Legislature(1993 - 1994)

01/28/1994 12:30 PM House O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
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              HOUSE SPECIAL COMMITTEE ON OIL & GAS                             
                        January 28, 1994                                       
                           12:30 p.m.                                          
                                                                               
                                                                               
  MEMBERS PRESENT                                                              
                                                                               
  Representative Joe Green, Chairman                                           
  Representative Pete Kott, Vice Chairman                                      
  Representative Harley Olberg                                                 
  Representative Gary Davis                                                    
  Representative Sitton                                                        
  Representative Sanders                                                       
                                                                               
  MEMBERS ABSENT                                                               
                                                                               
  Representative Jerry Mackie                                                  
                                                                               
  COMMITTEE CALENDAR                                                           
                                                                               
  Briefing on Superior Court's Stay of Lease Sale 78                           
                                                                               
  WITNESS REGISTER                                                             
                                                                               
  RAGA ELIM                                                                    
  Special Staff Assistant to the Governor                                      
  Capitol Building, Third Floor                                                
  Juneau, Alaska  99811                                                        
  Phone:  465-3500                                                             
                                                                               
  KYLE PARKER                                                                  
  Assistant Attorney General                                                   
  Civil Division                                                               
  1031 West Fourth Avenue, Suite 200                                           
  Anchorage, Alaska  99501-1994                                                
  Phone:  269-5100                                                             
                                                                               
  JAMES EASON, Director                                                        
  Division of Oil & Gas                                                        
  Department of Natural Resources                                              
  3601 C Street, Suite 1380                                                    
  Anchorage, Alaska  99510-0734                                                
  Phone: 762-2547                                                              
                                                                               
  BARBARA FULLMER                                                              
  Assistant Attorney General                                                   
  Civil Division                                                               
  1031 West Fourth Avenue, Suite 200                                           
  Anchorage, Alaska  99501-1994                                                
  Phone: 269-5100                                                              
                                                                               
  ACTION NARRATIVE                                                             
                                                                               
  TAPE 94-2, SIDE A                                                            
  Number 002                                                                   
                                                                               
  CHAIRMAN JOE GREEN called the meeting to order at 12:33 p.m.                 
                                                                               
  Number 011                                                                   
                                                                               
  CHAIRMAN GREEN stated that as he understood the issues,                      
  several environmental, fishing and other interests had sued                  
  the Department of Natural Resources Commissioner Harry Noah,                 
  for impermissible lack of consideration of various things,                   
  such as conflicts between oil and gas, the fisheries,                        
  subsistence use, environmental degradation, and water                        
  dependent/water related issues.  Chairman Green said that                    
  Judge Cranston had found that Commissioner Noah did have a                   
  best interest finding.  Judge Cranston then denied the stay                  
  of the best interest finding, but citing 6 AAC 80.040 (a),                   
  Judge Cranston decided that the Alaska Coastal Policy                        
  Council's administration of the Alaska Coastal Management                    
  Program must consider the following activities in                            
  preferential order: water dependent activities, water                        
  related activities, and those activities which are neither                   
  water dependent nor water related, but could not be                          
  performed from an inland location.  In addition, there were                  
  three other criteria.  One was that all reasonable and                       
  prudent steps have been taken to safeguard, and that there                   
  was no showing of a significant public need.  Chairman Green                 
  comented that Judge Cranston's decision upset him and it                     
  apparently upset the Governor.  He asked the Governor's                      
  office for an overview of what it is doing in response to                    
  the situation and that the Department of Law would give its                  
  position from a legal standpoint of what precedent may be                    
  established from this and what may happen to the efforts of                  
  the House Committee on Oil and Gas in their efforts to                       
  further the development of Alaska's resources.                               
                                                                               
