Legislature(2005 - 2006)CAPITOL 124
01/25/2006 01:00 PM House RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| Commissioner, Department of Natural Resources | |
| Big Game Commercial Services Board | |
| Adjourn |
* 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
January 25, 2006
01:07 p.m.
MEMBERS PRESENT
Representative Jay Ramras, Co-Chair
Representative Ralph Samuels, Co-Chair
Representative Carl Gatto
Representative Gabrielle LeDoux
Representative Kurt Olson
Representative Paul Seaton
Representative Harry Crawford
MEMBERS ABSENT
Representative Jim Elkins (excused)
Representative Mary Kapsner
COMMITTEE CALENDAR
CONFIRMATION HEARING(S)
Commissioner, Department of Natural Resources
Michael Menge - Juneau
- CONFIRMATION(S) ADVANCED
Big Game Commercial Services Board
Paul Johnson - Elfin Cove
Ted Spraker - Soldotna
Betty Jo Schmitz - North Pole
Colin Brown - Galena
Ralph Anderson - Dillingham
Roy Ashenfelter - Nome
Richard Rohrer - Kodiak
- CONFIRMATION(S) ADVANCED
PREVIOUS COMMITTEE ACTION
No previous action to report
WITNESS REGISTER
MICHAEL MENGE, Commissioner
Department of Natural Resources
Juneau, Alaska
POSITION STATEMENT: Testified as appointee.
PAUL JOHNSON, Chair
Big Game Commercial Services Board
Elfin Cove, Alaska
POSITION STATEMENT: Testified as appointee.
TED SPRAKER, Appointee
to the Big Game Commercial Services Board
Soldotna, Alaska
POSITION STATEMENT: Testified as appointee.
BETTY JO SCHMITZ, Appointee
to the Big Game Commercial Services Board
North Pole, Alaska
POSITION STATEMENT: Testified as appointee.
COLIN BROWN, Appointee
to the Big Game Commercial Services Board
Galena, Alaska
POSITION STATEMENT: Testified as appointee.
RALPH ANDERSON, Appointee
to the Big Game Commercial Services Board
Dillingham, Alaska
POSITION STATEMENT: Testified as appointee.
ROY ASHENFELTER, Appointee
to the Big Game Commercial Services Board
Nome, Alaska
POSITION STATEMENT: Testified as appointee.
RICHARD ROHRER, Appointee
to the Big Game Commercial Services Board
Kodiak, Alaska
POSITION STATEMENT: Testified as appointee.
ACTION NARRATIVE
CO-CHAIR RALPH SAMUELS called the House Resources Standing
Committee meeting to order at 1:07:43 PM. Representatives
Samuels, Gatto, Crawford and Seaton were present at the call to
order. Representatives LeDoux, Ramras and Olson arrived while
the meeting was in progress. Representative Elkins was excused.
^CONFIRMATION HEARING(S)
^Commissioner, Department of Natural Resources
CO-CHAIR SAMUELS announced that the first order of business
would be the continuation of the confirmation hearing for
Michael Menge for Commissioner of the Department of Natural
Resources (DNR).
MICHAEL MENGE, Commissioner Appointee, Department of Natural
Resources, said he is willing to answer questions.
REPRESENTATIVE CRAWFORD referred to Commissioner Menge's
statement blaming the Japanese for the demise of the original
gasline project, but what kept that project from going ahead was
that producers wouldn't make a commitment to put gas into the
marketplace.
COMMISSIONER MENGE said he used the Japanese to emphasize the
point that they were contemplating signing a contract, and there
was a euphoria amongst those involved after "a very lengthy
permitting process" and "a contentious exercise with the Federal
Energy Regulatory Commission (FERC)." He said, "The Japanese
were contemplating signing a sales agreement or purchase
agreement, and they didn't do it," and he didn't mean to imply
that it was their fault. He said the fault was the economic
picture. He said he was "not privy to Yukon Pacific's work with
the oil companies as it related to sales contracts." He said no
one was to blame; the value of the gas was so low that it would
not support the cost of the infrastructure.
REPRESENTATIVE CRAWFORD said there were three competing
proposals for the gasline last year, and it seems that the
administration has dropped two in favor of the producer's
proposal. "Wouldn't it be better for Alaska to have competing
proposals?" he asked. He noted Huey Long and his fight with
Standard Oil in the 1920s between producer-owned pipelines and
independent ones. "Wouldn't it be better for us to have an
independent-owned pipeline where the producers didn't control
the means of transportation?"
