Legislature(1993 - 1994)
03/01/1993 01:40 PM House FIN
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
March 1, 1993
1:40 P.M.
TAPE HFC 93 - 33, Side 2, #000 - end.
TAPE HFC 93 - 34, Side 1, #000 - #694.
CALL TO ORDER
Co-Chair Ron Larson called the meeting of the House Finance
Committee to order at 1:40 P.M.
PRESENT
Co-Chair Larson Representative Brown
Co-Chair MacLean Representative Therriault
Vice-Chair Hanley Representative
Grussendorf
Representative Navarre Representative Parnell
Representatives Foster, Hoffman and Martin were not present
for the meeting.
ALSO PRESENT
Jan DeYoung, Administrator/Hearing Examiner, Alaska Labor
Relations Agency, Department of Labor, Anchorage via
Teleconference; John Abshire, Deputy Commissioner,
Department of Labor; John Tillinghast, Chugach Electric
Company, Anchorage, Alaska; Raga Elim, Special Assistant to
Commissioner Olds, Department of Natural Resources.
SUMMARY INFORMATION
*hb102
HB 102 An Act relating to the Alaska Labor Relations
Agency; and providing for an effective date.
CS HB 102 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the House Finance Committee for the
Department of Labor.
*hb116
HB 116 An Act directing the commissioner of natural
resources to accept, under certain circumstances,
the contract price agreed to between a lessee of
federal land and a gas or electric utility as the
value of the federal government's royalty share
from natural gas production when royalty is
payable to the state under applicable federal law;
and providing for an effective date.
1
HB 116 was placed into subcommittee with
Representative Parnell as Chair and with members
Representative MacLean,
Representative Brown and
Representative Hanley. The bill
was held in Committee for further
discussion.
*hb102
HOUSE BILL 102
"An Act relating to the Alaska Labor Relations Agency;
and providing for an effective date."
JAN DEYOUNG, ADMINISTRATOR/HEARING EXAMINER, ALASKA LABOR
RELATIONS AGENCY, DEPARTMENT OF LABOR, ANCHORAGE, ALASKA,
testified via teleconference in support of HB 102. Ms.
DeYoung explained that the Alaska Labor Relations Agency
hears disputes between unions, public employers, individual
union members and the unions. The Agency administers the
public Employment Relations Act and the Railroad Labor
Relations Act. The Agency, created in 1990, over the past
two years has experienced a sixty-seven percent workload
increase.
In 1992, Ms. DeYoung noted, the volunteer board members met
a total of thirty-three days for agency business. This
workload has created a hardship for board members.
Consequently, the Department of Labor has requested that the
board be increased in order to share the workload. In
addition to increasing the panel, HB 102 would allow for an
honorarium with compensation reflected in the $12.8 fiscal
note.
Co-Chair Larson asked the number of members necessary to be
present to form an agency quorum. Ms. DeYoung replied for
administrative hearings three members need to be present and
two of those members would make a quorum. A public business
meeting could not be shared by the panel, consequently both
panels would need to be present and a quorum would consist
of four members.
Representative Hanley recommended that the fiscal note
itemize the per diem and travel costs associated with the
hire of the additional three board members. Ms. DeYoung
pointed out those costs are insubstantial as board members
currently reside in Anchorage where all cases are heard.
Representative Therriault asked if an appeal right would be
granted for a full board hearing if a person was not
satisfied with their initial determination. Ms. DeYoung
stated the appeal from a panel decision goes directly to the
2
Superior Court.
Representative Parnell questioned the honorarium position
and asked the criteria used to determine which boards
receive honorariums. Co-Chair Larson discussed various
boards which do have the honorarium paid positions.
Representative Grussendorf echoed his concern regarding the
requested honorariums.
JOHN ABSHIRE, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR,
stated that honorarium positions pay range from $50 - $450
dollars per day and added that the requested $100 dollars
per day was a low case medium. Mr. Abshire recommended that
all new members to the board continue to reside in Anchorage
which would alleviate travel costs.
Representative Hanley asked the compensation for the
Worker's Compensation Board honorarium. Mr. Abshire replied
it was $50 dollar per day with additional per diem.
