Legislature(1993 - 1994)
01/24/1994 08:00 AM House RES
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* first hearing in first committee of referral
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+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
January 24, 1994
8:00 a.m.
MEMBERS PRESENT
Representative Bill Williams, Chairman
Representative Bill Hudson, Vice-Chairman
Representative Con Bunde
Representative Pat Carney
Representative John Davies
Representative Joe Green
Representative Eldon Mulder
Representative David Finkelstein
MEMBERS ABSENT
Representative Jeannette James
COMMITTEE CALENDAR
Confirmation: Harry Noah as Commissioner of the Department
of Natural Resources
ALL COMMITTEE MEMBERS PRESENT VOTED "DO
RECOMMEND"
WITNESS REGISTER
HARRY NOAH, Commissioner
Department of Natural Resources
400 Willoughby Avenue
Juneau, Alaska 99801-1724
Phone: 465-2400
Position Statement: Provided information and answered
questions related to his confirmation
ACTION NARRATIVE
TAPE 94-3, SIDE A
Number 000
The House Resources Committee was called to order by
CHAIRMAN BILL WILLIAMS at 8:10 a.m. Members present at the
call to order were Representatives Williams, Bunde, Carney,
Davies, Finkelstein and Green. Members absent were
Representatives Hudson, James and Mulder.
CHAIRMAN WILLIAMS stated the purpose of the meeting was to
consider confirmation of the appointment of HARRY NOAH,
Commissioner of the Department of Natural Resources and
report back to the House on the committee's recommendation.
Number 026
HARRY NOAH, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES
(DNR) told committee members he did not have a prepared
speech, but rather hoped to answer member's questions. He
reviewed his background contained in his resume (on file),
including his many positions held.
Number 063
COMMISSIONER NOAH said he began his present job as
Commissioner of DNR July 1, 1993, and at that time, he
reviewed the department as it existed, noting he was the
sixth commissioner in seven years. He felt the constant
changes had destabilized the agency to the point where the
department was becoming counterproductive.
COMMISSIONER NOAH explained his job initially involved
calming people down, getting them focused on performing
their job and providing support. He noted there was a real
need to take care of DNR's business, including all of the
transactions the department has to undergo to allow people
in the state to do what they want to do. He stressed that
DNR's ability to move things along in an efficient and calm
manner is very important to the state's economy.
Number 112
REPRESENTATIVE JOHN DAVIES asked COMMISSIONER NOAH to
comment on the regulatory aspect of the Forest Practices Act
and the issue of large scale versus small scale utilization
of the Tanana Valley Forest.
COMMISSIONER NOAH remarked in the Fairbanks area, the
potential to diversify the economy is an important aspect to
consider, and felt there is a tremendous resource existing
in the Tanana Valley State Forest. He stated there has been
a large scale timber sale proposed and the first step is to
inventory what is currently there. He said based on the
information found, sound decisions will be made on moving
forward with the timber sale.
COMMISSIONER NOAH continued that DNR is looking for a value
added facility which might be located in Fairbanks, and
noted the actual scale of the facility is yet to be
determined. He said the determination will be based on
economics, not wishes and desires. He mentioned there are
many interests involved and part of DNR's job is to work
within the system to achieve the value added facility.
Number 149
(CHAIRMAN WILLIAMS noted for the record REPRESENTATIVES
MULDER and HUDSON arrived at 8:20 a.m.)
REPRESENTATIVE JOE GREEN asked COMMISSIONER NOAH to remark
on his position in regard to the spruce bark beetle kill
area.
COMMISSIONER NOAH responded most of the kill area is located
in the Kenai area, and mentioned there is a five year timber
schedule, proposing an increase in logging activity on the
Kenai Peninsula. He said the state has approximately
100,000 acres on the Kenai Peninsula, representing about 19
percent of the land there, so the state really is not the
major player.
