Legislature(1997 - 1998)

03/25/1997 01:30 PM House RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
               HOUSE RESOURCES STANDING COMMITTEE                              
                         March 25, 1997                                        
                           1:30 p.m.                                           
 MEMBERS PRESENT                                                               
 Representative Bill Hudson, Co-Chairman                                       
 Representative Scott Ogan, Co-Chairman                                        
 Representative Fred Dyson                                                     
 Representative Joe Green                                                      
 Representative Irene Nicholia                                                 
 Representative Reggie Joule                                                   
 MEMBERS ABSENT                                                                
 Representative Beverly Masek, Vice Chair                                      
 Representative Ramona Barnes                                                  
 Representative William K. ("Bill") Williams                                   
 COMMITTEE CALENDAR                                                            
 * SPONSOR SUBSTITUTE FOR HOUSE BILL NO. 128                                   
 "An Act relating to water quality; directing the Department of                
 Environmental Conservation to conduct water quality research;                 
 establishing the Water Science Oversight Board; and providing for             
 an effective date."                                                           
      - HEARD AND HELD                                                         
 * HOUSE JOINT RESOLUTION NO. 32                                               
 Relating to the Tongass Land Management Plan and to continued                 
 Congressional oversight of that plan.                                         
      - MOVED OUT OF COMMITTEE                                                 
 OVERVIEW:  Oil and Gas Field Technology                                       
      - HEARD                                                                  
 * HOUSE BILL NO. 144                                                          
 "An Act authorizing the Department of Environmental Conservation to           
 charge certain fees relating to registration of pesticides and                
 broadcast chemicals; and providing for an effective date."                    
      - SCHEDULED BUT NOT HEARD                                                
 OVERVIEW:  Nerox                                                              
      - OVERVIEW CANCELLED                                                     
 (* First public hearing)                                                      
 PREVIOUS ACTION                                                               
 BILL:  HB 128                                                               
 SPONSOR(S): REPRESENTATIVE(S) HUDSON                                          
 JRN-DATE      JRN-PG                 ACTION                                   
 02/12/97       318    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 02/12/97       318    (H)   RESOURCES, FINANCE                                
 02/18/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 02/18/97              (H)   MINUTE(RES)                                       
 02/20/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 02/20/97              (H)   MINUTE(RES)                                       
 02/27/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 02/27/97              (H)   MINUTE(RES)                                       
 03/18/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 03/18/97              (H)   MINUTE(RES)                                       
 03/19/97       756    (H)   SPONSOR SUBSTITUTE INTRODUCED -                   
 03/19/97       756    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/19/97       756    (H)   RESOURCES, FINANCE                                
 03/20/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 03/20/97              (H)   MINUTE(RES)                                       
 03/25/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 BILL:  HJR 32                                                               
 SHORT TITLE: TONGASS LAND MANAGEMENT PLAN                                     
 SPONSOR(S): RESOURCES                                                         
 JRN-DATE      JRN-PG                 ACTION                                   
 03/20/97       772    (H)   READ THE FIRST TIME - REFERRAL(S)                 
 03/20/97       772    (H)   RESOURCES                                         
 03/25/97              (H)   RES AT 1:00 PM CAPITOL 124                        
 WITNESS REGISTER                                                              
 DAVID STONE, President                                                        
 Council of Alaska Producers                                                   
 P.O. Box 22653                                                                
 Juneau, Alaska  99802                                                         
 Telephone:  (907) 463-5704                                                    
 POSITION STATEMENT:  Testified in support of SSHB 128.                        
 McKIE CAMPBELL, Consultant for the                                            
    Council of Alaska Producers                                                
 416 Harris Street, Suite 206                                                  
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 463-3171                                                    
 POSITION STATEMENT:  Testified in support of SSHB 128.                        
 MICHELE BROWN, Commissioner                                                   
 Department of Environmental Conservation                                      
 410 Willoughby Avenue, Suite 105                                              
 Juneau, Alaska  99801-1795                                                    
 Telephone:  (907) 465-5065                                                    
 POSITION STATEMENT:  Provided department's position and answered              
                      questions regarding SSHB 128.                            
 JAMES BALDWIN, Assistant Attorney General                                     
 Governmental Affairs Section                                                  
 Civil Division (Juneau)                                                       
 Department of Law                                                             
 P.O. Box 110300                                                               
 Juneau, Alaska 99811-0300                                                     
 Telephone:  (907) 465-3600                                                    
 POSITION STATEMENT:  Provided department's position and answered              
                      questions regarding SSHB 128.                            
 JIM BACON                                                                     
 P.O. Box 210383                                                               
 Auke Bay, Alaska  99821                                                       
 Telephone:  (907) 789-2405                                                    
 POSITION STATEMENT:  Testified in support of SSHB 128.                        
 SUSAN SCHRADER, Executive Director                                            
 Alaska Environmental Lobby                                                    
 P.O. Box 22151                                                                
 Juneau, Alaska  99802                                                         
 Telephone:  (907) 463-3366                                                    
 POSITION STATEMENT:  Testified on SSHB 128.                                   
 WALT SHERIDAN, Principal                                                      
 Walt Sheridan and Associates                                                  
 124 West Fifth Street                                                         
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-6367                                                    
 POSITION STATEMENT:  Testified in support of HJR 32.                          
 BERNE MILLER, Executive Director                                              
 Southeast Conference                                                          
 124 West Fifth Street                                                         
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 463-3445                                                    
 POSITION STATEMENT:  Testified on HJR 32.                                     
 BUCK LINDEKUGEL, Conservation Director                                        
 Southeast Alaska Conservation Council                                         
 419 Sixth Street, Suite 328                                                   
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-6942                                                    
 POSITION STATEMENT:  Testified in opposition to HJR 32.                       
 MARC WHEELER, Grass Roots Organizer                                           
 Southeast Alaska Conservation Council                                         
 419 Sixth Street, Suite 328                                                   
 Juneau, Alaska  99801                                                         
 Telephone:  (907) 586-6942                                                    
 POSITION STATEMENT:  Testified on HJR 32.                                     
 ELAINE PRICE, Mayor                                                           
 City of Coffman Cove                                                          
 P.O. Box 18135                                                                
 Coffman Cove, Alaska  99918                                                   
 Telephone:  (907) 329-2233                                                    
 POSITION STATEMENT:  Testified in support of HJR 32.                          
 DAVE McNAUGHTON, Support Manager                                              
 Mincom, Incorporated                                                          
 14811 Saint Mary's Lane, Suite 152                                            
 Houston, Texas  77079                                                         
 Telephone:  (281) 497-4600                                                    
 POSITION STATEMENT:  Presented overview on oil and gas field                  
 ACTION NARRATIVE                                                              
 TAPE 97-32, SIDE A                                                            
 Number 0001                                                                   
 CO-CHAIRMAN BILL HUDSON called the House Resources Standing                   
 Committee meeting to order at 1:30 p.m.  Members present at the               
 call to order were Representatives Hudson, Ogan, Dyson, Green and             
 Joule.  Representative Nicholia arrived at 1:42 p.m.  Absent were             
 Representatives Masek, Barnes and Williams.                                   
