what it was giving more money for.                                                                                      
                                                                                                                                
Representative  Doogan  thought  the  state would  be  at  a                                                                    
disadvantage with the precedent  agreement. He was concerned                                                                    
that  the  state  would  be  at  the  mercy  of  the  "least                                                                    
pleasant" entity making  an offer. He could not  see any way                                                                    
around  the situation.  He assumed  that the  administration                                                                    
and other interested  parties would be able to  figure out a                                                                    
way to  let the  rest of  Alaskans know  who "gummed  up the                                                                    
works" and why, at which time the state could possibly act.                                                                     
                                                                                                                                
Representative  Doogan   informed  the  committee   that  he                                                                    
supported  Amendment   32a.  He   did  not  feel   that  the                                                                    
administration had  given good  reason for spending  all the                                                                    
money.  He did  not  think testimony  received in  committee                                                                    
allayed fears  regarding how much  money would be  given. He                                                                    
questioned  the administration's  dedication to  the project                                                                    
and its willingness to fight for the project.                                                                                   
                                                                                                                                
11:17:19 AM                                                                                                                   
                                                                                                                                
Representative Kelly  voiced support  for the  amendment. He                                                                    
referred to previous discussion  in the DNR subcommittee and                                                                    
the decision  to bring the  issue to the full  committee. He                                                                    
agreed with  concerns about the  way the process  was moving                                                                    
forward.  However,   he  thought  the  course   set  by  the                                                                    
legislature  for  AGIA was  the  best  course available.  He                                                                    
acknowledged changes  that had  come about. He  believed the                                                                    
people of  Alaska supported  the course  that had  been set,                                                                    
and that the administration intended to do the same.                                                                            
                                                                                                                                
Representative Kelly  spoke to requirements set  out for the                                                                    
in-state gasline, including the  monthly report. He believed                                                                    
the project was on track; he  expected a report in April and                                                                    
July regarding significant deliverables.                                                                                        
                                                                                                                                
Representative  Kelly  strongly  preferred to  stay  to  the                                                                    
course  set; he  wanted any  change to  be in  the open.  He                                                                    
argued  that  there  would   be  sufficient  opportunity  to                                                                    
address  needed   changes  in  the   upcoming  supplemental,                                                                    
operating, and capital budgets.  He hoped the administration                                                                    
would communicate  with the  legislature to  come up  with a                                                                    
course of  action that  all could agree  on. He  pointed out                                                                    
that the legislature would meet  soon after the open season,                                                                    
providing another opportunity to address the issue.                                                                             
                                                                                                                                
11:21:31 AM                                                                                                                   
                                                                                                                                
Representative  Gara wanted  to  clear misconceptions  about                                                                    
the gasline. He  thought that people saw the  open season as                                                                    
the day  on which  the gasline deal  would die  if companies                                                                    
did not  come forward. He  asserted that  May 1 was  not the                                                                    
end of the process, but the beginning.                                                                                          
                                                                                                                                
Representative Gara  believed that the period  beginning May                                                                    
1, 2010 and the year following  could be an exciting time in                                                                    
Alaska  history, with  more promise  than  any other  period                                                                    
since the Trans  Alaska Pipeline was constructed.  On May 1,                                                                    
the major oil companies  would begin their negotiations, and                                                                    
he wanted the  state to be ready. He did  not agree with the                                                                    
misperception  that  the  state   would  have  to  lose  the                                                                    
pipeline project if Exxon Mobile  decided not to sell gas on                                                                    
May 1. He hoped that the administration would help.                                                                             
                                                                                                                                
Co-Chair Hawker  noted that  an administration  official had                                                                    
testified  before the  committee that  the state  had to  be                                                                    
vigilant to have a viable  project moving forward. He stated                                                                    
that the  intent of  Amendment 32a  was to  encourage frugal                                                                    
caution both in the long and  the short terms. He wanted the                                                                    
administration  to  make  their  request  clearer  and  more                                                                    
convincing in the  short term, and in the long  term to make                                                                    
sure a viable  project is pursued, in light  of the changing                                                                    
world.                                                                                                                          
                                                                                                                                
11:24:27 AM                                                                                                                   
                                                                                                                                
Co-Chair  Stoltze WITHDREW  his  OBJECTION.  There being  NO                                                                    
further OBJECTION, Amendment 32a was ADOPTED.                                                                                   
                                                                                                                                
                                                                                                                                
Co-Chair Stoltze  MOVED that  CSHB 300  (FIN) as  amended be                                                                    
reported  out of  Committee with  individual recommendations                                                                    
and that  authorization be given to  the Legislative Finance                                                                    
Division  and the  Legislative Legal  Services  to make  any                                                                    
necessary technical and/or conforming amendments.                                                                               
                                                                                                                                
Representative Gara  OBJECTED for DISCUSSION. He  stated his                                                                    
appreciation of the committee for the budget process.                                                                           
                                                                                                                                
Representative Gara  WITHDREW his OBJECTION. There  being NO                                                                    
further OBJECTION, it was so ordered.                                                                                           
                                                                                                                                
CSHB 300 (FIN)  was MOVED out of Committee with  a "do pass"                                                                    
recommendation.                                                                                                                 
                                                                                                                                
Co-Chair Stoltze  MOVED that  CSHB 302  (FIN) as  amended be                                                                    
reported  out of  Committee with  individual recommendations                                                                    
and that  authorization be given to  the Legislative Finance                                                                    
Division  and the  Legislative Legal  Services  to make  any                                                                    
necessary  technical  and/or  conforming  amendments.  There                                                                    
being NO OBJECTION, it was so ordered.                                                                                          
                                                                                                                                
CSHB 302 (FIN)  was MOVED out of Committee with  a "do pass"                                                                    
recommendation.                                                                                                                 
                                                                                                                                
11:27:51 AM                                                                                                                   
                                                                                                                                
Co-Chair Hawker appreciated the  committee for the work done                                                                    
and manner in which it was done.                                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 11:28 AM.                                                                                          

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