Legislature(1993 - 1994)
02/08/1993 08:00 AM House RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
JOINT MEETING OF THE
HOUSE RESOURCES STANDING COMMITTEE
AND THE HOUSE SPECIAL COMMITTEE ON OIL AND GAS
February 8, 1993
8:00 a.m.
HOUSE RESOURCES COMMITTEE MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Bill Hudson, Vice Chairman
Representative Con Bunde
Representative Pat Carney
Representative John Davies
Representative Joe Green
Representative Jeannette James
Representative Eldon Mulder
MEMBERS ABSENT
Representative David Finkelstein
HOUSE SPECIAL COMMITTEE ON OIL AND GAS MEMBERS PRESENT
Representative Joe Green, Chairman
Representative Pete Kott, Vice Chair
Representative Harley Olberg
Representative Gary Davis
Representative Jerry Sanders
MEMBERS ABSENT
Representative Joe Sitton
Representative Jerry Mackie
COMMITTEE CALENDAR
Confirmation: Glen Olds as Commissioner of the Department
of Natural Resources
ALL COMMITTEE MEMBERS PRESENT VOTED "DO
RECOMMEND"
WITNESS REGISTER
Glen Olds
Department of Natural Resources
400 Willoughby Ave.
Juneau, Alaska 99801-1724
Phone: 465-2400
Position Statement: Provided information and answered
questions related to his confirmation
ACTION NARRATIVE
TAPE 93-14, SIDE A
Number 000
The joint meeting of the House Resources Committee and the
House Special Committee on Oil & Gas was called to order by
Chairman Bill Williams at 8:10 a.m. Resources Committee
members present at the call to order were Representatives
Williams, Hudson, Bunde, Green, James, and Mulder; members
absent were Representatives Carney, Davies and Finkelstein.
Oil & Gas Committee members present at the call to order
were Representatives Green, Kott, Olberg, Davis, and
Sanders; members absent were Representatives Sitton and
Mackie.
Number 035
REPRESENTATIVE BILL WILLIAMS, CHAIRMAN, HOUSE RESOURCES
COMMITTEE, noted for the record that the purpose of the
joint meeting was to consider confirmation of Glen Olds to
the position of Commissioner of the Department of Natural
Resources. He directed members' attention to Dr. Olds'
resume in their files. It was agreed the two committees
would vote separately on recommendation for confirmation and
sign separate committee reports.
Number 075
REPRESENTATIVE JOE GREEN, CHAIRMAN, HOUSE SPECIAL COMMITTEE
ON OIL & GAS, noted the meeting would be run by
Representative Williams, who would take questions from
members of both committees in the order questions arose.
Number 082
DR. GLEN OLDS, ACTING COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES (DNR), thanked the committee for the opportunity
to appear before them. He acknowledged he had been in the
post of commissioner for the past six months, and referred
to the DNR as "the tide that lifts all boats in a harbor" in
a state whose primary revenue was derived from the
management of natural resources. He noted about 80 percent
of the state's budget was derived from that management, and
commented that Alaska was the only one of the 50 states that
had a special provision for natural resources in its
constitution.
DR. OLDS referred to the second section of the Alaska
Constitution, where provisions were made for utilization,
development and conservation of all natural resources
belonging to the state for the maximum benefit of the
people. Section 1, he said, established a policy of
encouraging the development of resources by making them
available for maximum use consistent with the public's
interest.
DR. OLDS told the committee his first task as Commissioner
was to develop a strategic plan to establish a means for
meeting the mission set forth in the Constitution. That
strategic plan, he said, was a public document that was
available to the committee. He concluded his opening
remarks by asking if any committee members had questions.
Number 148
REPRESENTATIVE ELDON MULDER commented on Dr. Olds'
completion of the land selection ahead of schedule.
Number 152
REPRESENTATIVE BILL HUDSON mentioned the intention of
President Clinton to develop a new Alaska region of the
Environmental Protection Agency. He asked Dr. Olds his
prospect for a good working relationship with the Clinton
administration in light of its environmental policies in
terms of development of Alaska's resources.
REPRESENTATIVE HUDSON expressed concern that Alaska's
resources might be locked up by the federal government under
the Clinton administration, especially given Vice President
Gore's strong environmentalist stance.
Number 169
DR. OLDS told the committee he had known Vice President Gore
for some time and has been critiquing Vice President Gore's
book, "Earth in Balance." He referred to the third section
in the book, which proposed striking a balance between
environmental and development concerns. Dr. Olds suggested
Alaska's experience showed the state had integrated
development with environmental concerns. He also referred
to the nation's economic needs as opening opportunities for
Alaska to contribute to new economic growth. He said
America's problems were Alaska's opportunities.
