Legislature(2001 - 2002)
04/04/2001 01:05 PM House RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
HOUSE RESOURCES STANDING COMMITTEE
April 4, 2001
1:05 p.m.
MEMBERS PRESENT
Representative Beverly Masek, Co-Chair
Representative Drew Scalzi, Co-Chair
Representative Hugh Fate, Vice Chair
Representative Mike Chenault
Representative Lesil McGuire
Representative Gary Stevens
Representative Beth Kerttula
MEMBERS ABSENT
Representative Joe Green
Representative Mary Kapsner
COMMITTEE CALENDAR
SENATE BILL NO. 77
"An Act repealing the exception that applies to collection and
payment of interest of $150 or less on royalty or net profit
share underpayments and overpayments; and providing for an
effective date."
- MOVED SB 77 OUT OF COMMITTEE
HOUSE BILL NO. 206
"An Act relating to a vessel-based commercial fisheries limited
entry system, to management of offshore fisheries, and to the
definition of 'person' for purposes of the commercial fisheries
entry program; and providing for an effective date."
- HEARD AND HELD
HOUSE CONCURRENT RESOLUTION NO. 8
Expressing the legislature's opposition to the proposed
"northern" or "over-the-top" route for a natural gas pipeline to
transport North Slope natural gas reserves to the domestic North
American market, and expressing the legislature's support of
commercialization of North Slope natural gas for the maximum
benefit of the people of the state.
- MOVED CSHCR 8(RES) OUT OF COMMITTEE
PREVIOUS ACTION
BILL: SB 77
SHORT TITLE:NET PROFIT SHARE UNDER/OVERPAYMENTS
SPONSOR(S): SENATOR(S) TORGERSON
Jrn-Date Jrn-Page Action
02/08/01 0309 (S) READ THE FIRST TIME -
REFERRALS
02/08/01 0309 (S) RES, FIN
02/21/01 (S) RES AT 3:30 PM BUTROVICH 205
02/21/01 (S) Moved Out of Committee
02/21/01 (S) MINUTE(RES)
02/22/01 0467 (S) RES RPT 6DP
02/22/01 0467 (S) DP: TORGERSON, PEARCE,
TAYLOR, KELLY,
02/22/01 0467 (S) LINCOLN, ELTON
02/22/01 0467 (S) FN1: ZERO(DNR)
02/28/01 (S) FIN AT 9:00 AM SENATE FINANCE
532
03/13/01 0633 (S) FIN RPT 9DP
03/13/01 0633 (S) DP: DONLEY, KELLY, GREEN,
AUSTERMAN,
03/13/01 0633 (S) HOFFMAN, OLSON, WILKEN,
LEMAN, WARD
03/13/01 0633 (S) FN1: ZERO(DNR)
03/13/01 (S) FIN AT 9:45 AM SENATE FINANCE
532
03/13/01 (S) Moved Out of Committee
03/13/01 (S) MINUTE(FIN)
03/19/01 0716 (S) RULES TO CALENDAR 3/19/01
03/19/01 0718 (S) READ THE SECOND TIME
03/19/01 0718 (S) ADVANCED TO THIRD READING
UNAN CONSENT
03/19/01 0718 (S) READ THE THIRD TIME SB 77
03/19/01 0718 (S) PASSED Y20 N-
03/19/01 0718 (S) EFFECTIVE DATE(S) SAME AS
PASSAGE
03/19/01 0720 (S) TRANSMITTED TO (H)
03/19/01 0720 (S) VERSION: SB 77
03/19/01 (S) RLS AT 10:45 AM FAHRENKAMP
203
03/19/01 (S) MINUTE(RLS)
03/20/01 0660 (H) READ THE FIRST TIME -
REFERRALS
03/20/01 0660 (H) RES, FIN
04/04/01 (H) RES AT 1:00 PM CAPITOL 124
BILL: HB 206
SHORT TITLE:VESSEL LIMITED ENTRY FOR COMM. FISHERIES
SPONSOR(S): RESOURCES
Jrn-Date Jrn-Page Action
03/22/01 0691 (H) READ THE FIRST TIME -
REFERRALS
03/22/01 0691 (H) FSH, RES
04/02/01 (H) FSH AT 5:00 PM CAPITOL 124
04/02/01 (H) Moved Out of Committee
MINUTE(FSH)
04/03/01 0826 (H) FSH RPT 2DP 4NR
04/03/01 0827 (H) DP: SCALZI, WILSON; NR:
DYSON,
04/03/01 0827 (H) COGHILL, KERTTULA, STEVENS
04/03/01 0827 (H) FN1: ZERO(DFG)
04/03/01 0827 (H) REFERRED TO RESOURCES
04/04/01 (H) RES AT 1:00 PM CAPITOL 124
BILL: HCR 8
SHORT TITLE:NORTH SLOPE NATURAL GAS PIPELINE ROUTING
SPONSOR(S): REPRESENTATIVE(S)WHITAKER
Jrn-Date Jrn-Page Action
03/16/01 0625 (H) READ THE FIRST TIME -
REFERRALS
03/16/01 0625 (H) O&G, RES
03/28/01 (H) O&G AT 3:00 PM CAPITOL 124
03/28/01 (H) Moved CSHCR 8(O&G) Out of
Committee
MINUTE(O&G)
03/30/01 0785 (H) O&G RPT CS(O&G) 4DP 1DNP 1NR
03/30/01 0786 (H) DP: FATE, GUESS, DYSON, OGAN;
03/30/01 0786 (H) DNP: KOHRING; NR: CHENAULT
03/30/01 0786 (H) FN1: ZERO(H.O&G)
04/04/01 (H) RES AT 1:00 PM CAPITOL 124
WITNESS REGISTER
DARWIN PETERSON, Staff
to Senator John Torgerson
Alaska State Legislature
Capitol Building, Room 427
Juneau, Alaska 99801
POSITION STATEMENT: Presented SB 77 on behalf of the sponsor.
BILL VAN DYKE, Lease Administration/Royalty
Division of Oil & Gas
Department of Natural Resources
550 West 7th Avenue, Suite 800
Anchorage, Alaska 99501-3560
POSITION STATEMENT: Answered question relating to SB 77.
MARY McDOWELL, Commissioner
Commercial Fisheries Entry Commission
Alaska Department of Fish & Game
8800 Glacier Highway, Suite 109
Juneau, Alaska 99801-8079
POSITION STATEMENT: Answered questions regarding HB 206.
KURT O. SCHELLE, Research & Planning Project Leader
Commercial Fisheries Entry Commission
Department of Fish & Game
8800 Glacier Highway, Suite 109
Juneau, Alaska 99801-8079
POSITION STATEMENT: Clarified language of HB 206.
JOE MACINKO
2625 Spruce Cape Road
Kodiak, Alaska 99615
POSITION STATEMENT: Testified on HB 206.
CHRIS BERNS
PO Box 26
Kodiak, Alaska 99615-0026
POSITION STATEMENT: Testified on HB 206.
PAUL SEATON
58395 Bruce Street
Homer, Alaska 99603
POSITION STATEMENT: Spoke in opposition to HB 206.
JOHN WINTHER (ph)
(No address provided)
Homer, Alaska
POSITION STATEMENT: Spoke in support of HB 206.
JOE KYLE
234 Gold Street
Juneau, Alaska 99801
POSITION STATEMENT: Spoke in support of HB 206 on behalf of
Korean hair crab fishery vessel owners.
