Legislature(1993 - 1994)
02/28/1994 08:15 AM House RES
| Audio | Topic |
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE RESOURCES STANDING COMMITTEE
February 28, 1994
8:15 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 Jeannette James
Representative Eldon Mulder
MEMBERS ABSENT
Representative David Finkelstein
COMMITTEE CALENDAR
HJR 55: Relating to the importance to the economy of
Southeast Alaska of continued timber harvests
on the Tongass National Forest.
ADOPTED CS HJR 55(RES) AND MOVED OUT OF
COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS
HJR 56: Relating to an exemption for federal lands
in Alaska from the federal PACFISH management
strategy.
ADOPTED CS HJR 56(RES) AND MOVED OUT OF
COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS
*HB 426: "An Act establishing the Chickaloon Flats
Critical Habitat Area."
CSHB 426(O&G) MOVED OUT OF COMMITTEE WITH
INDIVIDUAL RECOMMENDATIONS
HB 199: "An Act providing for oil and gas exploration
licenses, and oil and gas leases in certain
areas of the state; and providing for an
effective date."
ADOPTED CSHB 199(O&G) AND MOVED OUT OF
COMMITTEE WITH INDIVIDUAL RECOMMENDATIONS
WITNESS REGISTER
THYES SHAUB, Government Affairs Director
Alaska Forest Association, Inc.
217 Second Street, Suite 206
Juneau, Alaska 99801
Phone: 463-3175
POSITION STATEMENT: Answered questions relating to HJR 55
REPRESENTATIVE CON BUNDE
Alaska State Legislature
State Capitol, Room 112
Juneau, Alaska 99801-1182
Phone: 465-4843
POSITION STATEMENT: Prime Sponsor HB 426
JACK HENDRICKSON, President
Alaska Waterfowl Association
State Chairman, Waterfowl U.S.A.
3105A Lakeshore Drive, Ste. 102
Anchorage, Alaska 99517
Phone: 266-4280
POSITION STATEMENT: Supported HB 426
ELLEN FRITTS, Deputy Director
Division of Habitat and Restoration
Alaska Department of Fish and Game
P.O. Box 25526
Juneau, Alaska 99802-5526
Phone: 465-4105
POSITION STATEMENT: Answered questions relating to HB 426
REPRESENTATIVE JOE GREEN
Alaska State Legislature
State Capitol, Room 114
Juneau, Alaska 99801-1182
Phone: 465-4931
POSITION STATEMENT: Reviewed content of HB 199
KEN BOYD, Deputy Director
Division of Oil and Gas
Department of Natural Resources
P.O. Box 107034
Anchorage, Alaska 99510-0734
Phone: 762-2548
POSITION STATEMENT: Supported HB 199
GEORGE FINDLING, Manager
Government and Public Relations
ARCO Alaska, Inc.
P.O. Box 110360
Anchorage, Alaska 99510
Phone: 263-4174
POSITION STATEMENT: Supported HB 199
ARDIE GRAY, Public Service Manager
Alaska Oil and Gas Association
121 W. Fireweed, Suite 207
Anchorage, Alaska 99503
Phone: 272-1481
POSITION STATEMENT: Supported HB 199
BECKY GAY, Executive Director
Resource Development Council
121 W. Fireweed, Suite 250
Anchorage, Alaska 99503
Phone: 276-0700
POSITION STATEMENT: Supported HB 199
WALT FURNACE, General Manager
Alaska Support Industry Alliance
4220 B Street
Anchorage, Alaska 99503
Phone: 563-2226
POSITION STATEMENT: Supported HB 199
GREG GARRELS
1176 Broadview Drive
Fairbanks, Alaska 99712
Phone: 457-3543
POSITION STATEMENT: Opposed HB 199
CLIFF BURGLIN
17 Adak Street
Fairbanks, Alaska 99707
Phone: 452-5149
POSITION STATEMENT: Opposed HB 199
PREVIOUS ACTION
BILL: HJR 55
SHORT TITLE: TONGASS NATIONAL FORST TIMBER HARVESTS
SPONSOR(S): RULES BY REQUEST OF THE HOUSE ECONOMIC TASK
FORCE
JRN-DATE JRN-PG ACTION
02/11/94 2344 (H) READ THE FIRST TIME/REFERRAL(S)
02/11/94 2344 (H) RESOURCES
02/23/94 (H) RES AT 08:15 AM CAPITOL 124
02/23/94 (H) MINUTE(RES)
02/28/94 (H) RES AT 08:15 AM CAPITOL 124
BILL: HJR 56
SHORT TITLE: EXEMPT ALASKA FROM "PACFISH" REGS
SPONSOR(S): RULES BY REQUEST OF THE HOUSE ECONOMIC TASK
FORCE
JRN-DATE JRN-PG ACTION
02/11/94 2344 (H) READ THE FIRST TIME/REFERRAL(S)
02/11/94 2344 (H) RESOURCES
02/23/94 (H) RES AT 08:15 AM CAPITOL 124
02/23/94 (H) MINUTE(RES)
02/28/94 (H) RES AT 08:15 AM CAPITOL 124
BILL: HB 426
SHORT TITLE: CHICKALOON FLATS CRITICAL HABITAT AREA
SPONSOR(S): REPRESENTATIVE(S) BUNDE
JRN-DATE JRN-PG ACTION
02/02/94 2219 (H) READ THE FIRST TIME/REFERRAL(S)
02/02/94 2219 (H) O&G, RES, FIN
02/16/94 (H) O&G AT 05:00 PM CAPITOL 124
02/18/94 2456 (H) O&G RPT CS(O&G) 3DP 2NR
02/18/94 2456 (H) DP: KOTT, SANDERS, SITTON
02/18/94 2456 (H) NR: G.DAVIS, MACKIE
02/18/94 2457 (H) -ZERO FISCAL NOTE (F&G) 2/18/94
02/18/94 2457 (H) REFERRED TO RESOURCES
02/28/94 (H) RES AT 08:15 AM CAPITOL 124
BILL: HB 199
SHORT TITLE: OIL & GAS EXPLORATION LICENSES/LEASES
SPONSOR(S): RULES BY REQUEST OF THE GOVERNOR
JRN-DATE JRN-PG ACTION
03/05/93 549 (H) READ THE FIRST TIME/REFERRAL(S)
03/05/93 549 (H) OIL & GAS, RESOURCES, FINANCE
03/05/93 549 (H) -ZERO FISCAL NOTE (REV) 3/5/93
03/05/93 549 (H) GOVERNOR'S TRANSMITTAL LETTER
03/15/93 (H) O&G AT 05:00 PM CAPITOL 124
03/16/93 (H) O&G AT 08:00 AM CAPITOL 124
03/22/93 (H) O&G AT 05:00 PM CAPITOL 124
03/22/93 (H) MINUTE(O&G)
03/25/93 (H) O&G AT 05:00 PM CAPITOL 124
03/31/93 (H) O&G AT 05:00 PM CAPITOL 124
04/06/93 (H) MINUTE(O&G)
04/07/93 (H) O&G AT 05:00 PM CAPITOL 124
