Legislature(2009 - 2010)CAPITOL 106

02/09/2010 08:00 AM House STATE AFFAIRS


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08:13:39 AM Start
08:13:55 AM HB241
09:29:17 AM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
*+ HB 241 DIVEST INVESTMENTS IN IRAN TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE STATE AFFAIRS STANDING COMMITTEE                                                                           
                        February 9, 2010                                                                                        
                           8:13 a.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Bob Lynn, Chair                                                                                                  
Representative Paul Seaton, Vice Chair                                                                                          
Representative Carl Gatto                                                                                                       
Representative Craig Johnson                                                                                                    
Representative Peggy Wilson                                                                                                     
Representative Max Gruenberg                                                                                                    
Representative Pete Petersen                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
HOUSE BILL NO. 241                                                                                                              
"An Act relating  to certain investments of  the Alaska permanent                                                               
fund,  the  state's  retirement  systems,  the  State  of  Alaska                                                               
Supplemental Annuity Plan, and  the deferred compensation program                                                               
for state  employees in companies  that do business in  Iran, and                                                               
restricting  those investments;  and providing  for an  effective                                                               
date."                                                                                                                          
                                                                                                                                
     - HEARD & HELD                                                                                                             
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
BILL: HB 241                                                                                                                  
SHORT TITLE: DIVEST INVESTMENTS IN IRAN                                                                                         
SPONSOR(s): REPRESENTATIVE(s) GATTO                                                                                             
                                                                                                                                
04/18/09       (H)       READ THE FIRST TIME - REFERRALS                                                                        
04/18/09       (H)       STA, FIN                                                                                               
02/09/10       (H)       STA AT 8:00 AM CAPITOL 106                                                                             
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
THOMAS REIKER, Staff                                                                                                            
Representative Carl Gatto                                                                                                       
Alaska State Legislature                                                                                                        
Juneau, Alaska                                                                                                                  
POSITION   STATEMENT:      Presented   HB  241   on   behalf   of                                                             
Representative Gatto, prime sponsor.                                                                                            
                                                                                                                                
PATRICK GALVIN, Commissioner                                                                                                    
Department of Revenue                                                                                                           
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Testified during the hearing on HB 241.                                                                  
                                                                                                                                
MICHAEL BURNS, Executive Director                                                                                               
Alaska Permanent Fund Corporation                                                                                               
Juneau, Alaska                                                                                                                  
POSITION STATEMENT:  Answered questions  during the hearing on HB
241.                                                                                                                            
                                                                                                                                
SARAH STEELMAN                                                                                                                  
Missouri                                                                                                                        
POSITION STATEMENT:   Testified on  behalf of herself  in support                                                             
of HB 241.                                                                                                                      
                                                                                                                                
DAVID GOTTSTEIN                                                                                                                 
Anchorage, Alaska                                                                                                               
POSITION STATEMENT:   Testified on  behalf of himself  during the                                                             
hearing on HB 241.                                                                                                              
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
8:13:39 AM                                                                                                                    
                                                                                                                                
CHAIR BOB LYNN called the  House State Affairs Standing Committee                                                             
meeting to  order at 8:13  a.m.  Representatives  Gatto, Johnson,                                                               
Wilson, Gruenberg,  Petersen, and Lynn  were present at  the call                                                               
to order.   Representative Seaton  arrived as the meeting  was in                                                               
progress.                                                                                                                       
                                                                                                                                
               HB 241-DIVEST INVESTMENTS IN IRAN                                                                            
                                                                                                                                
8:13:55 AM                                                                                                                    
                                                                                                                                
CHAIR LYNN  announced that the  only order of business  was HOUSE                                                               
BILL  NO. 241,  "An Act  relating to  certain investments  of the                                                               
Alaska permanent fund, the state's  retirement systems, the State                                                               
of   Alaska  Supplemental   Annuity   Plan,   and  the   deferred                                                               
compensation  program for  state employees  in companies  that do                                                               
business  in   Iran,  and  restricting  those   investments;  and                                                               
providing for an effective date."                                                                                               
                                                                                                                                
8:14:26 AM                                                                                                                    
                                                                                                                                
THOMAS  REIKER, Staff,  Representative Carl  Gatto, Alaska  State                                                               
Legislature, presented HB 241 on  behalf of Representative Gatto,                                                               
prime sponsor.   He said Iran is  "actively sponsoring insurgency                                                               
on the ground against U.S. soldiers in Iraq."                                                                                   
                                                                                                                                
8:15:40 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P. WILSON moved to  adopt the committee substitute                                                               
(CS)  to HB  241, Version  26-LS0680\E, Kane,  2/8/10, as  a work                                                               
draft.                                                                                                                          
                                                                                                                                
