03/28/2003 01:05 PM House RES

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* first hearing in first committee of referral
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ALASKA STATE LEGISLATURE HOUSE RESOURCES STANDING COMMITTEE March 28, 2003 1:05 p.m. MEMBERS PRESENT Representative Hugh Fate, Chair Representative Beverly Masek, Vice Chair Representative Carl Gatto Representative Cheryll Heinze Representative Bob Lynn Representative Carl Morgan Representative Kelly Wolf Representative David Guttenberg Representative Beth Kerttula MEMBERS ABSENT All members present COMMITTEE CALENDAR HOUSE BILL NO. 187 "An Act extending the termination date of the Board of Storage Tank Assistance; and providing for an effective date." - MOVED HB 187 OUT OF COMMITTEE HOUSE BILL NO. 61 "An Act establishing an exploration and development incentive tax credit for persons engaged in the exploration for and development of less than 150 barrels of oil or of gas for sale and delivery without reference to volume from a lease or property in the state; and providing for an effective date." - MOVED CSHB 61(RES) OUT OF COMMITTEE HOUSE BILL NO. 97 "An Act authorizing a long-term lease of certain Alaska Railroad Corporation land at Anchorage; and providing for an effective date." - MOVED HB 97 OUT OF COMMITTEE SENATE BILL NO. 79 "An Act extending the termination date of the Alaska Minerals Commission." - MOVED SB 79 OUT OF COMMITTEE HOUSE BILL NO. 208 "An Act relating to hunting on the same day airborne; and providing for an effective date." - HEARD AND HELD HOUSE BILL NO. 191 "An Act relating to the Alaska coastal management program and to policies and procedures for consistency reviews and the rendering of consistency determinations under that program; relating to the functions of coastal resource service areas; creating an Alaska Coastal Program Evaluation Council; eliminating the Alaska Coastal Policy Council; annulling certain regulations relating to the Alaska coastal management program; relating to actions based on private nuisance; relating to zoning within a third class borough covered by the Alaska coastal management program; and providing for effective dates." - BILL HEARING POSTPONED PREVIOUS ACTION BILL: HB 187 SHORT TITLE:EXTEND BOARD OF STORAGE TANK ASSISTANCE SPONSOR(S): RLS BY REQUEST OF LEG BUDGET & AUDIT Jrn-Date Jrn-Page Action 03/12/03 0511 (H) READ THE FIRST TIME - REFERRALS 03/12/03 0511 (H) RES, FIN 03/26/03 (H) RES AT 1:00 PM CAPITOL 124 03/26/03 (H) -- Meeting Canceled -- 03/28/03 (H) RES AT 1:00 PM CAPITOL 124 BILL: HB 61 SHORT TITLE:OIL & GAS TAX CREDIT FOR EXPLORATION/DEV SPONSOR(S): REPRESENTATIVE(S)CHENAULT Jrn-Date Jrn-Page Action 01/24/03 0060 (H) READ THE FIRST TIME - REFERRALS

01/24/03 0060 (H) Committee CHENAULT, BILL: HB 97 SHORT TITLE:LONG-TERM LEASES OF ALASKA RR LAND SPONSOR(S): REPRESENTATIVE(S)KOHRING Jrn-Date Jrn-Page Action REFERRALS HOLM, MASEK BILL: SB 79 SHORT TITLE:EXTEND ALASKA MINERALS COMMISSION SPONSOR(S): SENATOR(S) STEVENS B Jrn-Date Jrn-Page Action REFERRALS WAGONER, HOFFMAN, 532 UNAN CONSENT REFERRALS LYNN BILL: HB SHORT TITLE:HUNTING SAME DAY AIRBORNE SPONSOR(S): REPRESENTATIVE(S)FATE Jrn-Date Jrn-Page Action REFERRALS WITNESS REGISTER LAURA ACHEE, Staff to Representative Ralph Samuels Alaska State Legislature Juneau, Alaska POSITION STATEMENT: Presented ACTION NARRATIVE TAPE 03-19, SIDE A Number 0001 CHAIR HUGH FATE called the House Resources Standing Committee meeting to order at 1:05 p.m. Representatives Fate, Masek, Gatto, Heinze, Wolf, and Guttenberg were present at the call to order. Representatives Lynn, Morgan, and Kerttula arrived as the meeting was in progress. HB CHAIR FATE announced that the first order of business would be HOUSE BILL NO. 187, "An Act extending the termination date of the Board of Storage Tank Assistance; and providing for an effective date." Number 0201 LAURA ACHEE, Staff to Representative Ralph Samuels, Alaska State Legislature, presented 187 Number 1272 REPRESENTATIVE MASEK noted that USTs are for commercial-use purposes such as gas stations. She asked Mr. Barnett to inform the committee of the target [of BSTA]. MR. BARNETT said in the "universe of tanks," which is regulated by this program, about 40 percent are probably service and retail stations. The balance of [UST owners and operators] are a mixture of everything from rental car companies to construction contractors, as well as a number of small grocery [stores] and other small businesses such as filling stations and roadhouses. "It's actually only about 30 or remarked. He said airports and aircraft-related tanks are associated with this program as well; quite a few different types of tanks are involved, but they are primarily gasoline tanks. Number 1360 REPRESENTATIVE GUTTENBERG noted that usually when a board is "sunsetting," a legislative audit [is conducted]. He asked for comments or criticisms on the audit report; he noted that he had not seen it. MR. BARNETT, in response, said the audit was as thorough as usual, and he noted that he done four [audits to date]. He said [the audit] usually takes a considerable amount of time, and he told the committee that he felt [the auditors] took an equal amount of time with the department and the industry before a consensus [was reached]. He indicated the audit was satisfactory. REPRESENTATIVE GUTTENBERG asked whether any improvements could be made. MR. BARNETT said no. Number 1435 REPRESENTATIVE GATTO asked if [BSTA] had any jurisdiction over aboveground storage tanks. MR. BARNETT, in response, said [BSTA] does not have any jurisdiction related to aboveground tanks, but