04/07/93 (H) MINUTE(O&G)
01/13/94 (H) O&G AT 05:00 PM CAPITOL 124
01/26/94 (H) O&G AT 05:00 PM CAPITOL 124
01/31/94 (H) O&G AT 05:00 PM CAPITOL 124
01/31/94 (H) MINUTE(O&G)
02/07/94 (H) O&G AT 05:00 PM CAPITOL 124
02/09/94 2312 (H) O&G RPT CS(O&G) NEW TITLE
3DP 2NR
02/09/94 2312 (H) DP: G. DAVIS, KOTT, GREEN
02/09/94 2312 (H) NR: OLBERG, SITTON
02/09/94 2312 (H) -ZERO FISCAL NOTE (DNR) 2/9/94
02/09/94 2312 (H) REFERRED TO RESOURCES
02/23/94 (H) RES AT 08:15 AM CAPITOL 124
02/28/94 (H) RES AT 08:15 AM CAPITOL 124
ACTION NARRATIVE
TAPE 94-21, SIDE A
Number #000
The House Resources Committee was called to order by Vice
Chairman Bill Hudson at 8:30 a.m. Members present at the
call to order were Representatives Hudson, Bunde, Davies,
James and Mulder. Members absent were Representatives
Williams, Carney, Finkelstein and Green.
VICE CHAIRMAN BILL HUDSON announced there is a quorum
present.
HJR 55 - Tongass National Forest Timber Harvests
VICE CHAIRMAN HUDSON said there is a committee substitute
before the committee. The changes from the original
resolution include page one, line four, through page two,
line nine, eight new WHEREAS clauses have been added. These
clauses strengthen the resolution and recognize other
multiple uses of the Tongass and laws in place to protect
those uses. He added that the Alaska Forest Association
does approve the changes. He stated another change is on
page three, line 28, the words "under current laws" have
been added.
VICE CHAIRMAN HUDSON noted for the record that
REPRESENTATIVE CARNEY joined the committee at 8:32 a.m.
Number 035
REPRESENTATIVE JOHN DAVIES felt the changes made are good,
but is concerned about the numbers contained in the
resolution. He said he would feel better if someone could
testify as to where the numbers came from. He also is
concerned about page two, lines 30-32 where the resolution
says "a decline in the availability of timber to harvest..."
and on page two, lines eight and nine, where HJR 55 says
"the economy of Southeast Alaska was built around an
expected annual harvest level of 450,000,000 board feet;".
He felt economies are not built.
REPRESENTATIVE DAVIES read portions of a recent report which
reviews the economic impact of the wilderness designation of
the Tongass National Forest. The report is required by the
Alaska National Interest Land Conservation Act (ANILCA)
every two years. "A concern of Congress in passing ANILCA
was the impact of the wilderness designation on three major
industries in Southeast Alaska: Forest products, fisheries,
and tourism. The changes in employment levels in these
three major industries in Southeast Alaska are linked to
changes in demand, supply and institution variables as well
as changes in wilderness designations. Thus far, an
economic effect on employment and personal earnings of
designating this land as wilderness cannot be distinguished
from the effects of other economic forces which have
continued to change between 1981 and 1991." He pointed out
that later in the report it shows that major changes in the
industry were driven by the change in the price of the
dollar on the world market in the early 1980s.
REPRESENTATIVE DAVIES stressed there are considerations
other than the availability of timber which cause
significant changes and to date, the effects have not been
determined between the availability and the actual
production. He felt the report contradicted what is stated
in HJR 55, page two, lines 30-32.
Number 087
REPRESENTATIVE ELDON MULDER said, reality is a mill has been
shut down and another mill is temporarily closed because of
a lack of availability of timber. He felt the WHEREAS
clause is quite appropriate for 1994 as opposed to 1991. He
agreed with Representative Davies in regard to page two,
lines eight and nine regarding "built around". He thought
perhaps "relies upon" might be better language.
VICE CHAIRMAN HUDSON noted for the record that
REPRESENTATIVE GREEN joined the committee at 8:35 a.m.
Number 105
REPRESENTATIVE JEANNETTE JAMES said she did not oppose the
words "built around", especially since there are huge
amounts of capital infused to build an industry. She also
accepts using the words "relies upon." Regarding the report
which Representative Davies referred to, she commented many
events have happened since 1991 which have caused the price
of lumber to skyrocket. She said the pulp mills situation
is due to a balance between the lack of timber and worldwide
pulp prices. She stated she is comfortable with the numbers
contained in the resolution.
VICE CHAIRMAN HUDSON reminded committee members that when
the last hearing on HJR 55 concluded, the original draft was
before the committee and there was a motion on the table.
He stated the committee must vote on the amendment. He read
the proposed amendment: Remove the language on page one,
line 15, "and the near completion of the first harvest" and
the second WHEREAS on page two.
