Legislature(1997 - 1998)
05/01/1998 02:25 PM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 1, 1998
2:25 P.M.
TAPE HFC 98 - 140, Side 1
TAPE HFC 98 - 140, Side 2
CALL TO ORDER
Co-Chair Gene Therriault called the House Finance Committee
meeting to order at 2:25 p.m.
PRESENT
Co-Chair Hanley Representative Kelly
Co-Chair Therriault Representative Kohring
Representative Davies Representative Martin
Representative Davis Representative Moses
Representative Grussendorf Representative Mulder
Representative Foster was absent from the meeting.
ALSO PRESENT
Kevin Banks, Division of Oil and Gas, Department of Natural
Resources; Chris Stockard, Captain, Department of Public
Safety; Jeff Cook, Vice President External Affairs, Mapco,
Fairbanks; James Hornaday, Staff, Representative Kott,
Patrick Lounsbury, Staff, Representative James.
SUMMARY
HB 81 "An Act relating to the members of the board and
staff of the Alaska Permanent Fund Corporation."
CSHB 81 (FIN) was REPORTED out of Committee with
"no recommendation" and with a zero fiscal note by
the House Finance Committee for the Alaska
Permanent Fund Corporation and zero fiscal note by
the Office of the Governor, 2/12/98.
HB 405 "An Act relating to failing to stop a vehicle when
directed to do so by a peace officer."
CSHB 405 (FIN) was REPORTED out of Committee with
"no recommendation" and with four fiscal impact
notes, one by the Department of Corrections, one
by the Alaska Court System, one by the Department
of Administration, and one by the Department of
Law dated 3/9/98.
HB 469 "An Act approving the sale of Prudhoe Bay Unit
royalty oil by the State of Alaska to Mapco Alaska
Petroleum, Inc.; and providing for an effective
date."
HB 469 was REPORTED out of Committee with "no
recommendation" and with a fiscal impact note by
the Department of Natural Resources.
HJR 50 Proposing amendments to the Constitution of the
State of Alaska relating to a public corporation
established to manage the permanent fund.
HJR 50 was HELD in Committee for further
consideration.
HOUSE BILL NO. 469
"An Act approving the sale of Prudhoe Bay Unit royalty
oil by the State of Alaska to Mapco Alaska Petroleum,
Inc.; and providing for an effective date."
KEVIN BANKS, DIVISION OF OIL AND GAS, DEPARTMENT OF NATURAL
RESOURCES explained that HB 469 would ratify a five-year
contract that would begin on December 1, 1998 with MAPCO.
The expiration date would coincide with a long-term contract
that MAPCO has with the state of Alaska. The contract also
has a security clause. MAPCO has agreed to put a letter of
credit equal to 75 days worth of oil. This would cover the
state of Alaska in the case that MAPCO defaults in the
contract. MAPCO is required to process at least 80 percent
of the oil in the state of Alaska. MAPCO has indicated that
they would process most of the oil. There is also a local
hire provision in the contract. Residents are defined in
the same manner as in the North Star lease agreement.
Mr. Banks explained that the price is based on the value
calculated by the producers. The producers base their price
on the market value of Alaska North Slope (ANS) oil,
transportation chargers for tankers, tariffs for the
pipeline, and adjustments for quality. MAPCO would pay this
price plus .15 cents.
Co-Chair Therriault noted that the State established this
pricing structure in the Amerada Hess settlement.
In response to a question by Representative Davies, Mr.
Banks explained that the additional .15 cents was added to
assure that the value to the state of Alaska is considered
first. He observed that the state of Alaska is taking a
portion of its oil and selling it in the same market. There
is concern that the State could reduce the value of royalty
oil through the sale of oil. He explained how the sale of
oil by the state of Alaska could shift the balance of oil
distribution between the West Coast and the Far East or mid
United States.
Representative Davies noted that MAPCO can increase or
decrease the monthly nomination. MAPCO would have to stay
below the maximum quantity authorized per year. Mr. Banks
noted that there is a reservation fee if MAPCO fails to take
the maximum quantity in any given month. The state of
Alaska is committed to a certain amount per month. He
clarified that MAPCO would not be allowed to exceed 33
percent in any month. The nomination occurs 3 months before
production begins.