  Number 045                                                                   
                                                                               
  RAGA ELIM, SPECIAL STAFF ASSISTANT TO THE GOVERNOR,                          
  expressed the concern of the Hickel administration about                     
  Judge Cranston's opinion, and how it may jeopardize the                      
  state leasing program.  He said that on January 25, 1994, in                 
  response to the opinion, the Governor asked Shelby Stastny,                  
  Director of the Office of Management & Budget, to convene a                  
  group to look at the situation in a very quick fashion.  He                  
  stated that Mr. Stastny convened a cabinet-level discussion                  
  involving the Division of Governmental Coordination,                         
  Department of Environmental Conservation, Department of Fish                 
  & Game, Department of Natural Resources (DNR) and Department                 
  of Commerce and Economic Development.  He said the                           
  commissioners met on January 25 to figure out what to do.                    
  He indicated the commissioners have a tight time frame to                    
  work with the issue, and they want to work with the                          
  legislature on a fix, however they currently do not have a                   
  solution.  He stated that Shelby Stastny had indicated he                    
  wanted to come to the legislature with ideas and then                        
  collectively figure out how to proceed within one or two                     
  weeks.                                                                       
                                                                               
  Number 088                                                                   
                                                                               
  KYLE PARKER, ASSISTANT ATTORNEY GENERAL, CIVIL DIVISION,                     
  stated Judge Cranston's decision is indicative of a pattern                  
  that has been developing since the Alaska Supreme Court's                    
  initial decision on Lease Sale 50 in 1987, which                             
  specifically regarded and addressed the Title 38 best                        
  interest finding requirements.  Since that time, the supreme                 
  court has issued two opinions on Lease Sale 50, both                         
  remanding to DNR for additional findings on the best                         
  interest finding and the coastal consistency determination.                  
  He said the most recent decision was on Lease Sale 55, where                 
  they remanded to DNR for additional findings in regards to                   
  the best interest finding.  He stated that in early 1994,                    
  there was a decision in a mining case, Kutzarik Corp v.                      
  State of Alaska, where the Alaska Supreme Court again                        
  remanded for additional findings in regard to the best                       
  interest finding.  He said that Judge Cranston's recent                      
  decision is just a continuation of that trend of losses for                  
  the State of Alaska.  He indicated that Commissioner Noah                    
  and the other resource agencies are taking these decisions                   
  into consideration as they look for solutions, not only in                   
  the oil and gas sector, but in timber and mining, as well.                   
                                                                               
  Number 111                                                                   
                                                                               
  CHAIRMAN GREEN invited Representative Mike Navarre,                          
  Representative Gail Phillips and Senator Suzanne Little to                   
  sit at the committee table.  He announced to the                             
  teleconference network that the following committee members                  
  were present:  Representatives Gary Davis, Jerry Sanders,                    
  Pete Kott, and Joe Sitton.                                                   
                                                                               
  Number 124                                                                   
                                                                               
  REPRESENTATIVE GARY DAVIS  said it appears the courts are                    
  taking a stance toward certain directions and have since                     
  1987.  He stated that Kyle Parker had indicated that in 1987                 
  best interest findings and Coastal Management Plans were                     
  being scrutinized.  It is his understanding that in this                     
  case the basis for the stay was based on Coastal Management                  
  Plans.                                                                       
                                                                               
  KYLE PARKER said that was correct.                                           
                                                                               
  Number 133                                                                   
                                                                               
  REPRESENTATIVE DAVIS said the court assumed the state should                 
  have recognized that the Coastal Management Plan was an                      
  issue.  He asked if the state presented its defense related                  
  to the Coastal Management Plan.                                              
                                                                               
  Number 137                                                                   
                                                                               
  CHAIRMAN GREEN stated that question might be better directed                 
  to Jim Eason in Anchorage.  He said he knows the state has                   
  taken the same safeguards and precautions on Lease Sale 78                   
  as they have done on many other lease sales.  He indicated                   
  that it seems as if the courts are finding different                         
  problems, even though many prior lease sales have been held.                 
                                                                               
