Legislature(1995 - 1996)
03/21/1995 10:05 AM House O&G
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE SPECIAL COMMITTEE ON OIL AND GAS
March 21, 1995
10:05 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
HB 207: "An Act relating to adjustments to royalty reserved to the
state to encourage otherwise uneconomic production of oil
and gas; relating to the depositing of royalties and
royalty sale proceeds in the Alaska permanent fund; and
providing for an effective date."
HEARD AND PASSED OUT OF COMMITTEE
WITNESS REGISTER
THOMAS WILLIAMS, Alaska Tax Counsel (Teleconference)
BP Exploration - Alaska, Inc.
P.O. Box 196612
Anchorage, Alaska 99519-6612
Telephone: 564-5955
POSITION STATEMENT: Supports HB 207
BRADLEY PENN, (Teleconference)
Marathon Oil Company
P.O. Box 196168
Anchorage, Alaska 99519-6168
Telephone: 564-6428
POSITION STATEMENT: Supports HB 207
KEVIN TABLER, (Teleconference)
Union Oil Company of California
P.O. Box 196247
Anchorage, Alaska 99519-6247
Telephone: 263-7600
POSITION STATEMENT: Supports HB 207
STEVEN MAHONEY, Managing Tax Counselor (Teleconference)
ARCO ALASKA
P.O. Box 100360
Anchorage, Alaska 99510-0360
Telephone: 265-6527
POSITION STATEMENT: Supports HB 207
JOHN SHIVELY, Commissioner
Department of Natural Resources
400 Willoughby Avenue
Juneau, Alaska 99801
Telephone: 465-2400
POSITION STATEMENT: Available for questions
JACK CHENOWETH, Attorney
Legal Services Division
Legislative Affairs Agency
130 Seward Street, Room 409
Juneau, Alaska 99801
Telephone: 465-2450
POSITION STATEMENT: Available for questions
PREVIOUS ACTION
BILL: HB 207
SHORT TITLE: ADJUSTMENTS TO OIL AND GAS ROYALTIES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
02/27/95 501 (H) READ THE FIRST TIME - REFERRAL(S)
02/27/95 501 (H) OIL & GAS, RESOURCES, FINANCE
02/27/95 501 (H) FISCAL NOTE (DNR)
02/27/95 501 (H) 2 ZERO FISCAL NOTES (DNR, REV)
02/27/95 501 (H) GOVERNOR'S TRANSMITTAL LETTER
03/08/95 665 (H) CORRECTED FISCAL NOTE (DNR)
03/09/95 (H) O&G AT 12:00 PM CAPITOL 17
03/09/95 (H) MINUTE(O&G)
03/14/95 (H) O&G AT 10:00 AM CAPITOL 124
03/14/95 (H) MINUTE(O&G)
03/15/95 (H) O&G AT 05:00 PM BELTZ ROOM 211
03/15/95 (H) MINUTE(O&G)
03/16/95 (H) O&G AT 10:00 AM CAPITOL 124
03/16/95 (H) MINUTE(O&G)
03/17/95 (H) O&G AT 05:00 PM CAPITOL 124
03/17/95 (H) MINUTE(O&G)
03/20/95 (H) O&G AT 05:00 PM CAPITOL 106
03/20/95 (H) MINUTE(O&G)
03/21/95 (H) O&G AT 10:00 AM CAPITOL 124
ACTION NARRATIVE
TAPE 95-16, SIDE A
HB 207 - ADJUSTMENTS TO OIL AND GAS ROYALTIES
Number 000
CHAIRMAN NORMAL ROKEBERG: Good morning, everyone. The meeting of
the House Special Committee on Oil and Gas is called to order at
10:05 on March 21st, 1995. For the record, committee members
present are Representative Bettye Davis, Representative Gary Davis,
Representative Scott Ogan, Representative Tom Brice, and the
Chairman, Representative Norman Rokeberg. A quorum is present. On
today's calendar we have House Bill 207, Royalty Reductions. I
believe we are in teleconference with Anchorage, is that correct?
Okay. The purpose of this discussion: A committee substitute was
adopted in our last meeting on Monday, March 20th, 1995. A new
draft has been prepared that removed Section 1 dealing with the
royalty reductions for net profit leases. There has been no
testimony at this time that would justify that, and there's been
requests that it be removed from the bill at this time. In
addition, after our discussions yesterday, the regulatory language
has been removed as was recommended by I believe the overwhelming
sense of the committee. The language dealing with the appeals by
the applicant has been removed, based on the testimony primarily
from Attorney General Pat, Patrick Coughlin, and the testimony by
Director Boyd, and then the language restricting the exact, but I
meant regulations, has been removed. It revolves around the entire
issue of the relationship of the statute to the regulations. Now
that we have a new document available, the committee should rescind
the regulation adopting work draft CH (indisc. - noise on tape),
dated 3/20/95. If there are any objections to rescinding our
motion, are there any objections to this motion?
REPRESENTATIVE (?): Could you repeat that, sir?
CHAIRMAN ROKEBERG: Okay, we're going to rescind, we're rescinding
the committee substitute we had yesterday, -- put it low and 4-
wheel drive, 4-wheel drive, okay.
REPRESENTATIVE (?): Okay, I'm in oil and gas now, now where were
we?
CHAIRMAN ROKEBERG: We are rescinding the committee substitute from
yesterday.
REPRESENTATIVE (?): Oh, committee substitute.
CHAIRMAN ROKEBERG: Yeah. Are there any objections to this motion?
Number 067
REPRESENTATIVE SCOTT OGAN: I'll object for the sake of discussion.
REPRESENTATIVE (?): Mr. Chairman.
REPRESENTATIVE (?): Disgusting.
REPRESENTATIVE (?): (Indisc. - many speaking) adopted the new one.
REPRESENTATIVE GARY DAVIS: Yeah, that's what I was just going, I
was just going to move to adopt a new one for a new work draft
9CH0039-1. Thank you.
REPRESENTATIVE OGAN: Thank you, I'm in this committee now.
Number 075
CHAIRMAN ROKEBERG: Thank you, Representative Ogan. And we have a
motion by Representative Gary Davis. Are there any objections to
that motion that we accept Draft 9CH0039F for discussion purposes.
If there are not objections, hearing none, then the new committee
substitute for House Bill 207 is now before the committee for
discussion. Is there anyone here that wishes to testify on the
committee substitute for House Bill 207? There are, I would ask,
there are four people in Anchorage that wish to testify and, on the
teleconference, and then Commissioner Shively is also here. Mr.
Commissioner, would you prefer to hear the Anchorage testimony
first?
COMMISSIONER JOHN SHIVELY: (Indisc. - static).
Number 095
COMMISSIONER ROKEBERG: In that case, the, we will proceed with the
teleconference testimony, and please indicate your name and
(indisc. - static) and telephone number and the affiliation for
testimony. First, we'd like to hear from Tom Williams.
Number 101
TOM WILLIAMS, BP EXPLORATION-ALASKA, INC. (Teleconference): Mr.
Chairman. My name is Tom Williams. I'm with BP Exploration-
Alaska, Incorporated. My telephone number is 564-5955. I was, I
put down to be, to testify in order to get different questions that
you had of BP, but otherwise, I don't really have a statement to
make today, Mr. Chairman.
Number 109
CHAIRMAN ROKEBERG: Mr. Williams, might I ask if you have the
latest, if you have had an opportunity to review the latest
committee substitute? It just was faxed north about, within the
last hour or so.
Number 113
MR. WILLIAMS: We just got it up here and, and I have had that
chance to look at it very briefly, Mr. Chairman.
Number 114
CHAIRMAN ROKEBERG: Okay, you do have it in hand in that room
though?
MR. WILLIAMS: Yes, we do.
Number 114
CHAIRMAN ROKEBERG: Well, thank you, Mr. Williams, for standing by.
If questions do develop we will direct them towards you.
MR. WILLIAMS: Thank you, Mr. Chairman.
CHAIRMAN ROKEBERG: Next is Bradley Penn. Mr. Penn?
Number 121
BRADLEY PENN of MARATHON OIL COMPANY, ANCHORAGE (Teleconference):
This is Bradley Penn. I work for Marathon Oil Company in
Anchorage. Address, P.O. Box 196168. Phone number is 564-6428.
I, like Mr. Williams, don't have any comments, probably be having
some advice in the review of this latest draft. My comments that
I had prepared were on Draft C, but those concerns are taken care
of in Draft F. That's all I have to say, Mr. Chairman.
COMMISSIONER ROKEBERG: Well, thank you, Mr. Penn. Next we get,
like to hear from Kevin Tabler, please.
Number 134
KEVIN TABLER, UNION OIL COMPANY of CALIFORNIA (Teleconference):
Yeah, my name is Kevin Tabler. I'm with Union Oil Company of
California, P.O. Box 196247, Anchorage. Phone number: 263-7600.
And like the other members in this room, I, I just had a chance to
briefly look at it and appears that the questions and concerns that
were, any statements or comments that I would have had, have been
addressed in this most recent draft. I would like to say that I
appreciate the work that's been put into this and the committee's
efforts to address the concerns of Unocal, these are the two points
that we raised. We'll stand by for any questions you may have of
myself as well.
CHAIRMAN ROKEBERG: Thank you, Mr. Tabler. Next, there is Steven
Mahoney.
Number 152
STEVEN MAHONEY OF ARCO ALASKA, Managing Tax Counselor, Anchorage
(Teleconference): I do have a very short statement, Mr. Chairman.
My name is Steve Mahoney. I am the Managing Tax Counselor at ARCO
Alaska in Anchorage. We would first like to say that we're
impressed with the progress at the hearing last night, and the
extensive efforts of the committee to understand these complex and
important issues. (Indisc.) the results of the hearing and what I
see and what I heard (indisc.) the CSHB. We believe we're making
progress towards the CS that ARCO can support. Specifically, we
agree with removing the regulatory language from the bill itself.
ARCO believes still that there is no necessary or particular
necessity of any oversight over the commissioner. But if the
committee so desires we would again suggest that the AG is
sufficient to oversee (indisc.) with the concurrence the
commissioner could provide for royalty reductions as needed. One
of the important parts that we've seen that's of course not in the
CS is legislative intent stressing the need for the interest of the
committee in encouraging the cooperative development of the state's
resources and sending a message to the industry that Alaska will be
competitive and has a long term eye towards the development of its
best resources. We support the fellow Cook Inlet producers who
respect and recognize needs for increasing flexibility in regard to
existing marginal production, which again, it didn't draft that.
And before I go, I'd again like to reiterate ARCO's request that
the intent to be brought by the committee in both the preamble of
the bill and any imported documents produced is essential to the
effect of, the success of this legislation. All too often the
legislature's intent is lost in the application of the details. If
the committee's intent is to provide a level of flexibility to the
development of its marginal resources, encourage this committee to
state that intent as clearly as possible to avoid any
misinterpretation in application of your design. Thank you very
much for your work, and that's all I have to say today, except if
questions arise.
Number 193
CHAIRMAN ROKEBERG: Thank you, Mr. Mahoney. Are there any
questions at this time for the people that testified, from the
committee members? Hearing none then I'd ask Commissioner Shively
to take his place.