EDWARD C. FURMAN
(No address provided)
POSITION STATEMENT: Spoke on behalf of the fishermen of
Cordova, in opposition to HB 206.
REPRESENTATIVE JIM WHITAKER
Alaska State Legislature
Capitol Building, Room
Juneau, Alaska 99801
POSITION STATEMENT: Testified as the sponsor of HCR 8.
MICHAEL J. HURLEY
Government Relations
North American Natural Gas Pipeline Group
601 West 5th Avenue, Suite 500
Anchorage, Alaska 99501
POSITION STATEMENT: Testified on HCR 8.
ACTION NARRATIVE
TAPE 01-29, SIDE A
Number 0001
CO-CHAIR BEVERLY MASEK called the House Resources Standing
Committee meeting to order at 1:05 p.m. Representatives Fate,
McGuire, Chenault, Stevens, Masek, and Scalzi were present at
the call to order. Representative Kerttula arrived as the
meeting was in progress.
SB 77-NET PROFIT SHARE UNDER/OVERPAYMENTS
CO-CHAIR MASEK announced that the first order of business would
be SENATE BILL NO. 77, "An Act repealing the exception that
applies to collection and payment of interest of $150 or less on
royalty or net profit share underpayments and overpayments; and
providing for an effective date."
Number 0135
DARWIN PETERSON, Staff to Senator John Torgerson, Alaska State
Legislature, came forth on behalf of Senator Torgerson, sponsor,
to give a brief overview of SB 77. He explained that in 1998
the legislature exempted the Department of Natural Resources
(DNR) from calculating interest on small overpayments or
underpayments of royalty, if the interest was $150 or less.
Prior to 1998, these small overpayments or underpayments were
calculated manually, using Excel spreadsheets; the cost of
manually calculating the payments was more than the interest
received or the credit applied.
MR. PETERSON informed members that with the state's new oil and
gas royalty accounting system, interested owed on even the
smallest amount is calculated electronically, and royalty
payments are sent electronically. Furthermore, if the
legislature does not repeal the statute in question, both [DNR]
and the payers of royalties would have to reprogram their
computer systems to not compute underpayments or overpayments
payments of interest in the amount of $150 or less; that would
be an unnecessary expense for all the parties involved, when
there is a much easier option available, such as [SB 77].
Number 0258
CO-CHAIR MASEK asked Mr. Peterson whether the sponsor expects
there to be a positive fiscal note. She asked how much money
will be gained by passage of SB 77.
MR. PETERSON replied that the amount in question is minimal.
For the 12 months prior to October 31, 2000, the state processed
1,716 royalty filings with interest amounts between a negative
$150 and a positive $150; the net gain was $4,096 to the state.
He deferred to the DNR to explain why there isn't a positive
$4,096 in the fiscal note.
BILL VAN DYKE, Lease Administration/Royalty, Division of Oil &
Gas, Department of Natural Resources (DNR), testifying via
teleconference, noted that Mark Meyers, Director, Division of
Oil & Gas, had asked him to fill in for him and that Jim Stoffer
(ph), head of royalty accounting, was with him. He said, as
aforementioned, the amounts of some of the returns are negative,
while some are positive. Although the sample size taken
resulted in a slightly positive number, the same analysis taken
over more years would produce results closer to zero; sometimes
royalty payers overpay, and sometimes they underpay, but the
number should average zero over a long enough time period.
Number 0475
REPRESENTATIVE FATE moved to report SB 77 out of committee with
individual recommendations and the accompanying fiscal note.
There being no objection, SB 77 was moved out of the House
Resources Standing Committee.
[Co-Chair Masek turned the gavel over to Co-Chair Scalzi.]
HB 206-VESSEL LIMITED ENTRY FOR COMM. FISHERIES
CO-CHAIR SCALZI announced that the next order of business would
be HOUSE BILL NO. 206, "An Act relating to a vessel-based
commercial fisheries limited entry system, to management of
offshore fisheries, and to the definition of 'person' for
purposes of the commercial fisheries entry program; and
providing for an effective date."
CO-CHAIR SCALZI mentioned that HB 206 had been heard in [the
House Special Committee on Fisheries, on April 2, 2001], where
Paul Seaton, Alan Parks, and Mako Haggerty testified against the
bill via teleconference, at which time Co-Chair Scalzi invited
them to submit their testimony in writing. Co-Chair Scalzi
indicated Mr. Seaton's testimony was in the committee packet.
[There was a motion to adopt HB 206 for discussion purposes, but
it was already before the committee.]
CO-CHAIR SCALZI, speaking on behalf of the House Resources
Standing Committee, sponsor of HB 206, told listeners that he
had been asked to submit HB 206 on behalf of the Commercial
Fisheries Entry Commission (CFEC), at the request of the
legislature. He explained that a few years ago the legislature
had experienced a problem with the [Korean] hair crab and
scallop fisheries in the Bering Sea. He mentioned a limit
placed on the number of fishing vessels, as well as federal
moratoriums and state moratoriums that are about to expire.
CO-CHAIR SCALZI stated that in order to enact a limitation plan,
Alaska's current license limitation program must be altered.
Currently, the CFEC's license limitation program designates a
license to an individual, rather than to a vessel. Thus HB 206
will allow the [CFEC] to develop a program to "fix a limited
license to a vessel." Co-Chair Scalzi explained:
Now, the reason that they want to do that is because
if they [use] the traditional method that they have
now, a license would have to go to every applicant who
was eligible, which could mean if you had four ... or
five skippers on a vessel, each one would be eligible
for a ... limited entry license. And ... that would
... change the number of available boats that you
could have. In other words, each skipper could get
his own boat, and instead of having 10 boats in the
fishery, you could have 40 boats in the fishery.
So ... having the ability to use this tool and create
a license limitation program that is attached to the
vessel ... will clearly limit the fishery to those
vessels that are permitted, currently, and [that are]
under the moratorium.
CO-CHAIR SCALZI clarified that HB 206 by itself is not a license
limitation plan, but if passed, would give [CFEC] the ability to
create one.
Number 0935
MARY McDOWELL, Commissioner, Commercial Fisheries Entry
Commission, Alaska Department of Fish & Game, explained the
genesis of HB 206:
The origins of this bill ... came at the time in 1996
when the legislature placed [a] moratorium on the
entry of new vessels into the Korean hair crab
fishery, and then they did the same thing with the
weathervane scallop fishery in 1997. In implementing
the moratorium [on] the hair crab fishery, the
legislature directed that the [CFEC] and the
Department of Law work together to draft, and bring
back to the legislature, legislation creating a
vessel-based limited entry program that could be used
in fisheries in which limitation under Alaska's
current limited entry program could not achieve the
purposes of the limited entry Act.
MS. McDOWELL defined those purposes as conservation of the
resource and protection of the economic viability of the
fishery. She emphasized that HB 206 in no way changes the
state's limited entry program; it just provides an alternative
approach that would be available to limit the few fisheries that
aren't suited for the method of limitation under the current
program. Ms. McDowell pointed out that the current program has
been in effect for over 17 years, with few changes made. She
indicated that 63 fisheries have been limited under the current
program.
MS. McDOWELL described the fisheries suited for the current
limitation program as having small boats, usually individually
owned and operated. Under that program, the limited entry
permits are issued only to individual human beings, not to
vessels, partnerships, or companies. She said [CFEC's]
challenge has been to create a modified version of limited entry
to effectively limit the few fisheries that have evolved in a
much different way over recent years - fisheries that have
ownership and participation patterns different from the model
upon which the current limited entry program is based. Ms.