REPRESENTATIVE GRUENBERG objected for discussion purposes.                                                                      
                                                                                                                                
8:16:03 AM                                                                                                                    
                                                                                                                                
MR. REIKER  stated that  the bill would  make Americans  safer by                                                               
directing  the  Department of  Revenue  to:    create a  list  of                                                               
scrutinized companies; divest from  publicly traded securities of                                                               
those   companies;  contact   the   mangers   of  any   comingled                                                               
investments in which the state  has a stake to strongly encourage                                                               
divestment in Iran;  and update the list annually  and inform the                                                               
legislature  and the  public of  any changes  to the  list.   Mr.                                                               
Reiker said  the bar for  significant investment would be  set at                                                               
$20  million.   He  said  this  standard  was borrowed  from  the                                                               
federal government's Iran Sanctions Act  of 1996, as well as from                                                               
various  other states'  divestment  efforts.   The funds  covered                                                               
under the bill  would be:  the Alaska Permanent  Fund, the Alaska                                                               
State Retirement  System, the  Alaska Supplemental  Annuity Plan,                                                               
and  the Alaska  Deferred  Compensation Program.   Regarding  the                                                               
comingled investments,  Mr. Reiker said the  bill would encourage                                                               
the state's divestment, but would not  mandate it.  Based on data                                                               
from a similar  effort by Massachusetts and  consideration of the                                                               
size of Alaska's  aggregate investments, it is  estimated that HB
241  could result  in approximately  $450  million in  investment                                                               
being pulled from Iran.   He stated that the proposed legislation                                                               
is not just a symbolic measure,  but is "an active stance against                                                               
... people that do not have America's best interest at heart."                                                                  
                                                                                                                                
8:18:59 AM                                                                                                                    
                                                                                                                                
MR. REIKER  relayed that Version  E brings language in  line with                                                               
existing federal statutes,  as well as other  state statutes, for                                                               
example,  the use  of the  term "scrutinized  companies" and  the                                                               
inclusion of a  $20 million bar for significant  investment.  Mr.                                                               
Reiker said  the language  on page  4, lines  1-27, was  added to                                                               
comply with  the Iran  Sanctions Act of  1996.   Furthermore, the                                                               
language on page  5, lines 7-14, was added to  insulate the state                                                               
against any  lawsuits that may  emanate out of any  lost revenues                                                               
resulting from  the divestment.   Mr. Reiker said the  bill would                                                               
be negated if the State department  ever removes Iran from a list                                                               
of state  sponsors of terror.   It would also be  negated if U.S.                                                               
Congress  or  the  Executive  Branch   were  ever  to  officially                                                               
recognize that divestment  from Iran is contrary  to U.S. foreign                                                               
policy.                                                                                                                         
                                                                                                                                
8:20:55 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO mentioned  a previous  bill to  divest from                                                               
Sudan because  of genocide  in Darfur, and  he specified  that HB
241 has nothing to  do with genocide.  He said  Iran is "awash in                                                               
oil" but  is producing nuclear  material.   He opined that  it is                                                               
scary that Iran is a country that  may be able to arm its allies,                                                               
particularly because  the president  of Iran wants  to "eliminate                                                               
Israel from the face of the earth."                                                                                             
                                                                                                                                
8:23:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO  said although  Iran  has  oil, it  imports                                                               
approximately  40 percent  its  gasoline; therefore,  sanctioning                                                               
the import of gasoline and other  things needed by the country is                                                               
a consideration.  The proposed  legislation is action that can be                                                               
taken now, rather than standing by and hoping for the best.                                                                     
                                                                                                                                
8:25:01 AM                                                                                                                    
                                                                                                                                
MR. REIKER,  in response to  a question from Chair  Lynn, offered                                                               
his understanding  that there are  approximately 21  other states                                                               
with similar legislation.                                                                                                       
                                                                                                                                
REPRESENTATIVE GATTO added  that his staff will find  the list of                                                               
states.                                                                                                                         
                                                                                                                                
8:25:36 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE JOHNSON  noted that the $20  million threshold has                                                               
to do  with direct  investments in  business operations  in Iran.                                                               
He asked if importing gasoline is a direct investment.                                                                          
                                                                                                                                
MR. REIKER said  he does not think that  importing gasoline would                                                               
count as the  type of significant investment that  is targeted by                                                               
HB  241.   He added,  "I think  you would  actually have  to have                                                               
holdings in  the nation of  Iran, not  just do trade  with them."                                                               
In response  to a follow-up  question, offered  his understanding                                                               
that  none of  the significant  oil companies  doing business  in                                                               
Alaska have been placed on lists in any other state.                                                                            
                                                                                                                                