Number 200
COMMISSIONER JOHN SHIVELY, DEPARTMENT OF NATURAL RESOURCES, Juneau:
Mr. Chairman, for the record, my name is John Shively. I'm the
Commissioner of Natural Resources. We would concur that the new
draft does take care of some of the major concerns I believe that
Patrick Coughlin and Ken Boyd raised last night. I would like to
just raise several concerns and I'm not sure that these absolutely
have to be addressed at this time, but you might want to consider
them. One, we think the legislative intent language might be a
little too restrictive. I don't know that I can, that any
commissioner could actually determine that decision would be based
on the investment being made only if a reduction was, was granted,
I mean, that's a high standard.
Number 213
CHAIRMAN ROKEBERG: May I just interrupt you for a moment, sir?
For the purpose of the committee members, and this is, there is
some intent language here that has been circulated, but it's not
part of the CS, so. Just so you're all aware of that. Then there
was some revised language too that, nothing we can discuss, but it
has been moved. So, I just want to make sure that everybody was
aware of that. Go ahead. Excuse me for interrupting,
Commissioner.
Number 220
COMMISSIONER SHIVELY: That's fine. Thank you, Mr. Chairman. Mr.
Chairman, on page 2, lines 30 and 31, as I understand the intent of
that is that fields might be shut in or abandoned, the royalty
could actually go to zero. We have not supported that concept.
And, and we think that the additional flexibility that this
legislation gives in terms of looking at marginal fields and fields
that might, that are shut in or might be abandoned, vastly improves
the opportunity for royalty reduction, but we think the state
should retain some opportunity for some income. We recognize that
the existing legislation, as I think was pointed out by Unocal last
week, would allow the commissioner theoretically to get to zero,
but the legislation doesn't work, so, I don't, that, I think this,
that would, keeping it at the, at the 25 percent for all three
kinds of situations we think is, is reasonable. In terms of the
oversight, we believe that one-step oversight is better. I think
our preference is on page 3 of would be 8A, but I think one or the
other. If you do two it just adds to the process. The thing with
the royalty board is that that will probably have, I'm not sure
what you mean there. If it's a royalty board meeting we're going
to have to public notice it. It's another 30 days. If it's just
going and finding three members of the royalty board to agree I'd,
I'm not sure, that's not unacceptable to us, but I think you ought
to choose one or the other and I think there's some difference of
opinion even in the oil industry as to which of those two are
better. And then on page 4, we don't have strong feelings about
the lines 7 through 21, we don't have strong feelings about
transmitting copies of the determination to these officials. I
think Representative Davis early on talked about providing notice
of the decision and then if people wanted the full document they
could ask for it. We think that's a reasonable approach. And we'd
certainly be able to, be willing to provide notice to all members
of legislature at the same time as a way to simplify that, but, you
know, that, again, since it's the legislature it's your call as to
whatever you would like see. Mr. Chairman, those are my comments.
Number 266
CHAIRMAN ROKEBERG: Thank you, Commissioner Shively. Are there
questions of the committee? Representative Davis.
Number 267
REPRESENTATIVE GARY DAVIS: Thank you, Mr. Chairman. Commissioner,
on the zero royalty, that's just an option isn't it. It gives you,
you have the flexibility within your negotiations to, to either go
from zero to whatever, so you know, as far as...
COMMISSIONER SHIVELY: You're correct.
REPRESENTATIVE G. DAVIS: Okay.
COMMISSIONER SHIVELY: I could, you know, any commissioner could
refuse to go to zero. That is correct.
Number 275
REPRESENTATIVE G. DAVIS: Okay. If I might continue. On the, but,
of course, I can't help but comment on the distribution of
documents. I agree that a notice that a report is available with
an executive summons, and there will be intent language added to
the, to the agency legislation today, or tomorrow, that indicates
the intent is to provide an executive summary, in short detail as
apposed to just a letter, this report is available. So, I'll, I'll
see what, what we can do to clean that up in here. Thank you, Mr.
Chairman.
Number 286
CHAIRMAN ROKEBERG: Representative Brice.
Number 287
REPRESENTATIVE TOM BRICE: Thank you, Mr. Chair. A couple of
questions. I had to pop out of the room there for a second
(indisc.). page 3, lines 12 and 3, the confidentiality clause. It
says it shall be kept confidential under AS whatever upon the
lessee's request, is that, is that going to require positive action
by the lessee then? Or is, can it just be kept confidential
period?
Number 295
COMMISSIONER SHIVELY: No, the way I would interpret that is that
they will have to say this part of the information we're giving you
is confidential. I mean, some parts of the information (indisc. -
static) where the name of the fields, those kinds of things
obviously aren't, I wouldn't think, certainly are going to be kept
confidential but there may be some part of their economic analysis
or some part of their field development analysis that it would like
to be kept confidential and they will have to tell us, as I think
is currently provided in regulation, what they want kept
confidential. So, it's a positive action by them.
Number 305
REPRESENTATIVE BRICE: On specific areas...
CHAIRMAN ROKEBERG: Representative Brice.
REPRESENTATIVE BRICE: ...and further on down in Section, or
further on down the page on line 18, we have a Section 7, which
says "...may require the lessee or lessees making application for
the royalty reduction to retain and pay for the services of a
contractor selected from a list provided by the commissioner...".
I know we're implying that it's the lessees, lessees who get to
select from that list. I guess my concern is that we don't want
implications, we don't want it implicitly in there, I guess. Would
you have problems making it a little bit clearer, that it's the
lessees that we're talking about that select from the list versus
(indisc. - static).
Number 320
COMMISSIONER SHIVELY: Mr. Chairman, Representative Brice. I have
no problem in clarifying it if you think it needs to be since
that's the intent. I, if...
Number 323
REPRESENTATIVE BRICE: Yeah, I just want to make sure that the
intent's on record too. And one last question. Under Section 8 on
page 3, on line 28, "...obtains the concurrence of the attorney
general...". Now, is the attorney general going to making policy
decisions? Is that what the department's expecting, or is this
just a process by which the attorney general checks off to make
sure that procedurally things have gone according to Hoyle here?
Number 332
COMMISSIONER SHIVELY: Mr. Chairman, Representative Brice. I think
it is primarily the latter that the attorney general would look at
whether or not the process is laid out and the legislation had been
followed by the commissioner; however, there's nothing in this
legislation that would prevent the attorney general if he felt that
part of the process was not carried out appropriately to do further
investigation into the merits of the decision.
CHAIRMAN ROKEBERG: Representative Brice.
Number 340
REPRESENTATIVE BRICE: Yes, I think my concern lies in that when
we're saying that it contains the concurrence of the AG is that it
does give the AG veto power over the decision making process. And
maybe if we can think about, Mr. Chair, (indisc. - static) to make
sure that the AG's determination is based on the appropriate use of
a process versus using, using that veto for a policy call by the
AG. In fact, you do want to make sure that that's clear as well,
that being something that....
Number 351
COMMISSIONER SHIVELY: Mr. Chairman, Representative Brice. Since,
of course, the administrative's position was that we didn't want
any review at all on anything that further constrains the review,
we think it expedites the process, and therefore, we would support
it.
Number 355
CHAIRMAN ROKEBERG: Well, Representative Brice, if I might (indisc.
- static) on what level of review here, or what, what concurrence
means?
Number 358
REPRESENTATIVE BRICE: Well, I, I think, yeah, well actually, we
can do this when we're getting down to, you know, offering the
amendments and discussing that, but I would just say take out
Section 8 period. We can discuss it.
CHAIRMAN ROKEBERG: Representative Davis.
Number 363
REPRESENTATIVE G. DAVIS: Thank you, Mr. Chairman. Yeah, since
we're on that, I, I too have some, some real concern about the
oversight. We, we've got, the commissioner now is, is making the
decisions, so who's going to, the AG and the commissioner work for
the same person, so there's kind of cut and dried how that, the
majority of those decisions will come out a lot, lot of times. So,
and, and, but I think the biggest questions there is the technical
nature of, of the data. I mean, who in the AGs office, nobody in
the Ags office has the expertise to properly analyze the data, so
they would have to contract or, or question someone else. So who
else would they, who would they question? So, initially, they
would probably go back to the Division of Oil and Gas who was
involved in it in the first place. So, so that takes them out.
So, you know, that's, that's the dilemma, and I think, I think the
oversight is, is the legislature. We went through last year on
production and public debate on oversight, and, and input into
findings, and I think after all of that, you know, I came down to,
you know, putting the technical data and the recommendation of the
commissioners as, as final on that other than you always have the
legislature and you always have special interest groups that are
there to continually bird-dog and watch, watch the process. So you
always have, have those to fall back on.
Number 390
REPRESENTATIVE BRICE: And, and to follow up on. You know, I think
that's why we want to make it very clear that we keep the Attorney
General and that it's clear that he's addressing a process by which
the commissioner came to a decision. Now the economics the
commissioner's taken into account more, various other aspects. So,
the necessary redundancy that would otherwise be, the redundancy
that would otherwise be necessary in, in, you know, in expertise on
the decision making process is not there.
Number 402
CHAIRMAN ROKEBERG: I'd like to just say maybe we can, to move
along here...
REPRESENTATIVE BRICE: Yeah, exactly. We'll talk about this later.
CHAIRMAN ROKEBERG: ...I just, yeah. And I, I really think that
what we need to keep in mind here is what's been by one wag been
referred to as the "evil commissioner" theory, and they my concerns
raised and some other further testimony about from the one hand the
skulduggery, the other hand stupid decisions. That's what we're
really talking about. I think that's what you are agreeing, what
you're saying, Representative Brice, is that well, we were just
reviewing the process here and, to see if these extremes have been
exceeded.
Number 412
REPRESENTATIVE BRICE: Well, to make sure that, you know, the steps
to acquire, number one to acquire the information necessary to make
the decision, the steps necessary to make the decision have been
followed. And that that's appropriate, not that X plus Y equals Z,
and therefore, the determination's appropriate.
Number 414
CHAIRMAN ROKEBERG: Right. I think that's, that was the obvious
extent. Representative Finkelstein.
Number 418
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, just let me pick an
alternative we ought to consider another one of these (indisc.)
just as a compromise to eliminate the reference to the Attorney
General, and to make the, make it go to the Royalty Oil and Gas
Board only when there is an appeal, not make it mandatory that it
go before them every time, but if there's an appeal then it goes
before them, and if not, the decision of the commissioner stands.
CHAIRMAN ROKEBERG: Thank you, Mr. Finkelstein. Representative
Ogan.
Number 426
REPRESENTATIVE OGAN: May I comment on that? I think the whole
idea of having the oversight is not for an appeal process, but as
a check and balance process.
Number 430
CHAIRMAN ROKEBERG: Thank you. Mr. Shively, do you want to
continue on anything? Or are we going to ask the questions that
were raised?
COMMISSIONER SHIVELY: Mr. Chairman, I'm through with my....
CHAIRMAN ROKEBERG: Oh, okay. Representative Finkelstein.
Number 433
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, I apologize for being
late. Commissioner, could you just say in a few words, the
problems that you had, if any, with your review here? I know the
subject you just mentioned the (indisc. - papers rattling).
Number 435
COMMISSIONER SHIVELY: We, of course, have not supported having the
royalty be able to go to zero for a shut in or fields, fields that
might be abandoned. We think one review process is enough, that we
don't need two, and we suggested a notice of the decision to the
legislature, all the legislature, but I mean, whatever the
legislature wants in that section we will do. And then I had a
comment about the legislative intent. We felt it was a standard
that we couldn't necessarily meet to say that we'd have to know
that they would make the additional investment before we would
reduce the royalty. It goes with the comments I gave you.