McDowell characterized those fisheries as having bigger, more
expensive vessels that are owned by partnerships or companies
and that fish further offshore. Many use hired skippers - or
multiple, successive skippers to fish throughout the season -
who often have no ownership in the operation.
MS. McDOWELL explained that limiting fisheries under the current
program might actually increase the number of participants over
time, rather than "cap it," thereby defeating the whole purpose
of limitation and posing a risk to the resource and the fishery.
At that point, she said, the only remaining options might be as
follows: to close the fishery entirely, which would mean the
loss of harvesting and processing jobs and the loss of tax
revenues to the state and local municipalities, or, in the case
of some of these larger-boat fisheries, to let the federal
government preempt [CFEC's] management and take it over. Ms.
McDowell continued:
Even if you could find a feasible way to provide for
the conservation and the economic viability under our
current program, in those fisheries many of the
permits would be issued to the hired skippers, who are
essentially employees, and not to those who have
invested in the development of the fishery.
So, as I said, the legislature recognized these
problems and the traits in the hair crab and scallop
fisheries in developing the moratorium for those
fisheries, and, in those cases, they developed the
moratorium, based on a vessel model. The interim-use
permits, under which those vessels operate during [a]
moratorium, are issued to the ... owners of the
vessel, rather than to the skippers in those
fisheries.
MS. McDOWELL recalled that last year the moratorium on hair crab
was about to expire and [CFEC] didn't have a "tool in place," so
the legislature opted to extend the moratorium on hair crab
until 2003, and on scallops until 2004, to allow enough time to
look at developing a tool for the long-term for such fisheries.
She added that [CFEC] didn't want to risk the return to open
access, which could create an influx of new participants, many
from outside of Alaska, or risk the closure of those fisheries.
MS. McDOWELL said HB 206 would provide the tools to deal with
those few fisheries in which an alternative method is needed;
the bill creates a generic program, as the legislature directed
the department to do. She stated that currently the only two
fisheries the department can foresee using it in would be those
for hair crab and scallops, but it is possible that over the
years other fisheries will come along for which the vessel-based
program wouldn't be a useful tool.
MS. McDOWELL explained that the bill establishes a framework for
this vessel-based program, similar to the framework for the
individual-based program that is in our current statute. It was
carefully drafted to preserve the use of the current person-
based program in any fishery in which it could work, and to
adhere to as many of the goals and purposes of the current
program as would be feasible "for a program like this." She
told members:
I'll point out a few of the important features of the
bill that are aimed at accomplishing those things:
First, on page 2, lines 16-31, is the criteria for
when the commission may use this alternative program.
It's tightly constructed to always default to our
traditional person-based limited entry, unless we can
determine that limitation under a current program is
not workable - that you couldn't achieve the purposes
of the limited entry Act by using that program.
As I said, that program is well designed to keep
fishing privileges in the hands of the actual
participants, and to avoid absentee ownership of our
fisheries, and consolidation of ownership. And it
does work well to protect the place of Alaskans in
their fisheries, both at the time of initial issuance
and over time, while still passing constitutional
muster.
MS. McDOWELL reiterated that the first section of the bill would
ensure that this alternative program would only be used in
state-managed fisheries if the current program "wouldn't achieve
purposes of the Act." She added that CFEC could also use this
program in a fishery that is in the waters of the exclusive
economic zone (EEZ), if it would help gain or retain state
management of a fishery. Ms. McDowell continued:
Another important feature in the bill is what can be
referred to as "second generation" language or
provisions that start on page 6, line 8. Under this
program, the permits are initially issued to the
owners of the vessels that qualify at the time of
limitation, whether the owners are individual persons
or partnerships or companies or any other entity. But
under these transfer provisions, when the permits are
transferred, either sold or given away, they can only
be transferred to an individual human being, which is
the case in our current program.
The bill provides that the transferee - the person
receiving the permit - must hold an ownership interest
in the vessel and must be onboard whenever that vessel
is fishing, as is the case in our current program.
There's one exception to that that's spelled out in
subsection (c), which would be where an initial
"issuee" - even if that is an entity - could obtain
another permit to use on the same vessel. So you
wouldn't [have] to buy up additional vessels in the
fishery. But in the case of endorsements where the
permits in [a] given fishery may qualify for certain
species or areas, if someone with one vessel wanted to
stack two permits for use on one vessel in order to be
able to fish more species in more areas, that would be
the one exception to the "must be a person" rule.
MS. McDOWELL mentioned concern expressed about the
enforceability of the provisions regarding ownership changes.
She noted that a penalty section, starting on page 11, line 27,
states that any person or entity who provides, or assists in
providing, false information or fails to correct false
information to the commission would be liable for a fine up to
$5,000 and suspension or revocation of all of fishing permits.
She suggested it would be a disincentive for any kind of lying
about a change of ownership, and said the CFEC believes it would
be a "large deterrent to any kind of fraudulent information."
Number 1610
MS. McDOWELL continued:
In summary, I would ... say that we think the bill is
responsive to the directive that we got from the
legislature to design a program to be used in
fisheries where the current program is unworkable.
And it's pragmatic, in that it recognizes the need to
develop a new tool for meeting the evolving needs in
our fisheries, but does so in a very cautious way that
departs from our current program as little as
possible.
MS. McDOWELL said this legislation would be the first step; the
department would be still be faced with proposing limitations
for the specific fisheries after passage of the bill. She said
there would be a learning curve, because this would be the first
time a program like this has been used; therefore, the
department would have a lot of work to do in implementing the
program, and working with the participants in the fishery to
make sure that the program was well crafted to meet the needs of
the fisheries. She told the committee members that having this
enabling legislation in place soon would be very helpful in
creating a good, workable program before the moratoriums on the
hair crab and scallop fisheries expire. Ms. McDowell mentioned
that Kurt Schelle was available to answer questions.
Number 1689
REPRESENTATIVE KERTTULA asked Ms. McDowell to clarify the issue
of second-generation licensing and how "a vessel can stack."
MS. McDOWELL answered:
At the initial issuance, entities besides human beings
could be issued the permits if they were the owner at
the time of limitation. From then on, every time that
permit changes hands, only a living human being - who
must be a participant in the fishery and onboard the
vessel - can obtain a permit. It ... prevents the
idea of the fishery going more and more towards
absentee corporate ownership, and [goes] more towards
participant ownership.
MS. McDOWELL reiterated that the exception would be when the
initial issuee - "whether a permit or an entity" - wants to
obtain another permit to use, on the same vessel, in order to
expand species, areas, and/or endorsements.
REPRESENTATIVE KERTTULA requested that Ms. McDowell explain
CFEC's intent behind the language, found on page 8, regarding
the commission's regulatory stance on "concentration of
ownership." She added that it is the only language that "gives
authority back to the CFEC."
MS. McDOWELL described a "protection" in the original program
that limits permit ownership to only one human being, and which
limits a human being from owning more than one permit in a
fishery. The bill allows the department to study a fishery and
cap the ownership within that fishery. She added that at
initial issuance, one company might own a couple of vessels and
might "grandfather in," but the department would have a cap so
those particular companies could not continue "buying up" more
and more of the fishery.
REPRESENTATIVE KERTTULA stated her [understanding] that those
hypothetical companies would not, therefore, be able to "stack"
all of the permits onto the vessels and control the fishery.
MS. McDOWELL concurred.