REPRESENTATIVE JOHNSON  said he would like  to see a list  of the                                                               
companies in question.                                                                                                          
                                                                                                                                
8:28:11 AM                                                                                                                    
                                                                                                                                
PATRICK  GALVIN, Commissioner,  Department of  Revenue, specified                                                               
that he is  speaking on behalf of the administration,  not in his                                                               
capacity  as trustee  of the  Permanent Fund  Corporation or  the                                                               
Alaska  Retirement   Management  (ARM)   Board.    He   said  the                                                               
Department of  Revenue would be  responsible for  implementing HB
241  if it  passes,  and  he complimented  the  bill sponsor  for                                                               
crafting  the  proposed  legislation   in  a  manner  that  would                                                               
substantially eliminate  most of  the administrative  burden that                                                               
generally  accompanies   a  divestiture   policy;  the   bill  is                                                               
structured  to  allow  the  department   to  implement  it  as  a                                                               
compliance function.                                                                                                            
                                                                                                                                
8:30:14 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  directed attention to language  on page 2,                                                               
subsections  (c) and  (d), which  outlines that  the commissioner                                                               
would  be required  to create  and update  a list  of scrutinized                                                               
companies  and  investigate  all  publicly  traded  companies  to                                                               
figure out if  those companies are scrutinized  companies, and he                                                               
asked Commissioner Galvin if he  is really saying that doing this                                                               
would not be "significant."                                                                                                     
                                                                                                                                
COMMISSIONER GALVIN  noted that  he had  just received  Version E                                                               
earlier  in the  morning.   Notwithstanding that,  he shared  his                                                               
understanding that the sponsor's intent  is that there be minimal                                                               
impact to  the department.  He  said he would study  the language                                                               
to ensure  it complies with  that intent.   He stated  his belief                                                               
that the  bill would  allow the department  to utilize  lists and                                                               
previously  prepared  investigatory   materials  to  satisfy  the                                                               
standard imposed  by statute.   He explained that he  is speaking                                                               
more to the intent than to the language in Version.                                                                             
                                                                                                                                
REPRESENTATIVE SEATON said  he would like the  department to make                                                               
that analysis of the language in Version E.                                                                                     
                                                                                                                                
8:33:00 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO,  in response to  CHAIR LYNN, said  the next                                                               
committee of referral is the House Finance Committee.                                                                           
                                                                                                                                
8:33:18 AM                                                                                                                    
                                                                                                                                
COMMISSIONER  GALVIN continued  his  testimony.   He stated  that                                                               
generally the  governor would be  skeptical of an attempt  to mix                                                               
state policy  with any social  or political policy;  however, the                                                               
governor  recognizes   that  in  certain  circumstances,   it  is                                                               
necessary  for  the   state,  as  a  member  of   the  Union,  to                                                               
economically  isolate nation  states  that are  troubling to  the                                                               
national  interest of  the  U.S., particular  where  there is  an                                                               
effort  to  avoid  armed  conflict   through  the  imposition  of                                                               
economic sanctions.   He said  the governor will be  reviewing HB
241 to determine if it falls under one of those circumstances.                                                                  
                                                                                                                                
CHAIR  LYNN opined  that this  issue is  more about  politics and                                                               
national security than it is social.                                                                                            
                                                                                                                                
COMMISSIONER GALVIN said the governor  recognizes that this issue                                                               
is a matter of national security  as well as being related to the                                                               
advancement of the country's foreign policy.                                                                                    
                                                                                                                                
8:35:16 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE GATTO  said quite a  few of the weapons  that show                                                               
up in Afghanistan and Pakistan are  made in Iran.  He opined that                                                               
the last  thing Alaska  should be doing  is supporting  Iran, and                                                               
investing  in  the  country  is  supporting  that  country.    He                                                               
characterized the bill as a moral obligation.                                                                                   
                                                                                                                                
8:37:38 AM                                                                                                                    
                                                                                                                                
MICHAEL   BURNS,  Executive   Director,  Alaska   Permanent  Fund                                                               
Corporation, , in  response to Chair Lynn, stated  that the board                                                               
of  the   corporation  has   a  long-standing   position  against                                                               
divestment related  to social investing.   He said the  board has                                                               
not  talked about  HB 241  and, thus,  does not  have a  position                                                               
regarding the  bill.  He  observed that the  proposed legislation                                                               
is different  from the aforementioned past  legislation regarding                                                               
Sudan divestiture, and  he confirmed that the  board did narrowly                                                               
support the past legislation regarding  Sudan.  He concurred with                                                               
Chair  Lynn's  previous  opinion  that  HB 241  is  an  issue  of                                                               
politics and national security.                                                                                                 
                                                                                                                                