  Number 144                                                                   
                                                                               
  JAMES EASON, DIRECTOR OF THE DIVISION OF OIL & GAS (via                      
  Anchorage), said Lease Sale 78, as with all other sales in                   
  the coastal zone, had a conclusive consistence determination                 
  written and issued for it.  The Division of Oil & Gas, as                    
  the issuing agency, all other resource agencies, and the                     
  Division of Governmental Coordination reviewed the                           
  consistency determination and approved it.  He stated the                    
  consistency determination is a written document that looks                   
  at the proposed sale and the mitigating measures intended to                 
  be used, pairs those with the standards of the Coastal                       
  Management Plan and finds the proposed sale to be consistent                 
  based upon the selection of mitigating terms and conditions                  
  that are applied.  He indicated this procedure was                           
  consistent with what the state has been doing since the                      
  Coastal Management Program was adopted.  He said that as                     
  found in previous cases, the court is substituting its                       
  judgment for that, not only of the Division of Oil & Gas or                  
  DNR, but for the combined resource agencies and the Division                 
  of Government Coordination in their certification of                         
  consistency.                                                                 
                                                                               
  MR. EASON said the court is taking the opportunity to give                   
  the state administration additional responsibilities that he                 
  believes are simply not provided for in the law, and Judge                   
  Cranston's decision provides a very graphic example of that.                 
  He stated there were three points on which Judge Cranston                    
  found that the Division of Oil & Gas' consistency                            
  determinations failed.  One of them was Judge Cranston's                     
  belief that one cannot condition, with mitigating measures,                  
  a sale and find it to be consistent without understanding                    
  and knowing beforehand all of the activities that are likely                 
  to occur during the development of those leases that result                  
  from the sale.  He indicated it was obvious from his reading                 
  of the statutes and regulations that not only is that not a                  
  requirement, but it is also an impossibility because no one                  
  knows when a lease sale is conducted whether there will be                   
  many wells drilled, a thousand wells drilled, or whether                     
  there will be production or no production.  Yet the court                    
  seems to be telling the state the only way they can certify                  
  that the selected terms actually make a sale consistent with                 
  the Coastal Management Program, is to know all the things                    
  that will happen over the next ten or twenty years.  He said                 
  the state simply cannot do that and the courts are telling                   
  it that it must.                                                             
                                                                               
  Number 180                                                                   
                                                                               
  REPRESENTATIVE NAVARRE asked if the state had just run into                  
  a rash of antidevelopment judges with these cases.  He said                  
  that judging from the Governor's press release, the Governor                 
  feels this particular judge is not exercising his                            
  responsibility as a judge, and that he needs to understand                   
  what the judicial system's rule is when it comes to                          
  developing the state's resources.  He asked if that is the                   
  court's responsibility or if it is interpreting the laws and                 
  the responsibilities that DNR has under the law.                             
                                                                               
  Number 190                                                                   
                                                                               
  KYLE PARKER said he believes the courts have been eroding                    
  the discretion, both in regards to the best interests                        
  finding and the coastal consistency determination, that the                  
  legislature intended the commissioner of DNR and the                         
  different coordinating agencies to have.  He said the courts                 
  are not recognizing the intent, and one can look back at the                 
  legislative history and see where the legislature did intend                 
  to vest the directors and the commissioners in the                           
  administrative agencies with the discretion to determine                     
  what is in the best interest of the state, and whether a                     
  particular project is consistent with the Alaska Coastal                     
  Management Plan.                                                             
                                                                               
  Number 204                                                                   
                                                                               
  REPRESENTATIVE NAVARRE asked if the legislative intent was                   
  part of the state's argument in court.                                       
                                                                               
  Number 205                                                                   
                                                                               
  KYLE PARKER said legislative intent has been a part of the                   
  state's argument before the supreme court and the superior                   
  court in each oil and gas lease sale that has been heard.                    
                                                                               
  Number 208                                                                   
                                                                               
  REPRESENTATIVE NAVARRE responded that in fact the state has                  
  lost.  He asked if legislation has been introduced in the                    
  past to clarify the statutes with respect to what exactly                    
  the legislative intent is.  He said he didn't mind                           
  clarifying the statutes, and the legislature definitely                      
  needs to do that, but he was upset because he knows Judge                    
  Cranston and he's very well respected in the legal                           
  community.  He stated that he took exception to the remarks                  
  of the Governor in this particular case.  With respect to                    
  what is required by DNR, he thought there were mistakes made                 
  by DNR that actually lead to a number of the parties joining                 
  in the lawsuit.  He stated this loaded on to the case a                      
  number of people in opposition that would not have been                      
  involved had additional steps been taken by DNR to                           
  accommodate some of their concerns or at least spend a                       
  little more time in discussion with them.                                    
                                                                               
