Legislature(2015 - 2016)SENATE FINANCE 532
03/18/2015 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Overview: Fy 16 Budget Department of Administration | |
| Overview: Fy 16 Budget Department of Natural Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | SB 26 | TELECONFERENCED | |
| + | TELECONFERENCED | ||
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
March 18, 2015
9:07 a.m.
9:07:04 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:07 a.m.
MEMBERS PRESENT
Senator Anna MacKinnon, Co-Chair
Senator Pete Kelly, Co-Chair
Senator Peter Micciche, Vice-Chair
Senator Click Bishop
Senator Mike Dunleavy
Senator Lyman Hoffman
Senator Donny Olson
MEMBERS ABSENT
None
ALSO PRESENT
Sheldon Fisher, Commissioner, Department of Administration;
Mark Meyers, Commissioner, Department of Natural Resources;
Jeanmarie Davis, Director, Division of Support Services,
Department of Natural Resources; Ed Fogels, Deputy
Commissioner, Department of Natural Resources.
PRESENT VIA TELECONFERENCE
Steven Masterman, Director, Division of Geological and
Geophysical Surveys, Fairbanks; Brent Goodrum, Director,
Division of Mining, Land and Water, Department of Natural
Resources, Anchorage; Ben Ellis, Director, Alaska State
Parks, Department of Natural Resources.
SUMMARY
SB 26 BUDGET: CAPITAL
SB 26 was HEARD and HELD in committee for further
consideration.
FY 16 BUDGET OVERVIEWS:
DEPARTMENT OF ADMINISTRATION
DEPARTMENT OF NATURAL RESOURCES
SENATE BILL NO. 26
"An Act making appropriations, including capital
appropriations and other appropriations; making
appropriations to capitalize funds; and providing for
an effective date."
^OVERVIEW: FY 16 BUDGET DEPARTMENT OF ADMINISTRATION
9:07:17 AM
SHELDON FISHER, COMMISSIONER, DEPARTMENT OF ADMINISTRATION
(DOA), related that the department had a single capital
request; $3 million for the public building funds,
reference 54089. He clarified that the item was an annual
request for funds to perform deferred maintenance on the
twelve buildings within the public building fund. He
reminded the committee that the funding was included for
the rates DOA charged to other departments. He felt that it
was a simple request and therefore had not prepared a
presentation.
9:08:41 AM
Senator Dunleavy asked if there would be any life, safety,
or catastrophic ramifications if the request was not funded
for a year. Commissioner Fisher characterized the funding
as a modest request, and was unsure if the lack of funding
would be life threatening. He pointed out that it would
delay the need to future years, and the safety
ramifications would be dependent upon the circumstances and
facts. He discussed emergency evacuation chairs, and stated
that there were items on the list that could be life-
threatening if not funded.
9:09:38 AM
Senator Dunleavy asked Commissioner Fisher to respond to
the committee with information about anything in the
request that might be life, safety, or emergency related.
Commissioner Fisher related that he had reviewed the list
of items in the request with his team. He described items
and instances in which safety would be compromised if they
were not funded. He discussed the state office building and
the necessity of leaving it vacant, which he opined was "an
unwise use of resources." He continued to say that the
request was a pared-down list, and if not life-threatening,
it was an important set of priorities.
9:11:27 AM
Senator Bishop commented had read a related report and
requested that Commissioner Fisher refresh the backup
details regarding the emergency generator. He furthered
that in a tight budget environment, it was possible and
prudent to extend the life of the generator by replacing
some switching gear.
Co-Chair MacKinnon pointed out item 5 on page 3 of the
"Deferred Maintenance Inventory" (copy on file), and
wondered if there were going to be additional costs
associated with the phased project as they remodeled the
space to make it usable. Commissioner Fisher indicated that
it would not be known after the first study. He mentioned
the need for finishing the bidding specifications before
having an expectation of what future phases of the project
would cost.
Co-Chair MacKinnon asked if there would be a preliminary
design phase and then a construction phase. Commissioner
Fisher clarified that the first phase of the project was
the design and bidding specifications, at the end of which
the detail would be available regarding the larger cost.
Co-Chair MacKinnon asked if it was the intention of the
department to rent out the space to a potential buyer, or
if state employees would be relocated to the space.
Commissioner Fisher specified that DOA would be relocating
other state employees in to the space.
9:13:35 AM
Senator Dunleavy clarified his earlier statements, noting
that it would be nice if the items on the list that were
"absolutes" were earmarked with an explanation provided.
Commissioner Fisher agreed to bring the committee more
detail with regard to projects that were imperative to
health and safety.
9:14:07 AM
AT EASE
9:16:10 AM
RECONVENED
^OVERVIEW: FY 16 BUDGET DEPARTMENT OF NATURAL RESOURCES
9:16:49 AM
MARK MEYERS, COMMISSIONER, DEPARTMENT OF NATURAL RESOURCES
(DNR), related that he wanted to have a great degree of
transparency in order to assist the committee in making
effective decisions. He wanted to honestly convey what the
requested capital improvement projects (CIP) did, their
status, and their importance. He summarized that all of the
department's CIP requests were based on economic
development; many in oil and gas and permitting. He asked
the committee to please keep in mind that the CIPs of the
previous and current administration were focusing on making
sure there was large amounts of future revenue in the state
by development of Alaska's resources.
9:18:18 AM
JEANMARIE DAVIS, DIRECTOR, DIVISION OF SUPPORT SERVICES,
DEPARTMENT OF NATURAL RESOURCES, discussed page 2 of the
presentation "Capital Budge Overview" (copy on file),
including FY 16 capital requests, existing phased project
status, and future capital funding needed to complete
existing projects. She listed the funding categories for
the FY 16 capital request: $750,000 in Unrestricted General
Fund (which in all cases matched other federal funds),
$7,650,000 in federal receipts, and $3,900,000 in other
funds for a total of $12,300,000. She related that the
total was in the governor's endorsed budget as it went
forward. She pointed out that DNR would be making a request
to withdraw one project in the amount of $2.5 million of
other funds, which would bring the net budget request to
$9.8 million.
9:20:03 AM
ED FOGELS, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, presented page 3, discussing two similar capital
projects that were mostly funded with federal grant monies:
National Recreational Trails Federal Grant Program
RefNum 6854
$1,500.0 Fed Receipts / $200.0 GF Match
Grant funds are awarded to organizations, agencies and
local governments as 80/20 matching reimbursable
grants for trail and trailhead development and
maintenance, and for education programs relating to
trail safety and responsible trail use. Grantees
provide cash, labor and equipment to match at least 20
percent of grant funds. The end result is a variety of
trails that are safe, highquality, have yearround
access, and include motorized, nonmotorized, and
diversified trails. This is an annual request as long
as the federal program continues. In FY2014, 50
different trail projects were awarded grants.
National Historic Preservation Fund RefNum 6865
$650.0 Fed Receipts / $150.0 GF Match
The National Historic Preservation Fund (NHPF) is a
federal program which assists states with their
historic preservation programs. The NHPF funds grants
to local governments, agencies, organizations and
individuals for restoration or stabilization of
historic properties, and grants for survey, inventory,
education, planning and training projects. This is an
annual request as long as the federal program
continues. In FY2015, 19 different grant projects were
awarded funding.
9:21:08 AM
Senator Dunleavy asked what was absolutely essential to
life and safety and by what other extraordinary reason did
the requested projects have to be funded in FY 16. Mr.
Fogels considered that within the trail work project there
could be safety implications, however he was unsure if he
could make the "life and safety connection" to the historic
preservation fund request. He reiterated that the two
requests were federal programs and the reason for the
general fund match request was to access federal funds.
Senator Dunleavy wondered if the requests were not funded
for one year, could the projects be funded the following
year and attain the federal matching funds. Mr. Fogels
answered in the affirmative. He commented that the downside
of not funding the requests for a year would be the loss of
key staff who would normally review projects and administer
funds as part of a very heavy administrative load.
Commissioner Fisher added that the matching funds were
dependent upon the federal budget, and there was a risk of
not receiving the funds in the future.
Vice-Chair Micciche discussed the National Recreational
Trails Program, and wondered about the ratios of grantee
contribution and matching funds. Mr. Fogels clarified that
there was a 20 percent match for the grant recipients, and
it leveraged the total.
9:24:30 AM
Mr. Fogels discussed page 4, outlining the Abandoned Mine
Lands Reclamation Federal Program and the Cooperative Water
Resource Program Pass-Through to USGS for Stream Gaging
Projects:
Abandoned Mine Lands Reclamation Federal Program
RefNum 6855
$3,200.0 Fed Receipts
The Legislature enacted the Alaska Surface Coal Mining
Control and Reclamation Act in 1983 (AS 27.21). The
main purpose of the act was to promote the reclamation
of areas mined before enactment of the federal Surface
Mining Control and Reclamation Act of 1977. Conditions
on some of these mined areas could endanger public
health and safety, have environmental implications,
and prevent the beneficial use of or cause damage to
land and water resources. All funding for this program
comes from federal grants. Since FY2012, funding has
been focused on projects in the Healy area.