8:40:01 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE PETERSEN  noted that there  is a zero  fiscal note                                                               
attached to  the proposed legislation, but  he questioned whether                                                               
there may  be a charge  related to selling  stocks, as well  as a                                                               
possible consequence to the state of a loss of revenue.                                                                         
                                                                                                                                
MR.  BURNS  responded that  at  times  the  board has  looked  at                                                               
trading  expenses.    He  stated,  "I'm not  sure  that  we  have                                                               
anything  that would  rise to  the  $23 million  threshold."   He                                                               
added, "I just don't see that  being part of our portfolio, but I                                                               
haven't seen the list either."                                                                                                  
                                                                                                                                
8:41:30 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO asked  if  the  corporation might  consider                                                               
divestiture   without  legislation   in  response   to  "downward                                                               
pressure on that group of  investments" resulting from the action                                                               
that 21 states have already taken in establishing divestiture.                                                                  
                                                                                                                                
MR. BURNS said he does not know the answer to that.                                                                             
                                                                                                                                
REPRESENTATIVE  GATTO said  he is  speaking philosophically.   He                                                               
said he would  expect that the action of some  in divesting might                                                               
create pressure in others to do the same.                                                                                       
                                                                                                                                
MR. BURNS responded that "might" is the operative word there.                                                                   
                                                                                                                                
8:43:12 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON  directed attention to language  in Section                                                               
1,  subsection   (j),  paragraph  (1),  subparagraph   (B),  sub-                                                               
subparagraph  (v),  which  says business  operations,  under  the                                                               
proposed legislation, would not  include operations that "consist                                                               
of  the  retail sale  of  gasoline  and  related products".    He                                                               
questioned how  companies selling  gasoline or diesel  fuel would                                                               
be tracked to arrive at an  end-point control of retail sale, and                                                               
he  asked if  such companies  would automatically  be put  on the                                                               
aforementioned list.                                                                                                            
                                                                                                                                
COMMISSIONER GALVIN responded  that he would need  to return with                                                               
a full  analysis.   Notwithstanding that,  he proffered  that the                                                               
structure of the bill would not  "capture a situation" in which a                                                               
producer  refines a  gasoline  product  that is  then  sold to  a                                                               
company outside  of Iran and  subsequently transported  into Iran                                                               
by that  second company and  sold.  He offered  his understanding                                                               
that the company  that makes the final sale in  Iran would be the                                                               
company that would "end up falling into this category."                                                                         
                                                                                                                                
REPRESENTATIVE SEATON  said he wants  to know what kind  of chain                                                               
of ownership the commissioner would be required to follow.                                                                      
                                                                                                                                
COMMISSIONER GALVIN relayed  that he will be  examining whether a                                                               
company would  be responsible for  its subsidiary  companies, and                                                               
he said he would get back to the committee with his conclusions.                                                                
                                                                                                                                
REPRESENTATIVE SEATON  remarked that  a subsidiary  company could                                                               
"totally circumvent" the intent of the bill.                                                                                    
                                                                                                                                
8:48:46 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO  relayed that  even  though  Iran has  more                                                               
difficulty making  gasoline, it  has refineries and  does produce                                                               
fuel  products,  which is  why  the  reference to  "gasoline  and                                                               
related products" is in the bill.                                                                                               
                                                                                                                                
REPRESENTATIVE  SEATON said  he would  like clarification  of the                                                               
definition of "related products".                                                                                               
                                                                                                                                
8:50:31 AM                                                                                                                    
                                                                                                                                
SARAH STEELMAN, testified  on behalf of herself in  support of HB
241.   She  related that  she is  the former  state treasurer  of                                                               
Missouri, started "terror-free investing"  in Missouri, served on                                                               
the board  of trustees to  the State of Missouri's  pension plan,                                                               
and  is  now the  advisor  to  a private  "terror-free  portfolio                                                               
fund."   Ms. Steelman stated that  when she took office  as state                                                               
treasurer, she was  shocked to discover that "we  are funding the                                                               
very  enemies that  we are  fighting"  through investments  worth                                                               
billions of  dollars and to  learn that her predecessor  had been                                                               
using foreign companies as brokers/dealers  to invest the state's                                                               
money.    This information  spurred  her  to  begin a  battle  in                                                               
Missouri  to  stop  taxpayer  funding  of  terrorism.    Missouri                                                               
commenced the first terror-free fund  in the country; any country                                                               
that did  business with a  sponsor of terrorism was  screened out                                                               
of the portfolio.  She stated  that those involved in this change                                                               
proved to the pension fund  managers who were skeptical about the                                                               
returns  that   the  state  could  make   equivalent  returns  on                                                               
investment  by keeping  the same  allocations  and by  increasing                                                               
holdings in  "clean" companies.   The state exercised  a complete                                                               
prohibition   on  companies   doing   business  with   terrorist-                                                               
sponsoring nations and  companies.  The State of  Missouri set up                                                               
the  nation's first  terrorism  screening  policy and  divestment                                                               
procedure for a  public pension fund, offered  the first "terror-                                                               
free"  mutual  fund in  the  state's  college savings  plan,  and                                                               
hosted  a summit  to educate  police and  firefighters about  the                                                               
fact that their pension plans may  be funding the very people who                                                               
end  up attacking  the country.    She said  she also  encouraged                                                               
every  state  treasurer  across  the  country  to  examine  their                                                               
portfolios and make divestments.                                                                                                
                                                                                                                                