  Number 226                                                                   
                                                                               
  KYLE PARKER stated he did not believe there was any intent                   
  to direct any pointed spears at Judge Cranston.  He said                     
  what the state was looking to was the court not recognizing                  
  the discretion.  He stated that not since the initial Lease                  
  Sale 50 decision came down and the legislature amended Title                 
  38 to add Title 38.05.035(g), had the state seen legislation                 
  with respect to intent.  He said the legislation apparently                  
  did not go far enough.  He indicated the courts are still                    
  left wondering who has the discretion to make these                          
  decisions, so they have been substituting their judgment for                 
  that of the agencies.                                                        
                                                                               
  REPRESENTATIVE NAVARRE stated that while he agreed with Mr.                  
  Eason's assessment that one cannot possibly know everything                  
  that will take place in a lease sale, he thought one could                   
  know some things that would not be specifically allowed with                 
  respect to the development of those lease sales.  He                         
  commented that some of those activities could have been                      
  articulated better.                                                          
                                                                               
  Number 247                                                                   
                                                                               
  CHAIRMAN GREEN stated, based on his previous employment with                 
  DNR, he knows there are discretions that are exercised by                    
  DNR, quite often to the chagrin of the applicants, because                   
  they seem somewhat oppressive and overbearing with respect                   
  to things that have happened in the past.  He did not think                  
  the legislature will ever be able to legislate the specifics                 
  of what has to be or has not to be done in a lease sale;                     
  those specifics were going to have to stay at the discretion                 
  of the department.                                                           
                                                                               
  Number 259                                                                   
                                                                               
  REPRESENTATIVE NAVARRE agreed with the chairman in that                      
  there were good people within DNR.  He said that one has a                   
  right to get to the lease and to develop it in a certain                     
  fashion, but one sets oneself up on the other end when                       
  attempts are made at restrictions and one ends up with a                     
  lawsuit from the people who bought the leases.  He stated                    
  this has to be realized from the beginning.                                  
                                                                               
  Number 275                                                                   
                                                                               
  REPRESENTATIVE SANDERS asked Mr. Parker if, in his opinion,                  
  the rulings handed down since 1987, in any way indicate a                    
  relaxed attitude on the part of DNR with regards to                          
  preparation for these lease sales.                                           
                                                                               
  KYLE PARKER said that he did not believe so, and he thought                  
  it was the exact opposite.  He stated that since the Lease                   
  Sale 50 decision, the time and resources dedicated toward                    
  creating the best interest findings, as well as doing the                    
  coastal consistency determinations, has expanded.  He                        
  thought the staff of the Division of Oil & Gas and the .035                  
  staff (a staff dedicated toward working on best interest                     
  findings), have been working closely with the Department of                  
  Law prior to issuing the findings and determinations.  He                    
  believes that DNR is doing more now than they ever have.  He                 
  thought Jim Eason could probably speak even more to that.                    
                                                                               
  Number 292                                                                   
                                                                               
  JAMES EASON (via Anchorage) stated he believes the Division                  
  of Oil & Gas is doing a credible and good job.  He thought                   
  if one were to look at the decision more closely in Judge                    
  Cranston's case, one would see the problem that the state is                 
  running up against.  He said in that particular decision the                 
  judge looked at whether he thought the plaintiffs would                      
  ultimately prevail in their challenge to the state's best                    
  interest finding and that he agreed that they would not, in                  
  other words, the judge indicated he believes that ultimately                 
  the best interest finding for Lease Sale 78 will be upheld                   
  by the courts.  He said the judge could not find a reason to                 
  allow an injunction in the Lease Sale 78 case, but then the                  
  judge turned to the issue of whether or not the state's                      
  consistency determination was likely to sustain a challenge.                 
  He stated the state believed that the issue of whether or                    
  not the plaintiffs even had a right to raise the consistency                 
  determination was one that the plaintiffs had lost.  He said                 
  the plaintiffs had 30 days to challenge the consistency                      
  determination beyond the time that it was issued as a                        
  conclusive determination and the plaintiffs failed to do                     
  that.  As he recalled, it was about 15 days beyond the                       
  deadline the plaintiffs appealed the best interest finding,                  
  which was issued after the consistency determination.  He                    
  believes that Judge Cranston should not have allowed the                     
  plaintiffs to raise the issue.  He went on to say the court                  
  then based its injunction decision on arguments that were                    
  not raised by the plaintiffs in their brief or in their oral                 
  arguments.  He stated the state essentially found itself in                  
  a court where the judge allowed the plaintiffs to approach                   
  an appeal, which technically they should not have been                       
  allowed to do because of the time line, and then constructed                 
  the arguments, which were not the plaintiffs arguments,                      
  which the judge believed should have granted the injunction.                 
  He said that against those kind of odds, he certainly did                    
  not know how the state could defend.                                         
                                                                               