In response to a question by Representative Martin, Mr.
Banks pointed out that the State is confined in its ability
to offer competitive bids. He observed that a substantial
amount of oil is going to MAPCO under a contract that was
awarded in the late 70's. At the end of the contract the
State hopes to be free to begin competitive bidding without
any potential customers having a significant advantage over
another. Both contracts would end in the year 2003.
Representative Martin questioned the criteria that would be
used to ensure local hire. Mr. Banks observed that MAPCO's
state contract provided them with the stability of supply
needed to start a refinery.
Representative Martin asked why the contract would only add
.15 cent a barrel. He maintained that the price is too low.
He suggested that in-state refineries have the advantage of
not paying shipping costs. Mr. Banks maintained that the
price at pump station one represents an amount close to
market value. The additional .15 cents provides a cushion.
Co-Chair Therriault pointed out that no monetary value is
applied to local hire. Mr. Banks noted that the commercial
terms of the contract were kept separate from other
potential benefits.
Representative Kelly referred to the definition of "royalty
value" on page 2, line 17. He observed that MAPCO is paying
what the State could get for the oil plus .15 cents.
JEFF COOK, VICE PRESIDENT EXTERNAL AFFAIRS, MAPCO, FAIRBANKS
spoke in support of the legislation. He noted that the oil
will be refined into jet fuel and diesel. He stressed that
MAPCO has hired locally. He noted that the Alaska Royalty
Oil and Gas Advisory Board took testimony on the MAPCO
contract. The Board approved the contract unanimously. He
emphasized that they pay the fair market value and the
tariff cost to Fairbanks.
Representative Kelly asked if MAPCO has any other sources of
oil. Mr. Cook observed that MAPCO purchases oil from the
state of Alaska and Phillips Oil. He noted that MAPCO pays
less to the Phillips Oil company than it pays to the state
of Alaska.
Representative Martin maintained that cost factors are not
the same. Mr. Cook observed that MAPCO did not receive any
tax breaks to offset their $70 million dollar expansion. He
pointed out that the same expansion would cost approximately
$45 million dollars if it were built in Tennessee.
Co-Chair Therriault noted that there is a zero fiscal note.
Representative Kohring stated that he is concerned with the
issue of competition.
Representative Kelly MOVED to report HB 469 out of Committee
with the accompanying fiscal note. There being NO
OBJECTION, it was so ordered.
HB 469 was REPORTED out of Committee with "no
recommendation" and with a fiscal impact note by the
Department of Natural Resources.
HOUSE BILL NO. 405
"An Act relating to failing to stop a vehicle when
directed to do so by a peace officer."
Co-Chair Therriault MOVED to ADOPT Amendment 1 (copy on
file).
JAMES HORNADAY, STAFF, REPRESENTATIVE KOTT stated that the
sponsor supports the amendment. He added that
representatives of the Anchorage Police Department and the
Department of Public Safety also support the amendment. He
explained that the amendment would add new language: "A
person commits the offense of failure to stop at the
direction of a peace officer in the first degree if the
person violates (b) of this section and during the
commission of that offense, the person violates a traffic
law or commits another crime." The amendment also provides
that "crime" has the meaning given in AS 11.81.900; and
"traffic law" has the meaning given in AS 28.15.261.
Co-Chair Therriault observed that there are approximately
330 of these types of violations on a yearly basis. The
Department of Law indicated that that they would try to
prosecute these offenses as felonies. He observed that the
Department of Law could prosecute with the use discretion in
order to reduce the fiscal impact. The Anchorage Police
Department supports full prosecution of violations.
CHRIS STOCKARD, CAPTAIN, DEPARTMENT OF PUBLIC SAFETY
explained that it is currently a class B misdemeanor to
elude a police officer. The legislation increases the
penalty and creates a new felony category for more serious
violations. There are approximately 20 states that have
made fleeing a police office a felony offense.
There being NO OBJECTION, Amendment 1 was adopted.