Cooperative Water Resource Program PassThrough to USGS
for Stream Gaging Projects RefNum 37762
$2,500.0 SDPR
Project request has been withdrawn.
Mr. Fogels pointed out that the Mine Lands Reclamation
Program was funded entirely from federal receipts. He
furthered that it was a national program generated on a
fee; 28 cents per ton on the mining of surface coal, and 12
cents a ton on the mining of underground coal. The monies
went to a fund that was distributed by the Federal Office
of Surface Mining, and with Alaska's funding portion DNR
participated in reclamation of abandoned coal mines in the
state. He related that if much progress was made with
abandoned coal mines, DNR could move to reclamation of
abandoned non-coal mines. He clarified that much of the
effort in recent years had been to put out coal fires in
the Sutton area due to historic mining. Currently DNR was
working in the historic mining area near Healy, where there
were many deep pits that were hazardous to the public.
Other recent work included closing old mining adits in a
highly populated area.
9:26:04 AM
Co-Chair MacKinnon asked if regulations required
reclamation or the establishment of reclamation funds for
mines currently operating. Mr. Fogels explained that
current law required reclamation for present-day Alaska
mines.
Co-Chair MacKinnon asked for clarification that the funds
were being utilized to bring past mines up to current
safety standards. Mr. Fogels replied in the affirmative,
that the work was to mitigate past practices completed
before modern environmental laws were passed.
Co-Chair MacKinnon asked if there were any additional
requirements or encumbrances on the property on which the
reclamation was being done using federal funds. Mr. Fogels
stated that he did not believe there was any further
encumbrance on the property.
Co-Chair MacKinnon outlined the example of DNR Division of
Parks and Recreation accepting federal funds [for purchase
of land for parks], and later being unable to identify the
properties. Further, the lack of identification of several
million dollars of federal receipts precluded access by
private property owners into the greenbelt. Mr. Fogels
continued to state that there were not additional
restrictions on the funding. He specified that DNR had done
a lot of reclamation work in the Sutton area that had
created nice areas for the public to recreate in; with no
restrictions but for the choices of the original landowner.
Co-Chair MacKinnon asked if DNR prioritized state lands
before private property owners. Mr. Fogels stated that the
priority was for health and public safety, and that the
more dangerous instances were prioritized.
Co-Chair MacKinnon asked if there was a list of land for
reclamation, and wondered what the state's liability was
for risk to the public. She clarified that she did not want
a formal letter; rather just a conversation to convey the
information.
9:29:01 AM
Senator Bishop asked if DNR had a pre-approved contractors
list for those that do the remediation projects. Mr. Fogels
stated that for each project, DNR went out to bid.
Mr. Fogels went back to slide 4, and discussed the
Cooperative Water Resource Program PassThrough. He
specified that DNR had withdrawn the request after looking
at the project more closely. He furthered that the program
received statutory designated program receipts, and DNR had
sufficient receipt authority on the books to last a couple
of years.
Mr. Fogels presented slide 5:
Federal and Local Government Funded Forest Resources
and Fire Program Receipts RefNum 37769
$1,400.0 Fed Receipts / $400.0 SDPR
This project provides receipt authority for federal
and local government funded projects including
competitive grant awards for hazardous fuels
reduction, Firewise and prevention education, special
forest disease surveys, forest restoration projects,
biomass inventories, towns and cities targeted for
community forestry projects and tree plantings, forest
stewardship plans, and agreements for one time local
government funded field projects.
EVOS Trustee Council Habitat Acquisition of Subsurface
Lands on Northern Afognak Island RefNum 60290
$1,000.0 EVOS
This project will use Exxon Valdez Oil Spill
settlement funds to purchase the subsurface estate or
a no surface occupancy agreement on approximately
36,370 acres of Northern Afognak Island. Acquisition
of these lands or interest in these lands will ensure
protected surface habitat values are not impacted by
subsurface activities. In FY2015 the Legislature
appropriated $15 million of EVOS funds for acquisition
of the surface estate.
Mr. Fogels discussed the Federal and Local Government
Funded Forest Resources and Fire Program Receipts, and
specified that it was a program in which DNR received funds
to pass through. He detailed that the program did fire
mitigation projects in local communities. He used an
example of the Fairbanks NorthStar Borough funding a fuels-
reduction program that protected about 100 houses from fire
in the last couple of years. Work funded through the
program also included the Mat-Su Borough funding a fuel-
reduction program, and some work done on the Funny River
fire fuel break.
Mr. Fogels discussed the Exxon Valdez Oil Spill (EVOS)
Trustee Council budget item, explaining that it entailed
habitat acquisition of subsurface lands on Northern Afognak
Island. He detailed that the program included using EVOS
settlement funds to purchase the subsurface estate for a
parcel on which they were close to finalizing the purchase
from Ouzinkie Corporation. He related that the surface
negotiations had almost been completed. The sub-surface was
owned by Koniag, Inc., and would require a separate
transaction.
9:31:45 AM
Vice-Chair Micciche asked for a definition of subsurface as
it pertained to the project. Mr. Fogel explained that the
land was subject to valid existing rights, the land was
private property, and DNR would be buying the entire sub-
surface estate (all mineral estate).
Vice-Chair Micciche asked if the lands would be off limits
for any development in perpetuity. Mr. Fogels elaborated
that the surface estate would be managed by the state park
system. He went on to say the state park director had
determined that the land would not be an additional fiscal
burden to his management, due to its location and type of
use. He added that the land would be part of the state park
system. He continued that if the state acquired the
surface, EVOST wanted to make sure that there would not be
parties attempting to develop mines in order to access the
subsurface mineral resource. He shared that studies had
shown that there was very little potential on the land for
any mineralized terrain.
9:33:22 AM
Vice-Chair Micciche asked for verification of the terms, to
demonstrate that the state was not "severing natural
resources from the people of Alaska forever." He described
EVOST control as "pretty absolute," and wanted some
demonstration that the state was not giving up resources
from the future of Alaska.
Senator Dunleavy asked for clarification that it was Alaska
Native Claims Settlement Act (ANCSA) land or Native land,
and the resources belonged to the Koniag Native
Corporation. Mr. Fogels answered in the affirmative, and
specified that the sale concerned private mineral rights
that the seller wanted to sell for the state, and they
would be off-limits to development.
9:34:22 AM
Co-Chair MacKinnon asked why it would be in the best
interest of the state to pay for the subsurface rights. Mr.
Fogels stated that the land purchase was an EVOST program,
and they made the determination using established criteria.
He described DNR as the real-estate broker for the trustee
council.
Co-Chair MacKinnon stated that the committee would need a
further evaluation of the trustee council, its mission, and
the land acquisitions it was making across the state. She
understood the council wanted to invest revenue in property
that the people could enjoy, but wondered if purchasing
subsurface rights from a private entity had been done
before. Mr. Fogels indicated that it had quite commonly
been done. He suggested that habitat protection was the
driver for EVOST purchases; in order to sustain the habitat
protection in the long-term, in many cases DNR would look
at additionally acquiring subsurface.
9:35:55 AM
Co-Chair MacKinnon queried the committee as to whether they
would be interested in having a presentation on the portion
of state statutes that describes the obligation of
reclamation.
Vice-Chair Micciche asked why the state did not consider
the subsurface rights when the property was purchased 15
years ago. He did not recall purchase of subsurface in the
past. He stated the importance of protecting critical areas
of habitat, but suggested that Alaskans might not
understand that the mission of EVOST sometimes took the
land out of even potential recreational development in
perpetuity. He thought that some small communities in
Alaska had experienced that eventuality. He expressed
interest in having EVOST present for the discussion.
9:37:12 AM
Senator Dunleavy observed that he had originally thought
the purchase was of state land rather than private/Native
land. He asked if state parks would administer the land,
and questioned the cost. Mr. Fogels related that there
would be minimal costs associated with the land. He related
that DNR was operating under the guiding philosophy that it
did not want to take on additional state park lands that
incurred additional management costs to the state. He
furthered that for every parcel that someone wanted the
state park to acquire, DNR evaluated it and decided if it
would add a management burden or not.
Senator Dunleavy asked for clarification on the response
regarding the cost of administering the land. While having
no issue with private to private transactions of land that
groups wanted to transact, he was concerned of any
financial burden that might be put on the state. Mr. Fogels
said there was potential for cost, but clarified that there
was no planned facilities or maintenance to take place on
the land. He characterized it as "passive management" of
the land. He remarked on DNR's plan for future facilities
to be revenue-generating, and to "wean" the park system off
of general funds in the long-term.