 [Contains considerable discussion of HB 51 at tape numbers 1006-              
 1189 and 1871-2263]                                                           
 Number 0058                                                                   
 CO-CHAIRMAN HUDSON announced the first order of business was                  
 Sponsor Substitute for House Bill No. 128, "An Act relating to                
 water quality; directing the Department of Environmental                      
 Conservation to conduct water quality research; establishing the              
 Water Science Oversight Board; and providing for an effective                 
 CO-CHAIRMAN HUDSON, sponsor, explained that SSHB 128 provides a               
 means to improve and Alaskanize water quality standards in the                
 state.  He believes standards are often predicated on scientific              
 research from other states or countries, with little or no                    
 relationship to Arctic and sub-Arctic conditions.  The bill allows            
 the Department of Environmental Conservation (ADEC) to form                   
 partnerships with interested parties to seek funding for water                
 quality research, with a goal of substituting science and certainty           
 for emotion and politics where possible.                                      
 CO-CHAIRMAN HUDSON said without Alaska-specific research, the                 
 Environmental Protection Agency (EPA) will not accept specific                
 Alaska changes to water quality regulations.  He expressed                    
 confidence that all parties will agree to the concept of forming a            
 partnership to seek funding for five years of technical research.             
 Number 0313                                                                   
 CO-CHAIRMAN HUDSON reported that the Alaska Science and Technology            
 Foundation (ASTF) has expressed interest in funding this research.            
 However, it will only accept an application from a public agency if           
 that agency is in partnership with a private organization.  He                
 advised that the ASTF may not exist soon.  However, if that is not            
 a source, he believes there are others.                                       
 CO-CHAIRMAN HUDSON advised that SSHB 128 sets up a process and an             
 organization that can try to obtain ASTF or federal funds.  He does           
 not intend to request general funds for this research.                        
 Number 0378                                                                   
 CO-CHAIRMAN HUDSON explained that the sponsor substitute removed              
 interim regulations.  At the beginning of session, permit holders             
 from the mining community had approached him, expressing concerns             
 about the permitting process in Alaska.  He had worked with them              
 and the ADEC to agree on specific interim regulations, included in            
 the original bill.  Now, he is working closely with the                       
 Administration, who are moving rapidly and deliberately to address            
 many interim standards on their own.  As long as he sees that                 
 progress, he sees no need for the legislature to place its own                
 CO-CHAIRMAN HUDSON generally believes regulation should not be                
 micromanaged.  However, frustration on all sides makes legislative            
 oversight necessary.  To that end, he had formally urged swift                
 consideration of technical matters by the ADEC and cooperation of             
 the industry.  He had not treated one differently from the other,             
 and he believes they both depend and rely upon each other.                    
 Number 0559                                                                   
 DAVID STONE, President, Council of Alaska Producers, came forward             
 to testify.  The council is a nonprofit corporation composed of all           
 the major mining companies doing business in Alaska:  Alaska Gold             
 Company; American Copper and Nickel Company, Incorporated/INCO;               
 Coeur Alaska, Incorporated; Cominco Alaska, Incorporated; Echo Bay            
 Mines; Fairbanks Gold Mining, Incorporated; Greens Creek Mining               
 Company; Kennecott Exploration; Nevada Goldfields, Incorporated;              
 Newmont Mining Corporation; North Pacific Mining Company/CIRI;                
 Placer Dome, U.S., Incorporated; and USMX, Incorporated.                      
 MR. STONE urged support for SSHB 128, saying mining is a bright               
 growth industry in Alaska.  He read the last paragraph of an                  
 article on mining by Tim Bradner, from the November 10, 1996,                 
 Anchorage Daily News, which says it is comforting to see expansion          
 of an industry that will require a skilled, highly paid work force.           
 MR. STONE said they agree but believe Alaska's future can be bright           
 for many natural resource industries.  However, it depends on                 
 environmental regulations that protect Alaska's air and water while           
 allowing responsible development.  He believes SSHB 128 helps                 
 achieve that.  He deferred to McKie Campbell.                                 
 Number 0756                                                                   
 McKIE CAMPBELL, Consultant for the Council of Alaska Producers,               
 addressed questions that had arisen.  He said if there is no                  
 funding, nothing will happen.  The law would exist, and efforts to            
 work with the ADEC to obtain other funding could continue.  He                
 emphasized that this type of research is necessary before the EPA             
 will consider changing water quality regulations.                             
 MR. CAMPBELL cited Whole Effluent Toxicity (WET) testing as an                
 example of appropriate research.  Even if individual discharge                
 levels are met, there may be synergistic reactions.  However,                 
 present WET testing gives "flukey" results.  While the council does           
 not believe those tests should be either more stringent or more               
 liberal, they do believe the testing should be evaluated.                     
 Number 0896                                                                   
 MR. CAMPBELL explained that similarly, the Water Science Oversight            
 Board would only be active if there is funding.  He noted that                
 committee packets contain two legal opinions regarding board                  
 appointments.  The first, dated March 4, 1996, by James Baldwin,              
 Assistant Attorney General, states there may be a constitutional              
 issue.  Mr. Campbell said he believes the Department of Law, in               
 defense of the governor's powers, has always tried to have the                
 least restrictions upon the governor's ability to appoint.                    
 MR. CAMPBELL referred to the second opinion, dated March 14, 1997,            
 from Terri Lauterbach, Legislative Counsel, Division of Legal and             
 Research Services.  Mr. Campbell said Ms. Lauterbach does not                 
 believe this would be a constitutional problem.                               
 MR. CAMPBELL expressed appreciation for the cooperative                       
 relationship established with Commissioner Brown and the ADEC,                
 regardless of whether parties agreed or disagreed on particular               
 points.  He concluded by urging passage of SSHB 128.                          
 Number 1006                                                                   
 REPRESENTATIVE JOE GREEN referred to HB 51, currently being debated           
 on the House floor.  He asked how the two bills differ and whether            
 there are areas where they will compete.                                      
 CO-CHAIRMAN HUDSON replied that SSHB 128 will produce scientific              
 data that will legitimize some concerns expressed in HB 51.  He               
 believes it complements HB 51.                                                
 Number 1070                                                                   
 MR. CAMPBELL indicated the council does not see a conflict.                   
 REPRESENTATIVE GREEN asked for clarification.                                 
 CO-CHAIRMAN HUDSON elaborated, saying SSHB 128 provides scientific            
 research that will be the basis for the ultimate Alaska water                 
 quality standards on most of the major contentious issues, such as            
 mixing zones and WET testing, over which the ADEC has been battling           
 with federal agencies.  The industry tells him they are prepared to           
 live with standards arrived at under SSHB 128 because those will be           
 based on scientific research, not politics.                                   
 Number 1129                                                                   
 REPRESENTATIVE GREEN said SSHB 128 tries to establish standards,              
 then, rather than be a testing mechanism for standards that might             
 be approved if HB 51 goes through.  From that standpoint, it                  
 appears they may be in competition.                                           
 CO-CHAIRMAN HUDSON suggested that Commissioner Brown respond.  He             
 restated his belief that there is no conflict.                                
 Number 1189                                                                   
 REPRESENTATIVE FRED DYSON asked who opposes SSHB 128.                         
 MR. CAMPBELL said they may hear concerns about components of the              
 bill, including whether the governor will have unfettered                     
 appointment ability for the board.  The council believes SSHB 128             
 provides a balanced approach, and appointees are required to have             
 academic and professional expertise in water quality science.                 
 Although there may be discussion that somehow the board should be             
 totally removed from politics, he does not know how that is done.             
 He is unaware of anyone opposing SSHB 128 outright.                           
 Number 1277                                                                   
 REPRESENTATIVE DYSON stated his understanding that there is concern           
 the board may be tilted in one direction.                                     
