Legislature(1995 - 1996)

02/28/1995 10:08 AM O&G

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
txt
             HOUSE SPECIAL COMMITTEE ON OIL AND GAS                            
                       February 28, 1995                                       
                           10:08 a.m.                                          
                                                                               
                                                                               
 MEMBERS PRESENT                                                               
                                                                               
 Representative Norman Rokeberg, Chairman                                      
 Representative Scott Ogan, Vice Chair                                         
 Representative Gary Davis                                                     
 Representative Bill Williams                                                  
 Representative Tom Brice                                                      
 Representative Bettye Davis                                                   
 Representative David Finkelstein                                              
                                                                               
 MEMBERS ABSENT                                                                
                                                                               
 All Members Present                                                           
                                                                               
 COMMITTEE CALENDAR                                                            
                                                                               
 HJR 26:  Urging the United States Congress to uphold Alaska's right           
          to 90 percent of the royalties from oil, gas, and coal               
          leasing on state land as provided by the Statehood Compact           
          adopted by a vote of the people of Alaska on April 24,               
          1956.                                                                
                                                                               
          PASSED OUT OF COMMITTEE                                              
                                                                               
 WITNESS REGISTER                                                              
                                                                               
 None                                                                          
                                                                               
 PREVIOUS ACTION                                                               
                                                                               
 BILL:  HJR 26                                                               
 SHORT TITLE: OIL & GAS ROYALTIES                                              
 SPONSOR(S): REPRESENTATIVE(S) ROKEBERG, Ogan, Navarre                         
                                                                               
 JRN-DATE     JRN-PG                  ACTION                                   
 02/01/95       197    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/01/95       197    (H)   WTR, O&G                                          
 02/14/95              (H)   WTR AT 05:00 PM CAPITOL 408                       
 02/14/95              (H)   MINUTE(WTR)                                       
 02/16/95       405    (H)   WTR RPT  CS(WTR) 6DP                              
 02/16/95       406    (H)   DP: PHILLIPS, KUBINA, G.DAVIS                     
 02/16/95       406    (H)   DP: WILLIAMS, MULDER, BARNES                      
 02/16/95       406    (H)   2 ZERO FISCAL NOTES (DNR, REV)                    
 02/28/95              (H)   O&G AT 10:00 AM CAPITOL 124                       
                                                                               
 ACTION NARRATIVE                                                              
                                                                               
 TAPE 95-6, SIDE A                                                             
 Number 000                                                                    
                                                                               
 The House Special Committee on Oil & Gas was called to order by               
 CHAIRMAN NORMAN ROKEBERG at 10:08 a.m.  Members present at the call           
 to order were Representative(s) Rokeberg, Brice, G. Davis, B.                 
 Davis, Finkelstein, Ogan, and Williams.                                       
 HJR 26 - OIL & GAS ROYALTIES                                                
                                                                               
 CHAIRMAN ROKEBERG stated there is a quorum was present and the                
 committee will hear HJR 26, a resolution supporting Alaska's right            
 to 90 percent of the royalties from oil, gas and coal leasing on              
 federal properties in the state of Alaska.                                    
                                                                               
 Number 011                                                                    
                                                                               
 CHAIRMAN ROKEBERG said as sponsor of the resolution, he will change           
 hats and give members an explanation of the resolution.  He asked             
 if anyone was signed up to testify on the resolution and found                
 none.  He then read the following sponsor statement for the record:           
                                                                               
 "HJR 26 is a statement by the Alaska Legislature that the United              
 States cannot unilaterally amend the Statehood Act.  Alaska has               
 tried since statehood to avoid a confrontation over issues by                 
 working with Congress to ensure that any post-statehood amendments            
 to the Statehood Act did not materially diminish the rights                   
 conferred to the State of Alaska by the act of admission into the             
 United States.                                                                
                                                                               
 "There is no question that an act of Congress admitting a new state           
 to the Union constitutes a compact, a legally enforceable contract,           
 between the citizens of the new state and the United States. The              
 first line of Section 4 of PL 85-508, the Alaska Statehood Act,               
 states in part, `As a compact with the United States said State and           
 its people do agree...'  Provisions contained in this act that                
 conferred rights to the State of Alaska are valid and can be                  
 enforced against the United States.                                           
                                                                               
 "Section 28, (a) Mines and Mining, of the Alaska Statehood Act                
 states clearly the formula for sharing business bonuses, royalties            
 and rentals under leases shall be distributed 90 percent to the               
 State of Alaska and 10 percent to the Treasury of the United                  
 States.  48 U.S.C. 439 dated October 20,1914, was amended to                  
 include the above formula.                                                    
                                                                               
 "HJR 26 seeks to reinforce the people of Alaska's resolve to                  
 protect our right to the 90-10 sharing formula granted by the                 
 United States Congress on July 7, 1958."                                      
                                                                               