9:39:58 AM
Senator Hoffman referred to materials which stated that the
surface estate was currently being negotiated. He wondered
if the transaction had been completed yet. Mr. Fogels
confirmed that the transaction had not been completed, and
furthered that if it did not get completed, the subsurface
estate would not be purchased.
Senator Hoffman asked why the state was paying $1 million
for "minimal" subsurface rights if it was never going to be
developed. Mr. Fogels related that DNR did not make such
determinations; rather, it was acting as real-estate broker
for EVOST, who had determined it wanted to acquire the
subsurface estate. He referred to some instances in Prince
William Sound, in which EVOST had purchased the surface
estate and not the subsurface; and later entities wanted to
conduct mining on subsurface potential that DNR had not
known was in existence.
9:41:26 AM
Co-Chair MacKinnon wondered how EVOST determined subsurface
value, and proposed that it was a question for a later
date.
Senator Hoffman suggested that a further question was if
EVOST was going to be acquiring properties in the future,
it would seem to be a better negotiating position if
acquiring surface and subsurface rights together.
9:41:58 AM
Vice-Chair Micciche expressed his worry that the state was
part of the effort to "turn Alaska into a giant park." He
pointed out that EVOST was a well-funded entity that had
eliminated lands from access and even recreational
development. He revealed that he had personal experience
with observing land that remained in a wilderness state in
communities that had demand for additional recreational
access. He avowed to ask about such considerations when the
committee met with EVOST.
9:43:02 AM
Commissioner Meyers presented slide 6, and spoke about the
Cook Inlet Oil and Gas Resources and Statewide Energy
Database project. He noted that the CIP had multiple
components and pertained to DNR's Division of Geological &
Geophysical Surveys (DGGS). He discussed one area of oil
and gas interest in Cook Inlet; the oil potential,
particularly in the lower inlet. He pointed out that DNR
knew there were good oil source rocks, yet had not yet
quantified the oil potential. He referred to the large
developed fields in Swanson River, and commented that there
had only been relatively minor success on oil since. He
explained that the project would complete the geologic
studies necessary to understand the oil potential better,
as well as look at database development and data
compilation of relevant geological and geophysical surveys
in the state. He remarked on the current lack of
centralized, consistent, and archived data; and alleged
that system improvements would be a huge marketing tool. He
praised the state survey division and its quality control.
He added that the CIP had a one-to-one match with funding
from the U.S. Geological Survey (USGS) for doing
cooperative mapping. He summarized that the request would
help the state understand oil and gas potential in Cook
Inlet. He noted that all of the oil in the inlet all went
to a local refinery, and in the long run could support
better in-state refining capacity.
9:45:10 AM
Commissioner Meyers continued on slide 6 and discussed the
Upgrade and Repair of Critical Volcano Monitoring
Instruments project request:
Upgrade and Repair of Critical Volcano Monitoring
Instruments RefNum 60704
$500.0 Fed Receipts
As part of a cooperative agreement between the USGS
and DNR, this funding authority provides helicopter,
fuel, and logistical support for all Alaska Volcano
Observatory field operations to install, repair, and
upgrade volcanic monitoring instruments at highthreat
volcanoes in Alaska.
Commissioner Myers referred to the Pacific Rim of Fire and
its active volcanos, and noted that much of the
instrumentation that was put on the volcanos had been
destroyed. He commented on the expense of installation and
the purpose of the instruments. He pointed out that results
of the instrumentation were crucial to air safety. He
commented that DNR's monitoring network was highly under
capacity, with many serious volcanos not instrumented. He
commented that the Alaska Volcano Observatory, which
conducted the field operations, was a partnership between
USGS, state DGGS and the University of Alaska Fairbanks.
Senator Dunleavy asked if there was zero state funds being
requested. Commissioner Myers responded in the affirmative,
that the CIP requested federal receipts only.
9:46:35 AM
Co-Chair MacKinnon referred to a cost shift in Pacific Rim
volcano monitoring in recent years and her subsequent
comments that had made national news. She related that the
federal government had stepped away from the cost of
research on volcano activity, and wondered how much in
general funds (GF) the state was now expending on a program
to protect the state. She noted that the federal government
was subsidizing the program somewhat. Commissioner Meyers
gave some background on the program, stating that it was
fundamentally funded by the USGS and supplemented by the
University of Alaska with National Science Foundation and
other grants. He added that the USGS funding had
significantly decreased as budgets had tightened.
STEVEN MASTERMAN, DIRECTOR, DIVISION OF GEOLOGICAL AND
GEOPHYSICAL SURVEYS, FAIRBANKS (via teleconference),
confirmed that current use of state GF contributions toward
the volcano observatory was zero. He stated that the staff
and their support was 100 percent federally funded through
the USGS grant system.
Co-Chair MacKinnon asked if there was a reduction in
activity or ability to track volcanoes when the government
withdrew years ago. Mr. Masterman shared that there had
been several more staff within DGGS that had to be let go
when the federal funds decreased, as there was no state
funding forthcoming. Additionally, the University staff
shrank, and there was attenuation of the viability of the
monitoring system as some volcano monitoring sites went
down without funding to support them. He welcomed the
funding increase, and stated it would mostly go toward
repair and upgrade of monitoring instruments on the
volcanoes. He stated that there would be no new staff
hires, but the monitoring system would be upgraded
considerably.
9:49:14 AM
Commissioner Myers related that he was USGS director when
the budget cuts came into effect, $3 million of which were
Federal Aviation Administration (FAA) funds that former
U.S. Senator Ted Stevens had earmarked specifically for
volcanic ash monitoring. He shared that he had personally
called the FAA director, his only lateral equivalent at the
time, and the director was the only individual that had
returned his call. He recounted that there had been strong
support for the funding on the federal and USGS side, and
Senator Stevens had pushed very hard for the funding.
Co-Chair MacKinnon expressed appreciation for the
investment by the federal government in helping to monitor
volcanic activity in the Pacific Rim.
9:50:09 AM
Mr. Fogels discussed slide 7, outlining the request for a
$1 million reappropriation for the Unified Permit
Automation and Document Management Project. He explained
that the funds were originally for the Shale Oil
Environmental Database Project, which DNR felt was no
longer a top priority, as the shale oil activity had
decreased to the point that the money would be better
utilized to fund continued efforts to automate permitting
in the Division of Mining, Land, and Water. He reminded the
committee that the project was a core part of what DNR had
tried to accomplish over the preceding four years. He
discussed increased land use and the subsequent permitting
load; and automating the permit process to reduce the
backlog. He shared that DNR had already fully automated
land use permits and was almost complete in automating
water rights permits. He shared that efficiencies had been
implemented with scanning of documents and diminishing
large case files. He estimated that the department had
achieved a 20 percent increased rate of efficiency. He
alleged that the additional funding would help to complete
the water rights automations and easements, which were the
bulk of DNR's permitting workload. He described the project
as "core to resource development" and stated that it
continued to support businesses that needed permits to do
their resource development work.
9:52:17 AM
Co-Chair MacKinnon shared her concern that capital funds
were being reappropriated for an operating function. She
related that past co-chairs of the Senate Finance Committee
had explicitly tried to eschew such grey areas in order to
foster public understanding of ongoing practices versus
one-time capital expenditures. She worried about the lack
of clarity and the possible future expectations of funds
that were not meant to be there. Commissioner Myers
addressed her concerns, suggesting that the project was
really more of a capital investment than an operating
expense. He expressed appreciation for the challenge of
appropriating funds without having gone through an
appropriation process. He discussed the shale oil project,
and addressed concerns about expediency. Recognizing that
shale oil was an abundant and important resource on the
North Slope, he explained that current oil prices were
resulting in companies slowing down and doing only basic
exploration work. He thought the shale oil project could
wait for a later time.
Commissioner Myers elaborated that the permit automation
project entailed programming and development of the system
itself rather than the operation, and thereby was a capital
expenditure. He furthered that the project included a great
deal of outsourced computer expertise and initial software
purchases. He pointed out that permitting activity and
complexity was increasing, and that DNR would be expected
to do future permitting with less staff. He stated that the
capital request would streamline the system and increase
efficiency. He restated that there would be a 20 percent
increase in efficiency if the system was fully developed,
and the funding would allow DNR to complete three of the
five phases for the permitting process. He pointed out the
potential savings in operating costs due to reduction in
necessary personnel to run the system.
9:54:56 AM
Mr. Fogels reiterated that there would be future operating
costs to keep the system going, however the funds in
question would reduce the amount of staff time spent on
permitting projects. He furthered that it would help DNR
keep up with the incoming workload of permitting and have a
net economic benefit to the state.
