Legislature(2005 - 2006)CAPITOL 120
07/24/2006 10:30 AM House JUDICIARY
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| HJR301 | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| *+ | HJR301 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
HOUSE JUDICIARY STANDING COMMITTEE
July 24, 2006
10:43 a.m.
MEMBERS PRESENT
Representative Lesil McGuire, Chair
Representative John Coghill
Representative Pete Kott
Representative Peggy Wilson
Representative Les Gara
Representative Max Gruenberg
MEMBERS ABSENT
Representative Tom Anderson
COMMITTEE CALENDAR
HOUSE JOINT RESOLUTION NO. 301
Proposing amendments to the Constitution of the State of Alaska
requiring legislative approval of certain state contracts for
the development of natural gas resources.
- HEARD AND HELD
PREVIOUS COMMITTEE ACTION
BILL: HJR301
SHORT TITLE: CONST. AM: LEG. APPROVAL OF GAS CONTRACTS
SPONSOR(S): JUDICIARY
07/13/06 (H) READ THE FIRST TIME - REFERRALS
07/13/06 (H) JUD, FIN
07/24/06 (H) JUD AT 10:30 AM CAPITOL 120
WITNESS REGISTER
JAMES CLARK, Chief of Staff
Office of the Governor
Juneau, Alaska
POSITION STATEMENT: During discussion of HJR 301, provided
comments and responded to questions.
ACTION NARRATIVE
CHAIR LESIL McGUIRE called the House Judiciary Standing
Committee meeting to order at 10:43:12 AM. Representatives
McGuire, Gara, Wilson, Gruenberg, and Kott were present at the
call to order. Representative Coghill arrived as the meeting
was in progress.
HJR 301 - CONST. AM: LEG. APPROVAL OF GAS CONTRACTS
10:43:28 AM
CHAIR McGUIRE announced that the only order of business would be
HOUSE JOINT RESOLUTION NO. 301, Proposing amendments to the
Constitution of the State of Alaska requiring legislative
approval of certain state contracts for the development of
natural gas resources.
CHAIR McGUIRE indicated that several members of the committee
wish to clarify that the legislature has a role in any contract
coming forward to build a natural gas pipeline, and one proposal
to ensure that that clarification occurs has come in the form of
HJR 301. The goal of this resolution is to make it eminently
clear that the administration respects the role of the
legislature and the efforts it has put into reviewing the
proposed Alaska Stranded Gas Fiscal Contract ("ASGF Contract")
on behalf of constituents.
REPRESENTATIVE GRUENBERG offered that the goal of HJR 301 is to
ensure that the legislature's constitutional role "in this" is
recognized. He added, "I think we all favor a good gas pipeline
- it's important for the state - but the balance of power
requires that both the legislative branch and the governor
participate in that effort."
10:45:34 AM
JAMES CLARK, Chief of Staff, Office of the Governor, relayed
that he has been the chief negotiator in the ASGF Contract
[discussions], and indicated that the administration takes
seriously the point raised by the committee as well as other
legislators; the administration respects the role of the
legislature, is very cognizant of it, and has been proceeding
all along under the notion that the legislature's role is
critical. He added:
We've said over and again that the [amendments to the
Alaska Stranded Gas Development Act] needed to be
passed to give us the legislative authorization to go
forward. There's just no doubt we've told people over
and [over] again that we don't have the authority with
respect to fiscal certainty, and we've made that clear
to the producers, the public, and to the legislature
that we need that authority from the legislature. So
we were quite surprised by your legislative counsel's
opinion that there was a separation of powers issue
such that we didn't have to come to the legislature.
We of course rely on our own attorney general for what
the law is in this area, ... [and will provide to the
committee] a letter from the attorney general which I
believe makes it absolutely clear that we see the law
as requiring legislative approval and ratification.
And the governor is aware of the attorney general's
opinion as is stated in the last sentence of the first
paragraph of the letter and in the ... penultimate
paragraph of the letter. We - the attorney general
and I - have been participating in these meetings and
made clear to the governor that the law requires, as
he thought it did, ... [the] legislature's role in
this.
And so when we say we're going to follow the law, we
believe the law requires that the legislature pass the
amendments, which we'd urge you to pass as soon as
possible, and ratify the contract, which we believe is
in the interest of the state given what the gas line
will do for us and what will happen to us in terms of
revenue sources if there is no gas line. So with the
notion of ... at least our internal analysis showing
[the Trans-Alaska Pipeline System (TAPS)] running dry
by 2030, and the lead time it takes to put in
infrastructure of this type, we would urge us all to
focus on the amendments and getting your approval of
those amendments and moving on to ratification.