MS.  STEELMAN said  in  the  last five  years,  many states  have                                                               
adopted  similar policies,  and  she applauded  the Alaska  State                                                               
Legislature for hearing  HB 241.  She related that  both sides of                                                               
U.S. Congress  have passed  legislation increasing  the sanctions                                                               
against  Iran.   The  threat  posed by  Iran  has escalated  with                                                               
Iran's ability  to obtain  nuclear weapons, as  well as  with its                                                               
direct threats  against America and  Israel.  She  listed Siemens                                                               
AG  and Nokia  as examples  of  companies that  help the  Iranian                                                               
revolutionary  guard  silence the  voice  of  the Iranian  people                                                               
through  monitoring   and  censoring  the  people's   ability  to                                                               
communicate with the Western world.                                                                                             
                                                                                                                                
8:55:47 AM                                                                                                                    
                                                                                                                                
MS.  STEELMAN said  Missouri heard  many  arguments against  this                                                               
from its fund  managers, but they were unfounded.   Some of those                                                               
arguments  were that  the  cost  is too  high,  the  task is  too                                                               
difficult,  and performance  will suffer;  however, Ms.  Steelman                                                               
warned that the cost is too high  if nothing is done.  She opined                                                               
that it is the responsibility  of every American to ensure he/she                                                               
does not invest  in companies that support terror.   She reported                                                               
that   Empowerment  Financial   Group   offers  a   "terror-free"                                                               
portfolio.   She opined that  no American dollar should  ever end                                                               
up in "the hand of terror."                                                                                                     
                                                                                                                                
MS.  STEELMAN, regarding  a previous  query [from  Representative                                                               
Johnson]  regarding  which  oil  companies  doing  business  with                                                               
Alaska may  be on the list,  named the French company,  Total SA.                                                               
She said PetroChina  Company Limited just signed  a $1.76 zillion                                                               
oil pact  with Iran.   She offered  her understanding  that Royal                                                               
Dutch Shell was operating in Iran,  and she indicated that BP had                                                               
been operating with Iran, but is no longer.                                                                                     
                                                                                                                                
8:59:02 AM                                                                                                                    
                                                                                                                                
DAVID  GOTTSTEIN,  testified  on  behalf of  himself  during  the                                                               
hearing on  HB 241.   He relayed that he  is the Alaska  chair of                                                               
the American Israel Public Affairs  Committee, which he described                                                               
as  "an  American  advocacy  group  that  tries  to  foster  good                                                               
relations  between  the  United  States and  Israel  -  America's                                                               
staunchest  strategic ally  and the  only true  democracy in  the                                                               
Middle East."                                                                                                                   
                                                                                                                                
MR. GOTTSTEIN read his testimony as follows:                                                                                    
                                                                                                                                
                                                                                                                                
     The  United  States,  along with  The  West,  is  under                                                                    
     attack by  Radical Islam.   Those trying to  convert us                                                                    
     or to destroy our way of  life are using every means at                                                                    
     their  ... disposal  to  attack us  in  their Holy  War                                                                    
     against us.   Terrorist  incidents seem to  be reported                                                                    
     almost weekly from around the  world, almost all rooted                                                                    
     in  Radical Islam  - not  ordinary  Islam, but  Radical                                                                    
     Islam - that unfortunately  controls most of the Muslim                                                                    
     world.     Recent  arrests  in  Houston,   Denver,  and                                                                    
     Brooklyn these  last few months  alone, along  with the                                                                    
     Fort Hood massacre, and now  the Christmas Day thwarted                                                                    
     airline suicide attempt, all point  to the fact that we                                                                    
     are under siege even on  American soil.  Even though Al                                                                    
     Qaeda,  the  Taliban,  and the  other  Radical  Islamic                                                                    
     movements spreading terror and  death across the Middle                                                                    
     East    and    Asia,    are    a    loose    collection                                                                    
     organizationally, they all embrace  jihad, or Holy War,                                                                    
     against  the  West,  and that  makes  their  collective                                                                    
     arsenal deadly and sizable.                                                                                                
                                                                                                                                