9:55:55 AM
Co-Chair MacKinnon referred to the phased approach of the
project, asked DNR to look forward to FY 17, and wondered
when the committee could expect additional operating
requests should they be successful in the efficiencies that
were discussed. Ms. Davis related that DNR anticipated that
in addition to the $1 million from FY 16, there would be
$1.5 million requested in FY 17. She recounted that the
project had been in the capital budget for 5 or 6 years.
She noted that there were five primary permit types
corresponding to each phase of the project, and it was the
goal of the department to have them all part of the
automated system: land use, water rights, leases,
easements, and material sales. She believed they could
accomplish the task by the end of FY 17, at which point DNR
anticipated transitioning a core portion of the programming
team into the operating budget for the ongoing maintenance
and upgrades expected for the system. She added that the
department wanted to pursue getting additional permit types
in the department added to the system; perhaps the State
Pipeline Coordinator's Office, Oil and Gas, Parks and
Recreation, or division issuing permits. She reiterated
that DNR saw the project as a long-term efficiency.
9:58:19 AM
BRENT GOODRUM, DIRECTOR, DIVISION OF MINING, LAND AND
WATER, DEPARTMENT OF NATURAL RESOURCES, ANCHORAGE (via
teleconference), underscored the previous speakers in
saying that since FY 12, DNR had been working aggressively
on the effort of permit automation and had reduced the
overall backlog of authorizations by over 61 percent (over
1,600 authorizations). He stated that there was work left
to do, and thus far the project had been done through the
capital budget. He furthered that DNR hoped to build up the
capability with the remaining authorization types, and
looked forward to the time the critical project would
transition to operational stage.
Vice-Chair Micciche asked how much had been spent on the
permit automation project to date. Ms. Davis clarified that
DNR had spent just over $11 million, with $600,000
encumbered.
Co-Chair MacKinnon recounted past expenditures on the
project: $800,000 in FY 10; $2.5 million in FY 11; $3.3
million in FY 12; $2.5 million in FY 13; and $3.9 million
in FY 14. Ms. Davis agreed to the accuracy of the figures,
and clarified that DNR had not fully spent the
appropriation from SLA 2014.
10:01:07 AM
Vice-Chair Micciche remarked that there had been a
noticeable improvement in permitting efficiency, and a
fairly dramatic reduction in the backlog. He asked how much
DNR would attribute to the improvements of the system. Mr.
Fogels thought that a significant portion would be
attributable to the system, and clarified that only the
land use permits had been fully automated. He furthered
that the water right permits were almost automated.
Mr. Goodrum clarified that the long-term strategy of the
unified permit project required dedication of a great deal
of staff time, which also impacted current functions. While
some backlog reductions could be attributed to their
efforts thus far, he opined that the greatest gain from the
capital project would be seen in the long-term.
Vice-Chair Micciche followed up to say that the current
year's austerities were obvious, and cautioned the
committee to consider not disadvantaging a program that
would save the department a lot of money in the long-term
as permit applicants became more familiar with the system.
He clarified that he was not necessarily supporting the
entire appropriation, but stated that the permit automation
was a worthwhile effort.
10:03:21 AM
Senator Bishop concurred with Vice-Chair Micciche's prior
comments and referred to the efficiencies discussed by Ms.
Davis. He suggested that efficiencies could go both ways
and was concerned with DNR having staffing levels to
complete the project in a timely fashion. He remarked that
everyone was aware the state needed the revenue from the
permit applications.
10:04:13 AM
Commissioner Myers discussed slide 8, noting that they were
now presenting the status of existing phased capital
projects, most of which were very advanced but not
complete. He wanted to update the committee on potential
consequences if the "money was swept out of the fund to the
projects." He discussed the Assessment of In-State Gas
Energy Potential, explaining that it was a study by the
State Geological Survey and had two phases:
Assessment of InState Gas Energy Potential
Phases: 3
Total Authorized $1,200.0 / Total Expended &
Encumbered $811.5 / Balance $388.5
A statewide review of publicly available data
regarding the fossil fuel potential of Alaska's
frontier basins has been completed and published as
DGGS Special Report 66. Funds are being used to study
the natural gas potential of the Susitna basin and the
Nenana basin. Findings from this program have been
released to the public and additional reports will be
published as the final evaluations are completed,
estimated by December 2017. This new data will help
reduce exploration risk and spur investment in these
basins.
Commissioner Myers informed that Doyon Ltd., now thought
there was oil potential in the Nenana basin based on some
source rock information from their wells. He continued that
the Nenana basin information was critical to understanding
the Yukon Flats and other high-potential gas basins; and
that largely the U.S. Fish and Wildlife Service but also
Doyon had a significant interest in the basin. He clarified
that the remaining phases of the review were to do
fieldwork on the edges of the basin. He discussed
subsurface geology, describing it as a four-dimensional
jigsaw puzzle under the ground. He explained that the edges
of the basin provided for access to exposed gas potential
source rocks or reservoir rocks; whereas looking into the
center of the basin required other techniques such as
remote sensing and geophysical seismic data. He furthered
that part of what the state survey had done was to put in
seismic geophones to monitor sound waves, using natural
earthquakes as an energy source, which he likened to doing
a sonogram of the earth. He discussed formation of the
basin and how it aided in understanding of the resources
that might be available within.
He discussed data gained from key wells that Doyon had
drilled, and described the company as "very bullish on
Nenana." He thought it would be very exciting to find a
significant source of gas or gas and oil so close to
Fairbanks and the Trans-Alaska Pipeline System (TAPS).
Commissioner Myers discussed the Upper Susitna basin,
calling it another extension of Cook Inlet, and recounted
that there were some exploration wells that were drilled
there, but nothing recently. He shared that the largest
potential in the area was gas generated in coal seams or
coal-bed methane. He explained that the data being done in
the area was to understand the Susitna basin. He concluded
that the project had a remaining balance of approximately
$388,000, which would finish the compilations and reports
as well as some fieldwork the following summer.
10:07:14 AM
Senator Dunleavy wondered if it was the state's
responsibility to help reduce exploration risk for
investment. He stated that some would say the
responsibility was within the purview of a private company,
and the state could help with regulations and perhaps
assist with suits brought by certain groups that did not
want exploration. He asked Commissioner Myers if he viewed
risk exploration as a function of state government.
Commissioner Myers related that he had seen the issue from
different perspectives; and had experience as an explorer
working in the industry, as well as in federal and state
government. He postulated that there was "a dividing line"
as to when it was beneficial for the government to engage
in the work of risk assessment versus when it was more
beneficial for the private sector or private-public
partnerships to do the work. He referred to a range of
outcomes and a range of successes; recounting that
historically, large owners of oil and gas potential had
done baseline studies to engage interest in their basin
from companies who might have a short time-frame with
capital. He added that often companies needed to make
capital decisions quickly while having little time to send
teams up to do fieldwork, nor did they necessarily have the
area expertise needed to do so. He specified that often DNR
tried to attract companies that worked around the world,
such as Repsol, that were not familiar with Alaska.
Further, a lot of state data and work by Armstrong Oil and
Gas had made exploration attractive and Repsol had
subsequently drilled ten wells. He described exploration
licensing DNR had done in the Susitna basin while providing
large chunks of land cheaply and requiring the company to
release a certain amount of information to the public.
Commissioner Myers further discussed the advantages of risk
exploration and asserted that having basic public
information available, companies could make good decisions
on drilling and exploration; adding that it also generally
reflected better on the lease terms due to more discernable
potential in the basin. The more potential to be seen in
the basin would result in higher bids for exploration
licenses and greater interest in the development. He
continued that risk exploration by the state informed state
policy, aiding the department as well as the committee in
decisions about in-state gas, off-takes on gaslines,
potential resources, and investment and infrastructure
decisions. He asserted that the information narrowed
uncertainty in public decision-making with regard to oil
and gas, as well as helping on the environmental and
permitting side by informing the most favored alternative.
He used examples of areas where the information would be
used; such as resource reports to the Federal Energy
Regulatory Commission (FERC), or environmental impact
statements done on a continued basis. He referred to the
risk exploration information as "seed corn," that if
limited and managed effectively, was critical in Alaska
because of the huge potential and very little data.
Commissioner Myers elaborated that he had worked helping
new companies come to Alaska. He relayed a story about when
Conoco Phillips first came to Alaska, looking in the Alaska
National Wildlife Refuge (ANWR), where they wanted to do a
field program. He recounted how the head of the geological
field program had called him with their plans to hike (in
one day) over the top of the mountains in rubber boots to
look at analogs. He specified that the company had no idea,
logistically, how to get there or how to manage the field
program. He estimated that the same would be true of almost
every new company that would come to Alaska.
10:11:22 AM
Mr. Fogels added to the commissioner's remarks, stating
that another reason to consider DNR's data gathering was
that the department still had 5 million acres of land to
acquire from the federal government, with a big pool to
choose from that was largely unexplored. He suggested that
additional data from DNR programs could help make wise
choices to finalize the land selection.