Number 450
CHAIRMAN ROKEBERG: Commissioner, if you'd indulge me. If we could
go to page 2, Subsection 3 there. I'd like to review that in the
light of the public hearing and make sure we have a complete
understanding of what this language means, and it starts on line 16
where it says "...the commissioner shall...", oh, incidentally, I
want to go back to line 12 for the record where the, we had had
earlier discussions about the "...may not grant a royalty
reduction..." etcetera, etcetera, "...unless they make a clear and
convincing showing...". It's my understanding that, that the
method of drafting statutory language in Alaska prohibits the use
of "shall" so we left "may not." I mean, that was just for your
information because we had some further discussions about this
historically. I mean, in the past week or so. Just to go on
though, to go to line 16. It says "...shall, if the royalty
reduction agreement is approved in the royalty reduction agreement
condition a royalty reduction granted under this subsection in any
way necessary to protect the state's best interest. Under this
subsection, the commissioner shall include provisions of increase
or otherwise modify the state's royalty share by a sliding scale
royalty or other mechanism upon the occurrence of a change in the
price of oil and gas." To focus on line 23, the word "shall" there
and may, did you, have you considered this with advice of counsel
and the effect of the way this language is put together? Or have
you had a chance to do that yet?
Number 472
COMMISSIONER SHIVELY: Well, I haven't 'cause I just got it. I
mean, I think it's certainly an improvement over the previous
substitute. I think it allows more flexibility than we felt the
previous committee substitute. It's, it allows us to, it gives
you, it give us the idea of some things you think are relevant to
consider, allows us the flexibility to consider other things which
we felt was important that whenever you try to list things, I mean,
you can never list everything. And so, we think that's good.
Number 482
CHAIRMAN ROKEBERG: Well, I'm concerned specifically, Commissioner,
about the mandate here as I read it that in your original
bargainer, your agreement with the applicant? You would have to
have some kind of a provision for an oil price, or some kind of a
provision or a trigger mechanism in the event they were pricing, a
major price increase or something. My understanding of the
language is that you would have to bargain, deal up front. You
couldn't come in there unilaterally with a reopener later, but you
could have a reopener clause inside the original agreement.
COMMISSIONER SHIVELY: Yeah, I...
CHAIRMAN ROKEBERG: I think that overcame some of the fears that
some people had about just having like a unilateral right to reopen
later downstream. And, so I'm, that's what I want to talk about,
make sure we're all in the same page or same track here with that
because it makes a, there's a distinction there between whether you
should require it. Well, we're going to require that, or we should
give you a suggestion that you should look at it. I mean, that's
the difference.
Number 495
COMMISSIONER SHIVELY: Mr. Chairman. It certainly was never our
intent that the commissioner would have the unilateral right to
call up an oil company that got the royalty reduction and say,
well, tomorrow your royalty is going up. I mean, so, conceptually,
I don't have a problem with what you're doing here, saying that
there has to be a sliding scale or some other mechanism and the
sliding scale may not be appropriate to, so that the state, if
there is change in the price of oil, or in the volume of the field,
which are certainly two of the things that are most easily looked
at, that the state gets an increase. That's always been part of
our concept, so I certainly, I don't have a problem with the
intent, and I'm going to have to talk to Patrick about the actual
language, but certainly, the intent is precisely as, as we have
stated it on the record.
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 506
REPRESENTATIVE FINKELSTEIN: Just, I missed something there. The
two factors, the price of oil and volume? Is that what you said?
Number 508
COMMISSIONER SHIVELY: Those are two factors. They are not the
only two. Those are the two easily, most easily measured.
Number 511
REPRESENTATIVE FINKELSTEIN: Because it, on line 26, 27, it says
that (indisc.) the change in oil and gas. It sort of picks that
out as the one, the only one that the royalty sliding scale will be
based on.
Number 514
CHAIRMAN ROKEBERG: Well, no, the intent, excuse me, Representative
Finkelstein, that, that would be, that's dictated. The ones may be
considered in any kind of formulation you want to do.
Number 516
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, the, since, you're
certainly right about the intents of the, it's confusing because
the sentence starts off not talking about sliding scale royalties,
but the initial sentence is "...shall include provisions to
increase or otherwise modify..." etcetera. Very general stuff and
I tend to see the, and may consider other relevant factors applying
to that. This sub, the little piece in here, which is, we can tell
it 'cause it's separated by commas, is the reference to royalty
share upon the occurrence of the change in the price of oil and
gas, and so we may want to ask the bill drafter about that because
I would take the rest of it after the comma, referring back to the
beginning, which isn't sliding scale rules. It's just "...shall
include provisions...".
Number 526
CHAIRMAN ROKEBERG: Well, yeah. Let's pursue that in a moment, but
I wanted to get some, focus on line 23, after the "shall", "...the
commissioner shall include..." that's, you know, we could change
that to "may" and then it would give you more flexibility. That's
a policy decision that we need to make as a committee, I think,
about whether we want to dictate the commissioner shall include
that provision in there, or allow them to have the flexibility to
do that. Is that how you see it, Mr. Commissioner? Or....
Number 533
COMMISSIONER SHIVELY: Yeah. Mr. Chairman, if the intent here is
to both, I mean, sort of take care of two interests in one, the
concern that the commissioner would only go down and would forget
what might happen if, if it could go up on one side. And on the
other side of the equation if there was, this concern was expressed
by Unocal that the commissioner could come in unilaterally and just
raise it, this language takes care of those two concerns, then I
don't have a problem with it. I, I think we may want to fiddle a
little bit with the wording, but conceptually, I do not have a
problem with what you're doing.
Number 540
CHAIRMAN ROKEBERG: We're going to ask Mr. Chenoweth to advise us
on this right now if we want to talk about this. Would that, do
you want to do that?
Number 542
REPRESENTATIVE FINKELSTEIN: I don't if we need to or not.
CHAIRMAN ROKEBERG: Okay.
REPRESENTATIVE FINKELSTEIN: I think the intent's clear. It's
just, the language reflected, it's, the language may well reflect
what you're saying. I just was....
Number 543
CHAIRMAN ROKEBERG: Yeah, I was just, actually, what I was trying
to elicit from the commissioner, I know it's tough when you in a
short review with no input, but if you'd prefer to put the word
"may" there rather than "shall" on line 23.
Number 544
COMMISSIONER SHIVELY: Well, of course, commissioners always prefer
may over shall. But....
Number 548
CHAIRMAN ROKEBERG: Okay, just so we have it on record. That's
just what I was looking for there. Okay, is there any other
questions of the commissioner at this time? Representative
Finkelstein.
Number 551
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. The, just
some tech things, if you missed it before, but to save people from,
kind of clear thoughts of them. You, at this point, don't have any
concerns about the companies hiring and employing the contractor?
COMMISSIONER SHIVELY: No.
REPRESENTATIVE FINKELSTEIN: That is, that's acceptable to you.
they won't work for you. They'll work for the oil companies.
Number 554
COMMISSIONER SHIVELY: Mr. Chairman, Representative Finkelstein.
No, we think that that's an estab... as long as we control who
those initial, which company is going on that initial list, no, we
do not have a problem since we get to choose those, so we,
therefore, do not have a problem.
Number 556
REPRESENTATIVE FINKELSTEIN: What about that idea that came up
previously that if a certain amount of (indisc.), if development
doesn't occur within a certain occur within a certain amount of
years the royalty reverts back to the peak level for performance
criteria, that you only get this if you actually do something, and
you don't get it as sort of a speculative venture. Would you have
any objections to something like that?
Number 562
COMMISSIONER SHIVELY: Mr. Chairman, Representative Finkelstein.
If we take care of the upside of the field size and oil price, I,
in the agreement which we're being mandated to do presently, I
don't really have a concern about that. On the other hand, if the
committee feels that there should be a time frame I don't know that
we would oppose it. I don't think we feel that it's, it's
necessary.
Number 562
CHAIRMAN ROKEBERG: Mr. Commissioner, Representative Finkelstein.
I think the, what that issue would be is just another relevant
factor here. It's the level of importance we want to rise it up to
stick in here. As we heard Director Boyd say yesterday, you could
have a hundred things on this laundry list. I expect that the
author's desire here was to make sure that these, these other three
factors were taken into consideration as a more or less statutory
reminder of the conditions to the commissioner. So, I'm not sure
what he's saying, and correct me if I'm wrong, Sir, that's
something you'd consider, but you don't think it's necessary to put
in the bill.
Number 572
COMMISSIONER SHIVELY: Yes, Mr. Chairman. And, and clearly, we
could do it under the current language. I mean, we could condition
the royalty reduction on them going into production in a certain
amount of time.
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, the...
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 579
REPRESENTATIVE FINKELSTEIN: ...another one I had was, this came
up. We discussed it previously, the idea of keeping some criteria
in law other than being in the state's best interest, which is now
basically in the intent of, or is it an amendment that's going to
be considered? But, it's, to put some words back in, such as
maximum possible, economic term possible under the circumstances,
something that refers to the kind of things you've always described
as what your decision would be based on, maximizing state returns
in the long run rather than just....
Number 586
COMMISSIONER SHIVELY: Mr. Chairman, again the difficulty was with
that is defining what maximizing return is. That's the problem I
have with that, and, and because there are other potential reasons
in a best interest finding other than for that particular field
maximizing the state's economic interest. It may have to do with
how much oil we want in the pipeline, how it relates to other
production facilities that might be shut in. There are a variety
of other things in a best interest finding that could have you keep
a field operating, particularly at the end of its cycle, or even
bringing a marginal field on, that don't necessarily tie to
maximizing the state's economic benefits on that one field. So, I
think it's limiting and therefore, I just don't think it, it would
work well.
Number 598
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, one last, one of the...
CHAIRMAN ROKEBERG: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: We had discussion before and you were,
said you were, didn't support the general concept of a sunset
provision, but what about a sunset that just covered, like a sunset
of five years only for future leases that are sold and all the
provisions stay in effect for existing leases, but if you sell some
in the future after that, they, unless this provision was extended
it wouldn't apply to them. Then the arguments that you had that
you want to get, five years is too short a period to give people
the chance to come in and take advantage of the provisions and, and
to build their plans on these provisions of the lease being there
permanently, that concern wouldn't be there because it would be
there permanently for any existing leases, but leases you sell
beyond that would only be subject to it if the provision was
extended.
Number 607
COMMISSIONER SHIVELY: Well, Mr. Chairman, Representative
Finkelstein. We've had royalty reduction statutes on the books in
the state since 1959. Something, when you and I discussed this
some time ago I was unaware of, I was, that legislation has been
changed a variety of times over the years as I suspect this
legislation, if it passes, will someday be changed, as we try to
meet current conditions or find problems with the legislation as we
did with, with the previous, with the current law that just makes
it very difficult to operate. So, I think it's still our
preference that we not have a sun, or I know it's still our
preference that we not have a sunset. On the other hand, a sunset,
you know, for, you know, some leases are all part of it. I don't
think it's something that we would say we're going to veto the bill
over, but to me it doesn't, doesn't make a lot of sense.
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman.