MR. CLARK concluded by saying that what is contained in the
aforementioned letter by the attorney general is the working
understanding of the administration "since day one."
10:49:39 AM
REPRESENTATIVE GRUENBERG said he has reviewed the attorney
general's letter, he agrees with Mr. Clark's summation of it,
and he takes the governor at his word. He asked that the letter
be disseminated to other members of the legislature, the press,
and the public. He went on to say, "And with that I don't see a
need for the resolution."
REPRESENTATIVE GARA said:
Let's be clear about this, Mr. Clark, because this
answer's a long time coming. Are you committing to us
that if the legislature says, "No, we want a better
contract," if a court says, "You don't need
legislative approval," so that part is irrelevant, if
we give you the amendments you want, the law changes
you want, so that you can sign this contract - so if
those three things happen, we give you the amendments
you want, the legislature thinks the contract doesn't
protect the people of the state of Alaska, and a court
says you don't need legislative approval - will the
governor commit not to sign a contract that we have
rejected?
MR. CLARK replied:
We believe that this contract will go forward to the
[Alaska Supreme Court], and when it does - as we say
in the letter - we don't want legislative approval or
the lack thereof to be one of the issues that comes up
before the [Alaska Supreme Court]. We have a
different view of ... how separation [of] powers works
in this case than your legislative counsel does, so we
are not going to argue about the legislature having a
role here. ... Again, we believe that having your
approval will help us before the [Alaska Supreme
Court].
So what have we been doing? Actions speak louder than
words, and we have called two special sessions. If we
didn't think we needed your approval we wouldn't have
done that. We wouldn't have told everybody at every
public meeting that we don't have authority under the
[Alaska Stranded Gas Development Act] to pass, for
example, the [production profits tax (PPT)] or grant
fiscal certainty on oil without the legislature.
We've been very, very public in saying what we think
the legislative role is, which is consistent with the
letter - as Representative Gruenberg has said - and
we're just going to continue to plow that course;
we're going to do everything we can to work with you
to persuade you that we have heard the public. ...
We have been out going back with our third phase of
our public process, and we have held hearings all over
the state ... to inform people of areas where we
understand the legislature wants changes. One of
those areas is ... the need to [have] something with
respect to fiscal certainty. This committee, before
the ... [last special session] ended, had a committee
substitute before it that spoke to those issues. Of
course we're going to work with you and the public to
try to get a resolution so we can move on with this.
I don't think that our administration has done enough
to explain to the public the two futures we have, one
without a gas line and what happens to state revenues
when we hit 2030 and the TAPS grinds to halt; imagine
if you will what Alaska [will] be like without [the]
TAPS and what would happen if we didn't have those
revenues. ... Last week the TAPS put out [638,000]
barrels of oil ... [and] it's going down at 6 percent
a year; we need to replace that revenue.
It is just the high cost of oil that's masking the
decline that's going on, and any responsible official
that sits in the governor's office and sees what's
going to happen to our revenue over time and what we
need by way of a budget to run this state fairly and
equitable for the people of the state would just plead
with you to focus on getting a gas line for the state,
and if we need to make changes to make that work,
we'll work with you to make those changes. You've
been responsible, we've been responsible, but Alaska
has to have a gas line; that will extend the life of
[the] TAPS for 20 years, give us a chance to be able
to do the research and development necessary to reach
the heavy oil that we think is about 13 billion
barrels (indisc.) Prudhoe Bay, [and] we can reach the
gas necessary to keep that gas line alive, we think,
with the potential for gas hydrates for 50-100 years.
So we need the gas line.
10:55:11 AM
CHAIR McGUIRE noted that the unique aspect of the ASGF Contract
is that the governor and the administration decided to negotiate
it under the Alaska Stranded Gas Development Act, which has the
framework to provide certain incentives, Payments in Lieu of
Taxes (PILT), and other things that are traditionally a
legislative function. So the concern, she surmised, is that
because the packet of legislation placed before the legislature
will allow the administration to negotiate a contract under the
terms of the Alaska Stranded Gas Development Act, the ASGF
Contract could be disapproved by the legislature and yet the
governor or administration could still go forward with it
despite that disapproval. Ordinarily the governor enters into
many contracts, but the ASGF Contract is a very specific and
unique contract - the magnitude of it, the fact that it provides
for PILT and that takes away the legislature's historic powers -
and this has raised the concern of the House Judiciary Standing
Committee. She added:
We just wanted it clear on the record ... that our
work here is important and that it will be recognized.