Representative Parnell questioned if board members living in
Anchorage receive per diem. Mr. Abshire stated they do not.
Representative Grussendorf noted his concern that all board
members be residents of Anchorage solely to avoid board and
travel costs.
Co-Chair MacLean MOVED Amendment #1, the deletion of Section
3, Page 2, Lines 3 through 7 of the proposed legislation
which would delete the honorarium position. There being NO
OBJECTION, it was adopted.
Representative Brown noted with the deletion of Section 3,
the fiscal note would be reduced to zero. Co-Chair Larson
MOVED CS HB 102 (FIN) out of Committee with individual
recommendations and a zero fiscal note. There being NO
OBJECTION, it was so ordered.
CS HB 102 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
House Finance Committee for the Department of Labor.
*hb116
HOUSE BILL 116
"An Act directing the commissioner of natural resources
to accept, under certain circumstances, the contract
price agreed to between a lessee of federal land and a
gas or electric utility as the value of the federal
government's royalty share from natural gas production
when royalty is payable to the state under applicable
federal law; and providing for an effective date."
JOHN TILLINGHAST, CHUGACH ELECTRIC COMPANY, ANCHORAGE,
ALASKA, testified in support of HB 116. He commented that
3
Chugach is seeking to introduce legislation that will help
resolve a royalty dispute that Chugach is involved in with
the Department of Natural Resources (DNR) concerning the
valuation of federal royalties for natural gas that Chugach
purchased at the Beluga River field. Chugach thought that
this issue had been resolved in 1986 when legislation (AS
38.05.180(aa)) was passed.
That legislation provides legislative guidance to DNR in
valuing royalties for gas and electric utilities. He added,
unfortunately, that the current DNR administration has
chosen to interpret the statute verbatim and is now
disregarding the legislative intent that was behind the law.
In so doing, the current DNR administration has flip-flopped
the agency's position and is now apparently in disagreement
with the intent behind the legislation which they fully
supported in 1986.
Mr. Tillinghast added, if DNR prevails in its pursuit of
increasing federal royalties for Beluga gas for prior years
(1984-1992), electric rate-payers from Homer to Fairbanks
will be asked to pay more than $21 million dollars in
additional royalties. At issue today are the federal
royalties for the years 1984-87 totaling $12.4 million
dollars. However, if DNR applies the same logic to future
years (1988-1992), Chugach rate payers would be liable for
an additional $9 million dollars.
Chugach, which is a member owned cooperative, will have no
choice but to pass these additional costs on to their
ratepayer through some type of rate surcharge.
Unfortunately, today's customers would be forced to pay
additional royalty payments for inexpensive natural gas that
they may not have been there to use. Chugach firmly
believes that by making royalty demands that they know will
simply be passed on to the consumers, that the agency is
actually trying to impose a tax on the Alaska public without
any notice to them, and without the Legislature's
involvement.
Representative Brown referenced a chart on Page 19 of
Attachment #1, "An Analysis of the Department of Natural
Resources Demand for Additional Beluga River Royalty
Payments from Railbelt Utility Consumers". Mr. Tillinghast
stated that Chugach is being audited for the period 1984 -
1987. If the State prevails and there is a delinquency
assessed, there will be a one time surcharge on residents
and businesses.
Representative Brown questioned the benefit percentages of
the proposed legislation and asked who would receive them.
Mr. Tillinghast stated that the business impacts would be
4
substantial. Representative Brown asked if Chugach would
object to covering only the Cook Inlet region. Mr.
Tillinghast said there would be no objection to that as the
greatest impact of the legislation would be experienced in
that area.
Representative Brown asked for further information as to who
would benefit from the proposed legislation. Mr.
Tillinghast stated that Chugach would benefit from the bill,
and added that all other pricing controversies in Cook Inlet
have been settled.
Co-Chair Larson questioned if the Power Cost Equalization
(PCE) subsidy would be affected by the proposed increase.
Mr. Tillinghast stated that PCE is required to fill the gap
between power cost expense between the urban centers and
rural areas.
(Tape Change, HFC 93 -34, Side 1).