VICE CHAIRMAN HUDSON asked for a roll call vote. Voting in
favor of the amendment was Representative Davies. Voting
against the amendment were Representatives Carney, Bunde,
Green, James, Mulder and Hudson. The motion was DEFEATED.
REPRESENTATIVE PAT CARNEY made a motion to ADOPT CS HJR
55(RES).
VICE CHAIRMAN HUDSON asked if there were any objections.
Hearing none, the MOTION PASSED.
REPRESENTATIVE DAVIES MOVED to AMEND CS HJR 55(RES) on page
two, line eight, deleting the words "was built around" and
insert the words "would benefit from."
VICE CHAIRMAN HUDSON stated the most significant point
regarding the work draft is the appeal for a timber harvest
level which allows industries in Southeast Alaska to remain
open.
REPRESENTATIVE MULDER stated the only problem he has with
the motion is that it almost insinuates "if we had it", as
opposed to the fact that we have had 450 million board feet.
He thought perhaps the statement was intended to say, this
is what we are intending to have and this is what we are
gearing toward. He asked if the harvest level is in fact
450 million board feet.
THYES SHAUB, GOVERNMENT AFFAIRS DIRECTOR, ALASKA FOREST
ASSOCIATION, INC., responded the harvest level has not been
that high in the past couple of years. She stated she did
not object to the proposed amendment. She commented that in
1978, when the compromise took place, because of the
wilderness designation and the changes in the Tongass Land
Management Plan at that time, written into the law was an
intention there would be an average of 450 million board
feet provided. Going back to the 1950s, the economy was
built around that figure.
Number 221
REPRESENTATIVE CON BUNDE felt it is more a level of
intensity.
REPRESENTATIVE JAMES said she liked the words "built
around", especially because the word built indicates that
money has been invested.
REPRESENTATIVE DAVIES pointed out that the report he
referred to earlier, lists the harvests from 1981 to 1991
and aggregates both the saw log and the utility in terms of
million board feet harvested. The figures contained in that
report are 387 million, 372 million, 250 million, 280
million, 232 million, 290 million, 336 million, 396 million,
444 million, 471 million, 364 million and 345 million board
feet. He said in that decade, there appears to be only two
years that approach the level called for in the resolution.
Therefore, it is difficult for him to see when the economy
has relied healthily on the timber industry for a decade
since the harvest levels have been far below the 450 million
board feet.
REPRESENTATIVE CARNEY suggested amending CS HJR 55(RES),
page two, lines eight and nine to read: "WHEREAS the timber
industry of Southeast Alaska was developed based on an
expected annual harvest level of 450,000,000 board feet;"
REPRESENTATIVE JAMES felt it is important to understand why
the resolution is at hand. If there is a desire to say that
the timber industry is not needed, then it is easy to single
out the timber industry and say that is what is being talked
about. She felt there is a need to emphasize that the
economy of Southeast is based on the timber industry. If
the committee focuses on the timber industry only and the
450 million board feet, the committee is saying it is not a
problem, the industry can be lost and picked up in tourism
and fishing. She did not feel that is true. She stressed
the economy in Southeast is definitely dependent upon the
timber industry, and if the timber industry was eliminated,
Southeast would feel a deficit.
REPRESENTATIVE JAMES supported the words "developed around,"
but stated she wants it understood there has been a lot of
economic input over the years in developing an economy which
is very important to Southeast.
REPRESENTATIVE MULDER speaking to the amendment suggested by
Representative Carney, stated the amendment is quite
appropriate when the following four WHEREAS clauses are
considered because they do talk about how many jobs are
created, what type of employment is created, how much the
annual income is, what the payroll does for the overall
region. He supported the proposed amendment.
Number 296
REPRESENTATIVE CARNEY felt it is important to stress that
action was taken by the timber industry based on
expectations. He thought the term "economy" is a stretch of
the imagination to think the economy of Southeast Alaska is
totally dependent upon the timber industry. He said by
stressing the industry was developed based on expectations
will indicate to people reading the resolution that the
Alaska timber industry extended itself based on federal
promises and that could be important to how the resolution
is viewed.
REPRESENTATIVE JAMES pointed out the two previous WHEREAS
clauses are related to the economy and felt if the committee
changes the term economy to the timber industry, the intent
of the resolution is destroyed.
REPRESENTATIVE DAVIES noted the two previous WHEREAS clauses
refer to the broader economy. He said he would accept
Representative Carney's amendment as a substitute for his.
REPRESENTATIVE DAVIES WITHDREW his motion to amend CS HJR
55(RES).
REPRESENTATIVE CARNEY MOVED to AMEND CS HJR 55(RES) on page
two, lines eight and nine to read, "WHEREAS the timber
industry of Southeast Alaska was developed based upon an
expected annual harvest level of 450,000,000 board feet;"
VICE CHAIRMAN HUDSON asked for a roll call vote. Voting in
favor of the amendment were Representatives Green, Carney,
Hudson, Bunde, Davies, and Mulder. Voting against the
amendment was Representative James. The AMENDMENT was
ADOPTED on a vote of six to one.
Number 384
REPRESENTATIVE DAVIES commented in regard to page two, lines
27-29, part of the problem with the resolution is the push
for 450 million board feet. He said one of the basic issues
is what the Tongass can really yield on a sustained yield
basis. The assessment of what is truly available in that
forest has changed in the past decade. He noted there had
been testimony indicating that the original inventory was
significantly overstated. He said while it may be true the
industry was developed based on that expectation, he felt
that expectation may have been an error due to the inventory
being incorrect.
REPRESENTATIVE DAVIES felt uncomfortable voting to support
the resolution because there is no reliable testimony as to
what the current inventory is in the Tongass, and thought it
is quite possible that production on private land was far in
excess of the sustained yield. He stated for the committee,
to make up a cut rate which was beyond sustained yield
principles on private land and increasing resources from
public lands is not good.