Number 619
CHAIRMAN ROKEBERG: Representative Finkelstein, the Chair observes
the fact that you would add this to a future lease and then put a
sunset in that when we have a, I believe, 10-year lease provision
development time frame (indisc.) testimony to the record is going
to take at least six years to turn around any decision now that
would be based on this particular new statute before there's any
proven level of production to predict its efficacy, if you will, so
we could look at a 16-year time frame is possible 'cause what a
sunset law is one of the problems, well, I think heard in testimony
that it obviates the need for the sunset provision. Plus, I have
every confidence that this committee would do such a good job here
on this bill that we won't need to.
Number 630
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, I think you're right and
I was trying to find a compromise, because the existing leases are
based, are the biggest portion of what's going on. I mean, if you
keep it applied to them forever, you only sunset for future leases,
that's just a tiny percent of what's going to happen.
Number 634
CHAIRMAN ROKEBERG: Okay, is there any other questions of the
Commissioner at this time? Representative Finkelstein.
Number 636
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, did the, did the, on the
subject of a floor coming up, not going to zero royalties, is your
recommendation that it be 25 percent, 50 percent, or the original
version, which had a two different levels?
Number 640
COMMISSIONER SHIVELY: Well, the original version had two
different, I'm sorry, Mr. Chairman, Representative Finkelstein.
The original legislation had two different levels because it was
geared to the permanent fund. The administration supported the
concept proposed by the Chairman to make it reduce to 25 percent of
the existing royalty with the implication that the permanent fund
would get its appropriate share of whatever money the state got and
the remainder would go to the general fund. We supported that. We
have not supported allowing the royalty for abandoned fields, or
fields about to be shut in to go to zero, which is in the current
legislation, even though that is something that theoretically could
be done as an existing law if the existing law would work for those
fields, which, in my mind, it doesn't.
Number 649
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, you're considered
recommendation is 25 percent for all.
Number 650
COMMISSIONER SHIVELY: Mr. Chairman, Representative Finkelstein.
Yes.
CHAIRMAN ROKEBERG: Representative Ogan.
Number 651
REPRESENTATIVE OGAN: Thank you, Mr. Chairman. Commissioner
Shively, on page 2, line 27 there's some verbiage there that says,
the whole end of that paragraph "...may consider other relevant
factors..." through line 29. Now is that going to limit you? Does
this specific wordage limit you only to these factors? Or should,
would it be prudent to put in some language like "and may consider,
but not limit to other relevant factors" or...
COMMISSIONER SHIVELY: Well...
REPRESENTATIVE OGAN: ...does this cover all the bases or just
going to tie your hands here?
COMMISSIONER SHIVELY: Mr. Chairman, Representative Ogan. I think
the words "such as" gives the flexibility to say this, these aren't
the only criteria which I can, or any future commissioner, can use.
Again, I haven't gone back over this section with our attorney,
but, and you do have your own attorney here who may want to comment
on that, but my reading of this is that you did not intend to limit
the number of, the factors that a commissioner could consider, but
you were giving him some hints of the ones you thought might be
important.
REPRESENTATIVE OGAN: Thank you, Sir. Mr. Chairman, one more?
CHAIRMAN ROKEBERG: Representative Ogan.
Number 667
REPRESENTATIVE OGAN: On page 3, line 8, Section A, it says "...may
not require disclosure of data relating to production for the
lessee or lessees obtained ownership of the lease if the reduction
application involves a lease described in 1B or 1C of this
Subsection...". Now, is this, do you foresee any problem with
this, like for example, they have some, some, suddenly a lot of
different leases changed hands and because it would be advantageous
not to provide information of production before that person owned
it, sort of as a shell game kind of scenario.
Number 677
COMMISSIONER SHIVELY: Mr. Chairman, Representative Ogan. I mean,
I don't know the answer to that question. I would say probably
not. For one thing, for those leases in 1B or 1C, for the most
part, I think the production data is going to be known because they
will have reported it to the state. It's, I think where there was
a problem with the Texaco situation, as I understand it wasn't in,
and depending on how you define data relating to production, but
the problem was in the expense side of it, that the new company
could not go back and create, or get the records as to what had
gone on and we were requiring, which is something we no longer
require in this legislation, that we look at the return of the
investment of the whole field. So, I, I don't really think that
that would be a problem. So.
REPRESENTATIVE OGAN: That was my concern.
Number 689
CHAIRMAN ROKEBERG: Very good. Any other questions of the
commissioner at this point? Hearing none, I want to thank you very
much, Commissioner, for this long and arduous ordeal or journey
we've been on.
Number 691
COMMISSIONER SHIVELY: Well, Mr. Chairman, I'd like to thank you
for all the time you've taken and all the work you've put in on
this progress we've made. Thank you very much.
Number 694
CHAIRMAN ROKEBERG: I appreciate that, Sir. Excuse me. Jack,
could, Mr. Chenoweth, could you come up here and try to help us out
a little bit?
TAPE NUMBER 95-16, Side B
Number 000
JACK CHENOWETH, ATTORNEY WITH LEGISLATIVE LEGAL COUNSEL,
LEGISLATIVE AFFAIRS AGENCY: Thank you, Mr. Chairman.
CHAIRMAN ROKEBERG: Thank you, Mr. Chenoweth. Would you please
identify yourself, Sir?
MR. CHENOWETH: Jack Chenoweth from the Legal Services Division.
Number 003
CHAIRMAN ROKEBERG: Thank you, Sir. This is a, I just want to make
sure the committee understands this, and the Chairman understands
the language as found in, on page 2 of line 16 down through 29
there as it relates to the requirements of the commissioner to
include or discretionarily include certain provisions in his, or in
his agreement, if you will. Could you, as this bill is written now
on that Section 3 there, starting on 16, could you explain what
the, the impact of the shell versus may language is, or what it
says. Why don't you explain what it is now?
Number 027
MR. CHENOWETH: Well, I, I guess I would encourage the committee to
give a little bit more attention to this thing and try to refine
it. The first part, beginning on line 16 requires the, the
commissioner to condition the royalty reduction granted under J in
any way necessary to protect the state's best interest. It's a
mandatory duty. And there's no discretion involved in that. He's
got to at least consider and make an educated decision as to how to
do that to protect the state's best interests. And I don't, I
don't have any problem with the way that's drafted. It seemed to
me that it's clear enough. Beginning then on line 22, after that
semi-colon with the words "under this subsection" and on down, I
think we ought to try to be a little bit clearer. It seems to me
that there are three problems here. First, your question about
whether the commissioner shall include provisions to increase or
otherwise modify, or whether that should be whether the
commissioner's authority should be, discretion should be broadened
by substituting the word "may." That's a choice the committee will
have to make. It is a policy call. It's drafted as "shall" at
this point in time. You may want to think about changing it. The
second is, is this phrase "to increase or otherwise modify the
state's royalty share by a sliding scale royalty or other mechanism
upon the occurrence of a change in the price of oil or gas." The
operative event is "a change in the price of oil or gas" and I
assume that we're talking about, it could go up, it could go down.
If we're concerned about either of those opportunities, either of
those situations, then I'm not sure that we need to retain the word
"to increase or otherwise," the words "increase or otherwise." It
seems to me that if you're going to give the commissioner this
authority, it, it is enough to say "The commissioner shall include
provisions to modify the state's royalty share by a sliding scale
royalty or other mechanism upon the occurrence of a change in the
price oil or gas." That way there is no presumption that it's
going to go in any one direction. If, however, you, you are
concerned about the fact that this thing ought to increase when the
price of oil or gas increases, then, and that is the law now. The
law now talks about an increase in the price of oil or gas. We've
bracketed that word "increase" then I suppose it's wise to keep the
word "increase" and I'm not sure what the "or otherwise modify"
what circumstances you're trying to cover there. I, I mean, it
seems to me that this sliding scale thing is going to go up or
down, and that's all it's going to do. It's going to increase or
decrease. So, it seems to me we ought to try to make the
construction of this phrase parallel within itself, and, and avoid
things that may give rise to questions at a later date. Finally,
on line 27, the way this is drafted, the words "and may consider
other relevant factors," my questions to you in the memo was "For
what reason, for what purpose?". If you're requiring the
commissioner to impose or include something that says that
provisions are there to increase or otherwise modify the state's
royalty share when the price of oil or gas changes, what purpose do
you have in mind when you ask him to, or when you authorize him to
consider "other relevant factors"? What are you getting at? And
my, my suggestion in the memo was: Do you, do you want to give him
the additional authority to change the royalty share to the state
when some of these other factors come into play, proven reserves,
well productivity, capital investment in the oil or gas field pool
and so forth and so on. Is that what you have in mind?
Number 093
CHAIRMAN ROKEBERG: Yes.
Number 094
MR. CHENOWETH: All right. Then it seems to me we need to
straighten that out. We need to make, again, make, make these two
halves, "the commissioner shall" and "the commissioner shall
include provisions" and the "may consider provisions" work toward
that end. That is to say he will have the, the duty to include
provisions that change the royalty share upon the occurrence of a
change in the price of oil, and in addition to that, he has the
authority, the discretionary authority to change the sliding scale
or other mechanisms taking into consideration other relevant
factors such as proved reserve, well productivity or capital
investment. To the question earlier about, I think it was
Representative Brice, questioning, do we need to substitute
"included" or "included but not limited to" for the "such as," you
could substitute "including proved reserves" but "such as" I think
is as the commissioner indicated is sufficient to give notice that
these are examples of the kinds of things that the commissioner
ought, commissioner ought to take into consideration when he
exercises authority in this discretionary grammar(?). So, I think
we need to try to find that, I'm no expert in this. I'm, I'm,
there may be reasons it's drafted the way it is, but from somebody
trying to figure out what is this trying to do? I would suggest
that those three points deserve your attention.
Number 125
CHAIRMAN ROKEBERG: Well, Mr. Chenoweth, do you, I know it's a
short notice here and so forth, and understanding about (indisc.)
would you have any recommendations that we could consider there to
do that?
Number 128
MR. CHENOWETH: Well, you mentioned the "shall" or "may" on line
23. That's a policy call and you've had that discussion. The, and
I've mentioned that if you're, if you're going to give the
commissioner the opportunity to move the royalty share on a sliding
scale or other mechanism as the price of oil or gas changes, then
I'm not sure that you want to include the words "increase" or
"otherwise." It may be enough to say "The commissioner shall, or
may, include provisions to modify the state's royalty share by a
sliding scale royalty or other mechanism upon the occurrence of a
change in the price of oil or gas."
Number 139
CHAIRMAN ROKEBERG: Well, I think, as I recall, I think the, it was
in the Governor's language. It was in the prior statute and also
as a reminder to the commissioner that that's what he has to do.
I don't, because I agree with what you're saying, but you know,
it's a....
REPRESENTATIVE OGAN: Mr. Chairman.
CHAIRMAN ROKEBERG: Representative Ogan.
Number 144
REPRESENTATIVE OGAN: In that point, Sir, what would you say would
be in the best interests of the state in that situation? In....
Number 147
CHAIRMAN ROKEBERG: Excuse me, Representative Ogan. If I might
interject, that's a whole different topic, if you will.
Number 150
REPRESENTATIVE OGAN: Well, no...
CHAIRMAN ROKEBERG: Or if, I mean, what's....
REPRESENTATIVE OGAN: My point would be I think it would be, I
guess, it, it, with all due respect to my oil company friends,
they're getting a price break here to go into, into this field.