DR. OLDS stated energy was the key to the world's economy.
He pointed to a national need to reduce dependence on oil
from the Middle East, and the potential for Alaska's
resources to increase energy independence. Dr. Olds
believed President Clinton understood the political
vulnerability of dependence on foreign oil.
DR. OLDS referred to Alaska's coal reserves, which he deemed
equivalent to about 1,600-1,900 Prudhoe Bays. He mentioned
the new technology of coal slurry that made coal development
a viable option in the marketplace. Of 14 oil and gas
basins in Alaska he said, only two had been explored. He
also referred to the potential growth of hydroelectric
power, with the capacity of generating 34 gigawatts of
electricity. That would be enough energy to drive the whole
economy of the Western United States, he said, and added
that Alaska's potential role had not been fully recognized
in Washington, D.C.
DR. OLDS advocated Alaska's adoption of a non-
confrontational mode in working with Washington. He also
advocated the state take advantage of new science and
technology in developing resources in ways that were
compatible with environmental interests.
Number 300
(Chairman Williams noted for the record that Representative
Davies had joined the meeting at 8:25 a.m.)
Number 303
REPRESENTATIVE HUDSON expressed concern that although the
capacity of Alaska's reserves had been generally known for
years, the new administration seemed to propose a general
lock-up. He suggested Dr. Olds play a central role in how
the state should go forward to make its case with Washington
as well as global environmental interests.
Number 325
REPRESENTATIVE PAT CARNEY joined the meeting at 8:26 a.m.
Number 331
DR. OLDS noted his position as the only Democrat in the
Governor's cabinet. He said he had to avoid the appearance
of being partisan. He cautioned the committee that the
state should avoid a self-fulfilling negative prophesy.
Talk of a lock-up, he said, was driven by fear and bad
information. Instead he suggested Alaska become politically
sophisticated and keep talking to Washington about the
importance of the state's resources.
Number 381
DR. OLDS told the committee that for Alaska to make its case
with Congress, it would have to win the majority view.
Promoting fear of a lock-up and perpetuating a
confrontational strategy, he said, would be detrimental to
Alaska's interests. At the protocol level, he said, the
Governor was the one to make the state's case with
Washington.
Number 418
REPRESENTATIVE JEANNETTE JAMES perceived Alaskans were being
given the message to back off its lobbying efforts to open
the Arctic National Wildlife Refuge (ANWR) for exploration.
Number 428
DR. OLDS reiterated a confrontational strategy would be non-
productive with Washington. Rather, he suggested Alaska
promote its role in building energy self-sufficiency. He
referred to the McKenzie Delta as a rich resource
alternative, and recommended the state pick up on Vice
President Gore's view that the application of science and
technology could accelerate development while protecting the
environment. He discussed reduction of a human "footprint"
on the environment as a result of development.
Number 478
DR. OLDS argued that the state should work to integrate the
concepts of wilderness and natural resources. He did not
see the need to necessarily look at wilderness as something
that had to be locked up. Exploration and development could
potentially take place without spoiling the environment, he
said, and mentioned the possible development of a monorail
to increase access to wilderness without corruption of the
environment.
Number 491
REPRESENTATIVE JAMES asked Dr. Olds whether there should be
money set aside in the 1993 budget for that educational
aspect.
DR. OLDS responded there should be more money for
interpretation and education of resource issues, but there
was no money for that purpose in his budget.
Number 499
REPRESENTATIVE CON BUNDE raised a question about balancing
the diversity of opinion within Alaska regarding development
versus preservation. In his view, the difference of opinion
seemed more confrontational here than on a national level.
Number 502
DR. OLDS responded that the concerns need not be seen as
enemies, but instead there should be an orchestration of
concerns in developing and implementing policy. He referred
to timber management in the Tongass National Forest. In the
Bradley Lake area, he mentioned the resolution of a problem
where a costly road building project to avoid disturbing the
habitat of five bald eagles was averted by building a new
nest for the eagles, which the eagles had adopted. He also
pointed out the enormous resistance initially to the Trans-
Alaska pipeline by environmentalists who protested the
disturbance of caribou habitat, while now the caribou herd
in that region had tripled, in part due to the caribou
taking advantage of the warmth of the pipeline during
mating.
Number 561
REPRESENTATIVE GREEN asked Dr. Olds his position on making
Alaska more "user-friendly" for advocates of energy
development. He mentioned alternatives to conventional
leases on conventional resources. These included concession
leasing, royalty, or severance relief in marginal areas,
tidal, and coal development.