REPRESENTATIVE JAMES stated resolutions are made up of
WHEREAS and RESOLVE clauses and felt the RESOLVE clauses are
the most important. She said in this resolution, it
indicates in a RESOLVE clause to manage the Tongass National
Forest in order to provide maximum opportunity for timber
harvest under current law. She felt that particular RESOLVE
protects the committee from anything the committee is asking
for and the problems referred to by Representative Davies
will be admitted in that statement. She said disagreeing
with the WHEREAS clauses is not as critical as disagreeing
with the RESOLVE clauses.
Number 441
REPRESENTATIVE CARNEY wondered whether the language on page
one, lines 13-16, "WHEREAS regeneration on harvested land in
the Tongass National Forest has demonstrated that second
growth yields can reach the 23,000 board feet per acre
necessary to sustain a harvest of 450,000,000 board feet per
year as designated in the Tongass Land Management Plan;" is
accurate.
VICE CHAIRMAN HUDSON responded the committee had as much
testimony for it as they did against it.
REPRESENTATIVE CARNEY felt there is a need to be accurate
and he assumes the statement is correct.
REPRESENTATIVE JAMES pointed out that HJR 55 came as a
recommendation from the House Economic Task Force. She
stated a lot of testimony was heard and the resolution
currently before the committee is the direct result of a
request which came from the timber industry and all of the
other information received. She believed there is back up
in House Economic Task Force testimony to support every
statement in the resolution.
Number 465
REPRESENTATIVE DAVIES said his motivation is to speak to
important issues raised in the resolution including what is
meant by multiple use forests, what is meant by sustained
yield and whether or not the resolution is calling for a
reasonable thing. He pointed out that in the second RESOLVE
clause, there is a request for an increase in the amount of
timber available. He stressed there is not sufficient
information to know whether or not the Tongass can sustain
an increase over what is currently offered and furthermore,
he stated he is not convinced that the current decline in
the economy in Southeast Alaska is directly related to the
availability of timber. He felt it is more related to
market forces and independent decisions on private
investments.
VICE CHAIRMAN HUDSON said while in Ketchikan, he had a long
discussion with Martin Pihl, the Chief Executive Officer of
the Ketchikan Pulp Company, discussing the availability of
trees and the impact it has on the company's ability to
operate. Vice Chairman Hudson stated the company is very
concerned about the cutback and proposed cutbacks and
believed when the original act was passed, the harvest of
450 million board feet was, in fact, a part of the
arrangement. Now they are being asked to take less.
Number 518
REPRESENTATIVE MULDER made a motion to MOVE CS HJR 55(RES)
with a zero fiscal note out of committee with INDIVIDUAL
RECOMMENDATIONS.
VICE CHAIRMAN HUDSON asked if there were any objections to
the motion. Hearing none, the MOTION PASSED.
HJR 56 - Exempt Alaska From "PACFISH" Regulations
VICE CHAIRMAN HUDSON explained the new material to be added
to the resolution. On page one, line four through page two,
line two, six new WHEREAS clauses have been added. On page
two, at the end of line 25 and at the beginning of line 26,
the words "and mining" have been added. On page three,
lines four-seven, a new WHEREAS clause was added. On page
three, lines eight and nine, the words "Chugach National
Forest, and on Bureau of Land Management land" was added.
On page three, line 25, after "exclude" the word "all" was
added.
REPRESENTATIVE CARNEY MOVED to ADOPT CS HJR 56(RES).
VICE CHAIRMAN HUDSON asked if there were any objections to
the motion. Hearing none, the MOTION PASSED.
REPRESENTATIVE JAMES made a motion to MOVE CS HJR 56(RES)
with a zero fiscal note out of committee with INDIVIDUAL
RECOMMENDATIONS.
VICE CHAIRMAN HUDSON asked if there were any objections to
the motion. Hearing none, the MOTION PASSED.
Number 600
HB 426 - Chickaloon Flats Critical Habitat Area
REPRESENTATIVE CON BUNDE, PRIME SPONSOR, said there is a
committee substitute for HB 426 before the committee. He
added that the committee folders contain a map showing the
location of the area, as there has been confusion on where
the Chickaloon Flats are actually located. He said the
Chickaloon Flats are the mud flats directly across and south
of the Anchorage Potter Creek area. HB 426 adds the
Chickaloon Flats area to two areas which have already been
declared critical habitat areas.
REPRESENTATIVE BUNDE stated the Chickaloon Flats area is a
waterfowl nesting, feeding and resting area, which is a
particularly important area in the fall when great numbers
of duck, geese and swan migrate through and Portage Pass is
closed. It becomes vital that waterfowl have this resting
area until the Pass is open. He stressed the legislation is
not intended to withdraw more lands from public use and lock
them up in any way. He explained HB 426 provides one more
step of protection. Currently, public lands are opened to
development without a permit. HB 426 will require a permit
from the Alaska Department of Fish and Game (ADF&G) before
development can take place. If exploration for resources is
compatible with the purpose of the critical habitat, it will
be allowed.
Number 683
JACK HENDRICKSON, PRESIDENT, ALASKA WATERFOWL ASSOCIATION
AND STATE CHAIRMAN, WATERFOWL U.S.A., testified via
teleconference, and stated his group has been involved in
getting protection for waterfowl in the Susitna Flats State
Game Refuge, which is 301,000 acres; Trading Bay State Game
Refuge, 186,000 acres; Redoubt Bay Critical Habitat Area,
201,000 acres; Goose Bay State Game Refuge, 14,000 acres;
Palmer Hay Flats State Game Refuge, 38,000 acres; and
Anchorage Coastal Refuge, 14,000 acres.
Number 700
MR. HENDRICKSON said the Chickaloon Flats is one of the
remaining spots in Cook Inlet needing oversight; not to the
extent that it needs to be declared a refuge, but to the
extent that ADF&G has some oversight. He felt critical
habitat area is a good designation and it will not cost any
more money than is already appropriated for ADF&G to have
oversight. He explained the Chickaloon Flats is very
important to waterfowl both in the spring and fall. If
Portage Pass is closed and waterfowl cannot go any further
south, they have to have places to rest and feed. The
Chickaloon Flats has been very popular with duck and geese
who get into that situation. He added that although the
Anchorage Coastal Refuge is also of assistance, waterfowl
seem to prefer the Chickaloon Flats.