 MR. CAMPBELL believes there is a feeling that the board is fairly             
 balanced but should be appointed by a nonpolitical entity.  He                
 pointed out that the board's role is advisory, which he believes is           
 important as far as constitutionality.                                        
 Number 1370                                                                   
 MICHELE BROWN, Commissioner, Department of Environmental                      
 Conservation, came forward to testify.  She said the Administration           
 is pleased by the change in the sponsor substitute.  They are also            
 heartened by the caliber of discussion.  She thanked Co-Chairman              
 Hudson and the council for that approach in a time of growing and             
 needless polarization over environmental management.                          
 COMMISSIONER BROWN said Alaskans' well-being is inextricably tied             
 to water quality.  Maintaining it begins with setting good water              
 quality standards, which must protect public health, value                    
 resources and foster and respect all water users.  To that extent,            
 the ADEC shares SSHB 128's vision of seeking to Alaskanize                    
 standards.  The bill will supplement their efforts, which include             
 using sound science, good resource management principles and full             
 public participation in setting standards.                                    
 Number 1434                                                                   
 COMMISSIONER BROWN said equally important is the application of               
 standards.  In applying standards, the ADEC considers specific                
 information on water bodies and contaminants.  They use those                 
 specifics to permit discharge; create mixing zones, which are                 
 variances wherein standards can be exceeded; create site-specific             
 criteria to handle the exceeding of standards for specified water             
 bodies where it will not cause harm; and classify and reclassify              
 water bodies for specified uses.  These tools allow them to                   
 accommodate particular activities without downgrading standards               
 COMMISSIONER BROWN discussed roles of the EPA and the state.  The             
 federal Clean Water Act gives states the duty to set standards.               
 The EPA retains four functions.  First, it develops effluent                  
 technology requirements, equipment that certain kinds of processes            
 must use to reduce the amount of pollutants discharged.  Second, it           
 develops scientific guidelines on pollutants.  States frequently do           
 not have money for necessary research.  The EPA does that research            
 and makes it available as guidance for the states, which may use it           
 as they choose in setting standards.  If states have their own                
 research, they may use that.                                                  
 COMMISSIONER BROWN said third, the EPA reviews and approves state             
 standards to ensure consistency with the Clean Water Act.  Fourth,            
 it takes over and writes standards when it believes a state has not           
 properly done so.  She believes in avoiding that at all costs.  The           
 one time it occurred in Alaska, the National Toxics Rule (NTR) was            
 imposed, leading to problems with arsenic levels, for instance.               
 Number 1545                                                                   
 COMMISSIONER BROWN explained that a standard is defined as the                
 maximum pollutant concentration that a water body can absorb yet              
 still maintain the water uses for which it has been used or could             
 be used.  These include drinking water, industrial usage,                     
 agriculture, aquaculture, fishing and other uses.                             
 COMMISSIONER BROWN said when the ADEC works on setting standards,             
 they start with a thorough scientific review.  They do independent            
 research, use the EPA's research, and look at what other states and           
 Canada do.  They then carefully look at Alaska's multiple water               
 uses and consult with users to ensure everyone's interests are                
 COMMISSIONER BROWN said that kind of detailed process is currently            
 underway for 13 standards, 12 of which were identified by industry            
 and the public as most in need of review and update.  She pointed             
 out that scientific information is constantly changing, and it is             
 appropriate to constantly review standards to ensure they are up-             
 to-date.  The 13th standard, the mixing zone standard, is currently           
 out for public review.                                                        
 Number 1604                                                                   
 COMMISSIONER BROWN referred to two charts.  The first, dated                  
 2/18/97, addresses the 12 standards currently under review.  Some             
 issues are resolved, and others are underway.                                 
 COMMISSIONER BROWN briefly discussed the second chart, entitled               
 "WQS Review Process."  She believes SSHB 128 will complement the              
 ADEC's efforts and enable them, should they gain funding, to tackle           
 difficult issues requiring Alaska-specific research.  When                    
 necessary, it will also enable them to convince the EPA a suggested           
 standard is inappropriate and that Alaska has a sound scientific              
 basis for its own.                                                            
 Number 1699                                                                   
 COMMISSIONER BROWN concurred with Co-Chairman Hudson that water               
 quality issues are highly volatile and emotional.  There are                  
 competing livelihood demands and serious health issues.  The more             
 science and rationality brought to this process, the better.                  
 COMMISSIONER BROWN discussed mixing zones.  Variances from existing           
 standards, they are highly controversial.  The ADEC has been                  
 revising standards to more clearly demonstrate how the department             
 will exercise its discretion and balance views on mixing zones.               
 They have held six public hearings and workshops, factored in over            
 500 comments and spent hundreds of hours in research and individual           
 conversations "on just about every word in this proposed reg."                
 Those standards are out for final public comment.                             
 COMMISSIONER BROWN said as painful as that process has been, she              
 believes it is necessary.  Because the subject is so complex, there           
 must be painstaking research and analysis to ensure that a standard           
 is not created that inadvertently creates a problem for someone               
 else.  The ADEC is convinced this type of negotiated stakeholder              
 rule-making is the way to build certainty, common sense and                   
 rationality in the process.  A science board and the kind of                  
 research in SSHB 128 will certainly further that effort.                      
 Number 1781                                                                   
 COMMISSIONER BROWN expressed concern that the board is set up in a            
 way that politicizes it.  Most boards are set up with the governor            
 making the appointment, because they work with the executive                  
 branch.  She noted that the Attorney General's office believes                
 there is a constitutional separation of powers issue.                         
 COMMISSIONER BROWN stated concern that the board is not simply                
 advisory because the bill mandates the ADEC to adopt regulations              
 when the board tells them to.  It also says the board is to direct            
 and oversee.                                                                  
 COMMISSIONER BROWN suggested appointments be made by the governor.            
 Beefing up the required scientific credentials would also be                  
 acceptable to ensure board members are focused on the science.                
 Number 1835                                                                   
 COMMISSIONER BROWN advised that the ADEC has a few minor technical            
 changes, clarifications of language, that she has spoken to McKie             
 Campbell about and that can be worked out in the future.  The board           
 composition is the only issue outstanding.  "When we resolve that,            
 we'd like to join with you to move this quickly through," she                 
 Number 1871                                                                   
 COMMISSIONER BROWN addressed HB 51.  She does not believe the two             
 bills contradict each other, although they differ in methodology.             
 While SSHB 128 seeks to Alaskanize standards, HB 51, for reasons              
 that baffle her, defers to the federal government.                            
 COMMISSIONER BROWN emphasized that the federal government does not            
 set standards for Alaska.  "And when they did, we hated it," she              
 said.  "Why we would turn over our standards to them is beyond me.            
 We don't want them to manage our fish and wildlife.  We can't stand           
 the way they manage our forests.  They're driving us crazy with               
 their interpretation of RS 2477.  Why we would turn over something            
 as important as water quality standards to them, when they base               
 them on what's going on in New Jersey, I just cannot understand."             
 COMMISSIONER BROWN advised that she has spent a lot of time trying            
 to convince the EPA that Alaska has very different conditions.  She           
 said SSHB 128 provides the tools to convince the EPA that Alaska is           
 different and needs to set its own standards that make sense for              
 COMMISSIONER BROWN pointed out that Alaska has more competing                 
 resource users than most states.  She believes there can be mining            
 next to fishing.  It's a question of good management and of being             
 good neighbors to each other.  However, HB 51 does not encourage              
 that kind of multiple use.  It says the first user on the block               
 gets to use up the water body, and if the rest are cut out, so be             
 it.  She believes that is not in Alaska's best economic or "good              
 neighbor" interests.                                                          
 Number 1941                                                                   
 COMMISSIONER BROWN said while SSHB 128 emphasizes good science                
 before making decisions, HB 51 says it wants good science but                 
 proceeds to adopt standards without having looked at any science.             
