Legislature(2009 - 2010)SENATE FINANCE 532

03/29/2010 09:00 AM Senate FINANCE


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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+= SB 217 GUARANTEED REVENUE BONDS FOR VETERANS TELECONFERENCED
Moved CSSB 217(FIN) Out of Committee
+= SB 219 TRAUMATIC BRAIN INJURY:PROGRAM/MEDICAID TELECONFERENCED
Moved CSSB 219(FIN) Out of Committee
+= SB 279 MORTGAGE LENDING TELECONFERENCED
Moved CSSB 279(FIN) Out of Committee
+= SB 284 CAMPAIGN EXPENDITURES TELECONFERENCED
Moved CSSB 284(FIN) Out of Committee
+ SB 117 PRICE OF CIGARETTES TELECONFERENCED
Heard & Held
+ SB 239 IGNITION INTERLOCK DEVICES/DUI/CHEM. TEST TELECONFERENCED
Heard & Held
+ SB 243 NO ROYALTY ON GEOTHERMAL RESOURCE TELECONFERENCED
Heard & Held
+ Bills Previously Heard/Scheduled TELECONFERENCED
= SB 305 SEPARATE OIL & GAS PRODUCTION TAX
<Bill Hearing Postponed>
                 SENATE FINANCE COMMITTEE                                                                                       
                      March 29, 2010                                                                                            
                         9:03 a.m.                                                                                              
                                                                                                                                
                                                                                                                                
9:03:49 AM                                                                                                                    
                                                                                                                                
CALL TO ORDER                                                                                                                 
                                                                                                                                
Co-Chair  Stedman   called  the  Senate   Finance  Committee                                                                    
meeting to order at 9:03 a.m.                                                                                                   
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator Lyman Hoffman, Co-Chair                                                                                                 
Senator Bert Stedman, Co-Chair                                                                                                  
Senator Charlie Huggins, Vice-Chair                                                                                             
Senator Dennis Egan                                                                                                             
Senator Donny Olson                                                                                                             
Senator Joe Thomas                                                                                                              
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Johnny Ellis                                                                                                            
                                                                                                                                
ALSO PRESENT                                                                                                                  
                                                                                                                                
Bryan  Butcher,  Director,  Government  Affairs  and  Public                                                                    
Relations,  Alaska Housing  Finance Corporation,  Department                                                                    
Of  Revenue;  Esther  Cha,  Staff,  Senator  Lesil  McGuire;                                                                    
Senator Hollis French; Senator  Kevin Meyer; Mike Pawlowski,                                                                    
Staff, Senator  Lesil McGuire;  Darwin Peterson,  Staff, Co-                                                                    
Chair Stedman; Senator Joe  Paskvan; Patrice Walsh, Division                                                                    
of   Banking  and   Securities,   Department  of   Commerce,                                                                    
Community,  &  Economic  Development (DCCED);  Jesse  Kiehl,                                                                    
Staff, Senator Egan                                                                                                             
                                                                                                                                
PRESENT VIA TELECONFERENCE                                                                                                    
                                                                                                                                
Mike  Elerding,  Ketchikan;  Cliff Kraemer,  Northern  Sales                                                                    
Company;  Paul  Thomsen, Director,  ORMAT-Technology;  Cathy                                                                    
Foerster,  Engineering  Commissioner,  Alaska  Oil  and  Gas                                                                    
Conservation  (AOGCC); Kevin  Banks,  Director, Division  of                                                                    
Oil and Gas, Department of Natural Resources                                                                                    
                                                                                                                                
SUMMARY                                                                                                                       
                                                                                                                                
SB 117    PRICE OF CIGARETTES                                                                                                   
                                                                                                                                
          SB  117  was  HEARD  and  HELD  in  Committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
SB 217    GUARANTEED REVENUE BONDS FOR VETERANS                                                                                 
                                                                                                                                
          CSSB 217 (FIN) was  REPORTED out of Committee with                                                                    
          a "do  pass" recommendation and with  a new fiscal                                                                    
          note by the Department of Revenue.                                                                                    
                                                                                                                                
SB 219    TRAUMATIC BRAIN INJURY: PROGRAM/MEDICAID                                                                              
                                                                                                                                
          CSSB 219 (FIN) was  REPORTED out of Committee with                                                                    
          no recommendation and with zero  FN 1 (DHS) and FN                                                                    
          2 (DHS.                                                                                                               
                                                                                                                                