had assisted, in the past, when asked; had assisted in putting on workshops; and had helped to put together documents over the past decade to assist. He noted BSTA had also lent its expertise at times, but had no authority related to that. CHAIR FATE, upon determining that no one else wished to testify, closed public testimony. REPRESENTATIVE GUTTENBERG commented that he was in support of [HB 187]; he noted a copy of the audit for review. CHAIR FATE said it's always useful if there's a problem with extending the authority [of a board] or if that authority is extended, whether or not there are certain improvements that have to improved within that authority as outlined. He noted that he had not read the audit, but he indicated he could attest to how that mechanism works because of his prior experience on the Joint Committee on Legislative Budget and Audit. Chair Fate said [HB 187] is board has been very useful, as testimony had indicated. He suggested if improvements to the board were needed, they probably would be pretty minor. Number 1559 PAT DAVIDSON, Legislative Auditor, Division of Legislative Audit, Alaska State Legislature, informed the committee that no findings or recommendations [were made] during the course of the audit relating to making any improvements to the board's operations. A four-year extension was recommended and was based on the role that the board plays in the transition from a grant program into a loan program. Mentioning development of regulations, she said that while there has been a decreasing amount of activity for the board, this major shift in the financing of cleanup activities will result in new questions. The board has quite extensive institutional knowledge about the program, she said, and it was found that it is very helpful. Therefore, based on those factors, a four-year extension is recommended. Number 1629 REPRESENTATIVE MASEK moved to report HB 187 Committee. HB CHAIR FATE announced that the next order of business would be HOUSE BILL NO. 61, "An Act establishing an exploration and development incentive tax credit for persons engaged in the exploration for and development of less than 150 barrels of oil or of gas for sale and delivery without reference to volume from a lease or property in the state; and providing for an effective date." Number 1687 REPRESENTATIVE MASEK moved to adopt HB 61 credit to encourage increased exploration and development of natural gas resources in areas south of the Brooks Range. To qualify for the [income tax credit] under CSHB 61(O&G), [bill] is strictly dealing with gas issues. Saying "new gas" was [better defined], he paraphrased from page 3, lines 22-26, which read in part: (1) "qualified capital investment" means a cash expenditure or binding payment agreement, as described in (b)(1) of this section, for real property or tangible personal property used in this state in the exploration and development of gas reserves in a gas reservoir for which there has not been commercial production if the reserves produce gas for sale and delivery Number 1781 REPRESENTATIVE CHENAULT said [this legislation] is a "successful efforts bill," which means no credits will be given for dry holes. He suggested that the Cook Inlet area continues to have great potential for additional natural gas development, and that other Alaska basins outside the North Slope have a similar potential. However, he said, a combination of exploration risks, high development costs, and historically low natural-gas prices have created a disincentive to drill for new reservoirs as compared with other areas of the world. REPRESENTATIVE CHENAULT told members that if credit is provided for successful efforts, more exploration will occur in southern Alaska, leading to much-needed new natural gas reserves. This will be a benefit to all residents and businesses at no direct cost to the state, he suggested. In addition to the benefit of developing new gas reserves, increased drilling in Cook Inlet also will aid the general economic status of the Kenai Peninsula, Anchorage, and other areas of the state. Moreover, increased tax revenue from additional gas production will more than offset any fiscal impact from the proposed credit, he said. Number 1885 REPRESENTATIVE MASEK turned attention to the fiscal note provided by the Department of Revenue (DOR). She cited a section of the analysis that read, "Corporations could use their tax credits under this legislation to reduce taxes paid to the state for North Slope production or production from elsewhere in the state." She asked about the impact on current North Slope producers. REPRESENTATIVE CHENAULT, in response, suggested the question could be better answered by someone with DOR. He said, to his knowledge, that certain corporations now work on the North Slope but don't really have any holdings south of the Brooks Range that they're currently drilling. He suggested DOL could better [determine] whether that would have an effect. Representative Chenault also suggested that all corporations probably have leases in Cook Inlet and other areas of the state and the North Slope. He indicated the possibility that the bill could [impact current North Slope producers]. However, he clarified that this tax [credit] is not [intended] for gas reserves on the North Slope; rather, it's for reserves developed south of the Brooks Range. REPRESENTATIVE MASEK asked for clarification from DOR. Number 2034 CHUCK LOGSDON, Chief Petroleum Economist, Tax Division, Department of Revenue, responded: Yes, ... in fact, it's the activity that generates the credit, and if a corporation did have production on