 She believes SSHB 128 provides a good long-term approach and                  
 protects all users.                                                           
 COMMISSIONER BROWN stated, "I think HB 51 is a tempting quick-fix,            
 although I'm not quite sure for whom, because I've yet to hear any            
 industry say they really support it.  It's an attempt to paint with           
 a broad brush, to say if one industrial discharger needs a standard           
 to be lowered in a certain area, then the standard for the whole              
 state should lower, as opposed to, you keep the standard and the              
 protective basis, but if you need to change it on a site-specific             
 basis and you can show it doesn't do harm, as we've done in a                 
 number of sites, then you change that.  So it's a difference in               
 Number 2002                                                                   
 REPRESENTATIVE GREEN discussed the possibility of an increased                
 standard if, for example, multiple uses occur where previously                
 someone else operated in compliance with the EPA standard.                    
 COMMISSIONER BROWN said she did not follow.  She advised that the             
 Clean Air Act sets national standards.  In contrast, under the                
 Clean Water Act, the federal government only sets standards when a            
 state does not.  They offer scientific guidelines, but not for                
 everything.  For example, they have no mixing zones.                          
 Number 2120                                                                   
 CO-CHAIRMAN HUDSON advised that he hesitated to get too deep into             
 HB 51 without the sponsor.                                                    
 REPRESENTATIVE GREEN said he was trying to make sure there is no              
 conflict.  He recalled a discussion the previous year about federal           
 COMMISSIONER BROWN replied that she does not believe this is a                
 direct conflict.  The only place where there could conceivably be             
 a conflict is if the state does research and finds that a stricter            
 standard than the federal government's criteria is necessary to               
 protect Alaska's water resources.  Under HB 51, Alaska would not be           
 allowed to use its research, even if it showed a stricter standard            
 was needed.  Commissioner Brown cited the example of turbidity                
 Number 2209                                                                   
 CO-CHAIRMAN HUDSON said SSHB 128 tries to develop scientific                  
 standards that could be used, if necessary, to change the statutes            
 modified by HB 51.                                                            
 REPRESENTATIVE GREEN referred to Commissioner Brown's indication              
 that there are no federal standards and asked for clarification.              
 Number 2263                                                                   
 COMMISSIONER BROWN explained it is federal criteria guidance.  The            
 criterion is a scientific basis, such as maximum pollutant load,              
 which when applied to water uses becomes a standard.  Although both           
 are loosely called "standards," they are different.                           
 REPRESENTATIVE GREEN suggested that using the EPA criteria and                
 Alaska's uses, there is a way to establish some limit based on the            
 EPA criteria.                                                                 
 COMMISSIONER BROWN responded, "If they have criteria.  There's a              
 number that they don't have criteria for."                                    
 REPRESENTATIVE GREEN said evidently there were some, though.                  
 COMMISSIONER BROWN agreed.                                                    
 Number 2347                                                                   
 REPRESENTATIVE GREEN asked:  If Alaska goes through this type of              
 research group and discovers a lower level of pollutants should be            
 allowed, would the state tell the EPA they believe it should be               
 more stringent and show them why?  And until that could be shown,             
 would there be no change?                                                     
 COMMISSIONER BROWN said where the federal government has criteria,            
 and the scientific research for it, the state would have to prove             
 alternative scientific research to justify a different standard,              
 which could be either less or more stringent.                                 
 REPRESENTATIVE GREEN asked whether at that point, the EPA must go             
 along with it.                                                                
 COMMISSIONER BROWN said the EPA must approve the state's standards.           
 For example, the federal government had just approved a change in             
 Alaska's arsenic standards.                                                   
 REPRESENTATIVE GREEN said he believes that intermediate step is               
 TAPE 97-32, SIDE B                                                            
 Number 0006                                                                   
 REPRESENTATIVE GREEN said he had been concerned that an operator              
 complying with state standards would be subject to rapid change in            
 standards.  He believes this would be more detrimental than slower            
 or more gradual changes by the EPA.                                           
 COMMISSIONER BROWN replied that she believes both federal standards           
 and criteria change more quickly than Alaska's because they have              
 the research tools.  Any change by the ADEC goes through a full               
 public process under the Administrative Procedures Act, and the               
 board would not be empowered to pass standards or regulations.                
 REPRESENTATIVE GREEN said this is advisory to another action.                 
 COMMISSIONER BROWN said it is a precursor to another action.                  
 Number 0103                                                                   
 JAMES BALDWIN, Assistant Attorney General, Governmental Affairs               
 Section, Civil Division (Juneau), Department of Law, came forward             
 to testify.  Although his written opinion of March 4, 1997,                   
 addressed the original version of the bill, the applicable section            
 relating to composition of the Water Science Oversight Board is               
 basically unchanged.                                                          
 MR. BALDWIN said the proposed statute may violate the separation of           
 powers doctrine inherent in the state constitution.  First, it                
 leaves appointment of executive branch officials largely in the               
 hands of someone other than the governor.  It also provides an                
 overly restrictive, limited list for those members whom the                   
 governor may appoint.                                                         
 MR. BALDWIN expressed interest in ensuring the most legally                   
 defensible set of regulations.  He stated concern that regulations            
 relating to water quality would be highly litigious.                          
 Number 0210                                                                   
 MR. BALDWIN said he respects the opinions of Ms. Lauterbach.                  
 However, he believes the correct way to look at whether a board is            
 advisory or not is by who listens to the advice.  If the board                
 gives fairly important advice to fairly important people, such as             
 the commissioner of a principal department of state government, and           
 it is a necessary step in the adoption process of regulations, then           
 those factors together mean "that we have to be very careful."                
 This is an important board, and the fact that it is advisory in               
 nature is not going to carry the day.                                         
 MR. BALDWIN noted that Ms. Lauterbach had not cited a case                    
 supporting her conclusion.  He referred to Bradner v. Hammond,              
 cited in his opinion, which indicates the legislature only has a              
 role in the appointment process when the constitution specifically            
 provides for it.  That case arose from the legislature's desire to            
 confirm executive officials not specifically named in the                     
 constitution.  Mr. Baldwin takes the reasoning in that case to say            
 there really is not much of a role in the appointment process,                
 other than confirmation, for legislators.                                     
 MR. BALDWIN said since this is not a principal department head or             
 quasi-judicial or regulatory board, there would be no confirmation.           
 Therefore, it would be a noticeable legal issue that may get wound            
 up in any litigation resulting over the regulations.  He said the             
 ultimate point to worry about is defending these regulations and              
 making them carry the day when they are adopted.                              
 Number 0305                                                                   
 CO-CHAIRMAN HUDSON responded that he would be more inclined to                
 agree if just the Speaker of the House or President of the Senate             
 presented candidates.  This requires a list of three, all of whom             
 could be struck by the governor, who could then request another               
 list.  The intent is to depoliticize it.  The governor chooses, but           
 from a list managed or developed by the House and Senate.                     
 Number 0376                                                                   
 MR. BALDWIN said on a continuum, it is not as bad as it could be.             