 Number 040                                                                    
                                                                               
 CHAIRMAN ROKEBERG said this issue is important to the committee               
 because of the committee's recent passage of a resolution                     
 requesting the United States Congress to open area 1002 in the                
 Arctic National Wildlife Refuge (ANWR) area for oil and gas                   
 exploration.  At the time this resolution passed out of committee,            
 it was the belief of the chair and the Congressional delegation               
 that the resolution not mention the royalty provisions.  There was            
 discussion at that time about the royalty issue and it was decided            
 that the royalty-sharing issue is extremely important to this                 
 committee and this legislature, and that the original resolution to           
 open ANWR can be carried forward by the Congressional delegation.             
 He said the committee wishes them success.                                    
                                                                               
 Number 055                                                                    
                                                                               
 CHAIRMAN ROKEBERG mentioned the delegation should remember that the           
 statehood compact creating Alaska provided for the additional                 
 sharing of revenues from federal lands to the state of Alaska.                
 There were specific exceptions made at the time to grant the state            
 of Alaska a greater share as provided for in Section 28, where the            
 Congress amended the Mineral Leasing Act under the citation 30                
 U.S.C. 191.  Chairman Rokeberg reminded the committee that their              
 packets included both the existing code, as well as the historical            
 background on what the code was prior to its latest amendment.                
                                                                               
 Number 068                                                                    
                                                                               
 CHAIRMAN ROKEBERG requested the committee members turn to Appendix            
 A in the bill packet.  He pointed out Section 2 in Appendix A of              
 the 1969 Opinion of the Attorney General Number 6, written by G.              
 Kent Edwards to Congressman Aspinall on September 5, 1969, which              
 includes language that was changed by the Statehood Act that                  
 provided for the sharing of revenues on all federal property to go            
 37.5 percent to all the states specifically for the construction of           
 public schools, roads and other public educational institutions.              
                                                                               
 The following is Section 2 of Appendix A:                                     
                                                                               
      The federal legislation which was confirmed and amended by the           
      Statehood Act, Sec. 28 (b). It provides that the State                   
      receives 90 percent of all money received by the United States           
      pursuant to the mineral leasing laws in Alaska, 37 1/2 percent           
      thereof for the construction of public roads or schools and              
      52 1/2 percent for the disposition of the State Legislature.             
      30 U.S.C. 191.                                                           
                                                                               
 Number 082                                                                    
                                                                               
 REPRESENTATIVE ROKEBERG referred to the amendment and said at the             
 time of statehood, Congress reserved a special grant to the state             
 of Alaska, namely 52.5 percent by amending the Mineral Act, which             
 is 30 U.S.C. 191, so that the state could receive additional                  
 amounts of money.  He asked the members to turn to page 10 of                 
 Opinion Number 6, and he then read the following two paragraphs of            
 the opinion into the record:                                                  
                                                                               
 "The question which is raised by the conflict of the two percent              
 royalty with the Alaska Statehood Act is the following."                      
                                                                               
 CHAIRMAN ROKEBERG interrupted the reading of the letter to say that           
 the various opinions revolved around the granting of a two percent            
 royalty in order for the state to move to the conclusion which                
 ultimately became Alaska Native Claims Settlement Act (ANCSA) and             
 resolved the sharing of revenues with the Native community of the             
 state.  So all these opinions and the research that relates to this           
 act are focused on the two percent royalty sharing provision.                 
                                                                               
 CHAIRMAN ROKEBERG continued reading from page 10 of the Attorney              
 Generals Opinion Number 6:                                                    
                                                                               
 "May the United States unilaterally enact legislation in direct               
 conflict with the Statehood Act?  The answer to this is that the              
 United States may not constitutionally enact effective legislation            
 in direct conflict with compact provisions of the Statehood Act               
 unless there is an amendment to the Constitution of the state of              
 Alaska because a Statehood Act constitutes a compact in the nature            
 of a contract between the two sovereign governments."                         
                                                                               
 Number 123                                                                    
                                                                               
 CHAIRMAN ROKEBERG interpreted the opinion to say that the Congress            
 of the United States cannot unilaterally change the law, from 90-10           
 to 50 percent without a constitutional change.  He then read from             
 a supplement to Opinion No. 6 which is not part of the package:               
                                                                               
 "For Congress to unilaterally rewrite those terms would be to                 
 dishonor its grant of the royalty and to breach one of the                    
 conditions on which Alaska consented to be bound by the Statehood             
 Act.  This arrangement cannot be otherwise viewed than as a solemn            
 compact between Alaska and the United States, which is entitled to            
 the same constitutional protection afforded all such obligations."            
                                                                               