Now, I don't, I feel that people need to take a certain amount of,
I mean, I always feel the oil companies take a certain amount of
risk to, as all business people do, to, to exploit a resource and
I just feel like if we're willing to make compromises to make the
risk a little bit more palatable, shall we say, that if the price
goes down that's the risk they take with, with all their oil
fields. And if the price goes up we've always compromised the
price on that. I wonder if we shouldn't consider just the idea, I
think, if we, we've already adjusted it down. If we need to
readjust it, it's probably up.
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 173
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. The, I think
the, it might solve the problems we've got on this, on these items
here, the "shall" or "may." We could pick either one. I think
(indisc.- papers rattling) the point that Representative Ogan is
making is a good one, but the point that Jack was making is
basically just an English kind of construction thing and it would
be covered either way, and I don't think we should worry about it
too much either way. He's basically said it works the same no
matter whether we leave in the words "increase or not," but I would
agree with the point the representative made just for the intent,
and when it gets to the final thing I think we should say the price
of oil and gas, or other relative factors, such as crude reserves,
something like that so that the comma and may consider, which seems
to take these other things and put them on to some B list instead
of an A list, at least they'd all be on the A list.
CHAIRMAN ROKEBERG: Good. Mr. Chenoweth. Would you care to
comment on that last statement, or?
Number 190
MR. CHENOWETH: There are many ways to address this and I, I don't
know enough about what it is that prompted, the point, the
observation that this came from the administration's bill is
correct. The original bill on its line 23, talked in terms of the
commissioner making additional royalty reduction granted under this
subsection in any way necessary to protect state's best interests
including and then their words "increasing or otherwise modifying
the state's royalty share" and so forth and so on. I don't know
what they had, why they distinguish between "increasing" and
otherwise modifying." If there's a reason to do that, if there's
a good reason to do that, fine. Then leave it. If not, I suppose
that the construction here ought to do what this committee ought to
be done. If you want the commissioner to have flexibility to move
this royalty share or other mechanism as the price of oil goes up
and down, that it's enough, it seems to me to just say modify,
without the word, without the predisposition word "increase." If
you want this to somehow move, give, I don't know, give notice that
this thing, that this price may go back up if the price of oil or
gas increases then, then we're going to have to do some, some
fiddling around here. I just point out to you that this is not as
clear as it could be in terms of trying to tell the commissioner
how to structure this provision that is to be included to make it
work, and I think it's both in the interests of the department and
the interests of producers when they look for this thing to have
clarity on this point so there's no stumbling around on it later
on.
Number 221
CHAIRMAN ROKEBERG: Thank you, Sir. If I might ask you, the
substance wouldn't change, or the language. The fiddling you refer
to is more a matter of clarity though.
MR. CHENOWETH: That's right. That's right.
CHAIRMAN ROKEBERG; And, if I might ask the commissioner, do you
have any knowledge about why that language was in there initially,
about why that language was in there initially about the increase,
or otherwise modify, if you might want to just interject that here?
Or, you have an idea on that.
Number 230
COMMISSIONER SHIVELY: Mr. Chairman, John Shively, for the record.
I believe the reason that the "increasing or otherwise modifying"
was that there are some things you can do that, other than just
increasing the state royal, or royalty. For instance, on some kind
of net profits need a modification that wouldn't be necessarily an
increase in the royalty. There might be others, and of course, I'm
not a real expert in this field, and, and it's my recollection
that's why the language was written the way it was, to give us
flexibility to get the state's share up by doing things other than
just, just (indisc. - static, papers rattling).
Number 240
CHAIRMAN ROKEBERG: Thank you, thank you, Mr. Commissioner. Any
other questions on this point? Mr. Chenoweth, in your memorandum
you indicated that when we remove the regulatory language there was
two items, one of which was the requirement for written findings,
and another one for, for the applicant to make an application,
which were removed by the, by the latest CS draft that you did.
And incidentally, I want to thank you for all your efforts there on
that. The, that, I, I think at this point it's my contention that
these are implicit in there, or do you think it's necessary or
would you recommend as a matter of drafting to reinsert, somewhere
in here, those provisions?
Number 252
MR. CHENOWETH: It would probably be necessary if we had left this
bill as it had been in the previous version, that is to say,
without leaving the commissioner regulatory authority. But at this
point, if the commissioner is clear on the fact that both written
findings are expected and that this is an application cross, that
is to say that the lessee or lessees initiate this process, then I
think that it's perfectly in order for the department to draft the
regulations, their procedural regulations, or amend their
procedural regulations to pick up on those points. The fact is the
legislature expects an application to be forthcoming and at the
other end, that there be a written deter., findings and
determination.
Number 265
CHAIRMAN ROKEBERG: But there are, just for my own clarification
and those of the committee here, there are existing regulations
that go through the, this royalty reduction application procedure,
there are now. It is my understanding that if we pass this bill as
is drafted now, that only that, those portions of the regulations
would be affected? And the existing regulations would stay whole,
if you will, but only be affected by stipulated portions of, or
specific portions of this, this bill?
Number 273
MR. CHENOWETH: Provisions that, provisions of the current
regulation that conflict with what the legislature is proposing to
do here ought to be repealed so there's no confusion on the point
in statute would govern. Otherwise, I would think that the gover.,
that the administration, the commissioner would take a look at the
regulations and decide whether there was any further need to
amplify or modify what's in there in order to conform to what the
legislature has put forth here.
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 282
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, you said they ought to
be repealed, but it isn't in effect that they, since they are
repealed...
MR. CHENOWETH: They are repealed. I mean, as a practical matter,
this will override the regulation.
Number 284
REPRESENTATIVE FINKELSTEIN: ...right. But by being, we don't have
to do anything, it just happens.
Number 285
CHAIRMAN ROKEBERG: Well, that's what I wanted to try to clarify.
Right. That was mu understanding. That's why we changed from our
discussion yesterday. I just wanted to get that out, because what
we're doing here is giving the commissioner the opportunity to
adopt any regulations he so desires, but we're not mandating that
he do anything. Is that correct?
MR. CHENOWETH: Right.
CHAIRMAN ROKEBERG: And then because there is a, one section in the
regulations that would be overridden by this bill, then that would
be negative anyway, so. Is that, would that be correct, Mr.
Chenoweth? Or?
MR. CHENOWETH: Yes.
CHAIRMAN ROKEBERG: Commissioner, you have a comment on that?
Number 294
COMMISSIONER SHIVELY: Mr. Chenoweth. Yeah, I don't think that the
regulations are totally overridden by this bill. I mean, they
would have taken effect so that the application process, the public
notice process, unless those regulations were absolutely revealed
would continue to be in effect, and any place, as I think Mr.
Chenoweth has indicated, where the law conflicted with these
regulations we would go in and modify the regulations. They're not
repealed, you're not repealing these regulations (indisc.) law.
Number 302
CHAIRMAN ROKEBERG: Right, that's what my understanding so I think
we're okay there by being silent on that. And then something that
Commissioner, if he wants to, he desires to modify them and go
ahead and do the regulatory routine, process, so. (Indisc. -
static).
Number 305
MR. CHENOWETH: Yes, I'm satis., yes, Sir.
CHAIRMAN ROKEBERG: Okay, is there any other questions of Mr.
Chenoweth by the committee members?
Number 310
REPRESENTATIVE BRICE: Maybe we can get, when we get down to
discussing amendments to the work draft, maybe we can have him drop
back.
Number 313
CHAIRMAN ROKEBERG: I appreciate you're making yourself, hopefully,
we can get through and make some progress right here, so we can go
to lunch. Thank you, Mr. Chenoweth. Any other discussions at this
point? I'll move the, move the CS and...
REPRESENTATIVE BETTYE DAVIS: Wait for a minute.
CHAIRMAN ROKEBERG: Excuse me?
Number 318
REPRESENTATIVE B. DAVIS: Are you ready for an amendment?
Number 321
CHAIRMAN ROKEBERG: Yeah, did we, oh, yeah, are we...
REPRESENTATIVE B. DAVIS: You're supposed to (indisc.) for
amendments.
CHAIRMAN ROKEBERG: Right. We do. Okay, excuse me. We are ready
for amendments. What's the role of the body here? Representative
Brice.
Number 324
REPRESENTATIVE BRICE: On page 3, line 19. I just, I would feel a
little bit more comfortable if we, we made it very clear that when
we're discussing who gets to pick the, pick from the list provided
by the commissioner, that it's very clear that it's the lessee, not
the commissioner himself, and you know, maybe something and pay for
the services of a contractor (comma) the lessee or lessees have
selected from a list provided by the commissioner.
CHAIRMAN ROKEBERG: I think there's....
REPRESENTATIVE BRICE: Okay, let me read, let me read it to you as
it, as I would like to see it.
CHAIRMAN ROKEBERG: Okay.
Number 337
REPRESENTATIVE BRICE: Okay, Section 7 would read: "may require the
lessee or lessees making application for the royalty reduction to
retain and pay for the services of a contractor select.," okay "the
lessee or lessees have selected from a list provided by the
commissioner to assist the commissioner in evaluating the
application, and financial and technical data."
Number 344
CHAIRMAN ROKEBERG: So, you're just adding in the lessees and
lessors having selected from a list?
Number 345
REPRESENTATIVE BRICE: The lessee or lessees have, and then it'd be
"they have selected from a list provided by the commissioner." So,
it's explicit that they're the ones getting to do the choosing.
Number 349
CHAIRMAN ROKEBERG: Any discussions on the amendment?
Representative Davis.
Number 350
REPRESENTATIVE G. DAVIS: I don't, I think that's redundant.
You're adding lessee and lessee again.
Number 352
REPRESENTATIVE BRICE: I think, I think it's, it is redundant in
the sense we understand what the implication is of Section, Section
7. I think we want to be very clear that folks making the
application are the ones who get to make, who get to choose from
this list provide, this list that the commissioner provides.
CHAIRMAN ROKEBERG: Representative G. Davis.
REPRESENTATIVE G. DAVIS: They're, let me see.
REPRESENTATIVE BRICE: See, it could be read that the commissioner
can select a group of three or four contractors and then select one
of those. It can be read that way.
Number 365
REPRESENTATIVE G. DAVIS: And that, Mr. Chairman, and that might be
a case that the commissioner, the department may even want some
additional expertise in a specific area and they may want to
contract with someone so that this gives them that, that ability.
Number 369
CHAIRMAN ROKEBERG: No, that's not, excuse me, that wasn't the
intention of it.
Number 370
REPRESENTATIVE B. DAVIS: They can do that anyway.
REPRESENTATIVE BRICE: They can do that anyway.
REPRESENTATIVE B. DAVIS: So we don't have to put that in here. I
understand what Brice is trying to do, Representative Brice is
trying to do. I guess I'd like to hear from the commissioner and
anyone else from the oil industry if they see that as a problematic
problem the way it's worded, because....
CHAIRMAN ROKEBERG: Thank you, Ms. Davis. Commissioner Shively,
would you care to comment?
Number 377
COMMISSIONER SHIVELY: Mr. Chairman, I think Representative Brice's
language probably does clarify that it's the lessee or lessee that
gets to select them, so we do not have a problem with this
suggested language. And that is the intent.
Number 380
CHAIRMAN ROKEBERG: Any further discussion on the amendment? Mr.
Chenoweth?
Number 382
MR. CHENOWETH: Would you let us change the language to read, after
the comma on that line, "selected by the lessee or lessees from a
list provided by the commissioner."
REPRESENTATIVE BRICE: That would probably be clear.
CHAIRMAN ROKEBERG: That would do it.
REPRESENTATIVE BRICE: That would probably clear, yeah.