Representative Brown noted for the record that her husband
is one of the five members of the Alaska Public Utilities
Commission (APUC). She stressed that the proposed
legislation has no effect on PCE until authority is
clarified to amend the floor.
Representative Grussendorf asked where the State's share of
the federal royalty would be distributed. Mr. Tillinghast
replied twenty-five percent would go to the Permanent Fund
and seventy-five percent would be allocated to the general
fund. Representative Grussendorf pointed out that Chugach
is asking that the Permanent Fund be reduced in order that
sixty percent of their consumers receive benefit. Mr.
Tillinghast stated that Chugach is a cooperative and does
not pass dividends on to share holders. Cost of direct
royalties will be passed on to the consumers.
Representative Grussendorf emphasized that the PCE program
was a price agreed upon to allow certain areas of the State
to benefit from hydroelectric projects.
Representative Hanley stated that the policy call made in
1986 states that in State leases, the contract price is the
price. The Legislature passed legislation in 1986 which
said that the State will accept the contract price on State
leases. Representative Hanley further discussed contracts
and royalty agreement made with the State.
Co-Chair MacLean questioned the 1959 retroactive date. Mr.
Tillinghast stated that the audit period in controversy was
1984 -1987, although there is a six year statute of
limitation. The federal government can not legally go back
to 1959 because of the existing statute. The 1959 date was
5
included because it was the date of statehood at which time
revenue sharing began.
Co-Chair MacLean asked how Chugach Electric could legally
charge for utilities which have not been used. Mr.
Tillinghast stated the decision will be made by APUC. DNR
proclaimed in 1985, that it is bad public policy to access
royalties retroactively against utilities.
Co-Chair MacLean inquired if the legislation would be
isolated to the use of natural gas for utilities. Mr.
Tillinghast stated yes. DNR took great care in assuring
that the legislation in 1986 was confined to sales for gas
and electric utilities. Representative Brown pointed out
that DNR did not strongly support the initial legislation.
She stated that the law does not clarify who qualifies as a
gas utility. Representative Brown noted her concern that
the legislation addresses gas pipelines. She suggested the
word "customer", primarily being residential, versus the
word "consumer", primarily interpreted as a pipeline
customer, should be more clearly defined. Her concern would
be to limit the legislation to current production and have
some protection from the granting of an unfair competitive
advantage.
Co-Chair MacLean expressed concern with the federal
government establishing the value of the leases. Mr.
Tillinghast explained that the bill only deals with federal
leases. The feds will be establishing the value because it
is their land.
Representative Brown provided the Committee with Amendment
Tillinghast stated that Chugach Electric has endorsed
Representative Brown's recommendation to confine the
legislation either to Cook Inlet or to fields that are
currently in production. DNR is currently trying to get the
federal government to retroactively access royalties by
disregarding the contract price. Mr. Tillinghast said if
the amendments proposed by Representative Brown were
adopted, they will kill the bill. Representative Brown
reiterated her concern that the entity benefitting from the
legislation be residential. Mr. Tillinghast recommended the
removal of "gas utility" language from the bill leaving the
remaining standards. Representative Brown agreed noting her
concern with "gas utility" and who can become one.
Mr. Tillinghast commented that the legislation does not make
policy but rather extends the 1986 decisions to include
something overlooked. If the bill does not pass, Golden
Valley Electric Company will be asked to pay a surcharge for
the years in which they did not buy electricity.
6
Representative Brown asked how the surcharge would be
distributed. Mr. Tillinghast added that decision would be
decided by APUC.
RAGA ELIM, SPECIAL ASSISTANT TO COMMISSIONER OLDS,
DEPARTMENT OF NATURAL RESOURCES, testified that DNR's
position on HB 116 is neutral. He added that DNR has
deferred to the Legislature to decide if the policy should
be changed. He added that the case addressed is currently
worth $10.5 million dollars with interest accruing.
Co-Chair Larson placed HB 116 in a subcommittee to be
Chaired by Representative Parnell with members
Representatives Hanley, MacLean and Brown. HB 116 was HELD
in Committee for further discussion.
*
ADJOURNMENT
The meeting adjourned at 3:05 P.M.
HOUSE FINANCE COMMITTEE
March 1, 1993
1:40 P.M.