Number 1892
CO-CHAIR SCALZI said he would ask some of the questions posed by
Mr. Seaton in the last hearing. Mr. Seaton had addressed the
licensed limitation permit (LLP), which is issued by the federal
government, and had suggested adopting a federal endorsement on
an LLP, rather than using the state permit process.
MS. McDOWELL replied that there were several issues involved.
She said the [Korean] hair crab fishery is not currently in any
federal management plan (FMP), but is exclusively managed by the
state. Ms. McDowell pointed out that if the state were to ask
the federal government to manage the licensing of that fishery,
it would be giving up control over the fishery and its
limitation program. In the scallop fishery, her understanding
is that the federal government has a FMP in federal waters only,
she added. By asking for an LLP, the state would be asking the
federal government to "preempt" state management in state
waters. Ms. McDowell expressed confusion over why [Mr. Seaton]
would propose that, because [fishermen] argue that it is better
to have fisheries in which the participants are the holders of
permits, and under the federal program permits would go entirely
to entities.
Number 2021
KURT O. SCHELLE, Research & Planning Project Leader, Commercial
Fisheries Entry Commission, Department of Fish & Game (ADF&G),
concurred with Ms. McDowell's statements.
CO-CHAIR SCALZI explained that an LLP is a federal permit
whereby the federal government puts an endorsement on a vessel
that fishes for crab or groundfish in the Bering Sea or Gulf of
Alaska and is qualified under a moratorium. Co-Chair Scalzi
said, "And this is how they manage new entrants. And it is
dissimilar from what the state does; the state does the
management of the crab fisheries in federal waters."
Mr. Seaton also points out that there's co-managed
fisheries in the state, such as the ... cod fishery
within state waters, and there's also federal
management [in] federal waters. They co-exist. And
... there is a sablefish fishery in Prince William
Sound, as there is a federal fishery, and a chad
fishery also, ... with licensed "permitation." I
would just point out that those are just co-managed.
It's not that you are managing one fishery; you're
actually managing two. So that's where the co-
management is. In this case, we're talking about the
state managing fisheries in federal waters. And
that's currently the way we do this, and ... it's a
little different than what Mr. Seaton pointed out; we
have two separate areas.
CO-CHAIR SCALZI made reference to Mr. Seaton's comments
regarding AS 16.43.460, page 5, lines 3-6, of the bill, which
read:
(2) the substitution of another vessel by
the applicant for a vessel interim-use permit or a
vessel entry permit if the vessel used to establish
eligibility for a vessel entry permit is lost before
the initial issuance of a vessel entry permit for the
vessel.
CO-CHAIR SCALZI then drew attention to Mr. Seaton's comments on
page 2 of 3 in his letter, under "Article 6A."
MS. McDOWELL stated her belief that the section to which [Mr.
Seaton's comments] refer is "substitution language" on page 7.
She added that she thought there was a misunderstanding, because
the vessel permits will have restrictions limiting capacity and
types of gear; therefore, if one vessel is substituted for
another, the replacement would have to be consistent within the
range of what that permit would allow. Ms. McDowell paraphrased
from HB 206, page 7, lines 21-23, subsection (b), which read:
A substituted vessel and the operation of the
substituted vessel are subject to all terms and
conditions attached to the vessel entry permit at the
time that the vessel permit is transferred from the
original vessel to the substituted vessel.
Number 2210
CO-CHAIR MASEK inquired whether a person whose vessel breaks
down and who owns a permit may use another boat and continue
fishing.
MS. McDOWELL replied that Co-Chair Masek would find the answer
in the "substitution" language on page 7 of the bill, where it
states that a person in that situation could apply to the
commission for permission to substitute another vessel in its
place. In response to a follow-up question by Co-Chair Masek,
Ms. McDowell called attention to page 3 of the bill, beginning
on line 16, which specifies that if a fishery is limited under
this program, there would be capacity restrictions on the vessel
permit. She asked Co-Chair Masek if she was referring to how
the determination would be made as to whether [a vessel] would
"fall under this program."
CO-CHAIR MASEK asked if it would be possible to add a size-
specification into the language of the bill to clarify the
intent to help the small-boat owners in the commercial fishing
industry.
MS. McDOWELL reiterated that the department would always default
to its current program in the small-boat fishery, whereby it
issues the permit to the vessel owner-operator. The department
may use the vessel-based program, however, in a fishery that
meets three criteria [subsection (a), page 2, lines 16-24]: the
fishery needs limitations; the purposes of the limited entry Act
could be met by using the program; and the purposes of the
limited entry Act could not be met by using the existing program
[AS 16.43.140 - 16.43.330].
CO-CHAIR MASEK asked why, on page 9, Section 3, the language had
been changed to "a fishery" from "a scallop fishery".
Number 2415
MR. SCHELLE responded that the only reason that language is in
the bill is in case there are other fisheries to which the
program would be applicable in the future. He speculated that
this language may have come from the "scallop moratorium"
language.
MS. McDOWELL asked the House Resources Standing Committee to
recall the debate over the "Mr. Big" fishery that wiped out the
scallop fishery resource for lack of a federal fishery
management plan. She said she believed that, at that time,
there was language added - specific to the scallop fishery - to
clarify that the state may assume management of a fishery in the
absence of a federal management plan. She explained that the
proposed bill before the committee broadens the language to say,
if a similar situation arises again, the state may step in and
assume management.
CO-CHAIR MASEK asked for a definition of "United States
exclusive economic zone", found on page 2, line 27.
MS. McDOWELL replied that she believes the federal exclusive
economic zone (EEZ) is 3 miles to 200 miles [off the coast].
Number 2505
CO-CHAIR SCALZI specified that all United States waters fall in
that range. He then opened public testimony.
Number 2538
JOE MACINKO, testifying via teleconference, mentioned the "over-
investment" and "over-capitalization" of all our fisheries. He
said if people are rewarded for doing what caused the problem,
the problem won't go away. He asked why it makes sense to give
permits to those who invest their "tax-deferred" dollars, rather
than their lives. He said he took exception to Ms. McDowell's
comment that there is no way to track entities. He said
individual human beings pass away, but the "initial" corporation
never goes away.
[A portion of Mr. Macinko's testimony was cut off due to
technical difficulties.]
MR. MACINKO asked the committee to imagine the consequences, had
this bill been active at statehood. He said the canneries owned
all the boats back then; therefore, they would have owned all of
the permits. He said he didn't see any compelling need to "go
down this road" now. Mr. Macinko referred an earlier comment
that if permits were given to operators, there would be too many
boats participating. He indicated that would happen only if
CFEC didn't make an "appropriate qualification for permits." He
added, "Some people qualify and some people don't. They come up
with an optimum number, and if [Ms. McDowell has] done her job
well, there will be the same number of participants, whether you
give them to individuals or entities."
Number 2675
CHRIS BERNS, testifying via teleconference, declared that [HB
206] "belongs in the garbage can." He stated that the bill is
"the will of about three guys [who] are pushing it." He
explained his view that this is a special-interest bill by a
handful of participants. In the scallop fishery, for example,
the majority of permits will go to one company. He told
members:
You need to investigate this as a resource committee,
and understand that this is a severe policy shift by
the State of Alaska. It's not coming from the
majority of the people of Alaska or the majority of
the fishermen out of Alaska. It's only coming from
about three or four people who have some highly paid
lobbyists [who] have been beating doors in Juneau and
elsewhere - about six years, as far as I can recall.
...