Number 730
MR. HENDRICKSON stated that in addition to small populations
of nesting duck, the flats are also valuable to migrating
shore birds who also use the area. Designating the
Chickaloon Flats as a critical habitat area is not costly,
is thoughtful and puts together almost an entire Cook Inlet
package of waterfowl refuges which is the largest, best and
least costly in the world.
Number 752
REPRESENTATIVE JAMES stated she is not familiar with the
other state refuges and critical habitat areas which have
been mentioned and what is permitted in those areas. She
wondered if the Chickaloon Flats Critical Habitat Area will
be different than the other refuges and habitat areas in
terms of development.
TAPE 94-21, SIDE B
Number 000
MR. HENDRICKSON responded it is not the intent of ADF&G to
stop development when an area has been designated. HB 426
provides for desirable oversight and is the kind of caution
an intelligent conservationist would use in setting up land
designations. If there is no development in the Chickaloon
Flats area in the next 20-30 years, it will not make any
difference whether the area was designated or not. However,
if large structures are going to be built there and the
development is not compatible with the fish or waterfowl
there, ADF&G could stop the development with the oversight
they have. He added that oil and gas development is one of
the least intrusive kinds of development on land because
most of it is done underground.
Number 023
REPRESENTATIVE JAMES asked if it is correct that state game
refuges and critical habitat areas do not have permission to
do other things. She expressed concern that if oil
development and other development is allowed by permit in
the other areas and not in the Chickaloon Flats, it will be
contradictory. On the other hand, if development by permit
is not allowed in the other areas but will be allowed in the
Chickaloon Flats, she does not see the need to set up two
different kinds of protection for migratory waterfowl.
MR. HENDRICKSON responded refuges suggest a higher degree of
concern. He said ADF&G has more care and examination at
refuges than critical habitat areas. He did not believe
ADF&G has a single person assigned to work on the refuges,
but ADF&G does watch refuges more because there is a higher
level of protection needed due to the larger number of
wildlife.
REPRESENTATIVE BUNDE told committee members they have a copy
of Alaska Statute 16.20.605 which lists critical habitat
areas and discusses what is allowed. HB 426 requires a
permit before development is allowed to ensure oversight.
Number 060
REPRESENTATIVE DAVIES pointed out the statute says Redoubt
Bay is a critical habitat area and it also has a similar oil
and gas permit clause.
ELLEN FRITTS, DEPUTY DIRECTOR, DIVISION OF HABITAT AND
RESTORATION, ADF&G, stated there are 32 critical habitat
areas located throughout the state. What can and cannot
happen within the areas is determined when the legislature
designates the area. In the proposed work draft on HB 426,
it lists specifically not only what kinds of things the
public will want to have happen there and what the
legislature thinks should happen there, but also states what
the area will specifically be set aside for. She pointed
out the Chickaloon Flats Critical Habitat Area will be set
aside for waterfowl. She stressed the purpose of the
elevated scrutiny is to look carefully at what the resources
are in the area, look at the activity which is proposed and
perhaps condition the activity so it can go forward while
still meeting the purpose of the area.
Number 095
REPRESENTATIVE JAMES pointed out the Chickaloon Flats area
is another 22,000 acres and there is a zero fiscal note.
She asked if ADF&G is stating there will not be a
significant fiscal impact when adding that many more acres
to the responsibility of ADF&G in maintaining the habitat.
MS. FRITTS said that is correct. ADF&G has permitters in
the Anchorage area who will review any applications for the
area and accomplish it as a part of their regular duties.
REPRESENTATIVE BUNDE added there are no known or proposed
requests for permits currently. There might be a fiscal
impact if a large number of requests were received.
REPRESENTATIVE BUNDE said HB 426 is a feel good type of
legislation which does not cost anything, either in lost
resources or actual dollars. He commended the Alaska
Waterfowl Association as they were the driving force behind
the other habitat areas which were mentioned.
Number 117
REPRESENTATIVE JAMES asked if there will be a blank permit
for uses of the area, based on a decision made by ADF&G
rather than issuing individual permits for activities
whereby a fee could be charged.
MS. FRITTS replied no fees are charged for any of ADF&G's
permits. She added that many of the activities included are
the types of activities which ADF&G does not review on any
of the refuges or critical habitat areas. She stated for
many of the special habitat areas, ADF&G does prepare a
management plan, asking members of the public to be a part
of a planning committee. Those management plans are more
specific on activities if there is a concern expressed by
the committee with that particular special area.
Number 148
REPRESENTATIVE MULDER made a motion to MOVE CSHB 426(O&G)
with a zero fiscal note out of committee with INDIVIDUAL
RECOMMENDATIONS.
VICE CHAIRMAN HUDSON asked if there were any objections.
Hearing none, the MOTION PASSED.
HB 199 - Oil and Gas Exploration Licenses/Leases
REPRESENTATIVE BUNDE made a motion to ADOPT CSHB 199(O&G).
VICE CHAIRMAN HUDSON asked if there were any objections.
Hearing none, the MOTION PASSED.
Number 175
REPRESENTATIVE GREEN said since the Department of Natural
Resources (DNR) representative had not dialed in yet, he
would review HB 199. He told committee members that in
their folder was a chart showing the revenues to the state
from the petroleum industry. It shows, contrary to a belief
which many people have, the lease bonus does not supply a
very large portion of oil revenue. He pointed out that the
state's wealth from the oil industry comes primarily from
royalties received and the severance tax applied to all
barrels.
REPRESENTATIVE GREEN stated, referring to two maps contained
in members' folders, that HB 199 does not apply to any land
north of the Umiat Base Line or the developed portion of
Cook Inlet. HB 199 does not impact conventional,
competitive leasing which is conducted every year by DNR.
He stressed HB 199 encourages companies remaining in the
state and perhaps encourages other worldwide companies to
return to the state or come to the state for the first time.