SB 239    IGNITION INTERLOCK DEVICES/DUI/CHEM. TEST                                                                             
                                                                                                                                
          SB  239  was  HEARD  and  HELD  in  Committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
SB 243    NO ROYALTY ON GEOTHERMAL RESOURCE                                                                                     
                                                                                                                                
          SB  243  was  HEARD  and  HELD  in  Committee  for                                                                    
          further consideration.                                                                                                
                                                                                                                                
SB 279    MORTGAGE LENDING                                                                                                      
                                                                                                                                
          CSSB 279 (FIN) was  REPORTED out of Committee with                                                                    
          a "do pass" recommendation and with FN 1 (CED).                                                                       
                                                                                                                                
SB 284    CAMPAIGN EXPENDITURES                                                                                                 
                                                                                                                                
          CSSB 284 (FIN) was  REPORTED out of Committee with                                                                    
          a  "do pass"  recommendation  and with  zero FN  1                                                                    
          (GOV) and FN 2 (ADM).                                                                                                 
                                                                                                                                
SB 305    SEPARATE OIL & GAS PRODUCTION TAX                                                                                     
                                                                                                                                
          SB 305 was SCHEDULED but not HEARD.                                                                                   
                                                                                                                                
9:04:52 AM                                                                                                                    
                                                                                                                                
SENATE BILL NO. 217                                                                                                           
                                                                                                                                
     "An Act relating to the issuance of state-guaranteed                                                                       
     revenue   bonds   by   the   Alaska   Housing   Finance                                                                    
     Corporation to finance mortgages for qualifying                                                                            
     veterans; and providing for an effective date."                                                                            
                                                                                                                                
9:05:48 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  stated that it  was the second  hearing on                                                                    
the bill.                                                                                                                       
                                                                                                                                
Co-Chair Hoffman MOVED to ADOPT  CSSB 217 (FIN), labeled 26-                                                                    
GS2879\R, as the working document.                                                                                              
                                                                                                                                
Co-Chair Stedman  OBJECTED. He explained that  there was new                                                                    
language on page  3, Section 5, which  authorizes the Alaska                                                                    
Housing Finance Corporation (AHFC)  to purchase the building                                                                    
where they  currently reside at 4300  Boniface in Anchorage.                                                                    
It also  allows AHFC to  purchase a site for  the relocation                                                                    
of their Anchorage in-take office.                                                                                              
                                                                                                                                
Co-Chair Stedman WITHDREW his OBJECTION.                                                                                        
                                                                                                                                
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
9:07:26 AM                                                                                                                    
                                                                                                                                
BRYAN  BUTCHER,  DIRECTOR,  GOVERNMENT  AFFAIRS  AND  PUBLIC                                                                    
RELATIONS,  ALASKA HOUSING  FINANCE CORPORATION,  DEPARTMENT                                                                    
OF REVENUE,  explained that by  state law, AHFC  is required                                                                    
to  make  a  statutory  change  any  time  it  purchases  or                                                                    
constructs a building. The cost  of the building will be for                                                                    
no  more than  $14.5 million,  of which  $5 million  will be                                                                    
from  a land  exchange  with the  Tatitlek Corporation.  The                                                                    
savings  due   to  purchasing  the  building,   rather  than                                                                    
continuing to  lease, should be approximately  $15.2 million                                                                    
in net present value.                                                                                                           
                                                                                                                                
Mr.  Butcher  shared  information  about  the  location  and                                                                    
problematic   condition  of   the   public  housing   intake                                                                    
building. Repairing  the building would exceed  the value of                                                                    
the  building. There  are federal  funds  and AHFC  receipts                                                                    
that can  be used to  relocate the building ideally  in East                                                                    
Anchorage  on  a  bus  route.  No  additional  appropriation                                                                    
request will be needed.                                                                                                         
                                                                                                                                
9:09:25 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman  noted one fiscal note  from the Department                                                                    
of Revenue  showing $150,000 in  AHFC receipts for FY  11 to                                                                    
inform the voters about the  bonds, and a negative amount of                                                                    
$1,235,600 in the  contractual line beginning in FY  12 as a                                                                    
result  of  not  making  any more  lease  payments.  In  the                                                                    
miscellaneous  line the  amount  of $1,275,600  is for  debt                                                                    
service on 25-year bonds to purchase the building.                                                                              
                                                                                                                                