the North Slope or was engaged in activities that generated income tax on the North Slope, and they also began to explore and develop in the Cook Inlet, to the ... extent that they produced and sold natural gas, to the extent if they spent enough money in the inlet, such that their only limit would be their total income in Alaska ... or 50 percent of their total corporate liability in Alaska, which would, of course, include income tax liability from North Slope operations. So, ... we're not saying that necessarily would happen, but that it could happen. REPRESENTATIVE MASEK turned attention to another section of DOR's fiscal note, which read, " Oil and gas corporate income tax collections in FY 2003 and FY 2004 are currently projected at $160 million and $200 million per year, respectively." Number 2156 JOHN A. BARNES, P.E., Alaska Business Unit Manager, Marathon Oil Company ("Marathon"), came forward to provide a presentation on why Marathon believes the bill is needed. Referring to a handout in packets, he noted that [page 2 of the handout] talks about what does. He told members: As was mentioned, it creates an income tax credit for exploration development of gas reserves south of the Brooks Range. I'd just like to stress that even though the focus is on the Cook Inlet, there are other basins in Alaska that may have gas potential. And this incentive would also apply to exploration efforts in those areas. Again, the focus is on natural gas. A key point ... is that these are the types of efforts that level the playing field in drawing capital into the state of Alaska from other opportunities that companies may have around the world. ... That is the goal, to draw more capital to the Cook Inlet, ... in context to the other comment about other basins, to draw potentially more capital to the state of Alaska. The next slide [page 3 of the handout], talking a little bit more detail about how the bill works: it would apply to 10 percent of qualified capital investment. It would apply to 10 percent of the qualified expenses that were associated with putting that capital investment to work. It would offset no more than 50 percent of corporate income tax in any one year, but it could be carried over for five additional years. It only applies to successful efforts, as was stated; it would not apply to dry holes or other work. Number 2274 MR. BARNES referred to [page 4 of the handout] and continued: And finally - this is important from the industry side - it could be factored into project economics when you understand weighing investment opportunities in the state of Alaska versus other opportunities. This is a robust, easily identified factor that could be measured. Why is it needed? First, natural gas reserves have been and are continuing to decline in the Cook Inlet. The current Cook Inlet proven reserve base is about 2 ... tcf [trillion cubic feet] ... on mixed units; 2 tcf is about 2000 bcf [billion cubic feet]. Those of you that talk about North Slope gas, it's smaller than that; I wish it was that big. These numbers are based on the DNR [Department of Natural Resources], [Division] of Oil and Gas, 2002 report. Finally, ... despite recent increases in Cook Inlet activity, the reserves are not being replaced on an annual basis. ... If you don't replace reserves annually, your reserve base will go down. Number 2317 On the next slide [page 5 of the handout], I'll talk a little bit about the impact of not replacing reserves. This slide shows the Cook Inlet proven reserves; that's gas that you know is in place through production and other geologic testing. In 1990, there was about three and a half tcf of gas, and in '95, '96, to '97 there were recalculations done. This is not the result of new work; it's just new estimates of the reserves increased ... to a higher level in '97; then they've continued to decline until 2002, in which I reported they were about two tcf or the 2000 bcf. Next slide [page 6 of the handout], ... why is House Bill 61 needed? Cook Inlet deliverability has declined over the last several years. Deliverability is the ability to pull gas out of the ground. It's the rate at which you can produce gas. Number 2363 MR. BARNES continued: Next slide [page 7 of the handout] talks about Cook Inlet peak supply-and-demand requirements. The Cook Inlet is blessed for a lot of reasons. One is it gets very cold in the winter, and because of that you use a lot of gas to heat your homes and provide light. Seasonally, that swing can be about a factor of 3 to 1 between summer heating needs and winter needs. In 1997, the Cook Inlet deliverability, the production capacity, which is shown in red on this exhibit, was about 900 million cubic feet a day, and the total requirements [were] somewhat less than that. During the interim, since that time in 2003, Marathon estimates Cook Inlet deliverability of production capacity at about 667 million cubic feet a day, and that falls below the total requirements that the inlet sees. Number 2407 Next slide [page 8 of the handout], further as to why is it needed, what are the consequences of these points I've tried to make, supply and demand rationalization is occurring: there's not enough gas to feed the low price consumer. That's represented by that deficit between requirements and deliverability, and the gas price is increasing. That's, again, supply and demand. At the current time, ENSTAR's weighted average cost of gas - or WACOG, which is the price that they purchase the gas for, not what they sell it to the consumer - is about 255 per million cubic feet. More recent ENSTAR contracts have been signed at prices