Vice-Chair Micciche assumed that the state would pay for
the information gathering either way, through credits. He
considered that credits worked best when exploration
efforts were more pointed, and more likely to result in
production. He thought the state was more efficient on the
general data, or companies would be unlikely to invest in
the overall basin analysis. He questioned if his comments
were a fair explanation. Commissioner Myers thought the co-
chair's comments were a perfect explanation.
10:12:23 AM
Senator Dunleavy asked if it was a foregone conclusion that
the state would pay through the capital budget or through
credits. Commissioner Myers stated that DNR had an abundant
series of credits - a credit system that was very
aggressive; the Middle Earth credits, the Cook Inlet
credits, and the credits under SB 21 [oil and gas tax
credit legislation that passed in 2013]. He clarified that
companies would get the credits whether they drilled or
not. He furthered that depending on the credits, and the
program under which they applied, companies could release a
certain amount of information. He reminded the committee
that even with the credits, frontier basins were risky; if
Alaska could provide information to lower the risk and
lower the upfront initial investment, it would encourage
companies to invest in a project. He noted that the system
was heavily geared toward competition; the more explores
that were in the state, the more capital investment was
made in the structure. He thought that by providing a base
level of information, the state also was providing a base
level parity between potential bidders, which could often
raise bidding prices.
10:13:38 AM
Senator Dunleavy commented that the legislature had
recently reduced funding for "pushing back on the feds" and
related that he had gleaned that the environment in Alaska
was often times difficult for companies as a result of
permitting and lawsuits from entities that were against oil
exploration. He asked if DNR could comment on pushing back
on the federal government, Non-Governmental Organizations
(NGOs), or environmentalist groups that were not in favor
of oil exploration. He postulated that the state could map
everything, but if other challenges were in existence no
one would get any resources from the ground. Commissioner
Myers agreed and suggested that the state needed a multi-
pronged approach. He pointed out that all aspects of the
endeavor were important, including effectively protecting
the state's interest with the federal process. He mentioned
a program which was valued for coordinating comments during
the EIS process. He discussed the difficulties in dealing
with branches of the federal government over oil and gas
development, and underscored the importance of having a
good understanding of the Alaska National Interest Lands
Conservation Act (ANILCA).
Commissioner Myers continued to discuss the gas potential
assessment project and working with the federal government.
He described recent cuts to the DNR budget as "unfortunate"
and shared his hope that some of the funding would be
restored. He felt he had cut DNR's budget too deeply given
the ongoing lawsuits, the navigability, and RS 2477 issues
[Revised Statute 2477 pertains to highway right of way]. He
referred to the challenges of cutting the department's
budget and not wanting to take funding from economic
development. He acknowledged that the legislature would be
scrutinizing new future energy potential studies; and
reminded the committee that the projects being discussed
pertained to ongoing studies that if not completed, would
never fully utilize the remaining funding. He emphasized
the importance of good data and necessary environmental
work to increase chances of success in working with the
federal government. He furthered that the studies made for
strong arguments and provided a greater chance of success
if there was any future litigation, whereas without the
baseline data, the state was much more vulnerable.
10:16:31 AM
Vice-Chair Micciche referred to different areas of lower-
potential oil and gas production in the state and
considered the in-state energy solutions in the Interior to
be largely a "Band-Aid." He thought the potential for the
Interior areas to provide natural gas for Alaskans was
pretty good, even if not in concentrated form, and for that
reason it was worthwhile to complete the energy potential
studies.
10:17:13 AM
Co-Chair MacKinnon commented that resource development had
been a mainstay of Alaska's general fund investment, and
that it provided almost $1.3 billion in to the state's
school system, and $1.3 billion towards delivering health
and human services to areas across the state. She asserted
that as the state tightened its investments, it needed to
be very conscientious about who had been providing the
economy and the revenue resource to invest in different
areas of the state. She expressed appreciation for the
committee's discussion of the DNR projects.
10:18:25 AM
Commissioner Myers spoke about the Foothills Oil and Gas
Development Infrastructure project on page 8:
Foothills Oil and Gas Development Infrastructure
Phases: 2
Total Authorized $740.0 / Total Expended & Encumbered
$436.2 / Balance $303.8
This phased project aims to provide a modern synthesis
of the petroleum geology around the stranded Umiat and
Gubik oil & gas fields on the North Slope foothills in
order to generate new exploration targets. Work to
date has focused on conducting extensive new field
geologic mapping in the Umiat area and collecting new
rock samples for scientific analysis. Work to be done
includes integration of the new analytical results
with extensive seismic and well data, possible
targeted field work as necessary to fill data gaps,
and completion and publication of the geologic map.
Commissioner Myers explained that the project pertained to
petroleum geology, particularly around the Umiat field, and
had public numbers of about 150 million barrels of oil. He
recounted that there had been various development attempts
and that DNR hoped to see it developed. He referred to the
Gubik oil and gas fields on the foothills of the North
Slope, where there was a lot of gas. He was unsure of how
commercial the gas was, and hoped for better understanding
to aid in future development. He mentioned that new gas
would be needed for the Alaska Liquid Natural Gas (AKLNG)
project between year 15 and year 20; it would be important
to know the resources to understand how the gas was phased
in. He discussed the need for expansion capacity in the
system, and explained that much of the gas in the foothills
was Native corporation owned, but there was mixed state
land as well. He saw the development of the area as a
collaboration, and spoke to the potential of the area. He
mentioned the incorporation of more subsurface information,
and specified that it had been a combined effort between
DGGS and the Division of Oil and Gas. He reiterated the
inherent value of such data to new companies interested in
development.
10:20:35 AM
Senator Hoffman asked if DNR anticipated completing the
Foothills Oil and Gas project in the next fiscal year. Mr.
Masterman guessed that it would be finished in the
following two fiscal years, and agreed to check to ensure
that was a correct assumption. Ms. Davis confirmed that the
project would be completed over the next two fiscal years.
Vice-Chair Micciche understood that the projects being
discussed (on pages 8 and 9) were not requests for
additional total authorized funds; rather, they were a
continuation of the work with remaining funds. Ms. Davis
clarified that projects on pages 8, 9, 10, 11, 12, 13 and
14 were all current phased capital projects and were status
updates rather than funding requests.
Co-Chair MacKinnon commented that many people across the
legislature had been looking at reappropriations and
whether there was unexpended funds that could be rolled in
to the general fund to meet the revenue shortfall. She
expressed her appreciation for the thorough job DNR had
done in helping the committee understand the benefit of its
current projects.
10:22:54 AM
Commissioner Myers presented slide 9, outlining the Gas
Pipeline Corridor Geologic Hazards project.
Gas Pipeline Corridor Geologic Hazards
Phases: 3
Total Authorized $2,050.0 / Total Expended &
Encumbered $1,922.1 / Balance $127.9
Fieldwork performing a hazard assessment of the
proposed gasline corridors from Delta Junction to the
Canada border and Livengood to Valdez was completed in
the summer 2014. Remaining work includes publishing a
comprehensive report and geologic maps of the Alaska
Highway Corridor and completing and publishing LiDAR-
based hazard assessment for LivengoodValdez route.
Commissioner Myers relayed that the project was started
when the conceived route for the proposed gasline corridor
was for a Lower 48 or Valdez-based project; part of which
was a valuable airborne laser LiDar survey that gave a very
good view of Earth and helped identify new geologic
hazards. The survey was paid for, made public, and was
still valid and important for the Livengood area.
10:23:48 AM
Mr. Fogels presented the second project on page 9, Alaska
Land Mobile Radio Emergency Response and Narrowband
Compliance, which he noted was a four phase project.
Alaska Land Mobile Radio Emergency Response and
Narrowband Compliance
Phases: 4
Total Authorized $5,326.5 / Total Expended &
Encumbered $4,936.9 / Balance $389.6
This project has funded DNR's migration to the FCC
mandated narrowband efficiency standards, and the
Alaska Land Mobile Radio (ALMR) to provide essential
communication across federal, state and local
jurisdictions to enhance public safety and operational
capability.
The Divisions of Forestry, Geologic and Geophysical
Surveys, and Parks have made significant progress in
migrating to the narrowband standards as well as
purchasing and installing equipment. The remaining
balance is being used to complete the upgrades of
equipment and legacy repeaters, implement wind and
solar systems to charge radio equipment in the field,
and purchase and install of mobile radios in fire
engines.
Mr. Fogels discussed the ALMR system and specified that it
was primarily used within the DNR firefighting force, but
was also used by state park rangers and remote geologic
survey crews. He furthered that the department was close to
completing the system migration.
10:24:46 AM
Co-Chair MacKinnon asked the department to consider ways to
pay for ALMR that spread the cost of the project
differently. She discussed small local firefighting units,
and remarked on the substantial fees being asked of them.