Senator  Olson  asked what  the  tax-assessed  value of  the                                                                    
property was. Mr. Butcher explained  that the tax payment on                                                                    
the   current   building   for   the   previous   year   was                                                                    
approximately $175,000 and the  value was for $12.2 million.                                                                    
The Tatitlek  Corporation plans to  build on the  site after                                                                    
the  land exchange  and should  show a  net increase  in tax                                                                    
value to Anchorage.                                                                                                             
                                                                                                                                
Senator  Olson inquired  if Anchorage  is opposed  to taking                                                                    
the property  off the  tax rolls.  Mr. Butcher  replied that                                                                    
the  municipality has  not stated  opposition  to this  land                                                                    
trade.                                                                                                                          
                                                                                                                                
Senator  Olson  asked where  the  intake  site currently  is                                                                    
located. Mr.  Butcher said it  was on  International Airport                                                                    
Road between  Arctic Boulevard and  C Street. It has  been a                                                                    
difficult place for people to get to.                                                                                           
                                                                                                                                
9:12:12 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman MOVED  to  report CSSB  217  (FIN) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  217 (FIN)  was REPORTED  out of  Committee with  a "do                                                                    
pass"  recommendation and  with  a new  fiscal  note by  the                                                                    
Department of Revenue.                                                                                                          
                                                                                                                                
9:12:24 AM                                                                                                                    
                                                                                                                                
SENATE BILL NO. 219                                                                                                           
                                                                                                                                
     "An Act establishing a traumatic brain injury program                                                                      
     and registry within the Department of Health and                                                                           
     Social Services; and relating to medical assistance                                                                        
     coverage for traumatic brain injury services."                                                                             
                                                                                                                                
Co-Chair  Stedman   noted  that  there  were   two  previous                                                                    
hearings on the bill.                                                                                                           
                                                                                                                                
Co-Chair Hoffman MOVED to ADOPT  CSSB 219 (FIN), labeled 26-                                                                    
LS1312\P, Mischel, 3/22/10, as the working document.                                                                            
                                                                                                                                
Co-Chair Stedman OBJECTED for discussion purposes.                                                                              
                                                                                                                                
Co-Chair Stedman  explained that  at the  last hearing  a CS                                                                    
was adopted that amended the  definition of "case management                                                                    
services" on page 2, Section  3. At that hearing language on                                                                    
page 3, lines  27 and 28, was deleted.  This CS incorporates                                                                    
those changes.                                                                                                                  
                                                                                                                                
Co-Chair  Stedman WITHDREW  his  OBJECTION.  There being  NO                                                                    
OBJECTION, it was so ordered.                                                                                                   
                                                                                                                                
9:14:01 AM                                                                                                                    
                                                                                                                                
ESTHER   CHA,  STAFF,   SENATOR   LESIL  MCGUIRE,   SPONSOR,                                                                    
explained the  changes by section.  The bill  establishes in                                                                    
Section  1 the  ability  for the  Department  of Health  and                                                                    
Social Services  to collect  and analyze  databases relating                                                                    
to  longitudinal  data,  the   same  amount  of  information                                                                    
tracked on the same person over  a period of time. Section 2                                                                    
adds case  management services for a  traumatic brain injury                                                                    
for optional services provided by  the department. Section 3                                                                    
amends  the  definition  of  case  management  services  for                                                                    
traumatic  or  acquired  brain  injury  to  align  with  the                                                                    
federal  definition. Section  4 adds  a Medicaid  waiver the                                                                    
department  can   apply  for.  Section  5   establishes  the                                                                    
program, which is the bulk of the bill.                                                                                         
                                                                                                                                
Co-Chair Stedman noted two fiscal  notes from the Department                                                                    
of Health and Social Services,  one zero fiscal note and one                                                                    
fiscal note  for an  increase cost  for $494,600  in general                                                                    
funds and $707,400 in federal receipts.                                                                                         
                                                                                                                                
9:15:35 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman MOVED  to  report CSSB  219  (FIN) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal notes. There  being NO OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  219  (FIN)  was  REPORTED out  of  Committee  with  no                                                                    
recommendation and with zero FN 1 (DHS) and FN 2 (DHS.                                                                          
                                                                                                                                
AT-EASE        9:16:21 AM                                                                                                     
RECONVENED     9:17:09 AM                                                                                                     
                                                                                                                                