that range from $2.75 per mcf [thousand cubic feet] up to Henry Hub. And many of you have seen different reports of Henry Hub gas prices, they go up and down a lot, but recently they've been over $9 an mcf, [and for a] few moments, even higher than that. Number 2457 MR. BARNES continued: Looking ahead on the next slide [page 9 of handout], the Cook Inlet reserves and resources: as I've said, reserves represent gas that you know you have in the ground; resources are gas volumes that you believe are there but have not yet been proven up through the drill bit. The current proven reserve base - as I've said, 2,000 bcf - represents about 10 years of production if you assume that you have no decline in the rates, that you can get it out of the ground, which is not actually a valid assumption. The potential gas committee, which represents various professionals, have estimated Cook Inlet resources - again, those are the reserves that have not yet been discovered - at about 1,050 bcf; that's probable reserves. And then, even riskier, these are reserves that have probably less than [a] 20 or 25 percent chance of being there at about 2,100 bcf. The point of that is that there is potential in the Cook Inlet and there is a reason to continue to explore in the inlet and probably in other basins around the state. Number 2518 What are the impacts to the State of Alaska [page 10 of handout]? First, we believe that it will stimulate activities in the Cook Inlet, and we would hope that it would stimulate activities in other basins as well. We believe it would aid in maintaining the Cook Inlet's current 200-plus-bcf-per-year production. That's what's required to service all needs in the Cook Inlet. Just to the point of reference, that 200 bcf in a year: if you convert that on an energy basis to an oil basis, that represents about 33 million barrels of oil, which is about a thirteenth month of production off the North Slope. So, in world standards, it's a pretty good volume of energy that's being produced. What does it do? It provides gas for the Cook Inlet utilities, the "industrials" that are present, jobs, royalties, and taxes. Number 2557 MR. BARNES continued: Next slide [page 11 of handout]: I'd like to talk a little bit about potential fiscal impacts to the State of Alaska. And I think as it's been stated, ... it may be hard to measure, but we believe that they would be clearly positive to the State of Alaska. ... The things you need to look for when you try to understand what is the fiscal impact and measure it, you have to ask yourself how many developments will be incentivized that might not have happened otherwise: how much gas will ultimately be discovered, what's that volume that you've found, what will that gas sales price be. And the effect of that is what the state sees on royalties and severance tax, obviously. How much will be spent for exploration and development: that's not only, obviously, the measure of the incentive, but it also represents [money spent] in jobs in ... Alaska. To begin, it's successful- efforts-driven: unless gas is found and developed and produced, no incentive will be applied. Number 2610 MR. BARNES continued: Next slide [page 12 of handout]: I've tried to put together a conceptual estimate of the impact. ... I've [listed] ... six assumptions, and they're open for discussion if other professionals or economists would like to look at it, but I varied the field size from 0 to 500 bcf. I looked at a development cost of about 50 cents per mcf, which is a good cost - we're not always that effective - royalty, [12.5] percent; severance tax, [7.5 percent]; ad valorem taxes, just based on sort of an average 2.7 percent. Then I used a $2.50 gas sales price, which is at or near that weighted average cost of gas. Number 2642 The next slide's columns of numbers [page 13 of handout]: I'll just go ahead and briefly go across, and then graphically it's shown on an additional exhibit. If you were to talk about a 50-bcf discovery, the second row in the table, the producing company would probably spend $25 million to develop it; the tax cut would be about [$2.5] million. The total revenue that would be generated at that $2.50 sales price would be $125 million. Royalties that the state would receive if the state had the entire leasehold would be $15.6 million; it would receive about $9 million in severance tax ad valorem, which goes not only to the state but to the local borough - about $1 million. So, the total tax take under this set of assumptions would be about $26 million, which is about the same as the investment cost that was spent to develop it. The other thing to note, though, is that it's about 10 times the tax credit. So, it looks like, under this set of assumptions, there's about a 10-to-1 return to the state, ultimately, if the efforts are successful. Number 2705 MR. BARNES continued: The next slide [page 14 of handout] just graphically shows the same data. I've increased field size on the bottom from 0 to 500 bcf, and you can see the top two cost curves, the development costs, the little reddish squares, then the total tax take, which is just above that, the blue line, and then below that are the different components, and you can see ... near the bottom of the yellow line, [it] represents the tax credit. ... Based on this conceptual model subject to discussion or other assumptions, obviously, the total tax take from one field, which was incentivized, there's a couple ways to look at it; one proposition would be that it pays for the credit for 10 other fields or that the state receives 10 times that revenue. So, I really don't