He said these worldwide companies are familiar with
concession type leasing which occurs in foreign countries
and noted this country has nothing like that, but rather
develops the oil industry in the U.S. based on private
ownership. He stated in the U.S., an oil company goes to a
private landowner and requests that a certain royalty be
arranged if the landowner allows drilling.
REPRESENTATIVE GREEN stated HB 199 allows competitive lease
bidding which is currently ongoing and is similar to the
conventional oil company operations within the U.S. He
explained that HB 199 supplements competitive lease bidding
with what is known as worldwide tract leasing or large
concession leasing with a licensing from the state on large
tracts of land. He noted the minimum amount of acreage to
exercise HB 199 is 20,000 acres and the maximum is 500,000
acres.
REPRESENTATIVE GREEN reminded committee members there are
large amounts of acreage in the state which have not been
developed, tapped, or even drilled upon. HB 199 will make
that acreage available by allowing a company or a
combination of companies to suggest to the commissioner of
DNR that they would like to exercise their license agreement
with the state for a particular area. He explained if the
commissioner finds it would be in the best interest of the
state to have activity looking for hydrocarbons to replace
the state's dwindling reserves, he would then publicly
announce that a competitive bid will take place for the
license privilege within the area which has been designated.
Representative Green said hopefully at that time, several
individual companies or combinations of companies will
submit sealed bids similar to the competitive lease sales
which occur in Cook Inlet and the North Slope.
REPRESENTATIVE GREEN added that when the commissioner agrees
the activity should happen, he will assign some blanket
conditions. Once those conditions are determined, they will
be listed in the licensing bidding. Therefore, when
companies bid, they are completely aware there are certain
restrictions. He explained the licensing agreements then go
on the block. The successful bidder will be chosen by a
sealed bid arrangement, similar to the competitive lease
selling. If the commissioner finds at that time the bids
are not satisfactory, the sale is cancelled. If it is
determined that there has been a satisfactory license bid,
that bid is accepted.
REPRESENTATIVE GREEN gave an example: Company A comes to
the commissioner and expresses an interest in a tract; the
lease sale is held and companies bid; company A bids $100
million and the bid is accepted. Company A is then
committed to the state to spend $100 million over a ten year
period to try and find hydrocarbons, with the restrictions
imposed in the area which company A has received a
designation on. Company A then has an exclusive ability to
look for oil anywhere in this concession. He pointed out
there are some restrictions. If company A has not committed
and spent at least 25 percent of their bid by the fourth
year, the commissioner relinquishes that license agreement.
Number 298
VICE CHAIRMAN HUDSON asked if their bond would be forfeited.
REPRESENTATIVE GREEN responded, yes the company would and
added that is a yearly commitment. He stated HB 199 says
company A has an up front requirement from a regulation
saying they have to commit or lose their bond. Current
leasing does not have that restriction. He continued that
if a company gets a ten year lease on a competitive basis,
it can wait nearly until the tenth year before it does
anything. He said HB 199 forces a company to do something
earlier which is to the state's benefit. He added that if a
company completes 50 percent and has actually spent $50
million in ground truth before the fourth year, there will
be no restriction of the land back to the state and the
company is allowed to continue to develop. If a company
commits more than 25, but less than 50 percent; for example,
a company commits 40 percent on a very expensive well within
the fourth year but then sits on their laurels and thinks
about it, the company begins to lose part of its acreage by
that time. The company loses 25 percent and ten percent
every year thereafter, up to 75 percent total. He stressed
the company has committed what is needed to hold but has
lost 75 percent of the land designated since it has not
committed to doing the work agreed to.
REPRESENTATIVE GREEN explained further that even though
there is a bond requirement or an environmental safeguard
for any petroleum activity within the state, a company
either has to show that it is capable or buy an actual
performance bond saying that if its drilling messes up the
countryside, that company can be taken to task or their bond
will be taken. That is a completely separate bond than the
bond which is issued in relation to HB 199. The bond for HB
199 is a commitment to the state that a company will do some
work and if it does not, it will sacrifice dollars to the
state.
REPRESENTATIVE GREEN gave an example: Company A has
committed $100 million. HB 199 says that you take that
amount of commitment and subtract the amount of work which
the commissioner has approved as adequate, and then divide
by the number of years remaining on the license agreement.
He pointed out the first year it would be $100 million minus
zero, divided by ten. A company would need to post a $10
million bond that if the company does not do anything in
that year, the state gets $10 million. The second year, the
company does 55 percent or $55 million - $100 million minus
$55 million, leaving $45 million yet to be divided by nine,
meaning the company needs to commit to a $5 million bond.
It works that way progressively down until the company has
spent $100 million. He stated at that point there is no
more bonding to the state, but there would still be
environmental bonding needed through the Department of
Environmental Conservation (DEC).
REPRESENTATIVE GREEN continued with the example. Company A
finds an oil field in its 500,000 acres. The company then
goes to the commissioner and states that the remaining land
seems to be a goat pasture and desires to convert the area
around the indicated oil field to a lease. He stressed
there is a provision in HB 199 to accomplish that. At that
time, the company goes on the same leasing program which it
would have done if it had gone through competitive leasing.
The lease area which the company commits to, will draw $3 an
acre rental until it can actually develop an economic stream
of oil from there. He added that it is up to the company to
develop a way to get that oil to market.
REPRESENTATIVE GREEN stated HB 199 is designed to get
activity in other parts of the state, probably remote parts
of the state, meaning there is no existing method of getting
there. The company will possibly incur pipelines, barges,
etc. The company needs to consider in their bid that once
oil is found, the company has to get the oil to market. HB
199 does not circumvent any biological, environmental or
economic problems which will incur after a company finds
oil.
Number 378
KEN BOYD, DEPUTY DIRECTOR, DIVISION OF OIL AND GAS, DNR,
testified via teleconference, and explained that HB 199
dates back to the second session of the seventeenth
legislature. The commissioner of DNR at that time was
challenged by the legislature to determine a way to allow
Alaska to remain competitive with the international oil
market. The commissioner came up with two ideas; one is
before the committee today, and the second is exploration
incentive credits which the committee will hear later in the
week. He stated the exploration licensing bill was
generated late in that session and (indiscernible) the
concession provisions of about 100 countries, putting
together a package suitable for Alaska.