 Number 136                                                                    
                                                                               
 CHAIRMAN ROKEBERG added that the above citation only emphasizes the           
 nature of the compact.  He noted that Opinion Number 6 was                    
 conveniently lost at the time other Attorney General Opinions were            
 bound and then had to be located during the discussions surrounding           
 the creation of Alaska National Interest Lands Conservation Act               
 (ANILCA).  An opinion from Attorney General Condon was included in            
 the committee packets, which explains why Opinion Number 6 was not            
 issued at the time John Havelock served as Attorney General.                  
                                                                               
 CHAIRMAN ROKEBERG asked the committee members to refer to an April            
 2, 1981, letter from Attorney General Wilson Condon to Hugh Malone,           
 which states on page 2:                                                       
                                                                               
 "What is clear is that the Unites States cannot unilaterally amend            
 the Statehood Act to the state's detriment without the state's                
 consent or acquiescence."                                                     
                                                                               
 CHAIRMAN ROKEBERG then read from footnote 1, on page 2 of the                 
 letter:                                                                       
                                                                               
 "No action was taken to ensure prompt resolution of pending Native            
 claims.  Governor Egan, on behalf of the state, consented to those            
 amendments and the state did not litigate the issue within the time           
 specified by Section 10 of ANCSA."                                            
                                                                               
 CHAIRMAN ROKEBERG said that the Alaska Native Land Claims                     
 Settlement Act could have been found to be unconstitutional, but              
 since the state acquiesced to it, there was no litigation and the             
 act went forward.                                                             
                                                                               
 Number 186                                                                    
                                                                               
 CHAIRMAN ROKEBERG added that it is his opinion that if the 90-10              
 provision is not enforced, and if ANWR is ever opened up, a lawsuit           
 could be brought by any citizen of the state that could hold up               
 development of the refuge.  He reminded the members that at the               
 time of statehood, the people of Alaska relied on the royalty                 
 percentage in order to become a state.                                        
                                                                               
 CHAIRMAN ROKEBERG then turned to the historical provision of 30               
 U.S.C. 191, and explained that presently, 50 percent rather than              
 52.5 percent, of all revenues go to the reclamation funds of other            
 states and Alaska has reserved 40 percent in addition to that.  The           
 37.5 percent which changed to 50 percent, and the 40 percent                  
 received by the state of Alaska then become the exception because             
 of the change in the reclamation fund.  He pointed out that Alaska            
 is the only state in the union with an exception to this code.                
                                                                               
 Number 217                                                                    
                                                                               
 CHAIRMAN ROKEBERG said that he, and Representatives Ogan and                  
 Navarre have offered this resolution for the committee's                      
 consideration.  He then asked the members to refer to the second              
 fiscal note, which states:                                                    
                                                                               
 "At current prices, discovery of a one billion barrel oil field               
 with a conventional 12.5 percent royalty and the 90 percent royalty           
 share would mean something on the order of $1.125 billion over the            
 life of the field or as much as $125 million a year at peak                   
 production.  A 50 percent share would reduce this to approximately            
 $70 million a year.  Regardless of royalty share, the state would             
 continue to assess production taxes on any oil and gas produced               
 within state sovereign territory."                                            
                                                                               
 CHAIRMAN ROKEBERG noted that although this resolution would bring             
 in money to the state, because of the speculative nature of the               
 resolution, the fiscal note is zeroed out.  He then closed his                
 testimony on the resolution and asked if there was testimony from             
 the audience.  Hearing none, he closed the public testimony.                  
                                                                               
 CHAIRMAN ROKEBERG introduced an amendment to the resolution.                  
                                                                               
 Amendment 1: Page 1, line 3: delete "Statehood Compact" and insert            
 "Alaska Statehood Act, approved by the United States Congress on              
 July 7, 1958, in which the Congress accepted, ratified, and                   
 confirmed the Constitution of the State of Alaska previously."                
                                                                               
 REPRESENTATIVE TOM BRICE expressed concern over whether the Mineral           
 Leasing Act should be included in the resolution, considering that            
 amendments were being made to the Mineral Leasing Act.                        
                                                                               
 REPRESENTATIVE ROKEBERG suggested the amendment be amended to cite            
 the U.S. Code.  He asked that the members label the second                    
 amendment, Amendment 2 and clarified that Amendment 1 simply                  
 clarifies the title of the resolution.  He then asked if there was            
 any discussion on Amendment 1.                                                
                                                                               
 Number 288                                                                    
                                                                               
 REPRESENTATIVE OGAN moved to accept the first amendment as                    
 introduced.                                                                   
                                                                               
 REPRESENTATIVE ROKEBERG said hearing no objections, it is so                  
 ordered.  Amendment 1 was adopted.  He then introduced Amendment 2:           
 Page 2, Line 8, delete lines 8 and 9 and insert "WHEREAS, the                 
 Congress intended the 37 1/2 percent royalty be paid by the Unites            
 States Treasury for the construction and maintenance of public                
 roads, support of public schools or other public educational                  
 institutions; WHEREAS, the remaining 52 1/2 percent royalty shall             
 be paid directly to the state of Alaska for disposition by the                
 legislature in lieu of payment to the reclamation fund created by             
 Congress;"                                                                    
                                                                               