know how you'd want to measure that. ... We believe the credit's needed now; there's not enough exploration currently in the Cook Inlet to meet the demands that are there. Just as a point of fact, if you do have a new discovery, it will probably take a minimum of three years to get first gas production on. Number 2768 MR. BARNES continued: Last slide [page 16 of handout]: what are the success measures, what I think we ought to look for to determine if this credit was successful. I would want to believe that you'd see increased lease activity. The State of Alaska's done a very good job on their areawide lease program, but maybe we'd see ... additional leasing. I would hope to see additional drilling rig activity, ... the activity that counts the most. Subsequent to discovery is construction activity and, ultimately, increased production and deliverability. And, finally, the credit's applied to the income tax. And for every dollar of credit, approximately 10 dollars were spent developing new reserves, and I think that's a good measure. There's been discussions and questions in other meetings about impact on the ... income tax that oil and gas currently contributes to the state. One way to look at it would be, if you had a $10- million credit applied, that the state saw a $10- million reduction. The other thing would be to recognize that 10 times that amount - $100 million - had been spent successfully developing new oil and gas reserves, and Marathon's suggestion would be that that's probably a pretty fair way to look at it. Thank you for your time. I'm available for questions or as required. Number 2831 CHAIR FATE, upon determining that no one else wished to testify, closed public testimony. CHAIR FATE turned attention to some proposed amendments that would be offered. [Typed on one page, the amendments used brackets to delete language and underlining to add language.] He said one has to do with the retroactivity: there was a retroactive date that which would allow this type of credit to start or to have started; with concurrence of the industry, that date was moved ahead, so this credit won't begin to take place for a couple of months, to preclude any question of "double dipping." Chair Fate characterized the remainder of the [proposed amendments] as corrections and cleanup language. Number 2900 REPRESENTATIVE MASEK moved to adopt Amendment 1, which read [original punctuation provided]: Page 2, Line 6 Delete "December 31, 2002" [December 31, 2002] June 30, 2003 There being no objection, it was so ordered. Number 2927 REPRESENTATIVE MASEK moved to adopt Amendment 2, which read [original punctuation provided]: Page 3, Line 11 exploration and development of [oil or] gas There being no objection, it was so ordered. REPRESENTATIVE MASEK addressed Amendment 3, which read [original punctuation provided]: Page 3, Line 19 The expenditures [that support claims for investment tax credits] authorized under.... REPRESENTATIVE KERTTULA asked for clarification. CHAIR FATE indicated the purpose is to tighten the language up. Number 2973 REPRESENTATIVE MASEK turned attention to page 3 of the bill, lines 17-20, subsection (h), which read: For purposes of determining allowable credits under this section, the department shall allow only expenditures and payments that are not inconsistent with the expenditures that support claims for investment tax credits authorized under 26 U.S.C. (Internal Revenue Code) for exploration and development of natural resources. TAPE 03-19, SIDE B Number 2982 REPRESENTATIVE MASEK pointed out that Amendment 3 deletes from it the following: "that support claims for investment tax credits". Number 2976 REPRESENTATIVE KERTTULA expressed concern that those may be two different things: expenditures that support claims for investment tax credits are expenditures brought forward to support those claims, whereas expenditures for exploration and development of natural resources seem to be quite a bit broader. MR. BARNES explained that under the U.S. tax code there currently aren't investment tax credits; thus Representative Kerttula was identifying something that no longer existed. Number 2934 REPRESENTATIVE MASEK moved to adopt Amendment 3 [text provided previously]. There being no objection, it was so ordered. Number 2923 REPRESENTATIVE MASEK moved to adopt Amendment 4, which read [original punctuation provided]: Page 4, Line 31 and Page 5, Line 1 Eliminate the entire Retroactivity clause There being no objection, it was so ordered. Number 2904 REPRESENTATIVE MASEK moved to report CSHB 61(RES) Committee. HB Number 2839 CHAIR FATE announced that the next order of business would be HOUSE BILL NO. 97, "An Act authorizing a long-term lease of certain Alaska Railroad Corporation land at Anchorage; and providing for an effective date." The committee took a brief at-ease at 1:57 p.m. Number 2804 REPRESENTATIVE VIC KOHRING, Alaska State Legislature, sponsor, explained that HB some property at Government Hill in Anchorage from 55 to 75 years. Thus a developer wishing to build senior housing on the property would be able to qualify for a U.S. Department of Housing and Urban Development (HUD) 202 grant. Representative Kohring noted that just last year the legislature passed legislation that extended the lease on lands owned by the Alaska Railroad Corporation (ARRC) to 55 years so that developers could have a longer period of time and qualify for financing. Shortly thereafter, HUD specified that for the HUD 202 grant, a 75-year lease is required rather than a 55-year lease. REPRESENTATIVE KOHRING informed the committee that Alaska Enfranchise