She wondered how field communications were handled
elsewhere and mentioned having further discussion about a
secondary system.
10:25:35 AM
Commissioner Myers presented slide 10, and discussed the
Strategic and Critical Minerals project.
Strategic and Critical Minerals
Phases: 4
Total Authorized $6,103.0 / Total Expended &
Encumbered $4,958.5 / Balance $1,144.5
Additional Funding Needed to Complete $3,065.0
To date, the previous funding for this project has
acquired 1,588 square miles of airborne geophysical
data, conducted a 2,600 squaremile resource
assessment, geologically mapped a 450square mile area,
digitized locations of 5,390 historical geochemical
analyses, and obtained modern geochemical analyses on
5,180 new and archived samples. In addition, a
collaborative agreement with the U.S. Geological
Survey (USGS) to obtain modern geochemical analyses
from historical samples collected by the USGS from
State land was initiated. Most raw data is published
and have been presented in public and professional
forums.
Commissioner Myers explained that the project was spurred
by recognition of opportunities for rare earth materials
and other strategic minerals including members of the
platinum group. He asserted that identifying such key
resources was a priority on both state and Native lands;
and reminded the committee that the state was badly under-
mapped. Differently than oil and gas, after getting the
basic data it was a priority to sample soils and rocks to
test for mineralization; geo-chemical analysis patterning
was an important component. He highlighted that modern
technology had allowed for many findings that were
previously impossible with traditional "old style"
analysis. He listed prioritization of land-selection area
in the Ray Mountains of the Yukon as an example of the
success of the data gathered from the survey, and noted
that the data would be used on an ongoing basis for land
selection. Additionally, the data was invaluable for
prospecting companies.
Commissioner Myers commented that DNR had cut back the
operating budget; including postponing the airborne gravity
magnetic surveys. He hoped that the airborne gravity
magnetic surveys would continue in the future, and in the
meantime would rely on the key datasets from the Strategic
and Critical Minerals program.
10:27:43 AM
Mr. Fogels spoke to the Wildland Fire Engine Replacement
project.
Wildland Fire Engine Replacement
Phases: 4 Total Authorized $2,300.0/ Total Expended &
Encumbered $2,188.2 / Balance $111.8
A total of 37 engines have been purchased since
FY2009. The remainder of the appropriation is being
used for essential fire safety equipment; installation
of light bars, sirens, striping, radios, GPS tracking,
and additional pumps.
10:28:13 AM
Commissioner Myers presented slide 11. He discussed the
Reservoir Studies for North Slope and Cook Inlet project;
noting that the project was critical to the state economy.
Reservoir Studies for North Slope and Cook Inlet
Phases: 2
Total Authorized $7,500.0 / Total Expended &
Encumbered $4,077.5 / Balance $3,422.5
The project provides funds needed to carry out a
variety of essential statutory and regulatory
requirements (AS 38.05.180, 11 AAC 83, Article 3, and
others) critical for supporting a wide range of the
Oil & Gas Resource Evaluation Sections' mandated tasks
to collect, maintain, and analyze subsurface data on
oil and gas reservoirs and resource potential
throughout the state. Projects such as these are often
unforeseen and require Oil & Gas to hire outside
consultants or employ specialized software or analyses
to protect the state's interests. This funding
provides the division much needed flexibility for
meeting its ongoing and longterm responsibility of
addressing these issues.
Commissioner Myers discussed the importance of
understanding an oil and gas field in terms of the location
of the resource, the amount of production, and how it would
be managed. He furthered that it was key to understand what
the royalties were, and also the correlative rights of the
different companies. He discussed joint management of
resources and the need for information as the funding moved
between the different entities. He discussed the
complexities of a dynamic underground reservoir system,
which changed over time as additional information was
gained through production. For full understanding of a
reservoir, ongoing scientifically technical study and
continuous evaluation was needed; including engineering,
geophysical and geological data sets, and economic
analysis. He discussed the challenges of early negotiations
of royalties with a dearth of available reservoir data. To
mitigate the difficulties, conflict, and financial
disputes; parties could agree on a complex reservoir model,
under which reevaluation benchmarks would be established
using highly technical information. Such complex models
included some work done in the state, but also required
consultants. He mentioned an example of a re-determination
using the reservoir model approach that gained the state
$100 million. He asserted that the complex reservoir models
were absolutely critical, and cited the gas offtakes of the
gasline as an example. He mentioned new units formed (such
as the large unit being formed between Alpine and Prudhoe
Bay) was crucial to develop the methodology and run the
initial models. Additionally, the regulation of units and
plans of development depended upon having the model data.
Commissioner Myers spoke to the complexity of newer
reservoirs (such as Nuna) and described the management of
their reservoir models as critical. He concluded that the
models were a cost of doing business, but were a benefit to
all parties that would ensure the state received what it
was fairly entitled to.
10:32:41 AM
Senator Bishop asked if the project would also help to
identify new oil (from a tax credit perspective).
Commissioner Myers responded in the affirmative, and
clarified that particularly when the first exploration well
was drilled. He discussed many small new wells with
reservoirs that were very hard to model, with subtle and
small changes determining whether they were economic or
not. He spoke to the new technology available, and credited
it with opening up wide fairways of oil and gas potential
in the North Slope, all of which needed reservoir models.
10:34:26 AM
Vice-Chair Micciche asked if DNR could produce a report to
include a list of objectives that included realistic and
potentially viable interested parties. He wondered if DNR
thought it probable that severance and royalty would end up
in the general fund. He asked if there was available
historic data to reflect upon and strategize with when
considering investments. Commissioner Myers responded in
the affirmative, specifying that it was particularly so on
oil and gas, because Alaska had a single 100-million barrel
field. He qualified that filling the pipeline added
additional value to existing production and cost structure
and flow. He furthered that lighter oil added value, and
that it was much of what was currently being found in the
state. He discussed prioritization of investments in items
with the greatest economic value, and considered that the
net present value of the reservoir studies was the most
positive investment that could be made. He mentioned
existing cash flow, fair management of the oil and gas
fields for all parties, and economic benefits related to
using such models as the reservoir studies. He mentioned
initial partnership agreements based on the science of the
studies; and used the state and oil companies, and as well
as the state and the federal government as examples. He
restated the huge economic value of the reservoir studies,
and indicated that DNR had numbers to quantify it.
Commissioner Myers discussed oil and gas exploration, and
stated that DGGS had provided speculative up-front data
projecting possible returns. He asserted that "the wisdom
had worked" and referred to a test core hole for coal bed
methane near Wasilla, which resulted in Evergreen Drilling
coming to the state. He clarified that the state hadn't
moved to a successful industry from the test, but asserted
that the potential was still present. He recounted that
there was "environmental hiccups" in terms of the
licensing-leasing program. He stated that there was
significant investment in the area, and companies like Lynx
Oil had also come to the state to look at the potential. He
believed that eventually the resources [coal bed methane]
would be produced in Alaska for in-state demand. He
summarized that the Wasilla area testing was an example of
baseline data garnering interest from companies.
10:37:54 AM
Vice-Chair Micciche related that he would like to see more
strategy being employed with the limited funds that were
available for assessments, and that it would be especially
helpful for the legislature to understand the primary
objectives of the entire department and where it was going
for the next four years. Commissioner Myers thought the
projects being presented could have been bundled together
in a better way, rather than scattered. He thought it would
have been clearer if the projects had been put into a
systematic structure before presenting.
10:38:54 AM
Senator Dunleavy asked about the coal-bed methane that had
been mentioned and wondered if it had not been developed
because there was not in sufficient quantity, or for other
reasons. Commissioner Myers related that there had been a
number of reasons that the industry did not flourish, the
largest of which was environmental opposition to the
project, which started with the Shell gas leasing program
which did not have public process. He furthered that the
leases with the most potential were within a fairly densely
populated area in which local environmental opposition grew
over time.
Senator Dunleavy asked if there had been a lot of gas in
the area. Commissioner Myers clarified that there was a lot
of potential, but the wells had not produced much gas and
were not as successful as anticipated. There were many
factors that influenced the decision; there was gas in the
coals but the coal fracture pattern was not optimal as
previously considered. He commented that the environmental
factors were in many cases as important as the subsurface
factors, and on the coal-bed project there was not good
alignment. He opined that there had not been enough tests
to evaluate the resource, and clarified that the drilled
wells had not been commercial. In combination with the
environmental opposition, the well outcome changed the
company's view. He referred to environmental activism, and
to the challenges of obtaining leases in multiple-use
densely populated areas.
10:40:40 AM
Co-Chair MacKinnon asked how the department interacted with
the Alaska Oil and Gas Conservation Commission (AOGCC). She
thought that some of the items that DNR wanted to contract
for were available internally. She wondered if DNR was
hiring contractors to expedite the understanding of below-
surface opportunities, or if there had been a timing or
access issue which necessitated the contractors.