 However, the effect is that the legislative officers make the                 
 appointment.  He suggested a scheme that would pass constitutional            
 muster.  The bill could specify the desired qualifications of                 
 appointees, then require the governor to consult with presiding               
 officers of the legislature.  The bill could also require, for                
 example, that appointees be recognized in their fields.                       
 MR. BALDWIN commended the sponsor for providing real compensation             
 for private members of the board.  He believes that is extremely              
 important for getting good people.                                            
 Number 0426                                                                   
 CO-CHAIRMAN HUDSON pointed out that the bill specifies, at least              
 generally, that candidates have academic credentials and Alaska-              
 based expertise in the field of water quality.  He acknowledged               
 perhaps there could be a deeper definition.                                   
 Number 0442                                                                   
 REPRESENTATIVE GREEN posed a hypothetical situation where the board           
 is established, recommends a change, and that change occurs.  If a            
 court decided that board was not properly constituted, he wondered            
 whether litigation or other legal action could affect the change              
 made on the board's recommendation.                                           
 MR. BALDWIN replied that it is highly possible since the board's              
 recommendation is a necessary step in the enactment process, as he            
 reads it.  He is less sure whether someone could contest the                  
 validity of scientific information provided by the board.  However,           
 one could contend the board's influence is so pervasive over the              
 ADEC's decision-making that there is a defect possibly emanating              
 from the composition of the board itself.                                     
 MR. BALDWIN explained one reason for the separation of powers                 
 doctrine is so each branch of government acts within its own                  
 sphere, without one predominating over another.  He stated, "And if           
 someone were to say, `Well, what happened here is that really this            
 wasn't an executive act at all, it was really a legislative act               
 when the power was given to the commissioner,' then that's a                  
 serious legal defect ...."                                                    
 Number 0518                                                                   
 CO-CHAIRMAN HUDSON referred to subsection (c), beginning on page 3,           
 line 15, and pointed out that the board shall review and comment;             
 meet at the request of the commissioner; provide advice to the                
 department; and report annually to the governor, the House and the            
 Senate.  These are constructive, important elements in order to               
 come up with bipartisan, scientifically-based standards.  He                  
 believes both the industry and the environmental community want               
 that.  He said the action defined in SSHB 128 is all advisory, and            
 he believes it is a well-crafted mechanism to establish standards.            
 Number 0598                                                                   
 MR. BALDWIN pointed out that this board is a necessary element.  If           
 science becomes the basis of regulations, when the regulations are            
 tested, the basis will also be tested, as well as composition of              
 the board and every other element that smart, well-paid lawyers can           
 bring into litigation.                                                        
 CO-CHAIRMAN HUDSON said the board, as he sees it, gets scientists             
 together and tries to put the research together in the kind of                
 language that legislators and the administration will understand.             
 He is not inclined to accept that change.                                     
 Number 0661                                                                   
 CO-CHAIRMAN SCOTT OGAN referred to separation of powers and said              
 the legislature had already delegated a great deal of authority to            
 the ADEC, which regulates and adjudicates the regulations.  He                
 suggested bureaucracy is currently a fourth branch of government.             
 Number 0723                                                                   
 REPRESENTATIVE GREEN asked whether other boards were made of a                
 MR. BALDWIN said yes, there are other boards where the legislature            
 has charted its own course.  "I wouldn't cite them as reasons why             
 we should do it again," he cautioned.                                         
 Number 0772                                                                   
 JIM BACON came forward to testify.  A commercial fisherman, he                
 supports SSHB 128.  He expressed appreciation for the good-faith              
 effort to address concerns about the original version.                        
 MR. BACON believes the bill seeks to establish good, sound                    
 scientific findings that can address unique situations in Alaska              
 and bring about a system whereby the seafood industry can work in             
 concert with other industries in the state and move forward.  "And            
 that is something that we would very much like to do," he                     
 Number 0863                                                                   
 SUSAN SCHRADER, Executive Director, Alaska Environmental Lobby                
 (AEL), came forward to testify.  She advised that member groups               
 represent over 10,000 Alaskans, united in the belief that there is            
 ample room in Alaska for both a strong state economy and strong               
 environmental protection.  They also believe there cannot be one              
 without the other.                                                            
 MS. SCHRADER said resource-extracting industries must be able and             
 willing to expend funds to conduct activities with the utmost care            
 for the resources.  They must also recognize and respect other                
 water resource users who depend on its purity for their livelihood            
 and enjoyment.  Under the public trust doctrine, the legislature              
 has an affirmative duty to manage water resources for the public              
 good, not just for private gain of individual interests.                      
 MS. SCHRADER expressed appreciation for the sponsor's efforts in              
 working with the ADEC and in keeping the AEL briefed.  The AEL is             
 pleased the interim standards have been deleted, which goes a long            
 way towards making the bill more balanced.                                    
 Number 0971                                                                   
 MS. SCHRADER cautioned that a couple of concerns prevent the AEL              
 from fully endorsing SSHB 128.  First, as discussed by others, is             
 the board composition.  Whether or not it will be politicized, it             
 will certainly have that appearance.  For that reason, the AEL                
 believes it would be difficult for the board to gain the confidence           
 of the many stakeholders involved in water quality issues.                    
 MS. SCHRADER said the AEL foresees that SSHB 128 will result in               
 good science and the adoption of improved regulations that industry           
 will feel more comfortable with.  However, the ADEC's funding is              
 inadequate to implement these regulations.  The AEL supports                  
 continued dialogue along the lines that SSHB 128 has initiated.               
 They suggest additional funding for the ADEC, so that department              
 can continue to fulfill its mission of protecting water quality.              
 Number 1088                                                                   
 REPRESENTATIVE DYSON asked how Ms. Schrader would propose that the            
 board members be selected to meet the objectivity criteria.                   
 MS. SCHRADER indicated she is not familiar with water quality                 
 research in particular.  In medical research, her own background,             
 the research itself is removed from political influences.                     
 Number 1152                                                                   
 REPRESENTATIVE DYSON said someone must make a choice.  He asked               
 whether Ms. Schrader believes it would be more objective if the               
 governor chose.                                                               
 MS. SCHRADER said she does not know because she lacks real                    
 knowledge of water quality research.                                          
 REPRESENTATIVE DYSON questioned whether it would be perceived as              
 more objective if the AEL or industrial users selected the board.             
 Number 1218                                                                   
 CO-CHAIRMAN HUDSON advised that there is a fiscal note from the               
 ADEC.  He said there is a fairly strong indication that substantial           
 funds may be available from federal sources or others.  He believes           
 the ASTF was ultimately designed to participate in producing                  
 scientific standards that both the environmental and developmental            
 communities can agree upon.                                                   
 Number 1258                                                                   
 CO-CHAIRMAN OGAN referred to Representative Dyson's questions.  He            
 commented that the logical conclusion is to have a diverse group              
 select the board.  He believes SSHB 128 reflects that.                        
 MS. SCHRADER responded that the AEL does not believes the bill                
 reflects the diversity of input with which they would feel                    
 Number 1325                                                                   
 REPRESENTATIVE REGGIE JOULE suggested a highly politicized board              
 may be positive because it places participants under intense                  
 scrutiny.  He expressed concern over funding and suggested passing            
 a fiscal note reflecting support, rather than just having the                 
 legislation sit on the books.  If for some reason other funding               
 were unavailable, perhaps the fiscal note could kick in.                      
 Number 1460                                                                   
 CO-CHAIRMAN HUDSON replied that he would be diligently searching              
 for funding.  He prefers to stick with the mode in place, which is            
 to create the board, establish the process, embark on a search for            
 scientific funds and "go for it."                                             
 REPRESENTATIVE JOULE noted that in his district, there has been               
 some mining development, and there will be more in other areas.               