Number 575
DR. OLDS cautioned Alaska would see potential out-migration
of industry if demands on private developers were too great.
As an example, he mentioned British Petroleum's sale of ten
years of Alaskan oil still in the ground, to finance the
capitalization of their exploration and development in the
Russian far east. The international arena was a threat to
Alaska's economy as American companies go for the
competitive advantage, and Alaska should look for incentives
rather than sit on the laurels of Prudhoe Bay, he said.
DR. OLDS mentioned that 16 years ago he had recommended to
then Governor Hammond that a percentage of Prudhoe Bay
revenues go into a development fund for future development
of Alaska's resources in the face of a finite oil supply.
He pointed out the heavy capital investment and long-term
commitment companies must make in developing a natural
resource, which required companies to feel comfortable that
the state could provide a stable situation. Coal technology
was of enormous consequence to the whole world, he said, and
Alaska should be on top of the situation.
Number 631
REPRESENTATIVE GREEN asked Dr. Olds to comment on the
potential for value-added resource development in Alaska.
DR. OLDS mentioned, as an example, the area of fisheries,
where 80 percent of the profitability had been harvested
elsewhere, like Seattle or Tokyo. The CDQ (Community
Development Quota) gave Alaska a chance for shore-based
investment, he said, and referred to the recent interest of
Tyson Foods in developing a market for Alaska's fish
products with the value-added development taking place in
Alaska. Regarding minerals and metals, Dr. Olds noted over
50 percent of the value was shipped out. He was looking at
ways to increase value-added development in-state, such as
smelting. The technology and energy resources were readily
available, he believed.
Number 650
DR. OLDS advocated the adoption of new technology for energy
transmission, such as laser technology. He suggested Alaska
could be a leader in developing practical uses for new
technology.
Number 668
REPRESENTATIVE JOHN DAVIES agreed with Dr. Olds's view on
taking a non-confrontational stance with the Clinton
administration. He expressed a hope that the state not
place too much hope on ANWR and instead look at other
assets. He urged complete geological mapping be a priority.
He also mentioned other areas of the DNR's jurisdiction,
including agriculture, and proposed that in streamlining
regulations, the DNR not eliminate opportunities for public
participation in the process. As an example of where
regulations needed to be streamlined, Rep. Davies pointed to
the 127 permits required for placer miners.
TAPE 93-14, SIDE B
Number 000
REPRESENTATIVE GARY DAVIS suggested the state might not be
able to afford to pursue the technological agenda proposed
by Dr. Olds. He said legislators were hearing the public
advise more cuts in state spending.
Number 035
DR. OLDS addressed the question of budget cuts and
sympathized with the public's interest in cutting the
budget. He was concerned, however, with where cuts were
being made and where they were not. He noted the public
perception that the state had a bloated bureaucracy. With
regard to the state's regulatory responsibility, Dr. Olds
referred to the recommended revisions of Title 38. Title 38
was originally a 14-page document, he said, but was now 187
pages with a 400-page supplement. The state, he added, was
paying a high price for redundancy. He suggested
departments take a cooperative look at ways to complement
each others' efforts without that redundancy.
Number 105
DR. OLDS again stressed the importance of the state
investing in capitalizing its own assets. With regard to
the Permanent Fund, he stated it was absurd to have money
managers managing $12 billion of Alaska's money without even
having an office in Alaska. In downsizing government, it
was important, he said, not to cripple government's ability
to fulfill its missions
Number 148
CHAIRMAN WILLIAMS commented on the appearance that the DNR's
responsibility for water quality under the Forest Practices
Act was being transferred to the Department of Environmental
Conservation (DEC).
DR. OLDS responded that he had talked with Commissioner
Sandor of the DEC about economizing at the field level where
there appeared to be redundancy in water quality efforts.
Dr. Olds advised that options like cross-training had been
looked into, to make efforts more efficient. On the advice
of the Department of Law, however, the change did not take
place because there would be problems with each department's
fulfillment of statutory functions. He said they would
still look into ways to facilitate better use of people in
the field without compromising statutory obligations.
Number 190
CHAIRMAN WILLIAMS inquired into plans for opening up the
forests of the Interior.
DR. OLDS disclosed value-added development in the Interior
was a priority, and that he had tried to bring in new
technology for development of a value-added timber industry.
Fairbanks could greatly benefit from Interior forestry
development, he said. He cited no-waste technology as being
permanently renewable and profitable for small sawmills.
Number 220
CHAIRMAN WILLIAMS asked about the rising cost of fees and
permits being charged as a way of increasing state revenues.