MR. BOYD said the exploration licensing bill was introduced
late in the session, had very few hearings, and languished
during the interim. He noted much work was done to the bill
between sessions resulting in a bill that was heard last
session in both the House and the Senate. He stated on the
Senate side, the bill was heard several times and was
heavily amended. It ended in the Senate as a result of
different groups having various ideas as to what the bill
should look like. He explained on the House side, the bill
was heard several times in the Oil and Gas Committee, was
not amended and sat until this session.
MR. BOYD pointed out that DNR and the industry knew there
was not a consensus on the bill. The one thing that gave
them hope, however, was that everyone wanted the concept of
exploration licensing. It was important and needed as an
incentive for companies to get out into the remote areas of
Alaska to explore. He pointed out that too many companies
were leaving the state. He said over the interim, DNR met
with approximately 20 companies of all sizes and took the
bill apart, reviewed each piece and reached a consensus.
Mr. Boyd stressed it is important that the committee
consider that HB 199 as it is written, is the bill that had
a consensus.
Number 447
REPRESENTATIVE BUNDE asked Representative Green if the four
years he used in his example is a firm four years or does
that vary with the length of the lease.
REPRESENTATIVE GREEN responded four years is included in the
bill.
REPRESENTATIVE JAMES said she is very supportive of any
activity to be done in the state which enhances economic
activity and encourages industry to take a part in the
development of the state's resources. She asked when
550,000 acres has been licensed to an oil company to drill
for oil and the company does the projected activity they
committed to do, what is the possibility of them using that
550,000 acres for any other resource development, such as
timber, mining, coal, etc. She also questioned if the
exploration license is given and the oil company
subsequently enters into a lease, how does that compete with
development of other natural resources.
Number 479
MR. BOYD replied all of the current provisions in regulation
and statute apply to licensing. He said just as it is with
the leasing program currently, the same is true for licensed
lands; every other activity is allowed, and added that this
includes the public access provision.
REPRESENTATIVE DAVIES stated there seems to be three
distinct land use decisions which get made if HB 199 was to
pass. The first decision would be the commissioner making a
preliminary written determination on state land, which is
subject to the provisions of HB 199. There would be a
blanket designation of a lot of land which may be entered
into licenses. He said the second land use decision which
might get made would be where a company applies for a
license on a subset of the land which was designated. The
third action would be to convert a portion of that licensed
land to a lease. He asked if the provisions for licensing
are exactly those which are in present law.
REPRESENTATIVE GREEN replied the law says there will be
restrictions put on a lease once it is converted, and added
that those restrictions could be in a blanket form or could
be site specific.
MR. BOYD added that the lease is actually tied to the
licensing. The lease received is already in place. He
stressed all the provisions in place currently apply and
gave an example. He said companies will have no surprises
when they convert to a lease. They will know there are
certain constrained areas within the licensed area which
will need to be addressed.
Number 558
REPRESENTATIVE DAVIES said taking a best interest finding as
an example, does that process occur at the time the
commissioner considers the issuance of the license or at the
time he considers the issuance of the lease.
MR. BOYD responded at the time of the license and stressed
everything has to be completed prior to issuing the license.
VICE CHAIRMAN HUDSON noted for the record that
REPRESENTATIVE WILLIAMS joined the committee at 9:40 a.m.
GEORGE FINDLING, MANAGER, GOVERNMENT AND PUBLIC RELATIONS,
ARCO ALASKA, testified via teleconference, and expressed
support of HB 199. He pointed out the strengths of HB 199,
including the provision of a level playing field for
potential competitors for licenses. First, the bonding
formulation strikes an appropriate balance among the variety
of interests, provides equal financial footing for bidders
and solid protection for the state's interest. Second,
leases are achieved only after the entire work commitment is
completed which minimizes the chances for speculation.
Third, the bonding and relinquishment provisions provide
incentives to conduct work early and vigorously. Fourth,
the bonding provision allows the licensee maximum
flexibility to pursue a work program which makes sense.
Fifth, the licensing supplements and also dovetails into the
proven state licensing system, providing licensees with
maximum certainty of the long-term rule. And finally, the
winning bid in any competition is selected based upon
objective standards of total dollar amounts by using sealed
bids. He stressed that ARCO strongly supports HB 199.
Number 646
ARDIE GRAY, PUBLIC SERVICE MANAGER, ALASKA OIL AND GAS
ASSOCIATION (AOGA), testified via teleconference, and said
AOGA believes that large oil and gas exploration licensing
is an attractive addition to the state's leasing program, to
accelerate exploration and financial development of Alaska's
frontier areas. She stated AOGA supports a large block
licensing program which does not apply to lands north of the
Umiat Base Line; lands south of the Umiat Base Line which
are within proposed competitive oil and gas lease sales 80,
87, and 88 prior to the initial sale; and in the vicinity of
Cook Inlet that are within the area bounded by the north
boundary of township 17 north Seward meridian, the Seward
Meridian, the south boundary of township 7 south Seward
meridian, and the west boundary range 19 west Seward
meridian.
MS. GRAY stated that AOGA supports a program in which a
license is conditioned upon posting of an annual bond or
other security in favor of the state and in which the annual
bond or other security is calculated as the entire work
commitment expressed in dollars less the cumulative
expenditures as of the last day of the most recent project
year, divided by the remaining years of the exploration
license. She said AOGA supports a competitive program in
which all licenses are awarded on the basis of written,
sealed bids for total dollar work commitment. The
commissioner should adopt regulations to evaluate competing
proposals.