COMMISSIONER MENGE said things have changed and now there is
FERC who stands guard over the operations and rate setting of
any interstate pipeline. He said FERC will deal with the
problems of excess influence, and he has a great deal of faith
in that process. He added that there are firewalls of
significant magnitude and an army of lawyers looking for a crack
in that wall. The consequences of violating that relationship
are dire, he noted. That is just the federal government, there
is also the state watchdogs, and he told the committee that DNR
will look at that issue very carefully to serve Alaska's
interests.
REPRESENTATIVE CRAWFORD asked what Commissioner Menge would say
to the question of Alaska's gas being stranded under today's
economics. He said economic models have said that an Alaska gas
pipeline project is economic under almost any scenario.
COMMISSIONER MENGE said that is an interesting question, and
beware of a simple answer. Looked at in isolation, Alaska's gas
may be considered as such, but there's over 6,000 [trillion
cubic feet] of stranded gas around the world, "and Alaska
competes with each one of those molecules. You cannot do an
economic analysis that simply assumes that this is the best
project in the world." He said the project has to be compared to
other projects before doing an economic analysis. Keep it in the
context of the world gas supply and competition, he stated.
1:17:50 PM
REPRESENTATIVE CRAWFORD said if Alaska's project makes more
dollars per cubic foot than another project, but the other
project has the ability to say, "Use it or lose it," then, "do
we have to look at that as a factor, or shouldn't we just be
looking at whether or not our project is profitable?"
COMMISSIONER MENGE said the Stranded Gas Act "told us" to put
together a business deal. "As we proceed forward we will knit
all of these things into what we believe is a reasonable offer.
But the governor said many times it is not an offer at any
price. We will not devalue the gas to compensate for other
alternatives. We will put together a deal that makes economic
sense for Alaska and for the companies." He said the state can
move into a litigation mode if it is not successful. "We can
entertain and proceed into covenants-to-produce, duty-to-
develop, the panoply of options available to us under a
litigation scenario, so we always have that option."
1:19:53 PM
REPRESENTATIVE GATTO asked if Alaska's definition of stranded
gas applies to other countries, and if there is a glut of it.
COMMISSIONER MENGE said he has trouble understanding the meaning
of stranded gas. The gas that is not being produced is competing
with all other gas that is not being produced, and the world is
awash in that gas, but it is being competed for in all the
growing economies in the world. Each growth center creates
demand, he said, and as each new project comes on, some gas
becomes unstranded. He said, "Stranded or unstranded is just a
function of whether you have accomplished the marketability of
the product." There is a tremendous amount of stranded gas, but
there is a growing market for it, he stated. "It is our job to
try to strike the balance in a way to commercialize our gas in
recognition of the growing value and to put it into production
in a way that protects us over the long term."
1:22:21 PM
REPRESENTATIVE GATTO said if gas is at tidewater far from
market, it will be liquefied and moved, and he asked if there
was a worldwide glut of that kind of gas.
1:23:07 PM
COMMISSIONER MENGE said that is a fair statement right now, but
he continued:
If you look 48 hours from now, we will have enhanced
the capacity to deliver that product from tidewater-
liquefying it, shipping it, degassing it, putting it
into the gas system. We talk about an hourglass, it's
tipping, and right now liquefied natural gas [LNG] is
at a marked disadvantage from any gas that can be put
in the pipeline. It is much more efficient just to
pipeline it, and the distribution systems are in
place, use existing infrastructure. But any casual
perusal of the trade journals across the country, you
will see one proposal after another for the
commercialization of LNG, and all of that activity is
manifesting itself in relaxed FERC rules for siting.
[indecipherable] companies are investing billions of
dollars in receiving terminals and ability to take the
liquefied natural gas and make it more available on a
demand basis.
COMMISSIONER MENGE said a tremendous amount of new technology is
focused on making LNG more commercial. He said the state is in a
race, and there is no question that a pipeline quality gas that
Alaska can deliver can compete economically with all the LNG in
the world. He said that advantage will go on for at least five
years, but in 10 to 20 years the market will equalize across the
globe. "At some point, the cost of LNG, the infrastructure to
develop LNG, we'll be in a position to compete successfully with
a regular pipeline."
1:25:05 PM
REPRESENTATIVE GATTO said that must be the reason to sell
gaseous gas today.
COMMISSIONER MENGE said it is a good reason to move forward
quickly in the development of a pipeline, "so that you can carve
out your portion of the market, establish your deliverability,
establish your customers and proceed forward. Once the pipeline
is in place nothing will be able to compete for it as far as
efficiency."