Number 384
CHAIRMAN ROKEBERG: That's Mr. Brice's amendment. Is that correct?
Any objections? So moved. The Amendment Number 1 has been
adopted. Mr. Chenoweth, are you going to provide us with the
written language there?
MR. CHENOWETH: We will produce either a CS or amendments as you
instruct.
CHAIRMAN ROKEBERG: Yeah. Okay. You're taking notes? Good.
That's all I'm concerned about. Okay. Moving on. Representative
Brice.
REPRESENTATIVE BRICE: Thank you, Mr. Chair.
CHAIRMAN ROKEBERG: Man.
REPRESENTATIVE BRICE: Chairman, Chairwoman, Chairmen/women.
CHAIRMAN ROKEBERG: Okay.
Number 390
REPRESENTATIVE BRICE: On page 3, line 28, I think it would be nice
if we scratched "obtains the concurrence of the Attorney General"
and have the role of the AG become more of a, of an oversight, I
mean, it's to the process, so maybe language along the lines of,
Mr. Chenoweth might be able to help us here.
Number 402
CHAIRMAN ROKEBERG: Well, do you have an amendment, Mr. Brice, or?
Wait a minute. Excuse me. Representative Finkelstein, you want to
interject here?
Number 403
REPRESENTATIVE FINKELSTEIN: No. I was just going to offer
specifics on what he's saying, but he wants to (indisc.) that's
fine.
CHAIRMAN ROKEBERG: I was just looking for something to put our
teeth into, Tom.
Number 406
REPRESENTATIVE BRICE: Okay, yeah. Let me give you some language
that's something that just, off the top of my head, and see what
drafters says here. Okay, instead of "obtains the concurrence of
the Attorney General" we'll strike that and put in "provides the
Attorney General with a determination for review to ensure the
process for making the determination was followed." And I am by no
means a lawyer, but I think what I would like to see clarified is
that the AG is, is not making policy calls, but making process
calls.
Number 416
CHAIRMAN ROKEBERG: Okay, if I could, could you read it again?
Number 418
REPRESENTATIVE BRICE: Okay, "provides the AG with the
determination for review to ensure the process for making the
determinations was followed."
Number 412
CHAIRMAN ROKEBERG: Any discussion on the amendment?
Representative Finkelstein.
Number 423
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, I tend to think that we
ought to just (indisc - paper rattling), get rid of the reference
to the AG.
CHAIRMAN ROKEBERG: There is some, right. Excuse me,
Representative Brice. You may be able to...
REPRESENTATIVE BRICE: In the best, in the best...
Number 427
CHAIRMAN ROKEBERG: If you want to hold your amendment in abeyance
here for a moment, maybe we can talk about the overall issue, and
then get back to amendments.
REPRESENTATIVE BRICE: Then, well, let me, but...
CHAIRMAN ROKEBERG: Representative Gary Davis.
Number 430
REPRESENTATIVE GARY DAVIS: And I would respond to Mr. Brice's
concern about, about the process. I think in, in the findings if
there's any question about the process, isn't the AG automatically
involved in it? I mean, if there's, so, so...
Number 432
REPRESENTATIVE BRICE: Let me amend my, and strike from page 3,
line 25 through page 4, line 21, Section 8 basically. I think if
we go back to the idea where the commissioner makes the decision,
business decision on behalf of the state, we have prescience for
those types of decisions being made. And the Attorney General,
when he is negotiating tax settlements and that type of thing.
CHAIRMAN ROKEBERG: Excuse me, Representative Brice. Let me
interject right here.
REPRESENTATIVE BRICE: Go ahead.
CHAIRMAN ROKEBERG: Just, why don't we talk about this whole
oversight before we start, we act on your amendment because,
because what you're doing here is throwing the baby out with the
bath water. We want to leave the Royalty Board in here.
REPRESENTATIVE OGAN: Mr. Chairman.
CHAIRMAN ROKEBERG: So, I mean, that's, that's, why don't we
discuss that and get a sense of the committee before we...
Number 442
REPRESENTATIVE OGAN: Point of order.
CHAIRMAN ROKEBERG: Representative Ogan.
REPRESENTATIVE OGAN: There's an amendment on it, and it's been
moved and I've objected.
CHAIRMAN ROKEBERG: Okay.
REPRESENTATIVE BRICE: That's something, well, we could discuss
that.
CHAIRMAN ROKEBERG: Okay. We're discussing.
REPRESENTATIVE BRICE: We're discussing.
CHAIRMAN ROKEBERG: Right, we're discussing. Right
REPRESENTATIVE BRICE: Correct, and Mr. Chairman.
CHAIRMAN ROKEBERG: Representative Brice.
Number 450
REPRESENTATIVE BRICE: Regarding, you know, having the Royalty
Board provide the oversight, it's, you know, I don't know, I don't
believe that, you know, that they are the appropriate body if there
would be an appropriate body. I, I just, I'm not very comfortable
having, having oversight thrown, of this type, thrown to a board or
commission. And that's the concern I have.
Number 459
CHAIRMAN ROKEBERG: Okay, so on a straw poll basis type, you're
against both the Royalty Board and the AG? Anybody else want to
throw their two cents in here? Representative Gary Davis.
Number 462
REPRESENTATIVE G. DAVIS: Mr. Chairman, thank you. I, I agree with
that. I think we, in testimony, we, we've tried to find some
oversight. We've discussed all the, all the logical oppositions,
or, or logical avenues, those that deal, those in, in, that we pay
for that deal with this issue. We've discussed all of them, and
it's come down to the testimony I think has indicated that none of
them have, are, that's not their job. That's not what they're
selected to do, the technical aspects of what they would need to do
to properly evaluate the procedure of either the Royalty Board or
the Oil and Gas Conservation Commission, neither one of those it's
been testified that, that they don't have the technical expertise
to deal with that, so I, you know, from that standpoint, I, I tend
to agree with the proposal Representative Brice is putting forward.
CHAIRMAN ROKEBERG: Representative Bettye Davis.
Number 475
REPRESENTATIVE B. DAVIS: From my standpoint, Mr. Chairman, I
thought the Royalty Board would be the ideal group to use, but I
know there are some people that's against that; however, if we're
going to do anything I would just advise that we probably just
delete line 28 with the Attorney General on it, and leave the
Royalty Board there, or whatever we decide to come up with. I
think somebody needs to be there.
Number 482
CHAIRMAN ROKEBERG: Well, the Chairman hasn't done a previous nose
count so.
REPRESENTATIVE BRICE: We're going to count noses.
CHAIRMAN ROKEBERG: Yeah. We're kind of counting noses. Gee,
Bill's getting out of here now. Representative Finkelstein. You
going for the coffee pot? Bring me a cup of coffee, Bill.
Number 486
REPRESENTATIVE FINKELSTEIN: I like keeping the Oil Royalty Board
and taking out the Attorney General.
REPRESENTATIVE BRICE: So do I.
CHAIRMAN ROKEBERG: Okay, let me get this down here. You got two
for...
REPRESENTATIVE BRICE: You've got seven different options.
CHAIRMAN ROKEBERG: This is, (indisc.) is this the committee
process, and not...
REPRESENTATIVE FINKELSTEIN: Who says?
UNKNOWN FEMALE: You should, you should ask, ask Representative
Brice if he will withdraw his motion.
CHAIRMAN ROKEBERG: I know.
UNKNOWN FEMALE: Take them one at a time.
Number 492
CHAIRMAN ROKEBERG: I know that. Right. We were trying to, we
were trying to hear the, we were discussing this for purposes of
formulation of an amendment, but I'd like Representative Brice to
withdraw his amendment if he wouldn't mind, so, so we could...
Number 495
REPRESENTATIVE BRICE: Well, I just, I mean, I started on the
discussion of the AG to begin with, and we wanted that withdrawn,
and I...
Number 497
CHAIRMAN ROKEBERG: Well, we're trying to find out which one, how
we're going to deal with this. Let's do one amendment and be done
with it.
Number 500
REPRESENTATIVE G. DAVIS: Mr. Chairman, I think, I think that this
is proper discussion. The motion is to delete both.
CHAIRMAN ROKEBERG: Right.
REPRESENTATIVE G. DAVIS: So, if someone has a problem with, with
the motion to delete both of them, I think the discussion is going
in order.
CHAIRMAN ROKEBERG: Thank you, Representative Davis.
Representative Ogan.
Number 501
REPRESENTATIVE OGAN: I'd like to amend the amendment to split the
question.
REPRESENTATIVE BRICE: There's three different areas here.
REPRESENTATIVE OGAN: Do the same thing. You're hung up
procedurally right now.
CHAIRMAN ROKEBERG: Bill, do you have anything to say?
Representative Williams.
Number 505
REPRESENTATIVE WILLIAMS: I, we, we come in here talking about how
much regulatory problems we're having and here we are putting more
regulatory issues in a bill. I think that, and we did discuss this
earlier on with the, with the industry and industry people and the
administration both thought, didn't think that this was
appropriate, or it would be very cumbersome. I have to agree with
Representative...
REPRESENTATIVE G. DAVIS: (whispering) Davis.
REPRESENTATIVE WILLIAMS: Oh, yes. ...Davis on this amendment. I
think that deleting Section 8 is good, this amendment that is
before us.
Number 517
CHAIRMAN ROKEBERG: To remove both. Right?
REPRESENTATIVE WILLIAMS: Yes.
CHAIRMAN ROKEBERG: Excuse me, is that the amendment before us?
Where are you looking? Representative Finkelstein.
Number 518
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, just to expedite things,
I think Representative Ogan's suggestion is a good one. This,
usually the procedure is just divide the question and vote on the
first half of it, vote on the second half, and then instead of
having to amend the amendment or some (indisc.) procedure.
Number 521
CHAIRMAN ROKEBERG: Why would, then we should split the amendment
and vote whether we want the AG in or out, and then the other,
Royalty Board, is that right? And then we can make the appropriate
fixes then. Representative Ogan.
Number 524
REPRESENTATIVE OGAN: That was the motion that I made was to split
the question, and I think we should probably deal with that, and
then argue each question separately and vote them up or down and
then go from there is the correct procedure, I believe.
CHAIRMAN ROKEBERG: Representative Bettye Davis.
Number 528
REPRESENTATIVE B. DAVIS: I thought that the motion that was before
us was to leave Section 8, so what is it to split?
Number 531
CHAIRMAN ROKEBERG: You turn it down or the Royalty Board or both,
I mean, get rid of the AG, get rid of the Royalty Board or get rid
of both of them.
REPRESENTATIVE B. DAVIS: The motion says to get rid of them both.
CHAIRMAN ROKEBERG: Excuse me, we're at ease here. Is there any
opposition to splitting the question?
Number 537
REPRESENTATIVE B. DAVIS: I don't think it's appropriate that it be
split, but if that's the way you want to do it that's fine with me.
The motion was to delete it period. And I don't see anything to
split.
Number 539
REPRESENTATIVE OGAN: Point of order.
CHAIRMAN ROKEBERG: Representative Ogan.
REPRESENTATIVE OGAN: I made a motion to split the question, the
amendment, a motion to amend his amendment to split the question.
That's, that's what we should be doing right now.
Number 542
CHAIRMAN ROKEBERG: And, and the amendment before us is to remove
all of Section 8. Is that correct? Representative Finkelstein.