  Number 324                                                                   
                                                                               
  CHAIRMAN GREEN asked Mr. Parker if Mr. Eason's statement was                 
  his understanding from a legal point of view.                                
                                                                               
  Number 326                                                                   
                                                                               
  KYLE PARKER stated that Mr. Eason had articulated the                        
  situation the state faced with Lease Sale 78 very well.                      
                                                                               
  CHAIRMAN GREEN expressed that the situation posed a very                     
  serious threat.                                                              
                                                                               
  Number 329                                                                   
                                                                               
  REPRESENTATIVE NAVARRE asked whether or not Judge Cranston                   
  had ruled on the appeal issue.  He said the state had                        
  indicated that the plaintiffs did not appeal in time and the                 
  plaintiffs had said the Coastal Management finding was part                  
  of the best interest finding; therefore could not be                         
  separated from the appeal.                                                   
                                                                               
  Number 336                                                                   
                                                                               
  KYLE PARKER stated that Judge Cranston did rule on the                       
  appeal issue.  He said the Department of Law feels the judge                 
  was wrong, and that was one of the points they plan to                       
  appeal in the supreme court.                                                 
                                                                               
  Number 341                                                                   
                                                                               
  SENATOR LITTLE said she had spoken with Mr. Eason recently                   
  regarding the Governor's press release, which stated that                    
  changes had been directed regarding the Coastal Management                   
  Planning Process in order to rectify the situation.  She                     
  commented that at that point, Mr. Eason did not know what                    
  direction DNR was headed.  She asked if someone had that                     
  information at this point.                                                   
                                                                               
  Number 352                                                                   
                                                                               
  RAGA ELIM said the administration has convened a cabinet-                    
  level group, chaired by Shelby Stastny, which is looking                     
  into the situation.  He stated the time frame was very tight                 
  because the problem requires legislation and the legislature                 
  is very busy.  He indicated that their proposal would                        
  probably reach the legislature within two weeks.                             
                                                                               
  Number 362                                                                   
                                                                               
  SENATOR LITTLE expressed her concern, as she had just                        
  administered a Coastal Management Plan.  She indicated that                  
  she saw the value of the Coastal Zone Management Program,                    
  but was very frustrated at the borough level, seeing the                     
  lack of detail coming out of the borough in their                            
  consistency determination, and also seeing the state                         
  depending upon the local entities' consistency determination                 
  as support for their consistency determination.  She would                   
  hate to see the Coastal Management Planning Process gutted                   
  to make development happen more easily.  She thought that                    
  the Coastal Management Planning Process, if done well, is a                  
  process that works well.  She stated that although the                       
  process will never identify all of the conceivable problem                   
  areas, she does believe it can identify some areas that                      
  should not be in a lease sale.  She said to that extent, she                 
  agreed with Judge Cranston that the planning process was not                 
  followed.  She believes if the Coastal Management Planning                   
  Process had been done thoroughly, the findings from the                      
  court may have been different.  She said it was a concern of                 
  hers that the process not be gutted, because she believes                    
  that it does serve a good purpose.                                           
                                                                               
  Number 404                                                                   
                                                                               
  REPRESENTATIVE SANDERS stated that he only heard the first                   
  reason why the state lost the lawsuit and he would like to                   
  hear the other two.                                                          
                                                                               