Facilities, Inc., wishes to build [a senior] facility funded through the HUD 202 grant. However, the developer needs a 75-year lease to build. Therefore, provides an extension on that particular piece of property on Government Hill. Number 2735 REPRESENTATIVE MASEK posed a situation in which there is development in the future and this project is in the way. In such a situation, would the state or the railroad have to buy out those who are building on the site? She inquired as to the impact this proposed project could have on long-term port expansion plans for Anchorage. REPRESENTATIVE KOHRING responded that although he couldn't predict the direction of the port expansion, he didn't expect the port to expand in the direction of Government Hill. With regard to Representative Masek's concern with the Knik Arm crossing, he said the location of that crossing hadn't been determined and thus he didn't believe it would be prudent to hold up the construction of this project, since there was no knowledge of when or if the crossing would be built. He said he has seen some of the proposed routes; the one receiving the most focus is to the west of Government Hill, far from the proposed building site. He added that the location of the proposed senior housing is in a highly developed area. REPRESENTATIVE MASEK asked where the state would fall if was passed and later this project was in the way [of the construction of the Knik Arm crossing]. REPRESENTATIVE KOHRING answered that he didn't know who would ultimately be responsible. However, he guessed that the federal government would ultimately be responsible because it would likely fund the project. He offered to research the issue. Number 2576 REPRESENTATIVE KERTTULA asked why this isn't a general grant of leasing authority to the railroad, rather than a special grant. "Why don't we just take a look at the policies of the railroad and make it general?" she asked. REPRESENTATIVE KOHRING agreed that the legislature could make a blanket extension from 55 years to 75 years. He deferred to the ARRC representative. REPRESENTATIVE KERTTULA explained her concern that if a law of general applicability can be passed [it would be better because] there may be constitutional problems with regard to special legislation. Number 2515 WENDY LINDSKOOG, Director, External Affairs, Alaska Railroad Corporation, acknowledged that this question has been coming up throughout the hearing process. She explained that ARRC's statutes specify that it has the broad authority to lease land for up to 55 years. However, the law is written such that ARRC has to obtain specific legislative approval to lease land for over 55 years unless ARRC reserves the right to terminate the lease. Therefore, the law requires that the railroad be specific with regard to the exemptions ARRC seeks. Ms. Lindskoog related her belief that Legislative Legal and Research Services found that [interpretation] to be consistent. REPRESENTATIVE KERTTULA said ARRC's enabling statute could be changed to make [the railroad's lease option] longer if the legislature so desires. She asked if the aforementioned is a good idea. MS. LINDSKOOG informed the committee that last year there was legislation that obtained authorization for the railroad to increase its lease from 35 years to 55 years, with which ARRC is comfortable. At that time, HUD requirements were for 40 years. However, the rules for HUD changed to 75 years. Number 2394 CHAIR FATE asked if ARRC has any other requests for extension of lease terms. MS. LINDSKOOG answered that the 55 years brings ARRC in line with what other state agencies, such as the University of Alaska, have. She reiterated ARRC's comfort with the 55 years. At this point, there are no other requests for leasing land for more than [55 years]. In further response to Chair Fate, Ms. Lindskoog said she didn't anticipate any other [lease requests beyond the 55 years] unless another HUD financing proposal surfaces. She said it's hard to guess. REPRESENTATIVE KOHRING suggested that there was somewhat of a precedent for lease extension when there was the change from 45 to 55 years for the Healy housing project in 2000. REPRESENTATIVE KERTTULA asked what this lease is for and whether there are any specific requirements for the lease itself. Number 2295 MARK MARLOW, Alaska Enfranchise Facilities, Inc. (AEF), confirmed that the lease is just for the land. REPRESENTATIVE KERTTULA pointed out that the claim has been that [HB housing. She asked what guarantee the state has that the land will be used for [senior housing] if the lease is only for the land. MR. MARLOW answered that if HB outdated and ARRC applies the same criteria for remote parcels as it does for parcels in the heart of an urban area. He also expressed concerns with regard to density in the Government Hill area. Directly across from this parcel of land are the highest- density multifamily housing complexes in the state. MR. PEASE turned to Representative Kohring's earlier statement that the developer is stuck because of the HUD change in its minimum lease requirement. He informed the committee that last year at this time there were two applicants interested in leasing the property. Before any lease was signed on this property, HUD announced that it was changing its minimum leasing requirements. In fact, one of the two applicants withdrew its application because of the changes. The current leaseholder knew before signing the lease that he wouldn't qualify for HUD said he considered HB Number 1814 REPRESENTATIVE GATTO said he has some notes referring to some railroad disputes over easement lands in Nenana. He