COMMISSIONER NOAH explained the intent for the Kenai
Peninsula is to put up a group of small sales, plus a couple
of large sales, allowing the state to take value out of the
dying trees. He stressed it also gives the state the
opportunity to become more aggressive with the reforestation
program along the Kenai, but added there are concerns
relating to timber harvest there. He said it is important
for DNR to listen to all sides in regard to resource
management of the state, but also be in a position where the
department can best utilize the resources which are the
basis of the state's income.
Number 200
REPRESENTATIVE GREEN believed the length of time a dead tree
still has value is approximately five years, and questioned
whether small sales will utilize enough of the timber to
make it worthwhile.
COMMISSIONER NOAH replied there is a concern, but advised
there are legal constraints. He stressed with a four to
five year timber sale, the court may not see it as a true
emergency. He felt if the resource is going to be
harvested, there must be an opportunity to do it.
Number 222
REPRESENTATIVE DAVIES mentioned a past legislative audit
which criticized the way in which forests are managed within
the state, and he expressed concern that on every sale, the
state only receives about 10 cents on every dollar spent
managing the forest. He asked COMMISSIONER NOAH if there
are any proposed increased fees, increased requirements for
the industry due to reforestation, etc.
COMMISSIONER NOAH responded that DNR looks at the return to
the state and noted that state income is always measured
relative to oil. He stated jobs created through the timber
harvest, logging activities and value added are equally
important. COMMISSIONER NOAH felt that with many of the
other resource uses, the margins are much more narrow and
there is a need to be careful. The state's share may
increase, but ultimately, it may affect the state's ability
to provide jobs in the economy. He stated he would not
propose increasing fees at this time.
Number 251
REPRESENTATIVE CON BUNDE asked COMMISSIONER NOAH to comment
on the relationship between the current administration and
the environmental community and with that relationship in
mind, to remark on the role of DNR in the next 5-15 years.
COMMISSIONER NOAH felt that as long as everyone is in court,
the tasks cannot be accomplished. He stressed DNR does not
work for industry nor the environmental community, but
rather for the majority of the people in the state, and in
trying to achieve that goal, DNR has to take the role of
project manager, listening to all sides of an issue and
attempting to get a consensus. COMMISSIONER NOAH said if
DNR becomes lost in a maze and does not focus on having the
state's resources available for lease and getting them on
the market, the overall economy of the state will be hurt.
Number 301
REPRESENTATIVE BUNDE asked COMMISSIONER NOAH to comment on
long-term goals for resource development in the state.
COMMISSIONER NOAH stated the central focus of the department
will need to remain in oil and gas because of the
fundamental revenues coming from that industry. He pointed
out the opportunities have tended to be very large
opportunities such as big mills, big gas and oil companies,
etc. He said he would like to see the state take a more
proactive role in bringing development to the state and not
just focus on large opportunities.
Number 350
REPRESENTATIVE GREEN asked COMMISSIONER NOAH if he believed
there will be a continuation of every lease sale having
potential litigation and if so, did he have any thoughts on
how to avoid that happening.
COMMISSIONER NOAH explained that for many years the state
prepared best interest findings, but when it was time to get
actual specifics, it was said the information will be
obtained at the time of development and upon approval of
operation. He said within the last eight months, the courts
have become more active, saying any analysis should be
completed before a lease sale takes place. However, he felt
that created a problem, as the courts are pushing the state
toward an Environmental Impact Statement (EIS) or National
Environmental Policy Act (NEPA) process at the federal
level, causing financial concerns in achieving that goal.
COMMISSIONER NOAH stressed if the state follows what the
courts say, the state will go from three or four oil and gas
lease sales annually to possibly one. He said recently the
Supreme Court handed down a finding on Goodnews Bay, which
said the best interest finding was not detailed enough and
an EIS was needed. He stressed the legislature approved the
two-step process, yet the courts are saying do it in a
different way. He said DNR is currently reviewing options
to suggest to the legislature.