If the owners of the boat [had been given the permits]
when the original limited entry for salmon was, ...
the canneries would own the majority of the rights to
harvest salmon right now. And that was the main
reason you have points for residency, points for
participation. And through the point system, the
actual people that were operating the boat and making
a living and taking the risk and taking the financial
risk got the permits, and the majority of the
(indisc.) permits in Alaska now are held by state
residents. The majority of these, if you look at the
ownership of the vessels in these fisheries, I think
you'll find that most of these guys are residing in
Palm Springs, or Washington, or they're basically
nonresidents.
So, I think that this resource committee should really
investigate what this is going to do to change how
fisheries are limited. And it's not going to do
anything for the conservation of the fisheries. And
... the biological conservation could be done in a
number of ways that don't have anything to do with
giving one company half the scallop fishery industry.
MR. BERNS concluded by urging members to look at a letter to the
editor by Barney Olson (ph) and at "Rationalization, Who Wins?"
on page 8 of the "2001 yearbook" of Pacific Fishing magazine.
Number 2889
CO-CHAIR SCALZI asked Mr. Berns if he was in favor of the status
quo and open access "in that fishery."
MR. BERNS said no, but began to qualify his answer.
CO-CHAIR SCALZI, in the interest of time, invited Mr. Berns to
submit any further testimony in writing.
Number 2935
PAUL SEATON testified by teleconference in opposition to HB 206,
indicating he would clarify points on previously submitted
written testimony [included in the bill packet]. First, he said
the oldest crab fishery in the Bering Sea is under a federal
license limitation program, and although that LLP could require
endorsements for specific species, it is not required presently.
He specified that right now the crab fishery allows fishing of
any crab; however, there is a moratorium on "this one." He
added:
This is basically a federal fishery, and I hate to see
us change the entire philosophy of the state,
empowering fishermen, and going to this vessel-owner
section for something that can be accomplished under
the current LLP of the [federal government].
MR. SEATON disputed a previous statement that the small-boat
fisheries are all owner-operated. He said the primary fishery
to be impacted by this bill would be the [Pacific] cod fishery,
which is managed in state waters.
TAPE 01-29, SIDE B
Number 2995
MR. SEATON mentioned specific boat names, and stated that
probably 80 to 90 percent of the entire harvest in the Cook
Inlet area is fished by operators other than the owners. He
said the percentage of nonowner-operated vessels is probably
greater than that in the Sand Point cod fishery. Mr. Seaton
continued:
If this bill was implemented, I can very quickly see a
move by people to petition to have limited entry in to
these fisheries - which are functioning just fine
right now - and turn them into ... much more of a
(indisc.) fishery, especially out at Sand Point,
because once you have the limited entry system out
there, then there wouldn't be any reason for limiting
the number of gear.
The whole idea of the Board of Fisheries in developing
this entire fishery was to give a long-duration
fishery that would supply fish to our communities over
[a] long period of time. I think that this [bill]
will undermine that.
The state-water sablefish fishery is not the limited
access fisheries that we're talking about in Prince
William Sound and Chatham Strait. We have two open-
access sablefish fisheries that occur: one of them in
the North Gulf Coast, that operates on its own
guideline harvest - it's open right now to state-water
fishermen - and we have the Aleutian Island/Bering
Sea, which has its own (indisc.) - which is not the
IFQ [individual fishery quota] fishery that operates
and is totally manageable. ...
Having these "coincident" fisheries does not mean that
they are unmanageable. And so, again, under the LLP
program, ... crab is limited; you have to have an LLP
to fish crab in the Bering Sea. If they put an
endorsement on that ... for hair crab, that would take
care of their problem.
I see severe ramifications of this in future CFEC ...
limited entry programs, and we're going to have a big
fight between vessel owners and fishermen when ...
these programs come out. And CFEC is going to be
caught in the middle, trying to make a political
decision as to whether, "Well, does this really
constitute an owner-operator fleet or a nonowner-
operated fleet, and does that base on the percentage
of the catch or on the number of the vessels?"
This dual system here is going to create severe
problems within communities in the future, when we go
to any new limited entry systems in the state waters.
Number 2839
JOHN WINTHER (ph), testifying via teleconference, stated his
support of HB 206. He said, contrary to previously heard
testimony, he does not think "we" will be covered by LLP
endorsement. He mentioned the methods of catcher-processors.
He discussed the steps that would be taken to sell his own boat,
including how the license would have to be passed on with an
individual, not with the vessel. He addressed Mr. Seaton's
concerns regarding the cod fishery, owners of vessels, and
different skippers. He said he sees [HB 206] as an opportunity,
"in that case," for ships to remain in the state. He mentioned
multiple skippers on the vessels that have fished through the
three- or four-year qualifying period.
Number 2631
JOE KYLE testified in support of HB 206 on behalf of Korean hair
crab fishery vessel owners. He indicated he was not
representing the scallop fishery. He said:
To my knowledge, there's no one working on this bill
from the scallop fishery, primarily because the
scallop fishery limited entry problem was mainly
addressed by the "feds," because there is a federal
management plan for the scallop fishery, and so the
"feds" could limit entry there.
I also want to add that I'm the chief operating
officer of one of the CDQ [Community Development
Quota] companies that encompasses the Aleutian Island
regions, and [am] intimately involved in the fisheries
from a management perspective. Also, I was a voting
member of the North Pacific Fishery Management Council
(NPFMC) - Governor Knowles' nominee. ...
I appreciate the philosophical concerns that the two
gentlemen from Kodiak and Paul Seaton from Homer have
mentioned, but right now there is no federal fishery
management plan for the Korean hair crab fishery.
Paul is just wrong that they can go to the "feds" and
get a license limitation endorsement - that is just
wrong. And I'll be happy to talk with Paul about it
offline.
But what will happen ,if this bill does not eventually
pass, is that the participants in the Korean hair crab
fishery will go to the "feds" and seek federal
management of the fishery in lieu of the current
ability that the state has to manage the fishery.
To me, what this bill does, is it gives the limited
entry commission the opportunity to have another tool
to manage fisheries. The major crisis in all
fisheries is over-capitalization, over-capacity, too
many boats in the fisheries.
The state has the ability, if this bill passes, to
manage this fishery. And I would just ask the
committee members to think that there are Alaskans in
these fisheries. The Korean hair crab fishery has a
CDQ vessel in it, jointly owned by a CDQ group out of
St. Paul, with a gentleman from Sitka.
And I would personally rather have the Commercial
Fisheries Entry Commission decide who can be in that
fishery, rather than the North Pacific Fishery
Management Council, which has members from Oregon and
Washington and the federal government, as well as
Alaska. [If] you pass this bill, you give Alaskans
the ability to dictate and determine who can be in
this fishery. If you don't, the "feds" will determine
that.
Number 2483
The other thing that I would like to ... mention is
that the people testifying against the bill, I ...
really don't hear - and I really didn't hear them in
[the House Special Committee on Fisheries] -
testifying against limiting the entry in the Korean
hair crab fishery. I hear it more that they're
worried about how the entry commission may use it in
other fisheries.
I know Commissioner McDowell and the staff have worked
for years to try to figure out how to get this bill to
a point where it can only rarely be used, and before
they can use it, they have to first find that their
traditional way of limiting entry will not work. And
right now ... there's only two fisheries that they can
even foresee, and really the scallop fishery in not
even an issue anymore because the "feds" have taken
most of that problem away. The only one you ... have
is this Korean hair crab fishery. ... If you don't
limit the entry [and] give the commission the tools to
limit the entry into it, the "feds" will [limit the
entry]. So, I just ask you to please give the
commission the tool they are seeking.