Commissioner Myers remarked that the oil and gas law in the
state was complicated, and clarified that AOGCC was a
quasi-judicial regulatory agency that did not protect the
state's interest (any more than they protect Exxon, Conoco-
Phillips, BP, Repsol, etc). The commission's job was to be
objectively neutral and adjudicate certain things that were
required in law; including conservation, prevention of
physical waste, and well safety. He furthered that some of
the functions of AOGCC had parallel functions in DNR oil
and gas statutes and laws. For example, while AOGCC had to
prevent physical waste, DNR had to prevent physical and
economic waste. Additionally, DNR had to develop plans of
development for the unit and protect correlative rights of
all parties.
Commissioner Myers related that he had previously been a
hearing officer as oil and gas director, protecting one
company's right after another company, and adjudicating
between companies' interests and challenges. He clarified
that although the functions were similar, DNR and AOGCC
operated differently through laws and regulations, and in
some cases purposes. He furthered that DNR's law was
adapted from the federal system, whereas AOGCC's was
adapted from the State of Oklahoma. He discussed the role
of DNR in representing the state's commercial interest, and
asserted that it took a balanced view while developing the
resource appropriately. He reiterated that the reservoir
model was critical to all of the elements mentioned; and
critical to understanding the state's resources, as well as
Royalty in Kind (RIK), Royalty in Value, and the fact that
the state was supplying oil to the refineries. He continued
that the state had to know where the supply was coming
from, and it was important that it was not done in a way
that adversely affected production. Understanding the
mechanisms of the reservoir would ensure that when the
state did a RIK sale, it would understand the consequences
to all parties.
Commissioner Myers argued that the type of data from the
reservoir studies was interwoven in the state's
responsibilities, whereas AOGCC was separate and distinct
and not entitled to see the state's data unless asked for
in a regulatory function. The state was not entitled to see
AOGCC's confidential data on a normal basis, although there
were some statutes in place under which the state could see
the confidential data. He added that the state's reservoir
modelling was more proactive in nature; where AOGCC did not
need to model anything until a case was before them, at
which time they would ask for models from the state and the
companies in question. He asserted that the state needed to
model reservoirs independently, or jointly with companies
through an agreement during the earliest stages of
development of a field.
Co-Chair MacKinnon expressed appreciation for the
thoughtful way in which the department shared information.
10:45:08 AM
AT EASE
10:47:06 AM
RECONVENVED
Co-Chair MacKinnon discussed the schedule. She explained
that she would recess the meeting so that DNR could
continue with their presentation later in the day.
10:48:06 AM
Mr. Fogels presented the second project on slide 11.
Knik River Public Use Area Target Shooting Facility
Phases: 2
Total Authorized $900.0/ Total Expended & Encumbered
$889.8 / Balance $10.2
Phase 1 of construction was completed on 7/18/14.
Phase 2 should be completed by September 2015 and will
widen the existing range, construct a pistol range and
create pavilions over the firing line to reduce noise
and protect the firing line from weather. This phase
is partially built, and design and engineering work is
finished.
The project is currently out for competitive bid.
Mr. Fogels explained that the completed first phase of
project was a 40-foot wide by 100-foot shooting range, and
the encumbered funds would extend the facility to 120-foot
wide by 100 yards with the addition of some pavilions. He
noted that the facility was a core component of the larger
management of the Knik River Public Use Area, where target
shooting was largely banned due to public safety concerns.
10:49:27 AM
RECESSED
1:33:33 PM
RECONVENED
Mr. Fogels presented slide 12, which outlined two phased
capital appropriations, both on the Kasilof River.
Mr. Fogels discussed the Public Access and User Facilities
Improvements at the Mouth of the Kasilof River CIP, which
was a two-phase capital appropriation for an extremely high
public use area for personal use dip netting.
Co-Chair MacKinnon asked if the project could be discussed
later when Vice-Chair Micciche was present since it was
located in his district.
1:34:53 PM
Mr. Fogels presented slide 13, and discussed the South
Denali Visitors Center, which was a two-phase project. He
specified that phase one was almost completed, and DNR had
the funds for completion. Phase 2 had a much larger scope
of project that would probably require a number of years
for completion. The overall plan was for a visitor complex
along the Parks Highway in the Denali State Park.
Components included a lower facility with a campground, a
ranger facility, and a pavilion; with a road to the top of
the ridge and eventually a grand visitor facility at the
top with views of Denali. He detailed that the lower
facility was almost complete; and consisted of an RV
campground with 32 spots and electricity, possible after
the capital appropriation funded transmission line from
Trapper Creek to the facility. He had visited the site the
previous summer and described it as one of the nicest
campground facilities in the state. He estimated that once
the facility was up and running, it would more than pay for
the management costs on the facility.
Senator Dunleavy stressed the need for supporting projects
with the greatest urgency or importance, and putting others
on hold for the future.
1:36:50 PM
Senator Olson asked about outside investors from the
private sector, and wondered if they were also hampered by
the possibility of DNR not receiving the CIP funding. Mr.
Fogels reiterated that it was a phased project for which
they had already secured funds. He clarified that there
were private investors, and detailed that Princess Tours
had contributed $1 million towards the transmission line;
Sea Lion and the village of Hooper Bay had donated land. He
furthered that there had been a land exchange that allowed
for reduced project costs for DNR in return for better
access for a possible lodge facility. He described it as a
very productive public-private partnership.
Senator Olson asked if any change in funding would
jeopardize the public-private partnership. Mr. Fogels
specified that the portion of the facility built on the
property in question had already been constructed,
therefore the land exchange would be complete. The
consequence of a change or lack of further funding would be
non-completion of the campground.
1:38:37 PM
Senator Dunleavy commented on the number of projects that
DNR had brought forward. He referred to a Senate Education
Committee meeting from the previous day, where a
superintendent from the Mat-Su school district had called
in and expressed support for the bonding concept while at
the same time expressing understanding of the fiscal
climate and willingness to curtail additional project
requests. He reiterated that it would be helpful if others
did the same. He thought that many of the DNR CIPs were
good projects, but asserted that if the state could "take a
break" it would help the state treasury.
1:39:59 PM
Mr. Fogels went back to slide 12, noting two projects that
were both on the Kasilof River.
Public Access and User Facilities Improvements at the
Mouth of the Kasilof River
Phases: 2
Total Authorized $2,800.0 / Total Expended &
Encumbered $2,795.2 / Balance $4.8
This project creates access and user facilities on the
north side of the Kasilof River to support the
Personal Use Fisheries each June through August, which
provides thousands of Alaskan residents an economical
food source. Phase 1 construction is expected to be
completed by June 2016 and includes parking for 120
vehicles, turnaround areas, two toilets and areas for
portable toilets and dumpsters. Phase 2 includes the
purchase of land on the north side of the river and
has been designed to include parking for 93 more
vehicles, camping area and designated RV sites, gravel
loop road joining parking and camping areas, and
repair of existing dune fencing. Further construction
efforts are on hold pending the outcome of a land
purchase negotiation. Should we be unable to acquire
the land, the project scope will focus on expanding
the parking and turnaround areas to ensure access to
emergency vehicles.
Lower Kasilof River Drift Boat Takeout
Phases: 2
Total Authorized $3,600.0 / Total Expended &
Encumbered $508.9 / Balance $3,091.1
This project includes the acquisition of two land
parcels along the lower Kasilof River for development
into a drift boat take out facility. One piece of land
has been acquired, and the acquisition of adjacent
land is in progress. Both parcels require an
environmental assessment and potential cleanup work,
and once the second parcel is acquired we will
complete the cleanup and begin improvements.
Mr. Fogels discussed the Public Access and User Facilities
Improvements at the Mouth of the Kasilof River, a two phase
project that would be half complete by the following summer
and fully complete by the subsequent summer. He pointed out
that most of the funds for the project had been expended to
encumbered. He continued that the improvements were in an
very heavily used area where the environmental damage had
become extreme. The improvements were an effort to clean up
the damage while building hardened parking facilities,
sanitary facilities, and camping facilities.
Co-Chair MacKinnon remarked that it was a small amount of
funding on the balance of the project, but she appreciated
the update.
Vice-Chair Micciche commented that he was very supportive
of the project, and that it was unfortunate that the state
had provided an expanded fishery before the area had the
facilities necessary to handle the crowds. He was grateful
for the investment.
Mr. Fogels discussed the Lower Kasilof River Drift Boat
Takeout. He described the safety concerns that were a
motivation for the project. He relayed that the department
was currently negotiating for two parcels of land in a
location that would allow for the building of a takeout
facility where boats could be pulled out of the river
safely.