 Number 309                                                                    
                                                                               
 REPRESENTATIVE BRICE suggested the amendment be amended to add "(30           
 U.S.C. 191)" after the word "Congress" in paragraph one and insert            
 "as set forth in 30 U.S.C. 191" after the word "royalty" in the               
 second paragraph.  He then suggested the first WHEREAS be amended             
 to mention that the Mineral Leasing Act is amended.                           
                                                                               
 REPRESENTATIVE ROKEBERG added that the act is confusing and the               
 Mineral Leasing Act could be referred to in the resolution to                 
 clarify it.                                                                   
 REPRESENTATIVE OGAN restated the amendments and REPRESENTATIVE                
 BRICE AND CHAIRMAN ROKEBERG clarified that the words "Mineral                 
 Leasing Act (30 U.S.C. 191)" be inserted after line 7 of the                  
 resolution.                                                                   
                                                                               
 Hearing no objections, it was so ordered.  CHAIRMAN ROKEBERG                  
 entertained a motion to move Amendment 2.                                     
                                                                               
 REPRESENTATIVE GARY DAVIS moved Amendment 2.                                  
                                                                               
 Hearing no objections, it was so ordered.                                     
                                                                               
 REPRESENTATIVE G. DAVIS asked why page 2 line 17 included the word            
 "coerce," because it implies that the United States is trying to be           
 coercive.                                                                     
                                                                               
 Number 419                                                                    
                                                                               
 REPRESENTATIVE BRICE said that line 16 clarifies the question                 
 because it specifically states "in the attempt," meaning, in the              
 future, if there are attempts to coerce the state, versus present             
 or past.                                                                      
                                                                               
 CHAIRMAN ROKEBERG thanked REPRESENTATIVE BRICE for clarifying the             
 matter.                                                                       
                                                                               
 REPRESENTATIVE DAVIS asked REPRESENTATIVE ROKEBERG if use of the              
 word "coerce" was considered before he arrived at the committee               
 meeting or in the drafting of the resolution.                                 
                                                                               
 CHAIRMAN ROKEBERG responded that the word was considered while                
 drafting the resolution, but that any help in clarifying the                  
 resolution would be appreciated.                                              
                                                                               
 REPRESENTATIVE G. DAVIS asked the committee to suggest adding less            
 threatening words to replace "coerce."                                        
                                                                               
 REPRESENTATIVE BRICE said that the word "coercion" has specific               
 implications that is "forcing the state to accept something less"             
 and that it doesn't have.  The type of attempt to get the state to            
 accept revisions to the 90-10, could be described as an act of                
 coercion, such as, for example, if Congress tries to take away our            
 federal highway funds.                                                        
                                                                               
 REPRESENTATIVE ROKEBERG asked for further discussion.                         
                                                                               
 REPRESENTATIVE BETTYE DAVIS asked that REPRESENTATIVE G. DAVIS read           
 the statement he is considering might replace the word "coerce."              
                                                                               
 Number 482                                                                    
                                                                               
 REPRESENTATIVE G. DAVIS read his suggestion:                                  
 "Be it resolved that any attempts by the U.S. Congress or the                 
 President of the United States to consider or impose on the state             
 of Alaska, anything less than what was promised at statehood,                 
 penalizes the people of Alaska."                                              
                                                                               
 REPRESENTATIVE G. DAVIS said that the word "coerce" might give                
 other legislators concern on the floor.                                       
                                                                               
 CHAIRMAN ROKEBERG lead discussion about the merits of the words               
 "coerce" and "impose."                                                        
                                                                               
 REPRESENTATIVE G. DAVIS moved that "to coerce" be deleted on Page             
 2, line 17, and the words "to impose" be added.                               
                                                                               
 REPRESENTATIVE BRICE stated his objection to the amendment.                   
                                                                               
 REPRESENTATIVE G. DAVIS clarified that the language would be "of              
 the United States, imposed on the state of Alaska anything less."             
                                                                               
 Number 560                                                                    
                                                                               
 CHAIRMAN ROKEBERG said hearing no objections, the amendment is                
 adopted.  He asked if there were any additional amendments.  He               
 then entertained a motion to move CS for HJR 26 (Oil & Gas), as               
 amended with individual recommendations, and accompanying fiscal              
 notes.  Hearing no objections, the resolution was passed out of               
 committee.                                                                    
 ADJOURNMENT                                                                   
                                                                               
 CHAIRMAN ROKEBERG adjourned the meeting at 10:53 a.m.                         
                                                                               

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