     At the heart  of the Radical Islamic  movement, and the                                                                    
     most  dangerous,   is  Iran.    That   is  because  the                                                                    
     intersection of  their vast oil wealth  controlled by a                                                                    
     Radical  Islamic government  ... determined  to develop                                                                    
     nuclear weapons has allowed  them to become dangerously                                                                    
     close to  completing their  decades-long march  to join                                                                    
     the nuclear  club.  Almost  every week,  including this                                                                    
     week, ... we hear about  their progress.  The prospects                                                                    
     of    a   nuclear    Iran,    capable   of    launching                                                                    
     intercontinental  ballistic  missiles  as far  away  as                                                                    
     Europe,  with Israel  clearly in  its  sights, and  the                                                                    
     danger  of  them  spreading weapons  to  their  allies,                                                                    
     along with  for sure  starting a  nuclear arms  race in                                                                    
     the  region, all  has to  be balanced  against the  far                                                                    
     reaching negative  consequences should  military action                                                                    
     need to be used to  derail Iran's weapons program.  The                                                                    
     only good outcome  is that we get Iran  to change their                                                                    
     behavior and stop weapons development.                                                                                     
                                                                                                                                
     ...  Our   arsenal  of  tools  to   cause  that  change                                                                    
     include[s]  diplomacy, sanctions,  blockades, and  then                                                                    
     military action.   Diplomacy  hasn't, and  isn't likely                                                                    
     to  work.   That  leaves sanctions  as the  appropriate                                                                    
     tool at  this time:   a  peaceful approach.   Sanctions                                                                    
     have in the  past had mixed results  for sure; however,                                                                    
     recent revelations  about the advancement and  state of                                                                    
     Iran's  nuclear weapons  program necessitate  our using                                                                    
     all  peaceful  means  possible  to  solve  the  problem                                                                    
     before having  to consider harsher  actions.   The hope                                                                    
     is that  a collection of enhanced  sanctions, including                                                                    
     State  divestitures,  and  the   passage  of  the  Iran                                                                    
     Sanctions Act passed just two  weeks ago at the Federal                                                                    
     level,  intended to  thwart  an  already weak  economy,                                                                    
     including   the   importation  of   refined   petroleum                                                                    
     products,  representing 40  percent  of their  domestic                                                                    
     fuel  use,  might  push  the  rulers  to  change  their                                                                    
     behavior.                                                                                                                  
                                                                                                                                
9:03:52 AM                                                                                                                    
                                                                                                                                
MR.  GOTTTSTEIN diverged  from his  written testimony  to discuss                                                               
the  two distinct  Acts  in  Congress that  were  combined:   the                                                               
Divestiture Program  that was  in the  Iran Sanctions  Act, first                                                               
passed in  1996; and  the Iran  Refined Petroleum  Sanctions Act,                                                               
which  was  an  attempt  to  limit  the  importation  of  refined                                                               
products into Iran.   Now that both are  passed, President Barack                                                               
Obama has the authority to  take measures, such as declaring that                                                               
it is  illegal to insure  fuel tankers that are  bringing refined                                                               
products to Iran.  The divestiture,  he explained, has to do with                                                               
companies that are engaged in  the development and enhancement of                                                               
the  Iranian  regime's  ability   to  garner  money  through  the                                                               
enhancement of  that country's oil  fields; it has nothing  to do                                                               
with the importation  of the refined products.  He  said the only                                                               
impact to  the State of Alaska  would be that "one  day the state                                                               
would own  shares in  a company  and the  next day  it wouldn't."                                                               
Transaction  costs would  be minimal.   It  would not  change any                                                               
relationship that "the state or  any other third party would have                                                               
with that company," he said.                                                                                                    
                                                                                                                                
9:05:56 AM                                                                                                                    
                                                                                                                                
MR. GOTTSTEIN  returned to his  written testimony, which  he read                                                               
as follows:                                                                                                                     
                                                                                                                                
     During a period of intense  public pressure as a result                                                                    
     of  [the]  stolen  election  last  June,  there  is  an                                                                    
     extraordinary    opportunity   to    influence   things                                                                    
     positively  and   hopefully  avoid   the  need   for  a                                                                    
     discussion   about   military   options.      President                                                                    
     Amahdinejad,   a   self-proclaimed  holocaust   denier,                                                                    
     clearly has in his sights  the wiping of Israel off the                                                                    
     face  of the  planet,  which,  if he  were  to try  and                                                                    
     accomplish   through   nuclear    means,   would   have                                                                    
     devastating   and   calamitous  economic   consequences                                                                    
     worldwide as the  oil rich Middle East  would turn into                                                                    
     a firestorm.                                                                                                               
                                                                                                                                