TAPE HFC 93 - 33, Side 2, #000 - end.
TAPE HFC 93 - 34, Side 1, #000 - #694.
CALL TO ORDER
Co-Chair Ron Larson called the meeting of the House Finance
Committee to order at 1:40 P.M.
PRESENT
Co-Chair Larson Representative Brown
Co-Chair MacLean Representative Therriault
Vice-Chair Hanley Representative
Grussendorf
Representative Navarre Representative Parnell
Representatives Foster, Hoffman and Martin were not present
for the meeting.
ALSO PRESENT
Jan DeYoung, Administrator/Hearing Examiner, Alaska Labor
Relations Agency, Department of Labor, Anchorage via
Teleconference; John Abshire, Deputy Commissioner,
Department of Labor; John Tillinghast, Chugach Electric
Company, Anchorage, Alaska; Raga Elim, Special Assistant to
7
Commissioner Olds, Department of Natural Resources.
SUMMARY INFORMATION
HB 102 An Act relating to the Alaska Labor Relations
Agency; and providing for an effective date.
CS HB 102 (FIN) was reported out of Committee with
a "do pass" recommendation and with a zero fiscal
note by the House Finance Committee for the
Department of Labor.
HB 116 An Act directing the commissioner of natural
resources to accept, under certain circumstances,
the contract price agreed to between a lessee of
federal land and a gas or electric utility as the
value of the federal government's royalty share
from natural gas production when royalty is
payable to the state under applicable federal law;
and providing for an effective date.
HB 116 was placed into subcommittee with
Representative Parnell as Chair and with members
Representative MacLean,
Representative Brown and
Representative Hanley. The bill
was held in Committee for further
discussion.
HOUSE BILL 102
"An Act relating to the Alaska Labor Relations Agency;
and providing for an effective date."
JAN DEYOUNG, ADMINISTRATOR/HEARING EXAMINER, ALASKA LABOR
RELATIONS AGENCY, DEPARTMENT OF LABOR, ANCHORAGE, ALASKA,
testified via teleconference in support of HB 102. Ms.
DeYoung explained that the Alaska Labor Relations Agency
hears disputes between unions, public employers, individual
union members and the unions. The Agency administers the
public Employment Relations Act and the Railroad Labor
Relations Act. The Agency, created in 1990, over the past
two years has experienced a sixty-seven percent workload
increase.
In 1992, Ms. DeYoung noted, the volunteer board members met
a total of thirty-three days for agency business. This
workload has created a hardship for board members.
Consequently, the Department of Labor has requested that the
board be increased in order to share the workload. In
addition to increasing the panel, HB 102 would allow for an
honorarium with compensation reflected in the $12.8 fiscal
8
note.
Co-Chair Larson asked the number of members necessary to be
present to form an agency quorum. Ms. DeYoung replied for
administrative hearings three members need to be present and
two of those members would make a quorum. A public business
meeting could not be shared by the panel, consequently both
panels would need to be present and a quorum would consist
of four members.
Representative Hanley recommended that the fiscal note
itemize the per diem and travel costs associated with the
hire of the additional three board members. Ms. DeYoung
pointed out those costs are insubstantial as board members
currently reside in Anchorage where all cases are heard.
Representative Therriault asked if an appeal right would be
granted for a full board hearing if a person was not
satisfied with their initial determination. Ms. DeYoung
stated the appeal from a panel decision goes directly to the
Superior Court.
Representative Parnell questioned the honorarium position
and asked the criteria used to determine which boards
receive honorariums. Co-Chair Larson discussed various
boards which do have the honorarium paid positions.
Representative Grussendorf echoed his concern regarding the
requested honorariums.
JOHN ABSHIRE, DEPUTY COMMISSIONER, DEPARTMENT OF LABOR,
stated that honorarium positions pay range from $50 - $450
dollars per day and added that the requested $100 dollars
per day was a low case medium. Mr. Abshire recommended that
all new members to the board continue to reside in Anchorage
which would alleviate travel costs.
Representative Hanley asked the compensation for the
Worker's Compensation Board honorarium. Mr. Abshire replied
it was $50 dollar per day with additional per diem.