I would just close by saying I know Commissioner
McDowell comes from a small-boat, coastal Alaskan
background, and I know she's very personally familiar
with the philosophical issues that we hear addressed
here. And she has tried to craft a bill with the
staff that addresses those concerns, while still
giving the practical ability for the state to use a
different program than it normally uses, in these very
rare fisheries.
MR. KYLE urged the House Resources Standing Committee to support
HB 206.
Number 2379
EDWARD C. FURMAN testified briefly in opposition to HB 206. He
said, "The fishermen from Cordova, Alaska, are against this
bill. That's all I have to say."
Number 2351
CO-CHAIR MASEK referred to page 2, lines 22-24. She asked Ms.
McDowell about a guarantee that would protect the smaller owner-
operator fishery.
MS. McDOWELL replied that it was true this issue would be left
to the CFEC to determine. She detailed the categories
considered before any limitation is decided upon: usually a
petition process; data analysis done by research and data-
processing staff; a decision about what program to use; and a
full analysis of ownership patterns. She said, "In a case where
we could meet the purposes of limited entry Act, based on those
ownership patterns, we would need to default to this."
MS. McDOWELL mentioned a point system used to rank applicants,
but added that the dilemma with the current program is that the
department is bound to create a "maximum number," which means
that the number of permits that must be issued in a fishery must
be set. Ms. McDowell stated, "The supreme court has ruled that
we must issue permits to the highest number of participants in
any one of the four years prior to a limitation." She added:
Yes, we could use a point system to rank those people,
but if the number of permits that you have to hand out
is much larger than the number of boats that have been
participating, that's where you start to run into this
problem of "grandfathering" in more participants than
you had at the time of limitation. ... If we could
limit with a number that would meet the purposes of
limited entry Act, using our traditional program, we
would feel bound by this statute to do that.
Number 2175
CO-CHAIR MASEK mentioned the zero fiscal note attached to the
bill, but asked Ms. McDowell if this would add any cost to the
limited commercial fishing industry or the CFEC.
MS. McDOWELL responded, "It wouldn't, in that this is enabling
legislation that just creates another framework, and for any
fishery that petitions us for limited entry, we would have to go
through the same process either way."
CO-CHAIR MASEK referred to previous comments about scallop
permits going to a large company, and asked if it would require
investigation "if that is happening."
MS. McDOWELL answered that the risk that one company will buy
many permits is [addressed] by the provisions allowing the
department to cap how many permits in a given fishery any single
entity could obtain. A permit has to be renewed every year, so
if shareholders or partners change, that change of ownership
would have to be reported, for each year, and could trigger the
need to transfer it to a human being. She said she thought that
although some details would need to be worked out, the language
of the bill provides protection to avoid consolidation.
CO-CHAIR MASEK inquired how much a scallop or Korean hair crab
boat costs.
CO-CHAIR SCALZI estimated $600,000 to $1.5 million.
MR. KYLE said he didn't have an answer regarding the cost of a
scallop boat, but a crab boat runs between $600,000 and $1
million.
CO-CHAIR MASEK asked what percentage of owner-operators are sole
owners, versus large corporate owners.
MS. McDOWELL responded that according to her records "most of
them are owned by partnerships." She added that only about ten
vessels qualified under the moratorium for scallops; however
there are people outside the state interested in getting into
these fisheries, if they should "go open-access." In response
to a follow-up remark by Co-Chair Masek, Ms. McDowell stated,
"In these fisheries, there are no smaller vessels. This is ...
the whole ...state-water scallop fishery."
Number 1900
CO-CHAIR SCALZI announced that HB 206 be held over.
[Co-Chair Scalzi called a brief at-ease at 2:17 p.m. and turned
the gavel over to Co-Chair Masek, who brought the meeting back
to order at 2:28 p.m.]
HCR 8-NORTH SLOPE NATURAL GAS PIPELINE ROUTING
Number 1877
CO-CHAIR MASEK announced that the next order of business would
be HOUSE CONCURRENT RESOLUTION NO. 8, Expressing the
legislature's opposition to the proposed "northern" or "over-
the-top" route for a natural gas pipeline to transport North
Slope natural gas reserves to the domestic North American
market, and expressing the legislature's support of
commercialization of North Slope natural gas for the maximum
benefit of the people of the state.
[There was a motion to adopt CSHCR 8(O&G) for discussion
purposes, but it was already before the committee.]
Number 1825
REPRESENTATIVE JIM WHITAKER, Alaska State Legislature, sponsor,
told members that HCR 8 is a special-interest resolution for the
people of Alaska. Furthermore, the resolution does not compete
with SB 164, but stands alone as a resolution that states
clearly that "the legislature opposes a so-called over-the-top
routing for a natural gas pipeline," and that the legislature
will do all that is within its power to encourage natural gas
commercialization "in a manner consistent with our maximum
benefit constitutional mandate."
REPRESENTATIVE WHITAKER gave a PowerPoint presentation, which he
explained was the result of consideration, over several years,
of the subject of natural gas and what it means to the State of
Alaska. [A written copy of the presentation is included in the
committee packet.]
REPRESENTATIVE WHITAKER showed the first PowerPoint "slide,"
titled "Natural Gas in Alaska: What does It Mean to the People
of the State?" He told the committee that natural gas means
$680 million to $4.2 billion to the state per year;
significantly lower energy costs for all Alaskans; and major
direct and indirect employment opportunities for all Alaskans,
"if we demand that our resource be developed in our best
interest."
REPRESENTATIVE WHITAKER referred to charts provided by BP
[Exploration (Alaska) Inc.]. He said between 1985 and 1998 the
use of natural gas for home heating had increased substantially,
to 70 percent. Even though heating use has decreased from
electrical generation, other uses have significantly increased;
therefore, use of natural gas has dramatically increased for
generating electricity. Gas and oil [uses] are increasing,
while coal [use] is declining, but gas is at the top of the "new
energy mix."
REPRESENTATIVE WHITAKER indicated on a chart that natural gas is
"clean and green," and he compared the differential between
waste products associated with coal versus gas. Natural gas is
also significantly less of an air pollutant, compared to oil and
coal. He added, "the demand for natural gas is soaring."
REPRESENTATIVE WHITAKER referred to a chart titled "Supply &
Demand For North America" that depicts a "demand curve" for
natural gas in North America, conservatively projected by the
Energy Information Administration. Representative Whitaker
indicated a special additional supply expected from Mexico and
the Rocky Mountain area, as well as the Mackenzie delta supply
and gas from an Alaskan pipeline project. Based upon the best
information available today, he concluded that the demand [for
natural gas] exceeds the supply.
REPRESENTATIVE WHITAKER highlighted another chart entitled
"Supply & Demand For The Pacific Rim," showing "contracted
supply volume" and "contracted supply extension." He mentioned
an Alaskan LNG [liquefied natural gas] project scheduled to go
online in 2007 and a Sakhalin LNG project scheduled to go online
[by approximately 2004]. Representative Whitaker stated that
given a low demand, supply exceeds demand; given a medium
demand, "it's very tight"; and given a high demand, demand
exceeds supply. He said he was not nearly as comfortable with
this chart as the previous one; however, he stated his
confidence that "we'll raise supply to this level."
Number 1378
REPRESENTATIVE CHENAULT asked Representative Whitaker if the
number "70" on the chart stood for metric tons or billion cubic
feet.
REPRESENTATIVE WHITAKER confirmed that it was in metric tons.