 This provides an avenue in rural Alaska for people to obtain work.            
 But it also provides a safety net for ensuring development occurs             
 in an environmentally sound manner.                                           
 Number 1594                                                                   
 CO-CHAIRMAN HUDSON advised that SSHB 128 next goes to the House               
 Finance Committee.  He stated his intention, as it moves from one             
 committee to the next, to discuss again with the commissioner and             
 others whether fine tuning is necessary.                                      
 REPRESENTATIVE GREEN said he has several questions.  He offered to            
 talk with the sponsor about them privately.                                   
 CO-CHAIRMAN HUDSON announced he would hold SSHB 128 until the next            
 HJR 32 - TONGASS LAND MANAGEMENT PLAN                                       
 Number 1720                                                                   
 CO-CHAIRMAN HUDSON announced the next order of business was House             
 Joint Resolution No. 32, relating to the Tongass Land Management              
 Plan (TLMP) and to continued Congressional oversight of that plan.            
 He said HJR 32 is fairly straightforward and resulted from findings           
 of the Governor's Timber Task Force.                                          
 Number 1857                                                                   
 WALT SHERIDAN, Principal, Walt Sheridan and Associates (consulting            
 firm), came forward to testify.  He said HJR 32 encourages the U.S.           
 Forest Service (USFS) to bring the decade-long TLMP process to a              
 close.  It also puts the Alaska legislature on record as supporting           
 an annual timber harvest level of at least 300 million board feet.            
 MR. SHERIDAN asked:  Why the rush?  And why 300 million?  The USFS            
 has worked on the TLMP for over a decade, during which time more              
 than half of the direct timber industry employment has been lost.             
 Furthermore, failure to produce a revised plan has put the economic           
 lives of people in Southeast Alaska communities on hold.  The                 
 revised plan will let these people know what resources from the               
 Tongass National Forest will be available in the next 10 to 15                
 years.  It will also provide a degree of certainty and                        
 predictability, necessary to attract investment in new plants and             
 MR. SHERIDAN said there are indications the USFS is under intense             
 pressure from the U.S. Fish and Wildlife Service to drastically               
 reduce harvest levels in the Tongass National Forest in response to           
 concerns about goshawks and wolves.  He does not believe those                
 concerns justify further delay.  There has been no new science                
 since the previous year, when the USFS issued a draft plan allowing           
 a harvest level of 297 million board feet, and when the U.S. Fish             
 and Wildlife Service issued its finding that goshawks and wolves              
 were not endangered.                                                          
 Number 1009                                                                   
 MR. SHERIDAN explained that an annual harvest of 300 million board            
 feet is the amount recently endorsed by the Governor's Timber Task            
 Force.  He said we can and should restructure the timber industry             
 around value-added processing.  However, that is only possible if             
 a way is found to deal with low-quality material and if there is              
 sufficient infrastructure, as well as primary manufacturing                   
 equipment, to efficiently log, transport and process the raw                  
 materials needed by the value-added segment of the industry.                  
 MR. SHERIDAN said according to industry exports and the Governor's            
 Timber Task Force, that requires a minimum annual harvest level of            
 300 million board feet.  He noted that "value-added processing" is            
 not a precise term.                                                           
 Number 2122                                                                   
 MR. SHERIDAN discussed the need to process low-quality material,              
 which accounts for up to half of the Tongass stand.  He said                  
 logging around low-quality material, taking only the best, would              
 leave a legacy of degraded forest stands made up primarily of                 
 defective material.                                                           
 MR. SHERIDAN noted that on April 5, 1996, the USFS came out with a            
 draft plan for a harvest level of 297 million board feet.  He                 
 concluded that HJR 32 sends a message to the USFS and to the                  
 Administration that Alaskans want to get on with their personal and           
 economic lives, including the opportunity to establish a value-               
 added timber industry that is economically viable and                         
 environmentally sound.                                                        
 Number 2244                                                                   
 REPRESENTATIVE GREEN stated that he supports this 1,000 percent.              
 He reported that Co-Chairman Ogan and Representative Williams had             
 arranged for them to go to Southeast communities to observe what              
 had happened.  They had also held a hearing in Ketchikan.  "And at            
 that time, it was heart-rending to see what was going on down there           
 without an adequate harvest," he noted.                                       
 REPRESENTATIVE GREEN pointed out that the Administration had failed           
 to be present for this extremely important issue.                             
 CO-CHAIRMAN HUDSON noted that they had invited the Administration.            
 Number 2356                                                                   
 BERNE MILLER, Executive Director, Southeast Conference, came                  
 forward to testify, summarizing his written statement.  For the               
 past year and a half, the conference has actively participated in             
 the USFS TLMP revision process.                                               
 MR. MILLER said they have repeatedly urged the Regional Forester to           
 select a TLMP alternative that does no unnecessary economic or                
 social harm to Southeast Alaska's people or communities.  In the              
 past, they were critical of the USFS's TLMP work, and last August,            
 they advocated that the USFS delay completion of TLMP until                   
 analysis defects were corrected.  However, that was before                    
 Ketchikan Pulp Company announced their mill would close.                      
 TAPE 97-33, SIDE A                                                            
 Number 0006                                                                   
 MR. MILLER said they recently urged that the Regional Forester make           
 a decision, based on what his supervisors have already placed                 
 before him, and publish a TLMP revision now.  They believe that is            
 necessary to rebuild a strong, diversified economy.                           
 Number 0081                                                                   
 BUCK LINDEKUGEL, Conservation Director, Southeast Alaska                      
 Conservation Council (SEACC), came forward to testify.  He advised            
 that SEACC is a regional coalition of 15 volunteer citizen                    
 conservation groups in 12 Southeast communities.                              
 MR. LINDEKUGEL stated, "We all want a Tongass plan completed.  But            
 the new plan must ensure the logging occurs only at a sustainable             
 rate that is consistent with maintaining current and future demand            
 for fish, wildlife and the other renewable resources that local               
 communities here in Southeast depend on.  We believe that 300                 
 million board feet is too high to sustain the long-term use of all            
 those resources.  Therefore, we oppose this resolution, and we urge           
 that the legislature shift its effort to helping support                      
 communities' efforts to make a transition to high-value-added                 
 timber industry that produces the most number of jobs per board               
 foot cut here in Southeast."                                                  
 MR. LINDEKUGEL reported that 59 percent of comments from Alaska on            
 the TLMP opposed the forest supervisor's preferred alternative.  He           
 said 52 percent of those comments request significantly more                  
 protection for fish and wildlife resources.                                   
 MR. LINDEKUGEL pointed out that of the 11 communities represented             
 on the Governor's Timber Task Force, eight opposed the resolution             
 calling for a 300-million-board-foot minimum.  These included                 
 Petersburg, Sitka and six small Southeast communities, represented            
 in a coalition called the Tongass Community Alliance.                         
 MR. LINDEKUGEL restated SEACC's opposition to HJR 32 and urged the            
 legislature to use resources to help Alaskan communities stabilize            
 their economies.                                                              
 Number 0293                                                                   
 REPRESENTATIVE IRENE NICHOLIA asked which six small communities               
 opposed that minimum.                                                         
 MR. LINDEKUGEL deferred to Mark Wheeler.                                      