  Number 410                                                                   
                                                                               
  JAMES EASON (via Anchorage) stated, the first issue was that                 
  under the regulations implementing the Coastal Management                    
  Act, there is a hierarchy or a prioritization of activity                    
  types that is presumed.  He said the activity types are                      
  those that are dependent on water, those that are related to                 
  water, and those that are neither dependent nor related to                   
  water.  He mentioned that when projects are proposed in the                  
  coastal zone there needs to be a determination as to whether                 
  they are water dependent, water related, or neither. He                      
  stated the hierarchy is designed so that if you have a water                 
  related activity that is competing with a water dependent                    
  activity, water dependent activity is presumed to deserve                    
  deference.  He said in the Lease Sale 78 case, Judge                         
  Cranston indicated he could not tell whether or not                          
  offshore oil and gas leasing and development was water                       
  dependent or water related.  He said the state believes the                  
  document does make clear that in certain cases offshore                      
  leasing and offshore development is water dependent.  He                     
  stated that as a practical matter, anyone who looks out on                   
  the Cook Inlet has to recognize that in some cases where                     
  those platforms are located, those are water dependent                       
  activities in the coastal zone.  He said that Judge Cranston                 
  determined it was not clear from the record whether the                      
  activities related to Lease Sale 78 were water dependent or                  
  not; therefore, the judge was not clear on whether it                        
  deserved priority over fishing and other activities that are                 
  water dependent in the coastal zone.                                         
                                                                               
  MR. EASON said the second basis was the judge quoted one                     
  sentence from the state's findings and consistency                           
  determination and claimed that was all the state had said                    
  about the benefits of oil and gas leasing, in general.  Mr.                  
  Eason said that was incorrect and there was considerably                     
  more in the record that dealt with that issue, but measured                  
  upon the judge's belief that there was one sentence dealing                  
  with the issue, the judge said the state had not                             
  demonstrated there was a significant public benefit from                     
  offshore oil and gas leasing.                                                
                                                                               
  MR. EASON stated those two issues, coupled with the                          
  determination that in order to be consistent with the plan,                  
  the state has to know what is going to happen later to be                    
  sure that the mitigating measures that are selected are                      
  appropriate, are the three basis for the decision.                           
                                                                               
  Number 455                                                                   
                                                                               
  REPRESENTATIVE PETE KOTT asked, if this decision is upheld                   
  by the supreme court, what would the effect be of that                       
  decision on the state's leasing program.                                     
                                                                               
  Number 460                                                                   
                                                                               
  JAMES EASON (via Anchorage) stated he was speaking on his                    
  own behalf and the commissioner may or may not have a                        
  different view.  He said the state has two separate lines of                 
  decisions that have come in on the issue of whether or not                   
  one needs to know what will happen in the development stage                  
  before one can be sure that the consistency determination is                 
  correct.  He stated that the Alaska Supreme Court decision                   
  from Goodnews Bay, as well as Lease Sale 55,  presumes that                  
  one needs to know what is going to happen in order to make a                 
  best interest claim.  He said the state finds itself in a                    
  strange position because Judge Cranston seems to have                        
  rejected the supreme court's recent declaration and has                      
  ruled that is not the case in the best interest claim, but                   
  it is the case on a consistency determination side.   He                     
  said that it was his belief that under the current law the                   
  state cannot, since they cannot predict the future, draft a                  
  best interest finding or a consistency determination that                    
  will pass the Alaska Supreme Court, possibly the superior                    
  court's approval.  He stated that if that is correct, it                     
  means the state cannot hold a lease sale that will survive a                 
  legal challenge, presuming anyone wants to challenge it.                     
                                                                               
  Number 494                                                                   
                                                                               
  REPRESENTATIVE NAVARRE asked what the current status of the                  
  appeal was, how soon would the court take it up,  and what                   
  does the decision do specifically to Lease Sale 78 and the                   
  time line that it is on.                                                     
                                                                               
  Number 501                                                                   
                                                                               
  KYLE PARKER said the Department of Law is planning to file                   
  in Alaska Supreme Court a Petition for Review of Judge                       
  Cranston's decision on January 28, 1994.                                     
                                                                               