asked if Representative Kohring knows any history [about that]. REPRESENTATIVE KOHRING answered that he wasn't aware of any. In response to Representative Lynn, Representative Kohring confirmed that Mr. Marlow is the same gentleman who owns the McKay building. Number 1755 REPRESENTATIVE GUTTENBERG directed attention to page 1, line 13, and the language reading "without reserving the right to terminate the lease if the land is needed for railroad purposes". He asked if that is standard language. MS. LINDSKOOG answered that it's standard language. She explained that legislative approval is required to lease land in excess of 55 years unless the railroad had the right to terminate. Therefore, the legislation allows the railroad to issue a longer-term lease without the right to terminate. The right to terminate is something that financers don't view as stable when issuing long-term projects. In further response to Representative Guttenberg, Ms. Lindskoog said that she didn't believe that ARRC has leased anything for longer than 55 years, but would have to check to be sure. Number 1659 CHAIR FATE requested that Ms. Lindskoog enlighten the committee with regard to the applicant who withdrew due to the HUD 202 grant requirements. MS. LINDSKOOG identified Anchorage Neighborhood Housing as that applicant. Anchorage Neighborhood Housing withdrew its application because of HUD's 75-year lease requirement. Furthermore, she recalled that there were some other environmental issues involved in that it was going to take Anchorage Neighborhood Housing longer to perform due diligence and be able to make lease payments on the land. However, Mr. Marlow said that he could make lease payments on the land at the time and he maintained his application. Therefore, ARRC's board was left with one application to review for this lease. She acknowledged that there were concerns from the neighborhood. CHAIR FATE asked if there has been any examination with regard to the impact such a project would have on a high-density area such as Government Hill. MS. LINDSKOOG replied no, although ARRC's board directive was to review ARRC's lease policy and see if it should be updated to allow for consideration when the area is dense. Now that there is a full board, the aforementioned is being reviewed and an updating of ARRC's policy should occur. Number 1496 REPRESENTATIVE GATTO related his assumption that the lease would include a default clause such that the land would be returned if the developer didn't perform. [Ms. Lindskoog nodded yes.] CHAIR FATE noted that the next committee of referral for is the House Finance Committee. Chair Fate said that although he has some reservations, he would like to see the legislation move from committee. He inquired as to the wishes of the committee. Number 1323 REPRESENTATIVE GATTO moved to report HB 97 think it's a second bite of the apple, and I don't like the testimony I've heard today," she added. A roll call vote was taken. Representatives Gatto, Heinze, Lynn, Morgan, Wolf, Masek, and Fate voted in favor of reporting HB 97 voted against it. Therefore, HB legislation], although he didn't want to stand in the way of good economic development. He related his belief that the next committee of referral would address that. [SB CHAIR FATE announced that the next order of business would be SENATE BILL NO. 79, "An Act extending the termination date of the Alaska Minerals Commission." Number 1120 REPRESENTATIVE KERTTULA moved to report HB CHAIR FATE announced that the final order of business would be HOUSE BILL NO. 208, "An Act relating to hunting on the same day airborne; and providing for an effective date." Number 1016 JIM POUND, Staff to Representative Hugh Fate, Alaska State Legislature, testified that HB Number 0866 REPRESENTATIVE HEINZE asked if an agent of ADF&G would be doing the shooting and how the agent would be defined and chosen. MR. POUND offered his understanding that it could either be an agent of ADF&G or an individual who is permitted by the commissioner; it would be a special permit. REPRESENTATIVE HEINZE asked for clarification regarding those responsible for doing the shooting. She said this really concerned her. Number 0761 BLAINE HOLLIS, Assistant Attorney General, Natural Resources Section, Civil Division (Juneau), Department of Law (DOL), testified that with regard to the agency issue, [DOL's] view is that it really doesn't change the status quo on that. He said with regard to the two changes to the bill, one would clarify whether both land-and-shoot and airborne shooting are allowed, whereas currently there is some question about whether land-and- shoot would be allowed. He said DOL's view is that probably the best reading of the current statute is that both are allowed currently, but the bill would clarify that and remove a potential ambiguity from the statute, clarifying that both types of predator control, land-and-shoot and aerial, are available to the department pursuant to subsection (a). MR. HOLLIS said the second change that the bill would make is to clarify that in addition to just considering prey population objectives, the board and the department could also look at harvest objectives and the other objectives that are specified in AS 16.05.255(g), about whether they are just limited to looking at prey populations or whether they may also consider harvest objectives. The bill would make those two clarifications, but it doesn't really go to the question - assuming that a predator control program is implemented under subsection (a) - of who could engage in it. MR. HOLLIS said the language in the statute currently