1:43:07 PM
Senator Dunleavy asked how the drift boat takeout was not a
part of a larger boat launch project. Mr. Fogels thought
that perhaps Senator Dunleavy was referring to a Department
of Fish and Game budget discussion. He explained that the
put-in for the Kasilof River was a state park facility, and
the money was thereby appropriated to DNR.
1:43:50 PM
Vice-Chair Micciche referred to land parcel dialogues and
asked if the lower parcel property owner was still
interested in negotiating. Mr. Fogels thought that the
property owner in question had backed out of the deal at
least once, and clarified that DNR was currently in
negotiations with him. He referred to State Parks Director
Ben Ellis for further information regarding the
negotiations.
Senator Dunleavy asked if there were operating costs
associated with the project. Mr. Fogels relayed that there
were indeed operating costs, much or all of which would be
recouped through fees.
BEN ELLIS, DIRECTOR, ALASKA STATE PARKS, DEPARTMENT OF
NATURAL RESOURCES (via teleconference), projected that
revenue generated from the boat launch would cover the
operating costs of the facility once it was operational.
Vice-Chair Micciche observed that the second piece of
property in question seemed far superior to make the
project more viable. He mentioned a state launch facility
well upstream and discussed safety concerns in the area due
to lack of options for boat launches and take-outs. He
described the changes on the Kasilof River to be relatively
dramatic over the last decade.
1:47:05 PM
Co-Chair MacKinnon commented that she would like to help
the negotiations, and stated that the committee would be
checking on whether negotiations had concluded before
moving the capital budget out of committee.
1:47:26 PM
Commissioner Myers presented slide 14, and discussed the
Statewide Digital Mapping Initiative. The project was an
effort to recognize Alaska as the worst mapped state in the
country. He described a partnership between the state and
federal government to work on a cooperative mapping program
in which the state paid one-third and the federal
government paid two-thirds. Outcomes included a consistent
statewide imagery product done through the University of
Alaska using a spot satellite; and a digital elevation
model, which had significant geographic and safety
implications. He discussed technical aspects of the
elevation model, specifying that the project utilized
airborne radar tools. He summarized that the partnership
had been very productive, with approximately 61 percent of
the state being covered, but needed monies to assure the
matching funds. He furthered that there was a lot of
support from the federal government, and thought the
project could be moved forward with much less ratio of
state matching funds. He noted that every base map that was
drawn in the state utilized the base data from the project.
Additionally there was cooperation with DNR providing land
records data, and the project was strongly supported by the
private sector and private mapping community.
1:50:27 PM
Co-Chair MacKinnon referred to other mapping projects in
Alaska, including at the university, at the Alaska
Aerospace Corporation, and with private contractors; and
surmised that it would be prudent to ensure there was no
overlap. She highlighted the importance of public
understanding of the different approaches and funding of
varied mapping projects. Commissioner Myers discussed the
coordination of state mapping needs by the Alaska
Geospatial Council, a group set up by the previous
administration that included deputy commissioners from all
the departments who wanted to participate in mapping. He
added that the university had also participated. He
furthered that there was a larger geospatial mapping
council that in turn facilitated coordination through
federal, state, and integrated levels; overseen by a high
level political appointee, the Assistant Secretary for
Water and Science at the U.S. Department of Interior. He
added that there was much input from the private sector. He
discussed early formation of the group and the lack of a
coordinated plan. He clarified the nature of the data as
baseline topographic mapping rather than vegetation,
hydrology, or cadastral mapping; and the baseline data
provided other state maps with fidelity.
Commissioner Myers listed numerous state agency functions
that required a digital elevation model and could utilize
the consistent base of data provided by the mapping
initiative: aviation safety, community development,
resource development, pipeline routing and right-of-ways,
coastal erosion, and glacier mass and water balances. He
discussed the instances in which higher resolution data was
needed and used the examples of pipelines, flood plain
measurement, and coast line mapping. He praised the deputy
commissioner's work on the Geospatial Council, and shared
that he planned on approaching the governor regarding
reformation of a committee to ensure coordinated spending
of the remaining funds for the project.
1:54:26 PM
Mr. Fogels added that USGS was using DNR data to update all
of its topographic maps in Alaska. He furthered that the
current topo maps were 60 years old and very inaccurate,
and new ones would be based on the data from the mapping
initiative. USGS had completed approximately 10 percent of
the state thus far.
Commissioner Myers shared a story about when he was USGS
director and there was no intention of increasing the
Alaska topographic map base. He had demanded that the
survey reinvent the topographic maps to the high resolution
1 inch to 1 mile scale, and brought the executive
leadership team to Alaska to discuss the progress on the
project and other issues. A map of Eagle River was used as
an illustration to the group, with beautiful new
hydrography and good vegetation coverage; yet with
buildings and infrastructure from 1962. He recounted the
lack of major features on the example map (such as bridges
and highways) and the obvious demonstration that there was
a major lack of systematic baseline data. He discussed the
importance of map layers being of the same quality with
regard to the age and viability of data; and asserted that
integrated maps were now being produced using automated
technology. He summarized that the mapping initiative data
underpinned the efforts to get the elevation model
consistent with other mapping data.
1:56:26 PM
Vice-Chair Micciche asked if all the digital data was
obtained using fixed-wing aircraft, or via satellite.
Commissioner Myers stated that the current Interferometric
Synthetic Aperture Radar (IfSAR) data being gathered was
via high-altitude airborne operations. He clarified that
the ability to use high-resolution satellites was also
available, although traditionally its data set had not been
adequate over Alaska. He discussed his previous
chairmanship of the U.S. Civil Applications Committee,
which allowed for use of military data; and commented that
the military underwrote much of the cost of commercial
satellites. He explained that the National Geospatial
Agency (the military mapping equivalent to the USGS)
gathered but did not map polar-orbiting data over Alaska
collected by half-resolution U.S. satellites. He furthered
that there was a new method that used satellite-based data
to acquire a digital elevation product at a much lower
cost, and had recommended the method as a product to the
U.S. chairs of the Arctic Council. He qualified that the
concept had gained significant traction with the state
department. He explained that through negotiations with the
University of Alaska and the National Science Foundation,
data was being made available to federal users; and through
an agreement with the geospatial agency some of the
derivative product of the data (a digital elevation model)
could be released publicly. He reiterated the importance of
quality and consistency of the data as compared to the
higher-resolution airborne data. He pointed out that part
of the requested funds would be utilized to do such a
comparison and determine if the new data was adequate for
federal and state needs. He reiterated the utility of an
automated mapping process that would be available for
future re-mappings.
1:58:59 PM
Mr. Fogels referred to page 15, "Future Capital Funding
Needed to Complete Existing Projects (GF Only)."
Atwood Building Renovation (additional $2,900.0)
The current $4,600.0 appropriation partially funds the
renovation and implementation of Universal Space
Standards on DNR occupied floors in the stateowned
Anchorage Atwood building. The project is on hold
until the cost and savings generated from full
implementation can be evaluated in the current fiscal
situation. It is estimated that, at a minimum, an
additional $2,900.0 would be required to fully
implement. Future funding may be requested in FY2017
or FY2018 to complete the project.
Deferred Maintenance
Current balance of existing deferred maintenance
projects for the Divisions of Parks, Forestry, and
Agriculture is
$8,146.6.
The deferred maintenance inventory of projects
remaining to be addressed is $71,957.3.
The divisions will focus efforts on completing the
projects currently funded. DNR expects to request
additional deferred maintenance funds for the most
critical repairs in the next two to three years.
Mr. Fogels discussed the Atwood Building Renovation,
stating that DNR occupied floors 6 through 14 of the
building. He stated that with new office space standards,
the department would be compressing down to about 7 floors;
requiring a major renovation and new furniture. He detailed
that the department had $4.6 million in an appropriation to
fund the move, however it was projected to cost an
additional $2.9 million to fund the move in its entirety.
Mr. Fogels discussed the deferred maintenance request. He
stated that DNR had a deferred maintenance inventory of
$71.9 million, $62.4 million of which was in the state
parks system; with the remainder in the Division of
Forestry and Division of Agriculture. He specified that DNR
had $8.1 million in hand to do the work, and there was a
lot more to do.
Vice-Chair Micciche stated that he would like to see a
prioritized list of critical repairs that would be
forthcoming in the next three to five years of capital
requests. Mr. Fogels agreed to provide the information to
the committee.
2:01:19 PM
Commissioner Myers thanked the committee for its diligence
and dialogue. He expressed appreciation for the questions
of the committee. He understood that the committee was
interested in seeing requests bundled in categories rather
than based on the budget book, and affirmed to do so in the
future. Co-Chair MacKinnon thanked the DNR team.
SB 26 was HEARD and HELD in committee for further
consideration.
ADJOURNMENT
2:02:23 PM
The meeting was adjourned at 2:02 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 031815 DNR Capital Budget Overview.pdf |
SFIN 3/18/2015 9:00:00 AM |
SB 26 |