REPRESENTATIVE SEATON asked if gas is considered stranded just
based on its profitability to a company, so if a company has
another field where its gas was more profitable, could the
company call the less profitable field stranded?
1:26:13 PM
COMMISSIONER MENGE said the economic viability of gas has many
variables: the price the gas is sold for and the cost of getting
it to market. "The gas that can be delivered to the burner tip
for the least price is the gas that will be developed."
1:28:29 PM
REPRESENTATIVE SEATON said Alaska is sitting in the position of
being told that our gas is stranded if a company can sell gas
more profitably elsewhere, so all the cards are in the company's
deck if they have other fields in the world.
COMMISSIONER MENGE said, "We have to deal with a punch list of
cold hard realities," and when being negotiated, lease terms
were not set and not based on production. "There is a duty to
develop within the leases, which we, at some point in time, may
choose to exercise, but until we do that, until we follow that
litigation pathway, because the value of the commodity in place
is measured in the hundreds of billions of dollars, so it is a
very high stakes poker game that we are talking about. Until we
have to deal with the reality of the leases as currently
written, so if there is another product somewhere that can be
delivered cheaper, given the legal framework that we are working
under, then that will be produced first. If we choose to
exercise our options, which we have, we can always do that." He
added that the governor said he is going to put together a
business deal first, and if it doesn't happen, then other
alternatives will be exercised.
1:30:25 PM
REPRESENTATIVE SEATON asked if the commissioner would agree to a
contract that would not limit Alaska's available litigation
strategies.
COMMISSIONER MENGE said he believes in a use-it-or-lose-it
provision. He would generally favor that component in any kind
of contract, "but it is always measured in light of the
foundation of fact that we have to deal with." On the Beaufort
Sea lease sale "we" shortened the lease terms in the core area
from seven to five years for that reason, he said.
1:32:09 PM
REPRESENTATIVE SEATON asked, "Then you wouldn't favor contract
provisions that would limit our litigation strategies that we
have available to us now if production didn't go forward?"
COMMISSIONER MENGE said, "We have a responsibility as custodians
of the resource to derive the maximum benefit possible for the
state, and we should be ever mindful of making sure that those
resources can be developed in the most expeditious fashion, and
should always pay a great deal of attention to any contract or
any lease that we get into and take those issues into
consideration."
1:32:51 PM
REPRESENTATIVE SEATON asked how the commissioner thinks the soil
and water conservation districts are functioning and if he
supports their continuation.
COMMISSIONER MENGE said he has always been an advocate of soil
and water conservation districts. He said these organizations
can be as good or bad as the participants, and they can be
mischievous or beneficial. He added that he will spend quite a
bit of time looking at them.
REPRESENTATIVE SEATON asked if he thinks they are working well.
1:34:42 PM
COMMISSIONER MENGE said his special assistant will report on it.
He said he does not want to prejudge what is going on.
REPRESENTATIVE SEATON said they have been valuable in his
community. He noted that the commissioner spoke of state and
federal partnerships, but not about local involvement. He said
that the Alaska Coastal Zone Management Program's recent
revisions have had feedback that local involvement is very
difficult. Representative Seaton said that the incorporation of
enforceable policies into municipal ordinances means that those
policies are no longer dealt with in the consistency review. He
said developers will need to go to the municipalities, which
goes against Alaska's streamlining movement.
1:36:59 PM
COMMISSIONER MENGE said he has been involved with coordination
his whole career. He said there is always a balance between the
local community's influence and the statewide issue. He said it
is a natural and healthy tension, and the community deserves to
have its influence, but to what extent, and when does it cross a
line? He said before the revisions there was a question "as to
the reach that [community influence] occurred." He said he is
the loudest advocate of community participation and he is
watching the new policies closely. It will all depend on the
reach of that community influence whether it is a good or
questionable thing, "and we're going to have to just test that
as we go." He said the Kensington mine in Juneau has to go
through a rigorous municipal permitting process, and "we will
incorporate that into our large project process, so that all
those voices work together." He said he doesn't see anything
wrong in the system that is evolving. "It gives everyone a voice
in the process," he said.
1:39:45 PM
REPRESENTATIVE GATTO asked if DNR could purchase agricultural
rights or purchase agricultural land in the Matanuska-Susitna
area because it is being diminished by subdivisions.