 Number 0335                                                                   
 MARC WHEELER, Grass Roots Organizer, Southeast Alaska Conservation            
 Council, answered that the six communities are:  Gustavus, Elfin              
 Cove, Pelican, Tenakee Springs, Port Alexander and the City of                
 Number 0350                                                                   
 REPRESENTATIVE JOULE requested copies of documents relating to the            
 59 percent and 52 percent figures quoted by Mr. Lindekugel.                   
 CO-CHAIRMAN OGAN asked what criteria were used as a basis for the             
 assertion that communities opposed it.                                        
 MR. LINDEKUGEL replied that the mayors of Sitka and Petersburg, as            
 well as a representative from the six communities, had been                   
 empowered to vote for those communities on the TLMP.  He stated               
 that numerous communities had opposed the preferred alternative               
 and offered to provide information to the committee.                          
 Number 0545                                                                   
 ELAINE PRICE, Mayor, City of Coffman Cove, testified via                      
 teleconference in support of HJR 32.  They support both completion            
 of the TLMP and the 300-million-board-feet annual minimum.  They              
 believe the latter is essential for the existence of any timber               
 industry.  She said the 100 million board feet suggested by                   
 environmental groups does not allow for lawsuits and set-asides,              
 for example.  Nor does it leave room for growth in the timber                 
 MS. PRICE indicated waiting for the TLMP has caused great stress in           
 her area on Prince of Wales Island.  Without knowing the allowable            
 sales level, people have been unable to start new businesses, for             
 example, by obtaining financing or drawing up business plans.                 
 Number 0672                                                                   
 CO-CHAIRMAN OGAN made a motion to move HJR 32 from committee with             
 individual recommendations and the attached zero fiscal note.                 
 There being no objection, HJR 32 moved from the House Resources               
 Standing Committee.                                                           
 CO-CHAIRMAN HUDSON called an at-ease at 3:13 p.m.  He called the              
 meeting back to order at 3:15 p.m.                                            
 OVERVIEW:  Oil and Gas Field Technology                                     
 Number 0737                                                                   
 DAVE McNAUGHTON, Support Manager, Mincom, Incorporated, presented             
 an overview on oil and gas field technology via teleconference.  He           
 is a petroleum engineer for "Mincom USA" of Houston, Texas, which             
 provides resource evaluation and engineering planning software for            
 the mining and petroleum industries.  He worked in Alaska 16 of his           
 23 years in the oil industry, much of that time for ARCO.                     
 MR. McNAUGHTON said while Mincom originally developed resource                
 planning tools for the mining industry, it has diversified into the           
 petroleum industry over the last ten years.  He stated, "The                  
 software we provide is used by a number of clients, including ARCO,           
 BP and Marathon there in Alaska.  And as we continue to expand our            
 client base, we are providing engineering and geoscience consulting           
 services, in addition to the software, in order to support newer              
 clients who don't have the large population of engineers and                  
 geoscientists on staff that the major oil companies typically                 
 MR. McNAUGHTON asked whether committee members had received                   
 Mincom's brochure packet.                                                     
 Number 0852                                                                   
 CO-CHAIRMAN HUDSON said yes, it was in front of them.                         
 MR. McNAUGHTON referred to the folded brochure entitled "Geolog"              
 and said that contains an overview of the product line.  Back-up              
 material includes details on the seven product lines offered.  He             
 said Mincom's philosophy is to provide basic engineering software             
 tools, from a powerful data base through the entire tool kit that             
 the engineer and/or geoscientist would need to model reservoir                
 performance and predict resource sales volumes at various stages of           
 a project.  He advised that it was premature to go into specific              
 Number 0975                                                                   
 MR. McNAUGHTON said the reason for discussing Mincom software                 
 products was because he, Representative Green and Robert Trent,               
 Dean of the School of Mineral Engineering at the University of                
 Alaska Fairbanks (UAF), had been discussing aspects of the proposed           
 pipeline for transporting Prudhoe Bay and other North Slope gas to            
 Valdez.  They recognize that there does not appear to be an active            
 valuation and planning effort for the gas project from the state's            
 MR. McNAUGHTON said as far as he can tell, all subsurface reservoir           
 productivity projections and pipeline deliverability planning is              
 being provided by the operators, who are appropriately maximizing             
 their interests in the project.  He suggested as a business                   
 partner, the state should ask how it knows its interests are being            
 protected.  He said discussions with Dean Trent indicate the UAF              
 Petroleum Engineering Department has the technical expertise to               
 conduct such studies on behalf of the state but not all of the                
 technical tools.  "And that's where we enter the picture," he                 
 MR. McNAUGHTON explained that basic data used by engineers and                
 geoscientists to evaluate hydrocarbon reservoirs are subsurface               
 geophysical surveys, well test data and core sample analyses.  He             
 compared evaluating a resource on the North Slope to looking at a             
 beehive honeycomb with thousands of small holes.  To figure out               
 what is happening in the beehive, the beekeeper inspects as many              
 holes as possible to obtain adequate information.  Similarly, there           
 are more than 3,000 wells across the North Slope, with 1,200 in               
 Prudhoe Bay, and these have an abundance of geological, geophysical           
 and engineering data.  They would study the gas resource by looking           
 at a subpopulation of key wells, with extra focus towards the gas             
 MR. McNAUGHTON explained, "The kind of project we're discussing on            
 a preliminary basis would provide a high-level overview of the                
 total resource value by describing the reservoir volumetrics and              
 fluid contents. ... That first step is the geophysicist and                   
 geologist activity.  Then we would pass these descriptions on to a            
 reservoir performance modeling module - that would be `Resnet' -              
 and then on to a gas delivery planning tool.  So then we would be             
 able to evaluate and analyze optimal gas delivery windows.  The               
 goal of the whole exercise would be to supply impartial information           
 to the state that would allow appropriate discussion of optimal               
 timing for beginning gas production."                                         
 Number 1173                                                                   
 MR. McNAUGHTON said a critical side issue is to evaluate the impact           
 of accelerating gas production on continuing oil production in the            
 years 2000 to 2010.  If early gas production would negatively                 
 impact oil production, it is important to identify the extent and             
 timing of the impact.  He said there is a high likelihood the                 
 optimal timing will only become apparent after analyzing multiple             
 scenarios, which is nearly impossible without proper software tools           
 in place.  Mr. McNaughton said the foregoing was a thumbnail sketch           
 of the project he, Representative Green and Dean Trent have been              
 Number 1233                                                                   
 CO-CHAIRMAN HUDSON commented that this is an extremely important              
 area for the state.  He indicated he, for one, has too little                 
 information on the amount of reserves and the economics involved.             
 This technology brings science to determining the level of reserves           
 and what the potential is.                                                    
 Number 1268                                                                   
 REPRESENTATIVE GREEN advised that 20 years before, he himself had             
 performed a reservoir analysis.  He said Mr. McNaughton was doing             
 this overview as a courtesy and would probably be a bidder should             
 they decide to go this route.  He indicated Mr. McNaughton could              
 take the history, match that history to date and then project into            
 the future under various scenarios.                                           
 REPRESENTATIVE GREEN asked:  Do we start selling gas as soon as we            
 can build a pipeline, sometime around the Yukon-Pacific                       
 Corporation's window of 2001 to 2003?  Or is it better to wait?  He           
 noted that the operators indicate the window has slipped from 2005            
 back to 2008 or 2009.  He further asked:  Is that window predicated           
 on the market or on ultimate recovery of oil or ultimate                      
 profitability?  He stated, "Those are three significant questions             
 that they will be answering in their board room quarterly,                    
 certainly semi-annually.  And we as a state are kind of left                  
 handcuffed, because as Dave said, the only information we get is              
 what they give us."                                                           
 REPRESENTATIVE GREEN continued, "That's not necessary.  We have               
 access to all the same information they do, and we can certainly              
 get as high-powered as they get."  He suggested the state could               
 make choices, and this would provide a bargaining chip.  As it is,            
 they must accept whatever the operators say is best.                          