He returned to the PowerPoint and introduced the next category
entitled "The World Market Dynamic Reality: Supply Will
Restrict Demand For The Foreseeable Future," which means that
prices will remain significantly higher than they have been in
the past. He said, "Given that Alaska's North Slope has the
largest undeveloped reserve of natural gas in North America, we
Alaskans, and particularly we legislators, need to ask
ourselves, 'how do we take advantage of that situation?'"
Representative Whitaker said the simple answer to that question
is that we [Alaskans] take our gas to market.
REPRESENTATIVE WHITAKER outlined routing options shown on
individual maps: the "over-the-top" route, which he described
as undesirable; the [governor's preferred] "highway" route; the
TAGS [Trans-Alaska Gas System] route, touted by Jeff Lowenfels
[of Yukon Pacific Corporation]; and the "hub" approach.
REPRESENTATIVE WHITAKER referred to a projection showing the
state constitution, Article VIII, Section 2, which reads, "The
legislature shall provide for the utilization, development, and
conservation of all natural resources belonging to the State,
including land and waters, for the maximum benefit of its
people." He said that the constitution makes it clear what the
responsibility of the legislature is.
REPRESENTATIVE WHITAKER outlined his ideas for attaining the
maximum benefit and best interest of Alaska. He emphasized the
need for maximum market exposure, saying an overland route alone
would exclude markets throughout the world, specifically Asia
and probably the U.S. West Coast. By connecting to multiple
markets, "we stabilize market opportunities for this very ...
valuable commodity resource." He noted that the "over-the-top"
and "Foothills/highway" routes exclude Asia, and the TAGS route
excludes mid-America; therefore, he stated that the hub approach
provides maximum market exposure.
REPRESENTATIVE WHITAKER next discussed how to obtain maximum
dollars to the state. He specified two options for financing:
public and private. Public financing, he explained, will exempt
the financing component from federal taxes, "which significantly
improves the economics of an Alaskan gas project and increases
the return to the state." Additionally, Representative Whitaker
estimated that the return on financing a project this size
should be "8-12 percent of capital costs per year, for 30
years," which would be a significant return to the state.
REPRESENTATIVE WHITAKER turned to the issue of public versus
private ownership. He told the committee that under public
ownership, besides being exempt from all federal income taxes, a
state-owned pipeline would give a greater netback to the state.
Furthermore, the state would not pay a tariff for royalty gas.
In comparison, under private ownership the returns on a project
would be much less to the state because of taxes paid to the
federal government and a tariff paid on royalty gas to "big
oil." Representative Whitaker clarified that he is not an enemy
of "big oil," stating that he lived in Alaska before [those
companies] were here and that his options for prosperity and for
opportunity were significantly less than they are today. He
continued:
What's the difference between public and private
ownership? We've made an assumption. That assumption
is a six bcf [billion cubic feet] per day project. ...
Given that, and given a rather conservative gas price
at $2.59 per million Btu(s), which is roughly
equivalent to 1,000 cubic feet, in mid-America -- this
is the Purvin & Gertz model. We didn't change it; we
used all their assumptions. What we did insert was a
six bcf project, [with] four ... bcf per day going to
mid-America [and] two bcf per day as an "LNG" option.
REPRESENTATIVE WHITAKER said assuming a price of $2.59 per
million Btu(s), the state would receive $1.3 billion under
public ownership and only $680 million under private ownership.
He indicated that the charts also gave assumptions of gas prices
at $4.50 and $8.00. Currently the price is $5.34.
Representative Whitaker noted that the return to the state would
be a fair one. He added, "This is a huge commodity resource,
the power of which should never be minimized."
Number 0765
REPRESENTATIVE STEVENS asked Representative Whitaker to explain
what he meant by "tariff."
REPRESENTATIVE WHITAKER replied that the tariff is a charge
assessed to those who use the facility. In response to follow-
up questions, he explained:
The owners of the current TAPS [Trans-Alaska Pipeline
System] are those [who] assess the tariff. And that
is charged to themselves, as well as other users,
including the state. As the current owners of the
existing TAPS line have the right and the opportunity
to charge a tariff - which is essentially a return on
investment - so too would the state ... have a right
and an opportunity to charge a transportation tariff
[on a state-owned gas pipeline].
REPRESENTATIVE WHITAKER returned to his discussion, detailing
"maximum in-state usage opportunities" that increase in relation
to two factors: the number of population centers the pipeline
crosses, and the number of miles of pipe in the state. He
indicated the "over-the-top" route does not include those two
factors; the "highway" route is "close"; the TAGS route is
"closer"; and the hub route works the best.
Number 0585
REPRESENTATIVE WHITAKER addressed the next PowerPoint idea:
"Maximum Competition For Gas Production," which he emphasized
was a key criterion. He stated:
Given that a competitor cannot have equal access to a
gas pipeline, given that that competitor is not
receiving the benefit of a tariff that an owner would,
that competitor is at a competitive disadvantage. And
we find that to be true with the current TAPS line.
We should not allow that to happen again.
There was a time when we were producing, on the North
Slope, 2.1 million barrels of oil [per day]. Today we
have three producers and they produce 1.1 million
barrels per day. A number of factors relate to that;
certainly depletion is one of those factors. But I am
nearly emphatic in my statement that a significant
part is played in the production decline on the North
Slope that relates directly to the number of
competitors doing business on the North Slope.
REPRESENTATIVE WHITAKER emphasized that [Alaska] should strive
to have the maximum number of competitors for gas on the North
Slope, which it cannot do unless there is a publicly owned
pipeline, which ensures that no producer will be precluded from
having equal access at an equal cost.
Number 0447
REPRESENTATIVE WHITAKER turned attention to "Maximum Job
Opportunities For Alaskans," calling it a "no-brainer" that it
is the state's job to ensure that both short-term and long-term
jobs associated with the gas pipeline project are provided to
Alaskans.
REPRESENTATIVE WHITAKER concluded his PowerPoint presentation by
summarizing the reasons that the hub approach, publicly financed
and owned, yet privately operated, would be the best choice and
would serve the best interests of all Alaskans. He told the
committee that there is substantial basis to what had been
discussed: sound economics, and a sound understanding of the
market. He added, "It is very clear that Alaska's natural gas
resource is substantially larger than we might have thought at
first glance."
REPRESENTATIVE WHITAKER emphasized that the resolution makes two
statements: First, there should be no "over-the-top" routing.
And second, the legislature should acknowledge its
responsibility to ensure that this resource goes to market "in a
manner consistent with the best interest of the people of the
state of Alaska."
Number 0144
CO-CHAIR MASEK asked whether Representative Whitaker had plans
to distribute the resolution to any groups in particular.
REPRESENTATIVE WHITAKER answered that he hadn't thought of a
distribution list, but would certainly entertain any thoughts
the committee might have in regard to that, in the form of a
committee substitute.
TAPE 01-30, SIDE A
Number 0053
REPRESENTATIVE WHITAKER, in response to a question by
Representative Stevens, said in "our" model an assumption was
made that the cost of a pipeline project would be financed by
the permanent fund. He said it is beyond him why "we" would
borrow money when we have a substantial amount to begin with; he
doesn't think [the state] could make a better investment, both
for infrastructure or on investment return. The return from the
permanent fund this past year was "less than sterling," which is
to be expected during a market downturn, he commented.
REPRESENTATIVE WHITAKER explained that this is a long-term
investment, guaranteeing a return somewhere in the neighborhood
of 8 to 12 percent, which outperforms the permanent fund
historically. The risk is that the market would "go away," but
Representative Whitaker said he didn't think that would happen.