Number 544
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. I think
Representative Ogan's motion is helpful because we will find if we
go through A that some people want to take out A, some people want
to take out B. I don't think anyone wants to take out C, which is
just a transmittal thing so when we get to that one, (indisc. -
paper rattling) that out.
REPRESENTATIVE BRICE: And add it to the stack of things (indisc.).
CHAIRMAN ROKEBERG: I know, it's just trying to cut it down.
REPRESENTATIVE G. DAVIS: Mr. Chairman. Mr. Chairman.
CHAIRMAN ROKEBERG: Representative Davis.
Number 549
REPRESENTATIVE G. DAVIS: I think a real quick solution is to move
on Representative Brice's motion and to entertain any other
amendments after that.
REPRESENTATIVE OGAN: Point of order. I have a motion on the table
to split the question.
REPRESENTATIVE G. DAVIS: Object.
UNKNOWN: Get out the rule book
Number 559
CHAIRMAN ROKEBERG: We'll vote. Let's get on with this. Let's
vote on Representative Ogan's motion to split. Go ahead and call
the roll Mr. Secretary.
JIM NASH, SECRETARY, HOUSE SPECIAL COMMITTEE ON OIL AND GAS:
Chairman Rokeberg.
CHAIRMAN ROKEBERG: No.
MR. NASH: Vice Chairman Ogan.
REPRESENTATIVE OGAN: Yes.
MR. NASH: Representative Gary Davis
REPRESENTATIVE G. DAVIS: No.
MR. NASH: Representative Williams.
REPRESENTATIVE WILLIAMS: Nay.
MR. NASH: Representative Brice.
REPRESENTATIVE BRICE: No.
MR. NASH: Representative Bettye Davis
REPRESENTATIVE B. DAVIS: No.
MR. NASH: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: Yes.
CHAIRMAN ROKEBERG: We've got a motion before us then it's the Rule
Book Section A. Procedurally here, we can vote on this and we can
go back and amend, is that right? Okay. So, let's, there's a
motion before us to remove the entirety of Section 8, and I, is
there any objections? (Two objections) Okay, would the secretary
take the roll call?
MR. NASH: Chairman Rokeberg.
CHAIRMAN ROKEBERG: No.
MR. NASH: Vice-Chair Ogan.
REPRESENTATIVE OGAN: Okay. I need a clarification.
CHAIRMAN ROKEBERG: Okay. At ease.
REPRESENTATIVE OGAN: Okay, no.
MR. NASH: Representative Gary Davis.
REPRESENTATIVE G. DAVIS: Yes.
MR. NASH: Representative Williams.
REPRESENTATIVE WILLIAMS: Yes.
MR. NASH: Representative Brice.
REPRESENTATIVE BRICE: Yes.
MR. NASH: Representative Bettye Davis.
REPRESENTATIVE B. DAVIS: No.
MR. NASH: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: No.
REPRESENTATIVE FINKELSTEIN: Mr. Chairman?
Number 559
CHAIRMAN ROKEBERG: Representative Finkelstein. The motion has
failed.
Number 571
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, could I move just to
delete just the Attorney General, or I move to delete the A, so
that just B would become A and C would become B.
Number 572
CHAIRMAN ROKEBERG: Right. Any discussion on this motion? Just
leaves the Royalty Board in place and deletes the Attorney General.
Any discussion? Hearing none, any objections? Are there no
objections to this motion? Hearing no objections, the motion
carries. Additional amendments or discussion? Representative
Finkelstein.
Number 578
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, I have one. This is
just to the floor, and just says that the floor of 25 percent
applies to, to all as the commissioner suggests.
CHAIRMAN ROKEBERG: All right. Would you move your motion, please?
REPRESENTATIVE FINKELSTEIN: I move the motion, Mr. Chairman.
Number 583
CHAIRMAN ROKEBERG: Any objections?
REPRESENTATIVE (?): (Aside) Number three.
CHAIRMAN ROKEBERG: Oh, this is Amendment Number 3? Okay.
REPRESENTATIVE BRICE: Number three, yes.
CHAIRMAN ROKEBERG: Any objections?
REPRESENTATIVE G. DAVIS: Object.
CHAIRMAN ROKEBERG: Discussion.
REPRESENTATIVE G. DAVIS: Mr. Chairman.
CHAIRMAN ROKEBERG: Representative Gary Davis.
Number 585
REPRESENTATIVE G. DAVIS: Yeah, I, I object. I think, you know, we
had discussion about Cook Inlet fields, and there is some, you
could pump 80 million, you could pump millions of dollars in those
fields and that's going to continue with jobs. It's going to
continue with infrastructure tax base, and the royalty, and to
recover those dollars you're, it's marginal. They're, they get
down to a place where they're losing, losing money, so they're
going to cap them off. So then we lose everything. So if you
allow for the zero you still keep, you still maintain the jobs, and
it's still the discretion and it's still the discretion of the
commissioner whether that is an economically feasible thing to do.
It's not, it's not a mandate. It just gives them that flexibility,
so you know, and that's the whole intent. The best interests of
the state, is it the best interests of the state to cap oil fields
that are pumping two thousand barrels a day? And, and costing the
oil companies money where they're going, they're going to cap them,
maybe not two thousand barrels a day, five hundred barrels a day,
whatever. So, that's, that's the argument and I, I think that
flexibility is very viable and very valuable, and is in the best
interest of the state. So, so I think I oppose the amendment from,
from that standpoint.
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 600
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. I think the
question is, is, obviously, if you're trying to do what
Representative Davis suggests, but is there some level, would you
get some very bottom line return to the state? Because these are
going to be places where the ELF is already resulted in a severance
tax going down to zero and the royalty reduction here would be,
let's say it started at 12.5, it'd be down to three percent. I
mean, it's a pretty major reduction. Is there some little teeny
bottom line bit that's going to go to the state out of this all?
And I think that's a reasonable expectation. The, you've got to
remember the economic activity actually, you know, brings costs to
the state as well. We provide public services, education. There's
a variety of costs that go with this activity that we have to bear
as a state, and some very, very bottom line level of return to the
state I think is reasonable.
Number 610
CHAIRMAN ROKEBERG: The Chair would remind the Representative from
Downtown Anchorage that the activity, this economic activity
creates jobs too as well as burdens, so that, that would be the
intention, I think, of this type of thing is to allow for the
commissioner to (indisc. - coughing) a sliding scale royalty that
accounted for very, very marginal fields in the future. There's, I
can think of a fact pattern whereas a platform in Cook Inlet could
be producing from a pool of gas field, if you will, on an economic
basis paying its full royalty, and because the platform happens to
be there, there may be an additional oil well from that platform
that's extraordinarily marginal, and the case could be made where,
I mean, it would be just as well to pump that thing where the, you
know, there could be a decision where if you could get down to zero
royalty they could still pump it, or if not, they would just shut
it in. So, I mean, why not have the flexibility, allowing the
company to come to the commissioner and ask him for some relief in
that circumstance? That's all we're trying to do. So, I'm going
to vote against your amendment. Any other discussion?
Number 625
REPRESENTATIVE OGAN: I concur, Mr. Chairman.
CHAIRMAN ROKEBERG: Anything else? Question.
REPRESENTATIVE G. DAVIS: Mr. Chairman.
CHAIRMAN ROKEBERG: Representative G. Davis.
Number 626
REPRESENTATIVE G. DAVIS: I don't to like to belabor it, but I, I,
you know, I can, I can, I can certainly see where Representative
Finkelstein is coming from, but even the modifiers in there to
change, you know, should, it may be zero now, but, but after the
recovery of, of investment dollars, I can see with all this
flexibility, I just don't see a problem with zero. You know, it
may be zero for a couple of years, or until production gets up to
a certain level if what they hope to add to the facilities, you
know, does create increases in productivity, then I'm sure a
modifier would kick in. So, with all this flexibility in the
negotiations, I, I just don't see the need.
Number 635
CHAIRMAN ROKEBERG: Any further discussion? Would the Secretary
read the roll?
MR. NASH: Chairman Rokeberg.
CHAIRMAN ROKEBERG: No.
MR. NASH: Vice-Chairman Ogan.
REPRESENTATIVE OGAN: No.
MR. NASH: Representative Gary Davis.
REPRESENTATIVE G. DAVIS: No.
MR. NASH: Representative Williams.
REPRESENTATIVE WILLIAMS: No.
MR. NASH: Representative Brice.
REPRESENTATIVE BRICE: No.
MR. NASH: Representative Bettye Davis.
REPRESENTATIVE B. DAVIS: No.
MR. NASH: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: Yes.
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 641
REPRESENTATIVE FINKELSTEIN: What's the time (indisc. - papers
rattling) minority caucus that was at 11:30. I've got three more
amendments myself and...
CHAIRMAN ROKEBERG: The charges are to move the bill today if we
can. Is there other burning amendments or recommendations?
REPRESENTATIVE B. DAVIS: Tell them to pass them out so we can, get
through them.
CHAIRMAN ROKEBERG: Let's rock 'n' roll if you got it. We got to
move this bill here.
REPRESENTATIVE (?): The minority can get up and leave.
CHAIRMAN ROKEBERG: That's right. You can go. No problem. Or you
can stay, I mean, you're certainly welcome.
REPRESENTATIVE WILLIAMS: Are you going to bring this up on the
floor (indisc.)?
REPRESENTATIVE FINKELSTEIN: That's what they talked about. I
won't let you pass this bill. That's the problem.
REPRESENTATIVE WILLIAMS: Then, we'll change it on the (indisc.).
CHAIRMAN ROKEBERG: Okay, let's see. You got...
REPRESENTATIVE FINKELSTEIN: I can just (indisc.).
CHAIRMAN ROKEBERG: Why don't you go ahead and we can mark them for
numbering.
REPRESENTATIVE FINKELSTEIN: The next one is the one that says page
3, line 19, 20.
CHAIRMAN ROKEBERG: That would be Amendment Number 4?
REPRESENTATIVE FINKELSTEIN: Right. And basically, the intention
of this is just to say that the contractor is an employee of the
state, not an employee of the oil company. In either circumstance
the oil company is going to pay for the contractor. It's just a
question of who oversees their work, and I don't want to redebate
it because I have brought it up a number of times, but it's, the
logic is just this is how we do business in the State of Alaska.
I, I still haven't heard of a circumstance where we take and turn
over our authority to hire experts to help us and make them
employees of the regulated entity. These folks ought be, they're
working for the state and providing determinations necessary for a
state decision that's the best interests of the state, and they
shouldn't have as their supervisor and hiring authority and firing
authority, the company that's regulated. These things operate at
very subtle levels and if you paycheck comes from someone in your,
even though the various criteria to work under come from the state
you get quite affected by who pays your bills.
Number 667
CHAIRMAN ROKEBERG: Well, it's the Chair's observation that we've
already tilled this ground in the forum of Representative Brice's
amendment, so I, unless there's any other comments on this, I'll,
be prepared for a vote. Any other comments? Would the secretary
read the roll?
REPRESENTATIVE OGAN: Mr. Chairman.
CHAIRMAN ROKEBERG: Oh, you have comments? Excuse me,
Representative Ogan.
Number 671
REPRESENTATIVE OGAN: I'm sorry. I missed it. Did Representative
Finkelstein move the motion?
REPRESENTATIVE FINKELSTEIN: I move the motion.
CHAIRMAN ROKEBERG: Oh, excuse me.
Number 675
REPRESENTATIVE OGAN: I object.