SENATE BILL NO. 284                                                                                                           
                                                                                                                                
     "An Act relating to state election campaigns, the                                                                          
     duties of the Alaska Public Offices Commission, the                                                                        
     reporting   and   disclosure    of   expenditures   and                                                                    
     independent expenditures, the filing of reports, and                                                                       
     the identification of certain communications in state                                                                      
     election campaigns; and providing for an effective                                                                         
     date."                                                                                                                     
                                                                                                                                
9:17:18 AM                                                                                                                    
                                                                                                                                
Senator Huggins MOVED to ADOPT Amendment 1:                                                                                     
                                                                                                                                
     Page 6, lines 3-4:                                                                                                         
     Delete "apply only to the extent permitted by federal                                                                      
     law"                                                                                                                       
     Insert "prohibit a foreign national from making a                                                                          
     contribution or expenditure in connection with a state                                                                     
     election only to the extent                                                                                                
     (1) that federal law prohibits a foreign national                                                                          
          from making a contribution or expenditure in                                                                          
          connection with a state election; and                                                                                 
     (2) permitted by federal law"                                                                                              
                                                                                                                                
Co-Chair Stedman OBJECTED for discussion purposes.                                                                              
                                                                                                                                
Senator Huggins explained that  the amendment was clarifying                                                                    
language.                                                                                                                       
                                                                                                                                
SENATOR  HOLLIS FRENCH,  SPONSOR, stated  that he  supported                                                                    
the amendment.                                                                                                                  
                                                                                                                                
Co-Chair   Stedman  WITHDREW   his  OBJECTION   to  adopting                                                                    
Amendment 1.  There being  NO further  OBJECTION, it  was so                                                                    
ordered.                                                                                                                        
                                                                                                                                
9:18:33 AM                                                                                                                    
                                                                                                                                
Senator French  explained that the  bill makes  certain that                                                                    
there is disclosure to the  Alaska Public Offices Commission                                                                    
(APOC)  of the  independent  expenditures made  in the  next                                                                    
election cycle by corporations and  unions that are now free                                                                    
to participate  in elections due  to a recent  Supreme Court                                                                    
decision. It  also provides  for disclaimers  in advertising                                                                    
on the radio,  on television, and in the  newspapers so that                                                                    
Alaskans know who is speaking to them about the elections.                                                                      
                                                                                                                                
Co-Chair  Stedman noted  the fiscal  notes; one  zero fiscal                                                                    
note from the  Governor and a fiscal note  by the Department                                                                    
of Administration  requesting one additional  staff position                                                                    
for APOC for $131,200 in general funds.                                                                                         
                                                                                                                                
9:19:36 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman MOVED  to  report CSSB  284  (FIN) out  of                                                                    
Committee   with   individual    recommendations   and   the                                                                    
accompanying fiscal  note. There being NO  OBJECTION, it was                                                                    
so ordered.                                                                                                                     
                                                                                                                                
CSSB  284 (FIN)  was REPORTED  out of  Committee with  a "do                                                                    
pass"  recommendation and  with zero  FN  1 (GOV)  and FN  2                                                                    
(ADM).                                                                                                                          
                                                                                                                                
SENATE BILL NO. 117                                                                                                           
                                                                                                                                
     "An Act requiring the Department of Revenue to set the                                                                     
     minimum price for cigarettes for sale by wholesalers                                                                       
     and retailers; and prohibiting a wholesaler or                                                                             
     retailer from selling at wholesale or retail                                                                               
     cigarettes at a lower price than the price set by the                                                                      
     Department of Revenue."                                                                                                    
                                                                                                                                
ESTHER  CHA, STAFF,  SENATOR LESIL  MCGUIRE, explained  that                                                                    
the bill  addresses a current loophole  in legislation which                                                                    
allows large  high volume cigarette  sellers to  price their                                                                    
cigarettes  at less  than the  minimum price  set by  law if                                                                    
they can prove  that their actual cost of  doing business is                                                                    
lower than the mandated  minimum price. The original purpose                                                                    
of  Article 7  in Title  43 was  to prevent  wholesalers and                                                                    
retailers from using predatory  pricing practices to promote                                                                    
the sale of cheap cigarettes and  use them as a loss leader.                                                                    
However,   AS  43.50.800(c)   specifically  states   that  a                                                                    
wholesaler or  retailer that wishes  to advertise,  offer to                                                                    
sell,  or  sell cigarettes  at  less  than the  presumptive,                                                                    
actual  cost  to  the wholesaler  or  retailer,  must  first                                                                    
obtain  approval from  the  department.  The department  may                                                                    
grant approval  only if the wholesaler  or retailer provides                                                                    
proof satisfactory  to the department that  the wholesaler's                                                                    
or retailer's actual  cost is lower than  presumed. She gave                                                                    
an example. SB 117 would  repeal AS 43.50.800 and replace it                                                                    
with Section 6 in the bill, which establishes AS 43.50.801.                                                                     
                                                                                                                                