He reiterated that the assumption is that the permanent fund
would finance the project.
Number 0211
MICHAEL J. HURLEY, Government Relations, North American Natural
Gas Pipeline Group, came forward to testify as follows:
As you are aware, the three companies participating in
the group (BP, Exxon/Mobil, and Phillips) have been
working diligently to develop an economically viable
project to commercialize North Slope natural gas by
pipeline through Canada to the Lower 48 market. And
in doing that, it is incumbent on us to fully consider
the options that could help us accomplish that goal.
Indeed, the Federal Energy Regulatory Commission
[FERC], before it will issue a certificate of public
convenience and necessity, requires us to analyze
alternative pipeline route options as part of the
application process.
This project has the potential to be the largest
energy project in North America, and will require
capital investments in the billions of dollars. These
investment decisions cannot be taken lightly, and must
be made with the confidence that can only be gained by
a thorough evaluation of the alternatives, and an
understanding of their relative strengths, weaknesses,
risks, and rewards. Such an approach is fundamental
to good business decision-making.
Our efforts have been focused on creating and
understanding opportunities, not prematurely
discarding them. This resolution seems to suggest we
do the latter. We believe that legislative action
which recommends shutting down options before they are
fully understood limits dialog and interferes with the
fundamental dynamics of a free-market economy.
It cannot be forgotten that any Alaskan gas project,
whether it's LNG, GTL [gas-to-liquids] or pipeline
technology, must be able to deliver products to the
market at a competitive cost in order to succeed.
There are many other competing sources of supply, and
buyers will be going elsewhere if a project fails to
deliver in this regard. If either Alaska project
advances, the benefits to the state and its citizens
and businesses will be substantial, and will make a
significant contribution to Alaska's economic future.
Finally, the work we are undertaking this year will
yield information that we believe will be necessary
for reasoned decision making. We have been listening
to the views and concerns of the Alaska legislature
and Alaska's citizens, and we will be evaluating
alternatives on the basis of seven criteria: overall
project economics, Alaskan access to gas, jobs for
Alaskans, revenues to the state, safety, environmental
protection, and project timing.
MR. HURLEY said [his group] doesn't feel that it has enough
information to make a "route" decision based on those criteria,
which is the reason for its aggressive work program. The
interest of commercializing North Slope gas is best served by
creating, not eliminating, choices. [The group] expects there
will be many opportunities in the future for legislative
guidance and action.
Number 0565
REPRESENTATIVE SCALZI asked if [the group has put] a value on
what benefits Alaska might utilize in terms of production of gas
in the state and the [sustainability of the] workforce when
assessing choices.
MR. HURLEY said that is part of the seven criteria; [the group]
understands that those are interests to the citizens and the
legislature of the state. [The group] understands what those
things mean to the parties involved, and [they] are taken into
account. For any kind of analysis one does on a project of this
magnitude, there is always a balance of benefits.
MR. HURLEY noted that those balances need to be made in an open
discussion between industry and the stakeholders in the project.
This will include the State of Alaska, Canada, some of the Lower
48 states that the pipeline will pass through, as well as the
relevant federal [agencies]. All will have a stake in how this
decision ultimately gets made; [the group] wants to try to
recognize the interests of all parties involved.
Number 0730
REPRESENTATIVE SCALZI asked if an environmental impact statement
(EIS) is going to be done to quantify a dollar value to these
things, or whether there will just be the "generic tradeoff"
language.
MR. HURLEY explained that [the group] fully expects that an EIS
will be done during this process, as well as other socioeconomic
studies that are required as part of the Federal Energy
Regulatory Commission (FERC) application process. He said that
is part of the program [the group] is working on during this
year, which needs to be concluded before the applications go in.
Number 0783
REPRESENTATIVE FATE referred to FERC's issuance of a
certificate. He asked if the discussion on this point referred
to the northern or "over-the-top route," or to a route that FERC
had already issued certificates on, the southern route down the
pipeline.
MR. HURLEY responded that the "over-the-top" route would need a
new certificate. It is [the group's] expectation that the
southern route may end up getting a new certificate, too, but
[the group] doesn't know that. Right now, there is a lot that
FERC is unsure of, according to some of FERC's recent documents.
What [the group] is doing right now is to push forward as if
these are going to be "two green options," because [the group]
doesn't want to wait for that to be resolved before starting
work.
MR. HURLEY said in either case, whether using existing
certificates or new ones, he believes a lot of the work that
will be done by the group during the year will be necessary. A
lot of the new environmental work and socioeconomic will need to
be done; those kinds of things aren't under an existing
certificate.
Number 0926
REPRESENTATIVE FATE referred to the seven criteria used for
evaluation. He questioned the one that says, "Alaskans' access
to gas" and asked if the intent was for local markets.
MR. HURLEY responded affirmatively. He said "we" understand the
need and interest in having gas for local consumption in the
state.
REPRESENTATIVE FATE said he didn't see anywhere where [the
group] had taken into account the political awareness or the
Alaska constitutional mandate, which was seen on the PowerPoint
presentation. He asked if it would be among the points that
[the group] uses as criteria.
MR. HURLEY replied that he wouldn't put it that way, but many
things inherent in the constitutional mandate are things [the
group] is looking at in the seven points. The constitutional
mandate is a mandate to the legislature; [the group] recognizes
the things [the legislature] is interested in, and is taking
those into account within the seven points.
Number 1065
REPRESENTATIVE McGUIRE said she sees in Mr. Hurley's testimony
that FERC requires an analysis of multiple options before
issuing a certificate. She asked, "Are you making the
assumption that anything in this resolution that the legislature
passes ... would preclude you from still analyzing those other
options."
MR. HURLEY replied no. He explained that a resolution is a
statement of preference, and said the legislature absolutely has
a right to have a preference. [The North American Natural Gas
Pipeline Group] would suggest [to the legislature] that it may
be premature to have a preference in that there is a lot of
information currently being developed. He noted that [the
group] is spending $75 million this year developing information
about the alternatives, which will provide more information in
order to make a better decision.
Number 1189
REPRESENTATIVE STEVENS asked Mr. Hurley if he disagrees with any
of the figures that Representative Whitaker used in his
presentation.
MR. HURLEY responded that he [would disagree]. However, he is
not prepared to talk about the facts and figures in detail. He
stated that he is suggesting that there is additional
information that will be appropriate for [the legislature] to
think about before making a decision on a preference.
REPRESENTATIVE STEVENS remarked that he assumes Mr. Hurley is
not objecting to the figures that were used.
MR. HURLEY replied that he does disagree with some of them and
has some questions; one example is with respect to the tariff
number that was asked about earlier. His understanding of
tariffs, having done them for some of the North Slope pipeline,
is that they are primarily made up of two components: cost and
rate of return. He noted that he has not had chance to look at
Representative Whitaker's numbers; therefore, he doesn't know
what they represent.
REPRESENTATIVE KERTTULA commented that she didn't understand how
the tariffs worked either.
Number 1399
CO-CHAIR MASEK made a motion to adopt a conceptual amendment, at
the bottom of the resolution, adding, "copies to be sent to
President Bush, Secretary of Interior Gail Norton, the Governor,
U.S. Congress, and other major development companies."
Number 1500
REPRESENTATIVE FATE made a motion to move CSHCR 8(O&G), as
amended, out of committee with individual recommendations and
attached fiscal note. There being no objection, CSHCR 8(RES)
moved from the House Resources Standing Committee.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 3:10 p.m.
| Document Name | Date/Time | Subjects |
|---|