1:40:42 PM
COMMISSIONER MENGE said zoning regulations are a draconian
approach to preserve agricultural lands, and Alaskans are
reluctant to engage in zoning. He said it is difficult to deny
old farmers the significant gain they can get from subdividing
their land. He said he would like to strike a balance in order
to preserve agricultural land by converting additional lands
into agricultural lands. He added that once a parking lot goes
over a carrot field, it will never be a carrot field again. He
said he can facilitate "what we have and make sure we grow the
agricultural base to the extent that we can." He suggested
encouraging new ways to market farm products, but that "farmers
and ranchers are rugged individuals and do not like to
organize." He said he will help them help themselves.
1:44:43 PM
REPRESENTATIVE GATTO said the Department of Transportation &
Public Facilities follows the no-net-loss of wetlands policy,
and he asked if a similar policy would work for agricultural
land.
COMMISSIONER MENGE said that could be legislated, but at least a
third of his hair loss has been fighting the concept of no-net-
loss of wetlands. He said it will be difficult to do "because of
the human components we have to deal with." He said the
covenants placed on lands would be very specific.
1:47:10 PM
CO-CHAIR SAMUELS asked him to discuss subsistence.
1:47:58 PM
COMMISSIONER MENGE said subsistence is a difficult issue and a
reasonable solution has not been found. He said he has not spent
time thinking about DNR's role in that issue. He said he will
work on the issues before him, and not subsistence.
1:48:42 PM
REPRESENTATIVE SEATON said the commissioner spoke of Alaska
getting a fair share for its resources, and he said the 160th or
about 0.6 percent tax on mining on the extracted value of $1.6
billion doesn't compare well with the taxation of oil and fish.
1:49:48 PM
COMMISSIONER MENGE said he strongly believes that Alaska
deserves a fair share, and mining should be treated the same as
other resources. He said most of it occurs on federal land, and
"I think we would look at the value of the commodity, the cost
associated with developing it, and once we had done those
economic analyses, then I would be in a position to answer your
question." He added, "We should not rush into this quickly." He
said to look at what companies are investing verses what they
are making. What seems like a simple solution may not be, he
said, and "the tragedy of unattended consequences goes hand in
hand with making rash decisions on things that are economically
complex." He said he will work with Representative Seaton to
determine what is fair, and he will support what is fair.
REPRESENTATIVE SEATON asked if analysis of profitability should
be considered with fisheries. He said Alaska has a minimum three
percent ex-vessel value tax and a five percent tax on the
floating processors. The fishing industry has been in a tailspin
for years, and net profits are near zero, and any fisherman
would love to pay taxes based on net profits as mining companies
do. "So are you saying that same structure of looking at cost
versus profits should be used for all our resources or should
that be just reserved for mines?" he asked.
COMMISSIONER MENGE said the "fishing industry is a very
complicated issue." He said he believes "that any of the state's
resources should be subjected to that kind of an in-depth
analytical analysis" before determining the state's share.
1:54:16 PM
REPRESENTATIVE SEATON asked if Commissioner Menge would support
agricultural leaseholders' ability to pay fair market value for
their leased property, taking the land out of the agricultural
designation.
COMMISSIONER MENGE said he needs to understand it more. He said
lease terms and conditions define the value of the lease, and it
might not be unreasonable for the state to clear the land and
then lease it. The state might lease raw land and require the
farmer to clear the land, "at which point they would have a
significant investment in that lease and would also justly be
entitled to compensation for their investment."
1:55:56 PM
REPRESENTATIVE SEATON repeated his question.
COMMISSIONER MENGE said he would not be against any proposal
like that, but he would want to make sure the state's interests
are considered.
1:56:50 PM
REPRESENTATIVE SEATON said there is warmer and warmer weather,
and in Homer the lack of firefighting equipment almost created a
tragedy last year.
COMMISSIONER MENGE said climate has changed and he hopes it is a
"blip on the radar screen," but he won't make that assumption
and supports changes. He said there are financial implications
but human lives supersede those.
1:58:40 PM
REPRESENTATIVE SEATON moved to advance the name of Michael Menge
as commissioner of DNR to the joint session for consideration.
Hearing no objection, it was so ordered.
The committee took an at-ease from 1:59:04 PM to 2:04:43 PM.
^Big Game Commercial Services Board
CO-CHAIR SAMUELS announced that the final order of business
would be confirmation hearings for seven appointees to the Big
Game Commercial Services Board.
PAUL JOHNSON, Appointee and Chair of the Big Game Commercial
Services Board, said a guide board was formed in the early 1970s
and was sunset in 1995 until last year. He said the new board is
composed of nine members represented by: two private land-
holders, one Board of Game member, two public members, two
transporters, and two big game guides. The board is not yet
full, but there is a wonderful set of people now on the board,
he said. He told the committee that he has been a guide for 30
years, and now also owns a lodge. He sat through the original
task force that created the board, and he was the chair of the
first board. He said the new board had its first meeting in
December.