Ms. Cha explained that the  only change between the original                                                                    
bill and the CS are  the multipliers. The original bill held                                                                    
the percentages to  what is currently in  statute, which was                                                                    
4.5 percent  at wholesale and  6 percent at retail.  The new                                                                    
CS  changes those  percentages to  2 percent  and 4  percent                                                                    
respectively.  The Department  of  Revenue  approves of  the                                                                    
change. The percentages in the  CS are currently higher than                                                                    
the percentage granted at the exemption.                                                                                        
                                                                                                                                
Ms. Cha shared  that the original reasoning  behind fixing a                                                                    
minimum price  for cigarettes was  based on  studies showing                                                                    
how  increased  prices would  work  to  provide a  financial                                                                    
incentive  for  existing smokers  to  quit,  as well  as  to                                                                    
discourage new  smokers. The  expected price  increase found                                                                    
in the  CS will not have  as great an effect.  The bill will                                                                    
not  change the  amount  of  tax received  by  the state  on                                                                    
cigarette  sales.  By  getting  rid  of  a  wholesaler's  or                                                                    
retailer's ability to  apply for an exemption,  the CS would                                                                    
bring parity and balance to  competition. It would level the                                                                    
playing field  by ensuring that  all vendors,  regardless of                                                                    
size, volume,  or accounting practices,  will have  to price                                                                    
at, or above, the minimum price set in law.                                                                                     
                                                                                                                                
9:24:45 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman  noted  one  zero  fiscal  note  from  the                                                                    
Department of Revenue.                                                                                                          
                                                                                                                                
9:25:06 AM                                                                                                                    
                                                                                                                                
MIKE  ELERDING,  KETCHIKAN  (via teleconference),  spoke  in                                                                    
favor of  the legislation.  He requested  that the  topic of                                                                    
the  bill  be  limited  to  only one  topic,  the  price  of                                                                    
cigarettes.  He spoke  as a  tobacco distributor  and shared                                                                    
the  history  of  his  company's  involvement  in  cigarette                                                                    
taxes.  He   provided  information  about   the  correlation                                                                    
between  increasing prices  and  decreasing consumption.  He                                                                    
described   how   cigarette   pricing  is   controlled.   He                                                                    
emphasized that if  the state is doing its  part to increase                                                                    
the  price of  tobacco, cigarettes  should not  be sold  for                                                                    
less than  the market cost. He  agreed that SB 117  closed a                                                                    
loophole and stated his support for the bill.                                                                                   
                                                                                                                                
9:29:21 AM                                                                                                                    
                                                                                                                                
CLIFF KRAEMER, NORTHERN  SALES COMPANY (via teleconference),                                                                    
spoke in  support of  the proposed  changes contained  in SB
117.  The   recommendation  to  set  a   minimum  price  for                                                                    
cigarettes is a compromise among wholesalers and retailers.                                                                     
                                                                                                                                
SB  177  was  heard  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
9:31:01 AM                                                                                                                    
                                                                                                                                
SENATE BILL NO. 239                                                                                                           
                                                                                                                                
     "An Act relating to ignition interlock devices, to                                                                         
     refusal to submit to a chemical test, and to driving                                                                       
     while under the influence."                                                                                                
                                                                                                                                
SENATOR KEVIN  MEYER, SPONSOR, provided  the history  of the                                                                    
bill.  He pointed  out that  not  all judges  are using  the                                                                    
tool, which is a concern.  He stated that research shows the                                                                    
effectiveness of  the interlock  device. He  emphasized that                                                                    
the bill closes loopholes.                                                                                                      
                                                                                                                                
Senator Meyer  said there was  no fiscal impact  because the                                                                    
law is already in place.                                                                                                        
                                                                                                                                
9:33:27 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman noted two zero fiscal notes.                                                                                   
                                                                                                                                
SB  239  was  heard  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
SENATE BILL NO. 243                                                                                                           
                                                                                                                                
     "An Act removing the royalty obligation for geothermal                                                                     
     resources."                                                                                                                
                                                                                                                                