provides that a person may. It is [DOL's] reading of the statute, in its current form, that it is not limited just to department employees, and that if a program were instituted pursuant to [subsection] (a), the department could authorize agents or other persons to participate in such a program. CHAIR FATE, sponsor of 208 who depend on wildlife resources as a way of life. Number 1425 CHAIR FATE announced that CSHB 61(O&G) Out of 03/06/03 (H) MINUTE(O&G) 03/14/03 0537 (H) O&G RPT CS(O&G) NT 5DP 1AM 03/14/03 0537 (H) DP: FATE, ROKEBERG, MCGUIRE, 03/14/03 0537 (H) KOHRING; AM: KERTTULA 03/14/03 0538 (H) FN1: ZERO(DNR) 03/14/03 0538 (H) FN2: ZERO(REV) 03/26/03 (H) RES AT 1:00 PM CAPITOL 124 03/26/03 (H) -- Meeting Canceled -- 03/28/03 (H) RES AT 1:00 PM CAPITOL 124 02/14/03 0214 (H) READ THE FIRST TIME - 02/14/03 0214 (H) TRA, RES, FIN 03/06/03 (H) TRA AT 1:30 PM CAPITOL 17 03/06/03 (H) Moved Out of Committee 03/07/03 0462 (H) TRA RPT 5DP 03/07/03 0462 (H) DP: HEINZE, KOHRING, FATE, 03/07/03 0463 (H) FN1: ZERO(CED) 03/28/03 (H) RES AT 1:00 PM CAPITOL 124 02/21/03 0242 (S) READ THE FIRST TIME - 02/21/03 0242 (S) RES, FIN 02/26/03 0276 (S) COSPONSOR(S): FRENCH 03/03/03 (S) RES AT 3:30 PM BUTROVICH 205 03/03/03 (S) -- Meeting Postponed -- 03/05/03 (S) RES AT 3:30 PM BUTROVICH 205 03/05/03 (S) Moved Out of Committee 03/05/03 (S) MINUTE(RES) 03/06/03 0382 (S) RES RPT 7DP 03/06/03 0382 (S) DP: OGAN, STEVENS B, SEEKINS, 03/06/03 0382 (S) DYSON, LINCOLN, ELTON 03/06/03 0382 (S) FN1: (CED) 03/13/03 0490 (S) FIN RPT 7DP 03/13/03 0490 (S) DP: GREEN, WILKEN, TAYLOR, 03/13/03 0490 (S) BUNDE, STEVENS B, OLSON 03/13/03 0490 (S) FN1: (CED) 03/13/03 (S) FIN AT 9:00 AM SENATE FINANCE 03/13/03 (S) Moved Out of Committee 03/13/03 (S) MINUTE(FIN) 03/17/03 0518 (S) RULES TO CALENDAR 3/17/2003 03/17/03 0518 (S) READ THE SECOND TIME 03/17/03 0518 (S) ADVANCED TO THIRD READING 03/17/03 0518 (S) READ THE THIRD TIME SB 79 03/17/03 0518 (S) PASSED Y17 N- E2 A1 03/17/03 0523 (S) TRANSMITTED TO (H) 03/17/03 0523 (S) VERSION: SB 79 03/19/03 0576 (H) READ THE FIRST TIME - 03/19/03 0576 (H) RES, FIN 03/19/03 0597 (H) CROSS SPONSOR(S): KERTTULA, 03/28/03 (H) RES AT 1:00 PM CAPITOL 124 208 03/24/03 0617 (H) READ THE FIRST TIME - 03/24/03 0617 (H) CRA, RES 03/24/03 0622 (H) REFERRALS REVERSED 03/24/03 0622 (H) RES, CRA 03/24/03 0622 (H) REFERRED TO RESOURCES 03/28/03 (H) RES AT 1:00 PM CAPITOL 124 l/Detail/23?Root=HB187'>HB 187 on behalf of the House href='/basis/Bill/Detail/23?Root=HB178'>HB 178; discussed href='/basis/Bill/Detail/23?Root=HB187'>HB 187; suggested ll/Detail/23?Root=HB187'>HB 187; explained that a four- is/Bill/Detail/23?Root=HB61'>HB 61. href='/basis/Bill/Detail/23?Root=HB61'>HB 61. HB 61 href='/basis/Bill/Detail/23?Root=HB97'>HB 97. href='/basis/Bill/Detail/23?Root=HB97'>HB 97, answered href='/basis/Bill/Detail/23?Root=HB97'>HB 97. href='/basis/Bill/Detail/23?Root=HB97'>HB 97, which he s/Bill/Detail/23?Root=HB208'>HB 208 on behalf of href='/basis/Bill/Detail/23?Root=HB208'>HB 208, provided legal HB 208; href='/basis/Bill/Detail/23?Root=HB208'>HB 208; suggested href='/basis/Bill/Detail/23?Root=HB208'>HB 208; suggested 187-EXTEND BOARD OF STORAGE TANK ASSISTANCE 23?Root=HB187'>HB 187 on behalf of the House Rules 13 years, the relationship with [DEC] has been delightful. "I move HB from committee. 40 percent," he he would have liked the committee to have had a very simple piece of legislation and that the is/Bill/Detail/23?Root=HB187'>HB 187 out of committee was reported from the House Resources Standing 61-OIL & GAS TAX CREDIT FOR EXPLORATION/DEV Bill/Detail/23?Root=HB61'>CSHB 61(O&G). There being as a bill that would create a new income tax href='/basis/Bill/Detail/23?Root=HB61'>HB 61, he explained, was the deletion of any reference to oil. This /Bill/Detail/23?Root=HB61'>CSHB 61(O&G), as amended, was reported from the House Resources Standing 97-LONG-TERM LEASES OF ALASKA RR LAND 97 would extend the lease option available on HB 97 HB 97 97] is necessary because of HUD financing for senior etail/23?Root=HB97'>HB 97 passes, this lease isn't 202 grant through AEF. The applications are due at the end of he HB 97 97 because ARRC's leasing practices are 202 grant money under the 55-year lease term. Thus Mr. Pease 97 to be special-interest legislation. HB 97 Bill/Detail/23?Root=HB97'>HB 97 out of committee with meets the standard of not being special legislation. "I from committee. Representatives Guttenberg and Kerttula Detail/23?Root=HB97'>HB 97 was reported out of the 97 because the legislation does [seem to be special- href='/basis/Bill/Detail/23?Root=HB97'>HB 97 was reported 79-EXTEND ALASKA MINERALS COMMISSION href='/basis/Bill/Detail/23?Root=SB79'>SB 79 out of committee ill/Detail/23?Root=SB79'>SB 79 was reported from the 208-HUNTING SAME DAY AIRBORNE tail/23?Root=HB208'>HB 208 would make some changes to 208. whereas currently there is some ambiguity 23?Root=HB208'>HB 208, offered his understanding that href='/basis/Bill/Detail/23?Root=HB208'>HB 208. She provided name='HB208' href='/basis/Bill/Detail/23?Root=HB208'>HB 208, he HB 208 1991, what worked adequately was having trapper's licenses, 1991, he said that method alone, without the bounties, was 23?Root=HB208'>HB 208 is a start in the right direction said HB provides sustainability to Alaska's residents and the people il/23?Root=HB208'>HB 208 would be held over and that "> id="docLink">Open document in new windowX ht:100%;min-height:600px" id="docFrame"> width="105" height="107" bills, locate st-whos-who.php">contact information. .gov/webmaster.php">help

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