     As respected  legislators, you are most  often consumed                                                                    
     by   the   onslaught   of   requests   you   get   from                                                                    
     constituents,  groups,  and   colleagues  -  especially                                                                    
     during  the  shortened  legislative session  -  all  of                                                                    
     which  pretty  much  have  to   do  with  local  and/or                                                                    
     statewide issues.   Seldom, however,  are you  asked to                                                                    
     grapple with national issues.   But today is different.                                                                    
     Today  you have  the opportunity  to join  in the  most                                                                    
     serious war  effort since the  defeat of the  Nazis and                                                                    
     the Soviet  Union, by joining  forces with all  our men                                                                    
     and women in uniform who  are deeply engaged in the war                                                                    
     against  Radical Islam  and  their  tactics of  terror.                                                                    
     Twenty  other   states  have  already   directed  their                                                                    
     investment   pools   [to  divest   from   international                                                                    
     companies  that  are engaged  in  Iranian  oil and  gas                                                                    
     development].                                                                                                              
                                                                                                                                
9:07:03 AM                                                                                                                    
                                                                                                                                
MR. GOTTSTEIN asked the committee  to support legislature calling                                                               
for the divestiture of stocks  within the Permanent Fund, as well                                                               
as the  Budget Reserve Account,  the latter  of which he  said is                                                               
not addressed in HB 241.   He said the proposed legislation would                                                               
protect fiduciaries from deviating  from rules regarding unbiased                                                               
investing.   He  opined  that  it is  critical  to U.S.  national                                                               
security.                                                                                                                       
                                                                                                                                
9:08:33 AM                                                                                                                    
                                                                                                                                
CHAIR  LYNN, after  ascertaining that  there was  no one  else to                                                               
testify, closed public testimony.                                                                                               
                                                                                                                                
9:08:54 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON said  he thinks that in  some respects this                                                               
issue  is  beyond  the  committee's  level  of  expertise.    For                                                               
example, he said  he wants to ensure that the  committee does not                                                               
indict an entire religion.                                                                                                      
                                                                                                                                
CHAIR  LYNN said  radical Islam  is the  issue, and  he expressed                                                               
concern  about  national survival.    He  stated that  the  issue                                                               
before the committee  is to figure out what Alaska  can do to add                                                               
to national security, and divestiture is one step.                                                                              
                                                                                                                                
9:11:08 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOHNSON  stated   concern   that  the   proposed                                                               
legislation would  not have  much effect and  is merely  a "feel-                                                               
good" bill.   He opined that to have an  effect, Alaska must quit                                                               
doing business  with the  companies that  do business  with Iran,                                                               
not  just divest  from those  companies.   Notwithstanding  that,                                                               
Representative Johnson said if the  committee can do a little bit                                                               
of good  it should, and  he said he would  not hold up  the bill.                                                               
In response  to Chair Lynn, he  said he would be  behind the bill                                                               
if he  thought it would  increase national security, but  he does                                                               
not think it will do harm.                                                                                                      
                                                                                                                                
9:12:42 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN  said  he  has  long  supported  nuclear                                                               
nonproliferation;  therefore, he  will support  the bill  even if                                                               
there is only a chance that divestiture will help.                                                                              
                                                                                                                                
9:13:21 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GRUENBERG said  he  wants to  see  the bill  move                                                               
along.                                                                                                                          
                                                                                                                                
9:13:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE SEATON echoed  Representative Johnson's point that                                                               
it is questionable how much good  the bill would do in asking the                                                               
state to divest  from certain companies while  continuing to have                                                               
business contacts  with those  companies.  He  said he  hopes the                                                               
committee  will receive  more information  on the  questions that                                                               
have been raised.                                                                                                               
                                                                                                                                
9:15:02 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE   JOHNSON  questioned   if  doing   business  with                                                               
companies  on  the  watch  list  makes  the  State  of  Alaska  a                                                               
candidate for the watch list.                                                                                                   
                                                                                                                                
9:15:35 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE P.  WILSON observed  that out  of 36  companies on                                                               
the list, 9 are based in Malaysia  and 6 in China.  She indicated                                                               
that  the committee  needs  to  give more  thought  to where  the                                                               
companies are  located.   She said the  State of  Alaska partners                                                               
with   many  companies,   and  she   wants  to   know  what   the                                                               
ramifications of the bill may be on those partnerships.                                                                         
                                                                                                                                