Number 410
REPRESENTATIVE BILL HUDSON complimented COMMISSIONER NOAH on
the manner in which he assumed the job. He said there is no
doubt about the importance of managing the state's natural
resources. He expressed concern regarding in-house
resources, and asked COMMISISONER NOAH if his human
resources, technological assets and legal assets are
adequate to get the job done, and wondered what the
implications would be if the legislature cut DNR's budget by
ten percent.
COMMISSIONER NOAH responded if DNR's budget was cut by ten
percent, he would explain the cause and effects associated
with the cut. He stressed DNR is beginning to struggle with
what is statutorily being dealt with and the demands being
placed on DNR. He felt, however, that DNR can manage if
priorities are set and energies are focused.
Number 472
REPRESENTATIVE DAVIES requested COMMISSIONER NOAH to comment
on the Mental Health Lands Trust issue.
COMMISSIONER NOAH replied the Mental Health Lands Trust
issue is top priority, and stressed a tremendous amount of
energy has been put forth on the issue. He said currently
DNR is trying to understand the range of concerns existing
with various groups, and noted the various groups include
the settling plaintiffs, the dissenting plaintiffs, the
resource groups, environmental groups, municipalities, and
small land owners.
COMMISSIONER NOAH stated DNR is attempting to determine a
strategy to bring the different groups to consensus. He
said in many instances the different groups have each other
blocked. He mentioned negotiations are currently ongoing.
REPRESENTATIVE DAVIES asked COMMISSIONER NOAH to comment on
the Judge Green decision.
Number 530
COMMISSIONER NOAH felt the decision was helpful and said
Judge Green assembled a very well-reasoned analysis of the
current status of the settlement. He explained it was her
opinion that the settlement was not a vehicle for full
funding of the mental health program, but rather the curing
of a breach and not a full funding situation. The
plaintiffs would receive equal to or greater compensation
out of Chapter 66 than what would have been expected if the
case was taken to court for final resolution.
COMMISSIONER NOAH stated Judge Green expressed concern about
a straight revenue type option, as the security needed was
not there. He thought what was most important is she said
this was in the range of options which could be approved.
He stressed that statement, along with a number of other
decisions, has laid the groundwork for DNR to develop a
potential package which might be brought back to the
legislature.
COMMISSIONER NOAH stressed Chapter 66 in itself was not a
settlement, but was a process to arrive at a settlement. He
said the key question remains what the expectations of the
plaintiffs are.
Number 576
REPRESENTATIVE GREEN said there have been strong statements
from the dissentient plaintiffs between settling and not
settling and inquired following Chapter 66, if an exchange
of land not requiring a cash settlement is possible.
COMMISSIONER NOAH replied a land based settlement is
complicated and any land that has value, someone else is
usually interested in it. He said cash is not an option,
due to the current budget situation.
REPRESENTATIVE HUDSON stated the Governor has outlined two
major solutions to the future of the state, and noted one of
them is elimination of the oil export ban and the other is
trying to market the state's natural gas. He asked how DNR
is involved in the proposed solutions.
Number 633
COMMISSIONER NOAH responded the major involvement on the oil
export ban is through the Department of Law. He said he is
involved in the natural gas pipeline issue, and explained
the current market and why there is an opportunity for the
state. He said that in December he traveled to Asia and
Korea to speak directly to natural gas buyers. He advised
it is clear that in the period 2000-2005, there will be a
shortfall of liquid natural gas (LNG) in the Asian market of
about 28 million tons per year.
COMMISSIONER NOAH stressed two occurrences are happening in
those countries he visited. One, an economic upgrading is
occurring in that electric appliances not previously used
are increasingly being used, resulting in a bigger demand
for electricity. He said the second happening is the gas
fields in Indonesia are being depleted much more rapidly
than anticipated, and by the year 2003-2004 there will be a
shortfall of LNG of 11 million tons per year. To put it in
perspective, COMMISSIONER NOAH mentioned an Alaskan project
currently proposed is about 14 million tons per year.