CHAIRMAN ROKEBERG: You object. Would the Secretary read the roll?
MR. NASH: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: Yes.
MR. NASH: Representative Bettye Davis.
REPRESENTATIVE B. DAVIS: Yes.
MR. NASH: Representative Brice.
REPRESENTATIVE BRICE: No.
MR. NASH: Representative Williams.
REPRESENTATIVE WILLIAMS: No.
MR. NASH: Representative Gary Davis.
REPRESENTATIVE G. DAVIS: No.
MR. NASH: Repre., Vice Chairman Ogan.
REPRESENTATIVE OGAN: No.
MR. NASH: Chairman Rokeberg.
CHAIRMAN ROKEBERG: No. Representative Finkelstein, recognizing
you for Amendment Number 5.
Number 679
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. It's page 2,
line 30, and this, I just discussed previously with the
commissioner, the idea is that the form of criteria, even though
the commissioner apparently has the authority to bring these
concepts up, this would require that if the royalty reduction
doesn't work, if there is not any significant development, within
five years then the royalty reduction is terminated. It's just a
performance incentive if nothing else. Certainly we wouldn't want
to be granting these royalty reductions to circumstances where it's
just a speculative advantage increasing the value of the lease if
nothing else. We want it to produce activity, not to increase the
value of the lease.
Number 685
CHAIRMAN ROKEBERG: You want to move this for the record?
Number 686
REPRESENTATIVE FINKELSTEIN: Mr. Chair, I move this (indisc.).
CHAIRMAN ROKEBERG: I, Representative Finkelstein, if you will
allow me...
TAPE 95-17, Side A
Number 000
REPRESENTATIVE FINKELSTEIN: The commissioner would be allowed to
put this performance requirement into his royalty reduction
contract, but this would say that it would have to be forfeit.
Number 006
CHAIRMAN ROKEBERG: Any further discussion on this amendment?
Representative Gary Davis.
Number 010
REPRESENTATIVE G. DAVIS: So, I understand this to be what? A 5-
year reopener? Is that, in essence, what it is?
REPRESENTATIVE FINKELSTEIN: No, no.
REPRESENTATIVE G. DAVIS: I can't follow the...
Number 011
REPRESENTATIVE FINKELSTEIN: That would be, that would be something
completely different, which is the ability of one or the other
parties to unilaterally, or bilaterally renegotiate provisions.
This just says deal's off, no more deal, back to the original, if
this doesn't work. If we lower your royalty and there's no
significant development that occurs because of it, then the royalty
goes back to the higher level after five years. I, I believe the
commissioner would put this kind of provision in anyway, but he's
not required to unless this was added.
REPRESENTATIVE G. DAVIS: Mr. Chairman.
CHAIRMAN ROKEBERG: Representative Davis.
Number 025
REPRESENTATIVE G. DAVIS: We've, we've heard a lot of testimony
relating to flexibility and I think this, again, reduces
flexibility. We've added, we've added, we've already added some,
some reduction of flexibility in, in some of the bill from the
original, and I think we're getting pretty... I would just object
because we discussed it and, and the, I'd just like to maintain as
much flexibility as possible.
Number 037
CHAIRMAN ROKEBERG: Any further discussion? The Chair would note
that I, I really like what you have in there, Representative
Finkelstein, but coming down the side of other relative factors and
what Representative Gary Davis has said, so, I'm going to vote no
reluctantly on your amendment. Call for the question.
Number 044
REPRESENTATIVE OGAN: Can we have a brief at ease?
Number 045
CHAIRMAN ROKEBERG: Brief at ease. We're back...
REPRESENTATIVE (?): You did that deliberately, didn't you?
CHAIRMAN ROKEBERG: ...we're back on. Any further discussion on
Amendment Number 5? Not the, there was objections and we need to
take their vote. Is that correct? Will the Secretary read the
roll, please?
MR. NASH: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: Yes.
MR. NASH: Representative Bettye Davis.
REPRESENTATIVE B. DAVIS: No.
MR. NASH: Representative Brice.
REPRESENTATIVE BRICE: No.
MR. NASH: Representative Williams.
REPRESENTATIVE WILLIAMS: No.
MR. NASH: Representative Gary Davis.
REPRESENTATIVE G. DAVIS: No.
MR. NASH: Representative, Vice-Chair Ogan.
REPRESENTATIVE OGAN: No.
MR. NASH: Chairman Rokeberg.
CHAIRMAN ROKEBERG: No.
REPRESENTATIVE FINKELSTEIN: Mr. Chair?
CHAIRMAN ROKEBERG: Representative Finkelstein.
Number 064
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, my last amendment is
just conceptual, but it's pretty simple, which is just to take out
the part that says "the commissioner's determination vehicle to the
court."
CHAIRMAN ROKEBERG: I didn't hear.
REPRESENTATIVE OGAN: I'm sorry. I distracted him.
Number 071
REPRESENTATIVE FINKELSTEIN: Mr. Chairman, on page 3, lines 16 and
17, strike the (indisc. - papers rattling) determination is not a
vehicle to the court.
Number 074
REPRESENTATIVE ROKEBERG: Discussion.
Number 075
REPRESENTATIVE FINKELSTEIN: Mr. Chair, just, I, I, we've discussed
the, I brought this up plenty, so I don't feel any great need to
discuss it any more. The argument is simple, and in favor of it is
that by and large it is already appealable regardless of this. We
have a memo that many portions of it, in fact, the vast majority of
the elements of decision are appealable and that's what we use our
court system for is for resolving conflicts where there is issues
involved, and I think, I think actually, there will be plenty of
circumstances where the aggrieved party isn't, you know, somebody
who is unhappy with the lease directly. It will be the party
trying to get the lease.
Number 093
CHAIRMAN ROKEBERG: The Chair notes that we have beat this dead
horse to death, and the, and the, my opinion is that we should
retain the language in order to deflect any law suits by outside
parties and/or the applicant in order that he doesn't twist in the
wind too long. Therefore, I, are you going to move your amendment,
or are you conceptualizing?
Number 102
REPRESENTATIVE FINKELSTEIN: Thank you, Mr. Chairman. I'm not
going to move.
CHAIRMAN ROKEBERG: Okay. Representative Brice.
Number 105
REPRESENTATIVE BRICE: One last conceptual amendment would be to
page 3, lines to delete, lines 29 through page 4, line 6. You got
that?
REPRESENTATIVE B. DAVIS: Go back over it.
CHAIRMAN ROKEBERG: We already, we already did that amendment.
REPRESENTATIVE BRICE: No, we didn't.
CHAIRMAN OGAN: Yeah, we did.
Number 114
REPRESENTATIVE BRICE: Point of order. This is a wholly, entirely
different amendment that I'm going to talk about. Representative
Ogan cannot read people's minds. I'm not finished making...
CHAIRMAN ROKEBERG: Okay, continue on, Sir.
REPRESENTATIVE BRICE: Okay, thank you. To delete, basically, what
it what it will be doing is to delete the Royalty Board, but to
maintain that the commissioner will...
Number 123
REPRESENTATIVE OGAN: Point of order.
CHAIRMAN ROKEBERG: Wait, let him finish his (indisc.).
REPRESENTATIVE OGAN: No, point of order. The point is that we
have already, we already had a motion to split this question in
three...
CHAIRMAN ROKEBERG: No,l this is different. He's trying to make a
different amendment. Let him finish with it so we can find out
what he's trying to get at.
REPRESENTATIVE OGAN: (Indisc.).
CHAIRMAN ROKEBERG: Go ahead, Representative Brice.
Number 128
REPRESENTATIVE BRICE: So, Section 8 would read "may not make a
determination that gives final approval an application for a
royalty reduction under this subsection unless the commissioner
first transmits copies of the determination made by the
commissioner to the presiding officer of each house. The chairs of
the standing committees, resources and the chairs of the
legislative Special Committee on Oil and Gas."
Number 138
CHAIRMAN ROKEBERG: Conceptually, I agree with Representative Ogan
then. But that's your point, so. I don't care to entertain this
motion unless you, what's the will of the committee?
Number 142
REPRESENTATIVE OGAN: Mr. Chairman, he made the motion (indisc.).
CHAIRMAN ROKEBERG: Did you make a motion, or just conceptual?
REPRESENTATIVE BRICE: I made a motion.
CHAIRMAN ROKEBERG: Okay, I'm sorry. Is there objections?
REPRESENTATIVE OGAN: Object.
Number 150
CHAIRMAN ROKEBERG: Is there discussion? Is there a vote? Let's
vote. Mr. Secretary.
MR. NASH: Chairman Rokeberg.
CHAIRMAN ROKEBERG: No.
MR. NASH: Vice-Chairman Ogan.
REPRESENTATIVE OGAN: No.
MR. NASH: Representative Gary Davis.
REPRESENTATIVE G. DAVIS: Yes.
MR. NASH: Representative Williams.
REPRESENTATIVE WILLIAMS: Yes.
MR. NASH: Representative Brice.
REPRESENTATIVE BRICE: Yes.
MR. NASH: Representative Bettye Davis.
REPRESENTATIVE B. DAVIS: Come back to me.
MR. NASH: Representative Finkelstein.
REPRESENTATIVE FINKELSTEIN: No.
MR. NASH: Representative Bettye Davis.
REPRESENTATIVE B. DAVIS: What you're doing is what -- I'm voting
no.
REPRESENTATIVE BRICE(?): You've got to try.
CHAIRMAN ROKEBERG: Well, that was a tight one.
REPRESENTATIVE (?): Mr. Chairman, it was supposed to come out that
way.
CHAIRMAN ROKEBERG: Oh, yeah, right. Excuse me, excuse me, just
one, I'll let you guys go. Is there any further discussion?
REPRESENTATIVE (?): Yes, there is.
Number 159
CHAIRMAN ROKEBERG: We need to move this bill here from the --
okay, wait a minute. Let me interject here before we have a motion
to move. The, it will be the, it's the intention of the Chair to
draft a letter of intent that has the input and approval of all
members of the committee, or a majority of it, and forward it on to
the Resources Committee, which I hope will steer this bill on
Friday if we can move it right now. And that would be my
intentions so we can tune that up, and not worry about it right
now. Would that, is that okay with everybody?
REPRESENTATIVE (?): I don't have any objection as written.
CHAIRMAN ROKEBERG: Well, the Chair does. Is there any, yeah, we
have, we have some work on it and we really need to get out of
here, so.
REPRESENTATIVE B. DAVIS: If you just move the bill and do that.
CHAIRMAN ROKEBERG: Yeah, that's what we're going to do.
REPRESENTATIVE B. DAVIS: Okay.
CHAIRMAN ROKEBERG: We're going to, we're going to circulate the
letter and then we'll forward it to Resources. I'll hand carry it
over there and give it to Joe myself.
REPRESENTATIVE OGAN: Mr. Chairman.
CHAIRMAN ROKEBERG: With the change that I get from the
commissioner.
REPRESENTATIVE OGAN: Mr. Chairman.
CHAIRMAN ROKEBERG: Representative Ogan.
Number 178
REPRESENTATIVE OGAN: I move CS for House Bill Number 207 with the
appropriate amendments, and fiscal notes attached. It would be
passed on, passed out of this committee, or moved out of this
committee.
Number 182
CHAIRMAN ROKEBERG: Any, any, any objections? Hearing no
objections so moved. We stand adjourned. Ten to Twelve.
Adjourned at 11:50 a.m.
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