  Number 505                                                                   
                                                                               
  BARBARA FULLMER, ASSISTANT ATTORNEY GENERAL (via Anchorage)                  
  stated that was correct.                                                     
                                                                               
  Number 506                                                                   
                                                                               
  KYLE PARKER stated there is no time line for the supreme                     
  court.  He said the state has requested expedited                            
  consideration of their Petition for Review, so the state can                 
  better understand what is going to happen with Lease Sale                    
  78.  He said that because the Division of Oil & Gas must                     
  hold the lease sale within 90 days of the quarter in which                   
  it was scheduled, the drop dead date for the lease sale is                   
  June 29, 1994.  He indicated that if Judge Cranston's                        
  decision to stay the lease sale has not been overturned by                   
  that date, the lease sale will have to go back on the five                   
  year plan.                                                                   
                                                                               
  Number 522                                                                   
                                                                               
  CHAIRMAN GREEN said it was his understanding that DNR                        
  received a fairly significant number of bids on Lease Sale                   
  78, and the state is holding these until the June 29 drop                    
  dead date.                                                                   
                                                                               
  Number 526                                                                   
                                                                               
  KYLE PARKER indicated that was the case, but Jim Eason could                 
  address the situation further.                                               
                                                                               
  Number 529                                                                   
                                                                               
  JAMES EASON (via Anchorage) said on the morning of the sale,                 
  the state announced the bidders had two options.  The first                  
  was that all of the bidders were free to pick up their                       
  unopened bids.  The second was that the bidders could leave                  
  their unopened bids sealed in the state's custody until the                  
  court made its decision, so if the bidders wanted to take                    
  the opportunity to preserve whatever rights they may have                    
  had if the sale had been able to happen that day, the state                  
  was willing to hold those bids as long as they could, which                  
  under the law is June 29.   He stated that if the sale is                    
  not held by June 29, the state cannot hold the sale.  He                     
  said presently those unopened bids are in the Division of                    
  Oil & Gas's custody, and as a matter of law, he cannot                       
  describe or tell the committee who the bidders were.  He                     
  added the sale did have some significant interest and that                   
  approximately one-third of the tracks received bids.                         
                                                                               
  Number 554                                                                   
                                                                               
  CHAIRMAN GREEN said his purpose for stating that, was to                     
  confirm that procedurally the state would be ready to                        
  continue with the sale up until June 29, if it gets a                        
  favorable ruling from the court.                                             
                                                                               
  Number 556                                                                   
                                                                               
  JAMES EASON said that was correct.                                           
                                                                               
  Number 558                                                                   
                                                                               
  REPRESENTATIVE NAVARRE asked about the likelihood of the                     
  supreme court taking the case on an expedited basis in light                 
  of the June 29 date.                                                         
                                                                               
  Number 563                                                                   
                                                                               
  KYLE PARKER said he would not presume to guess.                              
                                                                               
  Number 566                                                                   
                                                                               
  REPRESENTATIVE NAVARRE stated one of his concerns is the                     
  injunction is ordered on the last day before the lease sale                  
  and it throws the sale into a legal system which is not very                 
  expeditious, and so the net result is that it delays the                     
  whole lease process for a significant period of time.  He                    
  did not think that it was in the state's interest and the                    
  issue might be something that the legislature wants to look                  
  at, particularly with regard to the statutory 90-day time                    
  line.                                                                        
                                                                               
  Number 585                                                                   
                                                                               
  CHAIRMAN GREEN said he had been told that should this issue                  
  go until June 30, the state goes back to ground zero and it                  
  will be at least two years, maybe more, before this location                 
  can come back up again.                                                      
                                                                               
  NUMBER 590                                                                   
                                                                               
  RAGA ELIM said the Governor's office shares Representative                   
  Navarre's concerns.   He stated that last year when the                      
  state faced this situation with respect to the Camden Bay                    
  Lease Sale, one of the statutory changes that the Governor's                 
  office proposed was dropping the 90-day drop dead date off                   
  of Title 38.  He indicated the Governor's office will be                     
  coming back to the legislature with the same proposal.                       
                                                                               