COMMISSIONER NOAH stated all of the major LNG buyers said
they are prepared to accept a proposal from Alaska and begin
discussions. He pointed out there are four major projects
in the world: The Alaskan project, Sakhalin, Nutana and
Quatar II. He felt the Sakhalin is the most logical project
for Asia, but the political unrest there is totally
unacceptable to the Japanese. He explained that most LNG
projects are developed on a 25-year contract and political
stability is of great importance to buyers.
TAPE 94-3, SIDE B
Number 000
COMMISSIONER NOAH said the Nutana Island project has a few
technical problems. For example, on the North Slope, the
CO2 is taken out of the gas before it is shipped, and in
Nutana Island, the gas is taken out of the CO2. He stated
there is also a concern relating to the costs associated
with that project, which may be higher than an Alaskan
project. He remarked the Nutana Island project is not as
developed as the North Slope project.
COMMISSIONER NOAH stated although Quatar II is a lower cost
project, there is a political stability question associated
with that project. He said the Japanese are willing to
trade off the analysis of political stability with the cost
associated with the project. He noted the major oil
companies, Arco, Exxon and BP are looking for ways to reduce
capital costs associated with a project to make it more
competitive.
COMMISSIONER NOAH stressed Alaska has an opportunity in a
very competitive world and should not let the opportunity
pass by. He pointed out that in order to achieve a project
in 2002, the majors would have to begin this summer. He
explained there are two issues which still need to be dealt
with. The delivery cost of gas is one. The second issue is
that although there is a shortfall of gas happening, the
largest LNG project in the world is being fitted into a
market place which goes up in steps, so fitting the two
together is difficult. He added that dealing with four
countries, United States, Japan, Korea and Taiwan is also
difficult. He concluded the Governor believes there is an
opportunity for the state and every effort has to be put
forth to make it happen.
Number 037
REPRESENTATIVE HUDSON inquired how the Office of
International Trade is involved with the LNG project.
COMMISSIONER NOAH responded that Max Hodel is very much
accepted by the Japanese and if the project is to move
along, it will take a coordinated effort, both in Alaska and
Japan. He said the state needs to be aware of what is
happening in the Japanese and Asian markets, and cannot just
listen to the major oil companies.
REPRESENTATIVE HUDSON noted in prior discussions, the major
oil companies have told members that gas is needed for the
extraction of all of the oil. He remarked if oil companies
are looking at a scaled use basis, they will need to work
together to determine how exporting gas will impact the
production of oil.
Number 058
COMMISSIONER NOAH replied that is correct and added that the
state also needs to consider the impact. He stated there
may be a trade off between the economic potential of the
project and potential loss, but pointed out the loss will be
realized over a long period of time. He mentioned it is not
just the sale of gas, but stressed there are also other
economic benefits to the state.
REPRESENTATIVE BUNDE inquired what the proposed time frame
for an additional LNG plant in Alaska is.
COMMISSIONER NOAH responded the time period would be 2001-
2005 and pointed out there will be five to six years of
construction and a minimum of three years of engineering and
permitting. He said a large lead time is needed to
accomplish the project.
REPRESENTATIVE BUNDE asked if the overall plan still
includes the additional plant in Valdez.
COMMISSIONER NOAH replied currently the proposal includes
the Valdez plant.
Number 105
REPRESENTATIVE GREEN said he heard that negotiations will be
needed if the LNG project is going to happen, and asked what
kind of impact the project will have on the people at DNR.
COMMISSIONER NOAH stated the involvement of the Division of
Oil and Gas in the LNG project is minimal, as that division
has a heavy workload at this time, and this project is a
potential project not an existing one. He said people from
the pipeline coordinators office, who are more familiar with
the up-front requirements, are involved.
Number 150
REPRESENTATIVE GREEN asked COMMISSIONER NOAH to comment on
the relationship between DNR and the Oil and Gas
Conservation Commission.
COMMISSIONER NOAH responded the relationship is in an
awkward position currently. He stated the Commission is a
group housed under DNR only for administrative purposes, and
noted there is merit in them not being housed under DNR. He
added that the Commission is an independent group, and there
does not need to be a perceived conflict between their
funding coming through DNR and the role they have to play.