REPRESENTATIVE  SEATON reviewed  the  information  that had  been                                                               
requested  thus   far.     He  said  he   is  not   opposing  the                                                               
consideration  of   HB  241,  but   wants  the   information  for                                                               
consideration.                                                                                                                  
                                                                                                                                
9:19:06 AM                                                                                                                    
                                                                                                                                
COMMISSIONER GALVIN,  in response  to Chair Lynn,  estimated that                                                               
he  could  have  the  requested  information  available  for  the                                                               
committee in a week.                                                                                                            
                                                                                                                                
9:19:35 AM                                                                                                                    
                                                                                                                                
CHAIR  LYNN, in  response  to Representative  Gruenberg, said  he                                                               
does   not   want  to   entertain   questions   related  to   the                                                               
aforementioned past legislation on divestiture from Darfur.                                                                     
                                                                                                                                
9:20:52 AM                                                                                                                    
                                                                                                                                
CHAIR LYNN ascertained from the  bill drafter that legal opinions                                                               
would be available in about a week.                                                                                             
                                                                                                                                
9:21:31 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO said  he  thinks  there is  no  end to  the                                                               
number of details to research.   He emphasized that two-thirds of                                                               
those  serving   in  the  military  are   killed  by  "improvised                                                               
explosive devices"  that are manufactured  in Iran.   That alone,                                                               
he opined, is  enough of a reason  [to support HB 241].   He said                                                               
the bill is not  intended as a way to destroy  Iran, but it would                                                               
do   something  toward   preventing  the   losses  the   U.S.  is                                                               
experiencing.     He  encouraged   the  committee  to   pass  the                                                               
legislation  now   and  revisit  it   if  it  turns  out   to  be                                                               
ineffective;  however,  he  predicted  that  the  result  of  the                                                               
proposed legislation  would be helpful  rather than hurtful.   He                                                               
asked each legislator to think  about whether or not he/she would                                                               
be  willing  to not  value  a  stock  that supports  a  terrorist                                                               
organization.                                                                                                                   
                                                                                                                                
9:25:22 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GATTO, in  response to  Representative Gruenberg,                                                               
indicated  that Version  E would  make  the bill  "easier" as  it                                                               
relates to the investments of corporations.                                                                                     
                                                                                                                                
REPRESENTATIVE GRUENBERG  removed his objection to  the motion to                                                               
adopt  the committee  substitute  (CS) for  HB  241, Version  26-                                                               
LS0680\E, Kane, 2/8/10, before the  committee as work draft.  [No                                                               
further  objection  was stated,  and  Version  E was  treated  as                                                               
before the committee.]                                                                                                          
                                                                                                                                
REPRESENTATIVE GATTO asked  the committee to question  why BP and                                                               
Total SA  would remove their  investments in Iran  if divestiture                                                               
had no effect.                                                                                                                  
                                                                                                                                
9:26:15 AM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  PETERSEN  said  the reason  could  be  political;                                                               
however, he suggested one reason may  be that it may be dangerous                                                               
for employees to be working in Iran.                                                                                            
                                                                                                                                
The committee took an at-ease from 9:27:17 AM to 9:27:28 AM.                                                                
                                                                                                                                
9:27:35 AM                                                                                                                    
                                                                                                                                
CHAIR  LYNN   expressed  his  basic   support  of   the  proposed                                                               
legislation.                                                                                                                    
                                                                                                                                
9:28:22 AM                                                                                                                    
                                                                                                                                
CHAIR LYNN announced that HB 241 was held over.                                                                                 
                                                                                                                                
9:29:17 AM                                                                                                                    
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
State Affairs  Standing Committee  meeting was adjourned  at 9:29                                                               
a.m.                                                                                                                            

Document Name Date/Time Subjects
02 HB0241A.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241
03 explanation of changes HB 241.pdf HSTA 2/9/2010 8:00:00 AM
HB 241
04 sponsor statement HB 241.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241
05 sectional summary HB 241 Version R.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241
06 CPD position paper on Iran.pdf HSTA 2/9/2010 8:00:00 AM
07 background info 1, HB 241.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241
08 background info 2, HB 241.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241
09 background info 3, HB 241.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241
10 witness bio 2-9-10 David Gottstein.pdf HSTA 2/9/2010 8:00:00 AM
11 David Gottstein accompanying material.pdf HSTA 2/9/2010 8:00:00 AM
12 witness bio 2-9-10 Akiva Tor.pdf HSTA 2/9/2010 8:00:00 AM
13 witness bio 2-9-10 Sarah Steelman.pdf HSTA 2/9/2010 8:00:00 AM
14 HB241-REV-TRS-02-05-10 Iran Divestiture.pdf HSTA 2/9/2010 8:00:00 AM
HSTA 2/16/2010 8:00:00 AM
HB 241