Certainly ... there are members that have felt ...
[that] digging in, rolling up their sleeves, and
working on the [Alaska Stranded Gas Development Act]
amendments wouldn't really be worth their time if at
the end of the day their role wasn't envisioned.
MR. CLARK indicated that the administration believes that having
legislative approval is the law, and that the administration's
position before the Alaska Supreme Court will be enhanced by
having that approval. He said he is not sure why Legislative
Legal and Research Services has a different opinion on this
issue.
10:57:51 AM
REPRESENTATIVE GRUENBERG said he agrees with Mr. Clark's
comments regarding the pipeline and the need to continue [to
pursue] a solid and foreseeable [source of revenue] for the
state. However, he remarked, he has seen circumstances wherein
a governor has signed an agreement despite legislative
disapproval, and that precedent disturbs him and was the impetus
for having HJR 301 drafted. He offered his belief that AS
43.82.435 requires legislative authorization, and that by
signing that provision into law the governor was agreeing that
any contract developed under the Alaska Stranded Gas Development
Act must be brought to the legislature and that the Act binds or
estops the executive branch from taking a position contrary to
that statute. He said he is glad to see that the administration
is taking that view as well, that the governor will defer to the
legislature.
REPRESENTATIVE KOTT expressed doubt that the aforementioned
contract that was signed without legislative approval was of the
same magnitude as the ASGF Contract. He said that in viewing
the attorney general's letter, he agrees with Representative
Gruenberg that HJR 301 is no longer necessary, though that is
not to say that perhaps that issue shouldn't be taken up again
at a later point in time. He said he has no qualms about
believing what the administration has said via that letter.
Furthermore, should the administration act contrary to the
position stated in that letter, the legislature still has
recourse via the filing of an injunction through Legislative
Council.
11:02:28 AM
REPRESENTATIVE WILSON said she agrees with Representatives
Gruenberg and Kott. She noted that going forward with the ASGF
Contract will require funds, and the legislature has control
over that. With regard to the administration, she added, "I
trust what they say is actually what they will do."
MR. CLARK concurred on the issue of funds.
REPRESENTATIVE GARA said:
I know it's a complex question, but this is the one I
want the answer to: Assume the legislature says,
"No," assume the courts say, "You don't need
legislative approval," and assume we've now given you
all the amendments you need to make this contract "a
go" - the governor's sitting there at his desk and
he's deciding whether or not to sign this contract
anyway now that he realizes legislative approval's not
required - will the governor commit to not sign that
contract, and will the governor commit, then, to
negotiate and try [to] ... correct the problems the
legislature's identified. That's the question. You
may have intended to answer that, but I heard some
wiggle room.
MR. CLARK stated:
What you're talking about is inconsistent with
Article IX, Section 4, [of the Alaska State
Constitution] which requires a legislative act to
provide exemptions necessary ... to give us the
authority for fiscal certainty. Fiscal certainty is
one of the key elements of the deal, so ... your
hypothetical doesn't hold water; ... it is not a
construct that could occur, just based upon a reading
of Article IX, Section 4. ... We need your approval,
we want your approval, and ... we're very anxious for
this committee to move forward on the [Alaska Stranded
Gas Development Act] amendment package and other
matters that are pertinent to this legislation. ...
If we don't have a legislative action [in] the form of
an exemption, we ... can't get fiscal [certainty], and
without fiscal certainty we don't have a contract. So
in some form or other we have got to come up with an
amendment that you approve [of] that allows for fiscal
certainty; that's what we will take to the [Alaska
Supreme Court] as our rationale for our justification
for getting fiscal certainty. Now, that's not going
to be the end of the question before the [Alaska
Supreme Court], but if there is ... nothing that
amounts to legislative approval for fiscal certainty,
we see ourselves in a very difficult (indisc).
11:08:05 AM
CHAIR McGUIRE surmised that Representative Gara is merely
pointing out that the courts have surprised the legislature in
the past and that the court system is a separate branch of
government. Given those points, just suppose the Alaska Supreme
Court says that the legislature does not have a constitutionally
mandated role with regard to the ASGF Contract. Will the
governor go ahead and sign it anyway?
MR. CLARK said that hypothetical is so remote and so at odds
with how the administration is reading the law that he does not
want to continue discussing the issue. He stated that if the
legislature doesn't move forward with the Alaska Stranded Gas
Development Act amendments, the administration won't sign the
ASGF Contract. He added:
If the [Alaska Supreme Court] were to come up with
something shocking and completely at odds, obviously
we'd sit down and talk with you and figure out what
we'd do; we are not unmindful of the important role
the legislature plays here under any circumstances
because of what Representative Wilson brought up,
namely the power of the purse strings.