MR. JOHNSON said the board duties are to promote the
professionalism of big game guides and transporters through
contracts, a code of ethics and a testing program for guides.
Committees were formed during the first meeting. The testing
program is on hold until December because the board needs time
to "pull things together."
2:09:21 PM
REPRESENTATIVE SEATON asked about the make up of the board.
2:10:10 PM
MR. JOHNSON listed the seven appointees and their positions on
the board.
CO-CHAIR SAMUELS said most of the people are on line.
2:11:29 PM
REPRESENTATIVE LEDOUX asked why the board was allowed to sunset.
MR. JOHNSON said there are different opinions, and noted that
re-instatement passed the legislative House unanimously, but one
committee chair in the Senate held it so it couldn't go to a
senate vote. "We had the votes in the Senate; there was no
question," he stated.
2:12:37 PM
CO-CHAIR SAMUELS said a recent audit looked at the big game
guiding business as a whole and suggested re-creating the board.
2:13:26 PM
MR. JOHNSON said the prior commercial service board had a very
clean audit.
TED SPRAKER, Appointee, Soldotna, said he is from Wyoming and
has been in Alaska for 33 years. He worked as a wildlife
biologist for the Alaska Department of Fish & Game and was
appointed to the Alaska Board of Game once he retired. He said
the guiding industry has suffered from not having the guide
board. The enthusiasm he has already seen on the new board shows
him that it will make some needed changes including the creation
of a code of ethics. He said he is on the transporter committee.
2:17:02 PM
BETTY JO SCHMITZ, Appointee, North Pole, said she worked as a
missionary in some villages and later worked as a biological
technician for the United States Fish and Wildlife Service
(USFWS). She currently home-schools her children and is an
instructor and team member of the Becoming an Outdoors Woman
program. She is not a guide but she enjoys hunting and being
outdoors. She is on the examination committee to ensure guides
will be truly professional.
2:19:00 PM
REPRESENTATIVE SEATON said he appreciates the gender diversity,
and hopes that the governor will consider women for the final
two appointments.
2:19:36 PM
COLIN BROWN, Appointee, Galena, said he spent time in Anchorage
as a commercial pilot and then moved to Galena to be an air taxi
pilot. He worked for the USFWS as a pilot, and he trapped with
dog teams. He opened his own air service about eight years ago
and became concerned about the lack of ethics and
professionalism in the transporter industry. He was excited by
the renewing of the big game board and wants to bring ethics and
professionalism back into the industry.
2:22:20 PM
RALPH ANDERSON, Appointee, Dillingham, said he is an Alaska
Native and has degrees in English and political science. He said
he worked 20 years in Barrow, and moved back to Dillingham eight
years ago. Sport hunting and fishing are important to the
economy of Alaska, especially in rural Alaska, he said. Income
from the guiding and transporting industry has been helpful;
however, there are complaints about trespassing, but "we" are
taking "really good steps to address those." He stated that it
is important to build cooperative relationships. He is the chair
of the ethics committee, which made considerable progress at the
last meeting.
ROY ASHENFELTER, Appointee, Nome, said he is the Vice Chair of
the Western Arctic Caribou Herd Working Group. He is from Nome
and attended college in Anchorage. He holds one of the public
seats on the Big Game Commercial Services Board and is chair of
the transporter committee. He mentioned issues in the Nenana
region.
2:27:35 PM
RICHARD ROHRER, Appointee, Kodiak, said he grew up on a farm and
in a hunting family and now is a master guide and holds one of
the guide seats on the board. He said his wildlife viewing,
sport fishing and hunting guide business on federal land in
Kodiak provides his primary living. He said it was his turn to
serve on the board and he is chair of the contract committee. He
hopes to have, at the next meeting, proposed regulations so
operators will be more accountable for the services they offer
for the money they are paid. This includes how client money is
handled, including refunds on deposits in the case of
cancellations, he added.
2:30:53 PM
CO-CHAIR SAMUELS thanked all members and especially the public
members.
2:31:31 PM
REPRESENTATIVE SEATON moved to advance the names of Paul
Johnson, Ted Spraker, Betty Jo Schmitz, Colin Brown, Ralph
Anderson, Roy Ashenfelter and Richard Rohrer, appointees to the
Big Game Commercial Services Board, to the joint session for
consideration. Hearing no objection, it was so ordered.
ADJOURNMENT
There being no further business before the committee, the House
Resources Standing Committee meeting was adjourned at 2:32 PM.
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