Representative Parnell questioned if board members living in
Anchorage receive per diem. Mr. Abshire stated they do not.
Representative Grussendorf noted his concern that all board
members be residents of Anchorage solely to avoid board and
travel costs.
Co-Chair MacLean MOVED Amendment #1, the deletion of Section
3, Page 2, Lines 3 through 7 of the proposed legislation
which would delete the honorarium position. There being NO
OBJECTION, it was adopted.
Representative Brown noted with the deletion of Section 3,
the fiscal note would be reduced to zero. Co-Chair Larson
9
MOVED CS HB 102 (FIN) out of Committee with individual
recommendations and a zero fiscal note. There being NO
OBJECTION, it was so ordered.
CS HB 102 (FIN) was reported out of Committee with a "do
pass" recommendation and with a zero fiscal note by the
House Finance Committee for the Department of Labor.
HOUSE BILL 116
"An Act directing the commissioner of natural resources
to accept, under certain circumstances, the contract
price agreed to between a lessee of federal land and a
gas or electric utility as the value of the federal
government's royalty share from natural gas production
when royalty is payable to the state under applicable
federal law; and providing for an effective date."
JOHN TILLINGHAST, CHUGACH ELECTRIC COMPANY, ANCHORAGE,
ALASKA, testified in support of HB 116. He commented that
Chugach is seeking to introduce legislation that will help
resolve a royalty dispute that Chugach is involved in with
the Department of Natural Resources (DNR) concerning the
valuation of federal royalties for natural gas that Chugach
purchased at the Beluga River field. Chugach thought that
this issue had been resolved in 1986 when legislation (AS
38.05.180(aa)) was passed.
That legislation provides legislative guidance to DNR in
valuing royalties for gas and electric utilities. He added,
unfortunately, that the current DNR administration has
chosen to interpret the statute verbatim and is now
disregarding the legislative intent that was behind the law.
In so doing, the current DNR administration has flip-flopped
the agency's position and is now apparently in disagreement
with the intent behind the legislation which they fully
supported in 1986.
Mr. Tillinghast added, if DNR prevails in its pursuit of
increasing federal royalties for Beluga gas for prior years
(1984-1992), electric rate-payers from Homer to Fairbanks
will be asked to pay more than $21 million dollars in
additional royalties. At issue today are the federal
royalties for the years 1984-87 totaling $12.4 million
dollars. However, if DNR applies the same logic to future
years (1988-1992), Chugach rate payers would be liable for
an additional $9 million dollars.
Chugach, which is a member owned cooperative, will have no
choice but to pass these additional costs on to their
ratepayer through some type of rate surcharge.
Unfortunately, today's customers would be forced to pay
10
additional royalty payments for inexpensive natural gas that
they may not have been there to use. Chugach firmly
believes that by making royalty demands that they know will
simply be passed on to the consumers, that the agency is
actually trying to impose a tax on the Alaska public without
any notice to them, and without the Legislature's
involvement.
Representative Brown referenced a chart on Page 19 of
Attachment #1, "An Analysis of the Department of Natural
Resources Demand for Additional Beluga River Royalty
Payments from Railbelt Utility Consumers". Mr. Tillinghast
stated that Chugach is being audited for the period 1984 -
1987. If the State prevails and there is a delinquency
assessed, there will be a one time surcharge on residents
and businesses.
Representative Brown questioned the benefit percentages of
the proposed legislation and asked who would receive them.
Mr. Tillinghast stated that the business impacts would be
substantial. Representative Brown asked if Chugach would
object to covering only the Cook Inlet region. Mr.
Tillinghast said there would be no objection to that as the
greatest impact of the legislation would be experienced in
that area.
Representative Brown asked for further information as to who
would benefit from the proposed legislation. Mr.
Tillinghast stated that Chugach would benefit from the bill,
and added that all other pricing controversies in Cook Inlet
have been settled.
Co-Chair Larson questioned if the Power Cost Equalization
(PCE) subsidy would be affected by the proposed increase.
Mr. Tillinghast stated that PCE is required to fill the gap
between power cost expense between the urban centers and
rural areas.
(Tape Change, HFC 93 -34, Side 1).