CHAIR McGUIRE relayed that many members of the legislature are
trained to think about the unexpected, and so if the goal is to
recognize the role and the power of the legislature, one has to
anticipate that there might be many roadblocks along the way
[towards building a gas pipeline], and so the questions being
asked pertain to how far the administration is willing to go [to
ensure that the legislature has a role]. She surmised that the
administration is willing to only as far as the aforementioned
attorney general's letter and does not want to speak further on
this issue, regardless that the questions are fair ones.
REPRESENTATIVE GRUENBERG noted that the legislature disapproved
of the Exxon Valdez oil spill settlement but the governor signed
it anyway. The issue of whether legislative approval is
constitutional will apply to contracts other than the ASGF
Contract, he remarked, but he is simply attempting to ensure,
via HJR 301, that the ASGF Contract doesn't get signed without
legislative approval regardless of who the next governor is or
who the next year's legislators will be. Representative
Gruenberg said he appreciates Representative Kott's comments
pointing out that the courts are there if necessary. He added:
I would anticipate that if this governor were to sign
the contract without legislative approval, that any
lawsuit would involve the legislature as a party
weighing in on just this issue. And in the court of
public opinion I have no doubt that the public wants
the balance of power to be in full play here.
11:14:43 AM
MR. CLARK predicted that if the legislature were to agree to "an
amendment package" and agree to ratify the contract that came
out of that amendment package - and assuming that the
administration had successfully negotiated any changes with the
producers - the contract would be signed within 60 days of that.
And currently one could then bring a lawsuit within 120 days
regarding the constitutionality of "the Act," and then there
will be a period of a year in which the Alaska Supreme Court
could [make a determination] while the administration goes
forward with the planning phase of the [project]. In such a
lawsuit, if the Alaska Supreme Court decides that the ASGF
Contract violates the Alaska State Constitution, it will also
outline why. At that point the administration, the legislature,
and the producers can then review that opinion and decide what
steps to take next. Getting a gas line is so critical to the
state, he opined, that it would be irresponsible to lose the
chance to get a gas line contract in place. With that in mind,
he surmised, the administrative branch and the legislative
branch will have to consult with each other if there is an
adverse ruling from the Alaska Supreme Court about how to
proceed.
REPRESENTATIVE GARA again repeated his question.
MR. CLARK reiterated his responses.
CHAIR McGUIRE offered her observation that the administration
has answered that question as much as it is ever going to. She
added: "Turning our eye toward the [Alaska Stranded Gas
Development Act] amendments, ... I think that's where it will be
incumbent upon this committee to see what type of amendments we
want to approve ..., what that contract is going to look like,
... [so as to ensure] that what comes out of here reflects what
we envision ... as part of a contract."
11:23:19 AM
REPRESENTATIVE KOTT pointed out that if Representative Gara's
hypothetical example were to play out - the legislature rejects
the contract, the legislature's authority to approve a contract
is challenged and shot down, and the governor signs the contract
without legislative approval - nothing would prevent the
legislature from calling itself into special session and taking
this proposed constitutional amendment up at that time in order
to put the issue before the voters.
CHAIR McGUIRE mentioned that Representative Gruenberg has
received and distributed a series of memorandums from
Legislative Legal and Research Services regarding impairment of
contracts, and that the legislature could call itself into
special session with the goal of repealing the entire Alaska
Stranded Gas Development Act, though doing the latter could
raise the question of whether [that] legislative action was in
fact an impairment of a contract that had [already] been
negotiated.
REPRESENTATIVE GARA yet again asked: "If the legislature says
no, and a court said you didn't need our approval, will you
agree not to go ahead with the contract?"
MR. CLARK reiterated that the administration would first need to
see any such court opinion and then the administration would
consult with the legislature because there is no way to avoid
working with the legislature on this contract and any resulting
project. He concluded by saying that if the Alaska Supreme
Court stipulates any constraints regarding how the
administration is to work with the legislature on these matters,
then the administration will have to follow the law.
Acknowledging Representative Kott's comments regarding
introducing a constitutional amendment later if it is deemed
necessary, Mr. Clark expressed a preference for dealing with
such an issue only if and when it actually arises.
[HJR 301 was held over.]
[Following was a brief discussion regarding how the committee
would be proceeding on a different bill.]
ADJOURNMENT
There being no further business before the committee, the House
Judiciary Standing Committee meeting was adjourned at 11:29 a.m.
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