DR. OLDS said the state was obligated to insure fees charged
could not be greater than the cost of the service. One area
of enormous loss was in tideland leasing, which had a
relatively small fee compared to the high cost of
maintaining services. The state was not trying to make a
profit from its fee structures, he said, but rather to
support its services.
Number 265
CHAIRMAN WILLIAMS said a specific fee hike that came to his
attention was the salvage logging fee which had recently
doubled from $500 to $1000.
Number 276
REPRESENTATIVE GREEN asked Dr. Olds about the state's use of
beetle-killed trees.
Number 290
DR. OLDS said the DNR had developed a task force on beetle-
kill on the Kenai. He cited the fire risk in the area, and
said the DNR was looking at that aspect, as well as the
potential for value-added resource development.
Number 311
REPRESENTATIVE GREEN asked for Dr. Olds' comments on the
possibility of combining some boards and commissions as a
cost-saving measure. Specifically, he asked about combining
the Oil and Gas Conservation Commission (the Commission)
with the Division of Oil and Gas (the Division).
Number 290
DR. OLDS understood the importance of an independent
commission having a degree of objectivity as opposed to
advocacy or regulation. He described the statutory
obligations of both the Division and the Commission, and
said the DNR had looked into combining their functions.
From a statutory point of view, however, the Department of
Law advised they should be left as established.
Number 355
REPRESENTATIVE GREEN commented that if the functions were to
be kept separate, there should be an open exchange of
information.
Number 361
DR. OLDS told the committee that the DNR was moving in that
direction. He added that in the time he had been in the
position of Commissioner, he had virtually no money to
explore some of the ideas suggested.
Number 385
REPRESENTATIVE HUDSON referred to comments made during the
Department of Commerce Commissioner Paul Fuhs' confirmation
with regard to a common development methodology among
various departments of the state. He asked Dr. Olds to
comment on how the departments might work together toward
consensus on the common goals of economic development.
Number 419
DR. OLDS recommended a comprehensive strategic plan for the
state, and said he had promoted that idea. He told Rep.
Hudson that he had met with Commissioner Fuhs, and that each
of the 11 divisions of the DNR had one person committed to
the economic development of resources. He reported the
Governor had aggregated the cabinet into sub-groups, and he
was participating in a sub-group on revenue enhancement
which involved members of several departments who hoped to
develop a comprehensive plan. He referred to other states
that had adopted such plans.
DR. OLDS continued by telling the legislators they could
help by reinforcing the need for a plan with incentive and
an organizational design. He said Alaska was too small a
state to afford the luxury of fragmented strategy.
Number 466
REPRESENTATIVE HUDSON agreed, and questioned the level of
independence of each department, which seemed to create
redundancy. Drawing agencies together to reach a common
philosophy should be a priority, he said, if the state
wanted to best serve the people of Alaska.
Number 487
DR. OLDS said the best effort was in the pipeline authority,
which had brought together many functions. He said that in
the DNR he was trying to find creative ways of enlisting
various strategies.
Number 501
REPRESENTATIVE GREEN raised concerns with the Mental Health
Lands question, and said it could be detrimental to many
parties if it was dragged on and on. He commented that the
potential of Alaska's resource markets could be in critical
balance, and asked Dr. Olds' for his view on the settlement.
Number 515
DR. OLDS said his office was doing everything possible to
fast-track a resolution. He said the DNR had in place all
the elements that had to do with the task of restoring the
lands that were restorable -- about 35,000 acres. He also
said they were prepared to restore another 330,000 acres
that had clear comparability. He was arguing to radically
reduce the hypothecated lands pool which included about
seven million acres that had been set aside pending the
implementation of the land exchange. Virtually all of the
developmental components of the state were locked up in that
seven million acres, he explained. He believed it was
unnecessary to tie up seven million acres when about 600,000
were needed. He suggested the hypothecated pool could be
reduced to about a million acres without crippling the
appropriate development of the other resources.
DR. OLDS commented on the role of the courts in resolving
issues like the Mental Health settlement. If the
legislative or executive branch failed, he said, in the
discharge of its responsibilities, the judiciary branch
would take over. Courts end up administering the state's
affairs and, he said, judges were not chosen for that
purpose. He was trying to prevent that happening more,
because the time schedules of the judicial system were so
sluggish that administrative decisions and legislative
intent were delayed for too long. His recommendation was to
write an agreement with the plaintiffs and the mental health
people that did not require a commitment of six percent of
revenues in perpetuity, but where the state pledged its full
resource to guarantee the agreement. This would avoid tying
up resources, he said.