Number 193
REPRESENTATIVE DAVID FINKELSTEIN noted COMMISSIONER NOAH had
served as a consultant to a variety of companies and asked
if there are any which he has remaining financial interests
in.
COMMISSIONER NOAH responded in each case he worked on a
contract and stated that currently he has no financial ties
to any of the companies. However, he said one of his more
recent projects was the Fairbanks gold project and when he
took his current position, he delegated his authority to the
Deputy Commissioner on that project.
REPRESENTATIVE GREEN recalled from a trip to the Kenai River
last year, there was a conflict between private land owners
efforts to abate the erosion problem and the Department of
Parks, and asked COMMISSIONER NOAH to comment on whether
the Department of Parks is attempting to do something to
abate the erosion and if not, are they impeding private
owners efforts.
COMMISSIONER NOAH asked Representative Green if he was
referring to a specific state park.
REPRESENTATIVE GREEN responded he was near the state park,
but also traveled along other areas of the river.
COMMISSIONER NOAH stated there is a specific area where the
river takes a big bend and borders the state park. He said
the Department of Parks is not impeding private land owners'
attempts to abate the erosion, but are looking for ways to
reduce erosion in the particular area mentioned. He noted
the Department of Parks is attempting to find ways to spread
people out along the river.
Number 265
REPRESENTATIVE ELDON MULDER mentioned a recent study
emphasizes the fact that whether there are fish or not, the
fishermen will be there and additional controlled access
points need to be provided. He asked COMMISSIONER NOAH if
he supports determining and developing new access points.
COMMISSIONER NOAH replied he does support new access points,
but stressed they will cost money and funding at this point
is difficult.
REPRESENTATIVE MULDER pointed out that last year, $3 million
from Exxon settlement funds was put through the budget for
habitat restoration and enhancement along the Kenai River.
Number 298
COMMISSIONER NOAH said there is a need to think about the
general Prince William Sound area and the land which might
be purchased. He explained 60 percent of all of the habitat
along the Kenai River is located in a very narrow band, and
focusing on those areas and buying those properties makes
good sense.
REPRESENTATIVE GREEN commented Alaska has a tremendous coal
resource and asked if DNR is considering the easing of
restrictions to make lands with coal reserves available.
COMMISSIONER NOAH responded easing restrictions should not
be considered. He felt coal is market driven and there may
be an opportunity to sell coal to Asia. However, coal is
not the same as natural gas because of the environmental
aspects of LNG. He added if there is an indication the
market has changed, DNR will put a senior project manager in
place and make an effort to market Alaska coal.
REPRESENTATIVE GREEN mentioned Alaska's coal is unique in
that it is extremely low in sulphur and environmentally
friendly.
Number 375
REPRESENTATIVE HUDSON pointed out that over the years there
has been an effort to determine ways to lessen the pressure
on the Kenai and Russian Rivers, and at the same time
provide greater outlet for sports fishermen. He said there
was also a discussion of developing a road on the other side
of the river. He asked if the administration is examining
these type of expansions.
COMMISSIONER NOAH replied in terms of transportation issues,
the Department of Transportation would need to answer
questions.
Number 397
REPRESENTATIVE HUDSON MOVED to confirm the appointment of
HARRY NOAH as Commissioner of the Department of Natural
Resources with individual recommendations.
CHAIRMAN WILLIAMS asked if there were any objections.
Hearing none, the MOTION PASSED.
CHAIRMAN WILLIAMS thanked COMMISSIONER NOAH for his
presentation and stated he was looking forward to working
with him.
ANNOUNCEMENTS
CHAIRMAN WILLIAMS announced the committee will meet on
Wednesday, January 26, 1994 at 8:00 a.m. to hear HJR 49
regarding federal regulations under the Oil Pollution Act of
1990.
ADJOURNMENT
There being no further business to come before the House
Resources Committee, CHAIRMAN WILLIAMS adjourned the meeting
at 9:20 a.m.
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