Representative Brown noted for the record that her husband
is one of the five members of the Alaska Public Utilities
Commission (APUC). She stressed that the proposed
legislation has no effect on PCE until authority is
clarified to amend the floor.
Representative Grussendorf asked where the State's share of
the federal royalty would be distributed. Mr. Tillinghast
replied twenty-five percent would go to the Permanent Fund
and seventy-five percent would be allocated to the general
fund. Representative Grussendorf pointed out that Chugach
is asking that the Permanent Fund be reduced in order that
11
sixty percent of their consumers receive benefit. Mr.
Tillinghast stated that Chugach is a cooperative and does
not pass dividends on to share holders. Cost of direct
royalties will be passed on to the consumers.
Representative Grussendorf emphasized that the PCE program
was a price agreed upon to allow certain areas of the State
to benefit from hydroelectric projects.
Representative Hanley stated that the policy call made in
1986 states that in State leases, the contract price is the
price. The Legislature passed legislation in 1986 which
said that the State will accept the contract price on State
leases. Representative Hanley further discussed contracts
and royalty agreement made with the State.
Co-Chair MacLean questioned the 1959 retroactive date. Mr.
Tillinghast stated that the audit period in controversy was
1984 -1987, although there is a six year statute of
limitation. The federal government can not legally go back
to 1959 because of the existing statute. The 1959 date was
included because it was the date of statehood at which time
revenue sharing began.
Co-Chair MacLean asked how Chugach Electric could legally
charge for utilities which have not been used. Mr.
Tillinghast stated the decision will be made by APUC. DNR
proclaimed in 1985, that it is bad public policy to access
royalties retroactively against utilities.
Co-Chair MacLean inquired if the legislation would be
isolated to the use of natural gas for utilities. Mr.
Tillinghast stated yes. DNR took great care in assuring
that the legislation in 1986 was confined to sales for gas
and electric utilities. Representative Brown pointed out
that DNR did not strongly support the initial legislation.
She stated that the law does not clarify who qualifies as a
gas utility. Representative Brown noted her concern that
the legislation addresses gas pipelines. She suggested the
word "customer", primarily being residential, versus the
word "consumer", primarily interpreted as a pipeline
customer, should be more clearly defined. Her concern would
be to limit the legislation to current production and have
some protection from the granting of an unfair competitive
advantage.
Co-Chair MacLean expressed concern with the federal
government establishing the value of the leases. Mr.
Tillinghast explained that the bill only deals with federal
leases. The feds will be establishing the value because it
is their land.
Representative Brown provided the Committee with Amendment
12
Tillinghast stated that Chugach Electric has endorsed
Representative Brown's recommendation to confine the
legislation either to Cook Inlet or to fields that are
currently in production. DNR is currently trying to get the
federal government to retroactively access royalties by
disregarding the contract price. Mr. Tillinghast said if
the amendments proposed by Representative Brown were
adopted, they will kill the bill. Representative Brown
reiterated her concern that the entity benefitting from the
legislation be residential. Mr. Tillinghast recommended the
removal of "gas utility" language from the bill leaving the
remaining standards. Representative Brown agreed noting her
concern with "gas utility" and who can become one.
Mr. Tillinghast commented that the legislation does not make
policy but rather extends the 1986 decisions to include
something overlooked. If the bill does not pass, Golden
Valley Electric Company will be asked to pay a surcharge for
the years in which they did not buy electricity.
Representative Brown asked how the surcharge would be
distributed. Mr. Tillinghast added that decision would be
decided by APUC.
RAGA ELIM, SPECIAL ASSISTANT TO COMMISSIONER OLDS,
DEPARTMENT OF NATURAL RESOURCES, testified that DNR's
position on HB 116 is neutral. He added that DNR has
deferred to the Legislature to decide if the policy should
be changed. He added that the case addressed is currently
worth $10.5 million dollars with interest accruing.
Co-Chair Larson placed HB 116 in a subcommittee to be
Chaired by Representative Parnell with members
Representatives Hanley, MacLean and Brown. HB 116 was HELD
in Committee for further discussion.
ADJOURNMENT
The meeting adjourned at 3:05 P.M.
13
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