DR. OLDS remarked that the state was acting as if its only
resource was the revenue from Prudhoe Bay royalties. If BP
could capitalize our oil for ten years and use the capital
to generate more income, the state ought to be able to do
something comparable, he said.
Number 571
REPRESENTATIVE GREEN referred back to Dr. Olds' comments on
11 people in the DNR's divisions that were committed to
economic potential. He asked if those people had gotten
together to exchange ideas, and suggested those people could
meet with Representative James' committee on International
Trade.
Number 590
DR. OLDS said the DNR's Assistant Commissioner, Larry
Galloway, had met with Max Hodel of the Governor's Office
and Commissioner Fuhs. He said he would be happy to arrange
a meeting with Representative James' group, and mentioned a
sub-group called "Alaska, Inc." that looked at Alaska as if
it were truly an owner state. He said the group had brought
out fresh, creative ideas for a more comprehensive economic
plan.
DR. OLDS said his assistant, Raga Elim, would be able to
provide more information on or access to the Alaska, Inc.
group if legislators were interested.
Number 612
REPRESENTATIVE DAVIES returned to the question of the Mental
Health Lands settlement, expressing a concern that a
solution be found to minimize future court action. He
referred to possibilities for reconciling the interests of
the parties concerned with a revenue stream with those
concerned with tying up the land. He discussed the
possibility of putting more revenue-generating lands into
the mix, which might generate a clearer revenue stream and
might also require less total acreage and, therefore, fewer
land exchange issues to contend with. He asked for Dr.
Olds' comments on those possibilities.
Number 636
DR. OLDS agreed the reasoning was sound for such an idea and
might be pursued. He said the problem was that the
Department of Law had to guard against the possibility under
the mandate to maximize the value for the public's interest
with respect to a special class -- the mentally ill. If the
highest value land was set aside for a special interest, the
state would be more vulnerable at the point of law, he said.
He has argued that it was in everyone's interest to try to
move the best value-added development capability of the land
into the settlement, he advised.
Number 650
DR. OLDS, in respect to the most recent lease sale in Cook
Inlet, said he had argued that if it could be shown the
Mental Health Trust would be more zealous in the development
of the lease than the state generically, it would be in
everyone's best interest. He said the plaintiffs and the
Department of Law would have to be persuaded that was the
case. He said the preoccupation of self interest was what
they were trying to guard against. He suggested the state
try to find fresh, creative solutions because "time was not
on our side."
CHAIRMAN WILLIAMS asked if there were any public testimony.
There being none, he then asked the House Resources
Committee if they were ready to consider recommendation of
Glen Olds for confirmation as Commissioner of Natural
Resources.
Number 680
REPRESENTATIVE HUDSON made a MOTION to recommend nomination
of Glen Olds for confirmation as Commissioner of Natural
Resources.
CHAIRMAN WILLIAMS asked if there were any discussion from
the Resources Committee members. Hearing none, he asked if
there were any objections to the motion. The MOTION CARRIED
with all members in favor. The committee report form was
circulated and signed with "Do recommend" from all Resources
committee members present.
Number 680
CHAIRMAN GREEN of the Oil and Gas Committee asked his
committee members how they would like to proceed.
REPRESENTATIVE DAVIS MOVED to recommend confirmation of Glen
Olds.
CHAIRMAN GREEN asked if there were any objections. Hearing
none, the MOTION PASSED and the House Oil and Gas Committee
members signed the committee report form.
Number 698
REPRESENTATIVE PAT CARNEY suggested the members of Alaska,
Inc., might appear before the committee and report on their
ideas and activities.
ANNOUNCEMENTS
TAPE 93-15, SIDE A
Number 000
CHAIRMAN WILLIAMS announced the House Resources Committee
would meet at 8 a.m. on Wednesday, February 10, 1993, to
hear a briefing on the spruce bark beetle problems on the
Kenai. Following that briefing, he said the committee would
discuss the Mental Health Lands Trust settlement. He asked
that committee members come to that meeting with suggestions
on how to proceed. Options to be considered included
staying out of the issue and allowing the courts to proceed,
or introducing legislation on the issue, he said.
Number 047
REPRESENTATIVE HUDSON asked the Resources Committee staff to
have potential draft legislation identical to SB 67 prepared
for discussion.
Number 065
REPRESENTATIVE GREEN announced to the Oil and Gas Committee
members that because of a scheduling conflict, they would
meet at 5:00 p.m. on alternate weeks.
Number 095
ADJOURNMENT
CHAIRMAN GREEN adjourned the House Special Committee on Oil
and Gas at 9:44 a.m.
There being no further business to come before the
committee, Chairman Williams adjourned the meeting of the
House Resources Committee at 9:44 a.m.
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