MS. GRAY stressed that AOGA supports a program in which
conversion from license to lease is under existing state
leasing statutes AS 38.05.180 (j)-(m), (o)-(u), and (x)-(z),
and upon conversion, such a lease is subject to the acreage
chargeability of AS 38.05.140(c). She stated AOGA supports
a program in which any relinquishment of the license area
does not occur before the fourth anniversary of the license
and each year thereafter is a percentage relinquishment of
the remaining license area, not to exceed 50 percent of the
original license area. As an incentive for early evaluation
of a license area, AOGA believes no relinquishment should be
required if the licensee has expended 50 percent of the
approved work commitment by the fourth anniversary of the
license.
MS. GRAY stated the House Oil and Gas Committee Substitute
for HB 199 is consistent with the AOGA position on
exploration licensing legislation. AOGA supports HB 199.
TAPE 94-22, SIDE A
Number 000
BECKY GAY, EXECUTIVE DIRECTOR, RESOURCE DEVELOPMENT COUNCIL
(RDC), testified via teleconference, and said RDC strongly
supports HB 199 and believes it will augment the present oil
and gas leasing program. She stressed that many hours of
work have gone into building the exploration licensing from
a concept into a workable program, which should help
encourage exploration of Alaska's vast resource potential.
Most people think of resources already in production or
under development, but she felt exploration is the key to
the future of resource development. Just as the state
cannot afford to wait for megatons like Prudhoe Bay, to fill
its coffers, neither can exploration companies afford to
rest on their laurels of past successes in looking for new
oil and gas lease areas.
MS. GAY stressed exploration is the lifeblood of the
industry and anything which will help encourage more
exploratory work in Alaska, particularly on state lands,
should be supported. This legislation will not supplant the
ongoing lease program, but it should enhance it. Many
compromises allowing small companies to pursue exploration
licensing have been made, but noted in any event,
exploration in Alaska is costly, very risky in regard to
success, and even more difficult because of the huge areas
off-limits, and the lack of infrastructure to support
exploration activities. RDC urged the committee to move HB
199 on to the next committee.
Number 036
WALT FURNACE, GENERAL MANAGER, ALASKA SUPPORT INDUSTRY
ALLIANCE, testified via teleconference, and said the board
of directors of the Alliance reviewed HB 199 and supports
the intent of the legislation. The Alliance's position is
that as Alaska's known oil and gas fields are depleted,
there is a need to take aggressive steps to encourage
companies to explore areas of the state which may not be of
prime capacity. In reviewing the legislation, the Alliance
noted that it does provide (indiscernible) vehicle. The
Alliance also endorses the bonding mechanism contained in
the bill and supports the concept that when companies
explore, the financial responsibility must be in place.
MR. FURNACE stressed the Alliance supports HB 199 because
the oil and gas industry is the lifeblood of Alaska and
urges the rapid passage of HB 199. Without its passage,
Alaska will no longer be able to provide this source of
revenue which is so crucial to the development of its
resources. He reminded committee members that under the
state's Constitution, legislators are charged with
developing Alaska's resources to the maximum benefit of the
state's citizens.
Number 063
GREG GARRELS, FAIRBANKS, testified via teleconference, and
stated he had not heard anyone mention the fact that what
this bill amounts to is an option on a lease. He felt HB
199 gives the large, powerful corporations the ability to
lock up an area equivalent to 50 percent of all private
lands in Alaska with very little oversight. He wondered if
anyone had considered the possibility that with large
discoveries being made all over the world, and with oil
companies, in general, moving many of their operations
overseas, what the oil companies may be looking for is a
cheap and efficient way to lock the door behind them on
their way out.
MR. GARRELS noted that he had heard the words level playing
field mentioned and he felt there is only a level playing
field if you are a multi-billion dollar corporation, not a
small company located in Alaska. He stated the whole thing
is going to be overseen by one ex-oil company employee. He
asked if the provisions are going to be enforced through the
same diligence which has resulted in $6 billion in back
taxes. He felt HB 199 was written by a major oil company
and that it is in the interest of the major oil companies,
not in the interest of the state.
Number 098
CLIFF BURGLIN, FAIRBANKS, testified via teleconference, and
said British Petroleum (BP) is Alaska's major producing
corporation. He stated in the last year, BP has had
discoveries in Columbia and in the last two weeks, BP has
announced findings of 500 million to one billion barrels of
oil in the North Sea. He mentioned that BP produces about
600,000 barrels of Alaska oil a day and it appears they are
headed elsewhere. He stated companies are already sitting
on finds which will produce two billion barrels a day, close
to infrastructures and he named the fields. He stressed
the fields have been discovered, but not yet developed in
addition to about two million acres that companies are also
sitting on in leases, which have not been developed or are
only partially developed. Mr. Burglin asked what makes the
legislators think these companies are going to do anymore
than they have already done if they get exploration
licensing. He expressed opposition to passage of HB 199.
REPRESENTATIVE GREEN said when the House Oil and Gas
Committee reviewed HB 199, Mr. Burglin stated he had several
questions to ask the committee and was requested to send the
written questions to the committee. Representative Green
noted he had not received them to date.
MR. BURGLIN responded he had sent the questions and he would
like to have his concerns addressed in writing. He added
there is trouble brewing in the Mid-East and when it comes
to fruition, Arabs do not care about oil fields and 15
billion barrels a day could come off the market just like it
did in 1973 and 1974. Alaska will be the only place where
the U.S. can pick up additional production easily like they
did during the Gulf War. If the land in Alaska is allowed
to be locked up by big oil companies, he hoped that people
are prepared to freeze and wait in long gas lines.
Number 183
REPRESENTATIVE MULDER made a motion to MOVE CSHB 199(O&G)
with a zero fiscal note out of committee with INDIVIDUAL
RECOMMENDATIONS.
VICE CHAIRMAN HUDSON asked if there were any objections to
the motion. Hearing none, the MOTION PASSED.
ANNOUNCEMENTS
VICE CHAIRMAN HUDSON announced the committee will meet on
Wednesday, March 2 at 8:15 a.m. to hear HB 238.
ADJOURNMENT
There being no further business to come before the House
Resources Committee, Vice Chairman Hudson adjourned the
meeting at 10:17 a.m.
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