  Number 607                                                                   
                                                                               
  REPRESENTATIVE SANDERS stated he did not mean in any way to                  
  encourage the oil companies involved to do anything like the                 
  following, but as more of a warning to the people who                        
  encourage this type of legal action.  He said, if he were an                 
  oil company in Alaska today and he had all of his money in a                 
  computer the way the oil companies do, he would have it                      
  transferred and he would not be available to bid this sale                   
  when it comes up.                                                            
                                                                               
  CHAIRMAN GREEN stated as a member of the Federal Energy                      
  Council of States, he has been informed that Latin America                   
  is ready for investment dollars.  He said it is not in a                     
  risk mode, it is a guarantee that they need significant sums                 
  of money to process gas that is currently ready and                          
  available.   He added it is only one of several areas in the                 
  world looking for that kind of capital.  He said                             
  Representative Sanders made a very good point that industry                  
  may start to look elsewhere.                                                 
                                                                               
  Number 633                                                                   
                                                                               
  SENATOR LITTLE said she wanted to clarify with the                           
  Governor's office that there might be some legislation                       
  coming forward within two to three weeks.                                    
                                                                               
  Number 639                                                                   
                                                                               
  RAGA ELIM said that was correct.  He said the resource                       
  agencies have gathered together once and will be getting                     
  together again when Shelby Stastny returns to Juneau to try                  
  to craft some possible legislation that they could work with                 
  the legislature on.                                                          
                                                                               
  Number 645                                                                   
                                                                               
  SENATOR LITTLE said she would like to be involved in that                    
  process and wanted to be kept informed of those meetings.                    
                                                                               
  Number 648                                                                   
                                                                               
  RAGA ELIM said it was still a little early.  He stated the                   
  Governor's office has asked the agencies to work on the                      
  issue, but the feeling is that once they have a sense of                     
  what they want to do, they would be coming to the                            
  legislature, not necessarily with a bill, but to have                        
  discussions on how to proceed.                                               
                                                                               
  Number 654                                                                   
                                                                               
  CHAIRMAN GREEN stated that with the members of the Oil & Gas                 
  Committee's indulgence, he had volunteered the committee's                   
  services.                                                                    
                                                                               
  Number 657                                                                   
                                                                               
  REPRESENTATIVE JOE SITTON said he would like to give a                       
  friendly reminder to the oil companies that while Latin                      
  America might be appealing, they should also remember the                    
  state in Latin America frequently seizes the property of oil                 
  companies and other companies, and  they should put that                     
  into the equation as well.                                                   
                                                                               
  Number 664                                                                   
                                                                               
  CHAIRMAN GREEN agreed and stated that what they are doing is                 
  decentralizing and privatizing.                                              
                                                                               
  Number 666                                                                   
                                                                               
  REPRESENTATIVE NAVARRE stated he hoped that the oil                          
  companies will bid when the lease sale does become                           
  available.  He said the Cook Inlet area was where oil was                    
  first developed in the state and the state has had a                         
  longstanding cooperative working relationship between the                    
  oil industry and fishing interests.  He indicated he has                     
  worked in the oil industry, as a commercial fisherman, and                   
  he is still a sport fisherman.  He stated there needs to be                  
  an attempt towards more cooperation.  He thinks that the                     
  members of the Oil & Gas Committee, and everybody in the                     
  state, recognized the value of the oil industry to Alaska                    
  and that the oil industry also recognized the value of                       
  Alaska to the oil industry.  He thinks the state needs to                    
  encourage further development and hopefully, the legislature                 
  can do that with some changes in the law, as well as with                    
  the protections that need to remain in law.                                  
                                                                               
  Number 684                                                                   
                                                                               
  CHAIRMAN GREEN agreed with Representative Navarre, and                       
  stated that Alaska does owe its livelihood to the oil                        
  industry, because the discovery at Swanson River was one of                  
  the major issues in whether or not Alaska became a state,                    
  because that ushered in the era that Alaskans would then be                  
  able to pay their own bills.                                                 
                                                                               
  Number 702                                                                   
                                                                               
  CHAIRMAN GREEN adjourned the meeting at 1:20 p.m.                            

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