(Tape Change, HFC 98 - 140, Side 2)
In response to a question by Representative Grussendorf, Mr.
Stockard clarified that a person must knowingly elude a
police officer. The police officer's vehicle must be marked
appropriately so that a reasonable person would recognize it
as a law enforcement vehicle. If the officer is not
operating a vehicle they must be in a clearly recognizable
uniform.
Mr. Hornaday pointed out that there is a definition of
"knowingly" in AS 81.900.
Representative Mulder asked if the legislation would act as
a deterrent.
Mr. Stockard observed that the Anchorage Police Department
feels that it would be a deterrent. The Department of
Public Safety is less certain. He explained that officers
would include information about the law in their school
presentation.
Co-Chair Therriault asked if forfeiture of the vehicle was
considered as a deterrent. Mr. Hornaday stressed that
forfeiture is difficult to enforce.
Representative Davies asked if persons in an emergency
situation would be charged with eluding a police officer.
Mr. Stockard emphasized that generally persons in an
emergency situation will stop because they want the police
to assist them.
Representative Grussendorf spoke in support of the
legislation.
Representative Mulder MOVED to report CSHB 405 (FIN) out of
Committee with the accompanying fiscal notes.
CSHB 405 (FIN) was REPORTED out of Committee with "no
recommendation" and with four fiscal impact notes, one by
the Department of Corrections, one by the Alaska Court
System, one by the Department of Administration, and one by
the Department of Law dated 3/9/98.
HOUSE BILL NO. 81
"An Act relating to the members of the board and staff
of the Alaska Permanent Fund Corporation."
Co-Chair Therriault noted that the Committee had take
previous action on HB 81.
Representative Davies MOVED to ADOPT Amendment 4 (copy on
file). He observed that the amendment would replace
section 4 with: "A removal by the governor must be in
writing and must state the reason for the removal. The
removal should not be based on the general decision to have
the governor's own appointed member on the board. The
governor may not request a member of the board to submit a
resignation."
Representative Grussendorf noted that an individual may wish
to resign as opposed to receiving public humiliation.
Co-Chair Therriault expressed concern that a governor could
ask for a resignation without cause.
Representative G. Davis MOVED to delete "should" and add
"may". There being NO OBJECTION, it was so ordered.
Representative Kelly questioned if "the governor may not
request a member of the board to submit a resignation"
should also be deleted.
PATRICK LOUNSBURY, STAFF, REPRESENTATIVE JAMES spoke in
opposition to the amendment. He maintained that the
language is still loose.
Representative Martin spoke against the amendment.
Representative Mulder spoke in support of the amendment.
Representative Grussendorf MOVED to amend the amendment by
deleting: "The governor may not request a member of the
board to submit a resignation." There being NO OBJECTION,
it was so ordered.
A roll call vote was taken on the motion.
IN FAVOR: Kelly, Kohring, Mulder, Davies, Davis, Grussendorf
OPPOSED: Martin, Moses, Therriault
Co-Chair Hanley and Representative Foster were absent for
the vote.
The MOTION PASSED (6-3).
Representative Mulder noted that the fiscal note would no
longer pertain to the legislation. He MOVED to report CSHB
81 (FIN) out of Committee with a new zero fiscal note. Mr.
Lounsbury agreed that the fiscal note would be zero. There
being NO OBJECTION, it was so ordered.
Mr. Lounsbury stated that everyone supports the legislation
with the exception of the current Administration.
CSHB 81 (FIN) was REPORTED out of Committee with "no
recommendation" and with a zero fiscal note by the House
Finance Committee for the Alaska Permanent Fund Corporation
and zero fiscal note by the Office of the Governor, 2/12/98.
HOUSE JOINT RESOLUTION NO. 50
Proposing amendments to the Constitution of the State
of Alaska relating to a public corporation established
to manage the permanent fund.
Co-Chair Therriault questioned if the language should be in
a separate section of the Constitution.
Mr. Lounsbury stated that Article III, Section 26 would not
be the proper place for HJR 50.
HJR 50 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 3:45 p.m.
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