 REPRESENTATIVE GREEN had asked Mr. McNaughton to come up with an              
 estimated cost and was certain there would be a wide spectrum.  For           
 example, UAF students could study it.  Whether or not "technical              
 people" load the program and then experts crank out the variables,            
 the state can provide hypothetical scenarios; although each run               
 costs money, the more cases, the better the answer.  He had wanted            
 Mr. McNaughton to talk to the committee to see whether there is               
 enough interest in the state's well-being to "start to push this              
 thing and probably have to run it over the interim."  He asked                
 whether Mr. McNaughton estimated a six-month study was appropriate.           
 Number 1470                                                                   
 MR. McNAUGHTON replied, "I think a minimum of six months' study in            
 order to do anything that is reasonably good in terms of quality.             
 Less time than that and all you do is just scratch the surface."              
 REPRESENTATIVE GREEN recalled that 20 years before, legislator Chat           
 Chatterton, a retired Chevron oil company executive, had felt it              
 was so important that the legislature got emergency funding to                
 conduct this study, which Representative Green said he was                    
 fortunate enough to do as a state employee.  He stated, "My point             
 is now that perhaps it's time to upgrade, especially so while we're           
 trying to make decisions on the gas line."                                    
 Number 1515                                                                   
 CO-CHAIRMAN HUDSON suggested they were thinking out loud.                     
 REPRESENTATIVE GREEN concurred.                                               
 CO-CHAIRMAN HUDSON stated, "It strikes me that we've been pushing             
 hard for a resolution bringing all of the big players together to             
 ultimately lead to a gas pipeline, which is of major importance to            
 our state."  He said he was hearing that the state has no current             
 information on its holdings and what aspects might affect the                 
 window of opportunity.  He said as a committee member, he would               
 certainly entertain a proposal for consideration.  He said they               
 need more information, including specifics on time lines, costs and           
 so forth.  Noting that Co-Chairman Ogan is responsible for oil and            
 gas issues in committee, he asked for his opinion.                            
 Number 1582                                                                   
 CO-CHAIRMAN OGAN responded that it is difficult to come to a                  
 conclusion from one presentation.  Questions that came to mind                
 include what information is proprietary; the need for a capital               
 appropriation even if UAF does the study, as they would need                  
 equipment; and timing.  He noted there is no commitment from the              
 oil producers other than a nonbinding memorandum of understanding.            
 He questioned whether it would be money wisely spent at this point            
 until they know that petroleum companies are making appropriate               
 moves forward.                                                                
 Number 1646                                                                   
 REPRESENTATIVE GREEN said using UAF students and a relatively lean            
 analysis - effective but not covering every possibility - he                  
 believes this could probably be done for around $100,000; he had              
 talked with Mr. McNaughton briefly about it.  He said this is                 
 "peanuts" even compared to Alaska's tourism marketing.  They are              
 possibly risking a window of opportunity that may not come again              
 for 15 or 20 years.  However, the operators and Yukon-Pacific                 
 Corporation indicate there are widely different views.                        
 REPRESENTATIVE GREEN recalled a presentation in Anchorage at a                
 Chamber of Commerce meeting; he said for worldwide potential gas              
 production, Alaska is a small player.  He expressed concern that              
 "if we don't get our oar in the water, the boat ain't gonna move."            
 He agreed timing is important.                                                
 Number 1715                                                                   
 CO-CHAIRMAN HUDSON asked Representative Green, from his past                  
 experience, what happens to the natural gas when an oil field runs            
 out of oil or becomes uneconomic to operate.                                  
 REPRESENTATIVE GREEN said normally, in fields where there is a                
 pipeline connection, they can do a "blow-down."  They blow the gas            
 down and sell it.  However, from all indications he has seen, blow-           
 down, but not gas sales, would not occur until 2015 or 2020.  He              
 said, "That's about the time Prudhoe, unless there's some new                 
 technology that's developed, would be reaching pretty close to its            
 economic limit.  I don't know how many thousands of barrels a day             
 that would be, because it's such a big field, but if we wait that             
 long, we would minimize - absolutely minimize - any adverse affect            
 on oil production."                                                           
 REPRESENTATIVE GREEN suggested even the major operators will say if           
 they wait until 2015, there will be no market; they will have                 
 missed the Asian market.  "So we can't wait till it's absolutely              
 safe," he said.  "So we've got to start now determining where do              
 the lines cross between `let's get the gas on the market' and                 
 `we're going to  start losing some oil production.'"  He emphasized           
 the importance of this kind of study.                                         
 Number 1780                                                                   
 CO-CHAIRMAN HUDSON stated, "I would urge you, on an informal basis,           
 at any rate, to follow through and at least give the committee                
 something to consider.  And it may be an expanded hearing or                  
 something, Mr. Chair, or something like that?"                                
 Number 1791                                                                   
 CO-CHAIRMAN OGAN advised that the House Special Committee on Oil              
 and Gas was taking the lead on some of these issues.  He suggested            
 talking to Representative Hodgins, chair of that committee.  He               
 suggested they could find out what data is available and what                 
 studies have been done that the legislature can review, then                  
 ascertain whether further work is needed.                                     
 Number 1823                                                                   
 REPRESENTATIVE GREEN said he did not fault the logic but the time             
 schedule.  If they lost a year, it could be a critical one.  He               
 suggested a special hearing, for example.  He noted Mr.                       
 McNaughton's willingness to return for a more detailed presentation           
 of the capabilities.                                                          
 CO-CHAIRMAN HUDSON asked who would oversee the study.                         
 REPRESENTATIVE GREEN replied the University of Alaska Fairbanks.              
 CO-CHAIRMAN HUDSON asked whether that was for scientific research.            
 REPRESENTATIVE GREEN said it was for running a model.  He suggested           
 it was so technical, they did not want the legislature to even                
 touch it.  However, once it was done, results could be used to                
 weigh options.  He cited examples.  He said it may even turn out to           
 be less sensitive, this late in the field development life, than he           
 is concerned it may be.  However, if it is sensitive, the                     
 legislature should know that.                                                 
 Number 1930                                                                   
 MR. McNAUGHTON offered to provide more information later.                     
 CO-CHAIRMAN OGAN advised that it would be weeks before it could be            
 scheduled in committee.                                                       
 CO-CHAIRMAN HUDSON pointed out that it is a capital issue, and the            
 capital budget is usually the last to come through.  He encouraged            
 Representative Green and Co-Chairman Ogan to work on this with him.           
 CO-CHAIRMAN OGAN suggested the House Special Committee on Oil and             
 Gas could do preliminary work.                                                
 CO-CHAIRMAN HUDSON suggested a joint meeting.                                 
 REPRESENTATIVE GREEN concurred, saying that was what he was hoping.           
 CO-CHAIRMAN OGAN said it could be worked out.                                 
 CO-CHAIRMAN HUDSON and REPRESENTATIVE GREEN thanked Mr. McNaughton            
 for the presentation.                                                         
 CO-CHAIRMAN HUDSON adjourned the House Resources Standing Committee           
 meeting at 3:40 p.m.                                                          

Document Name Date/Time Subjects