9:34:30 AM                                                                                                                    
                                                                                                                                
MIKE  PAWLOWSKI,  STAFF,  SENATOR  LESIL  MCGUIRE,  SPONSOR,                                                                    
explained that the bill attempts  to find a rational royalty                                                                    
regime for the development  of geothermal resources on state                                                                    
lands  in Alaska.  Originally,  the bill  started  out as  a                                                                    
complete negation of all royalty  on geothermal. However, in                                                                    
working  with  the  administration   and  in  the  Resources                                                                    
Committee,  understanding  was  reached  that  a  geothermal                                                                    
lease still  is actually a   property right  and, therefore,                                                                    
while  geothermal resources  themselves are  not exportable,                                                                    
some royalty  is necessary to maintain  the state's interest                                                                    
in  that the  state has  issued a  lease for  the geothermal                                                                    
resources. There  is one major geothermal  project currently                                                                    
being developed on state land.                                                                                                  
                                                                                                                                
Mr.   Pawlowski  related   that  Section   1  of   the  bill                                                                    
establishes a federal royalty rate  of 1.75 percent on gross                                                                    
income for the  first ten years, followed by  3.5 percent of                                                                    
gross income  for the following  ten years. The goal  of the                                                                    
bill  is to  find a  rational royalty  regime that  attracts                                                                    
development and ensures a fair return to the state.                                                                             
                                                                                                                                
9:36:32 AM                                                                                                                    
                                                                                                                                
Co-Chair  Stedman asked  how many  geothermal facilities  in                                                                    
the  state pay  a  royalty. Mr.  Pawlowski  said that  there                                                                    
currently were none. Several  projects under development are                                                                    
not on state land.                                                                                                              
                                                                                                                                
Co-Chair   Stedman   requested   an  explanation   of   what                                                                    
geothermal  energy   is  and  what   happens  after   it  is                                                                    
extracted. Mr.  Pawlowski understood that  geothermal energy                                                                    
comes from  hot rocks  in the  ground. Water  under pressure                                                                    
flows upwards and drives  turbans producing electricity. The                                                                    
water is re-injected to maintain pressure.                                                                                      
                                                                                                                                
Co-Chair Stedman summarized that it  was "hot water" and the                                                                    
hotter the  water, the  more value  it has.  As long  as the                                                                    
water is  re-injected into  the ground there  is no  loss of                                                                    
the resource.                                                                                                                   
                                                                                                                                
Co-Chair  Stedman  recalled  a discussion  about  California                                                                    
where  water  is not  re-injected  and  there are  depletion                                                                    
issues in reservoirs. Mr. Pawlowski  reported that there was                                                                    
an extensive  discussion of this  topic with  the Department                                                                    
of  Natural  Resources  and  with the  Alaska  Oil  and  Gas                                                                    
Conservation Commission.                                                                                                        
                                                                                                                                
9:38:55 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman   asked  for  more  information   about  a                                                                    
geothermal project in Anchorage.  Mr. Pawlowski replied that                                                                    
it  is  Ormat  Technology's   Mt.  Spurr  Project.  Co-Chair                                                                    
Hoffman asked  how much revenue  would come to the  state in                                                                    
the  first   ten  years  from   that  project,   under  this                                                                    
legislation. Mr.  Pawlowski referred  to information  in the                                                                    
packets  which  calculates the  revenue  over  the first  25                                                                    
years. Co-Chair Hoffman asked what  that total would be. Mr.                                                                    
Pawlowski said it would be $38 million.                                                                                         
                                                                                                                                
Co-Chair  Hoffman  asked  how  the tax  on  natural  gas  is                                                                    
calculated. Mr. Pawlowski clarified  that the tax on natural                                                                    
gas in Cook  Inlet is calculated as a royalty.  The lease of                                                                    
land for  geothermal land is,  in effect, a  property right,                                                                    
and  a certain  amount of  royalty  is in  the state's  best                                                                    
interest, which is  why the federal rate of  1.75 percent is                                                                    
used. Under current law the rate is 10 to 15 percent.                                                                           
                                                                                                                                
9:40:40 AM                                                                                                                    
                                                                                                                                
Co-Chair Stedman asked for a  definition of "geothermal land                                                                    
lease" versus  "volume of water use".  Mr. Pawlowski related                                                                    
that for a geothermal lease,  a specific land area is leased                                                                    
and  the  right  to  develop   the  geothermal  resource  is                                                                    
conferred. He  could not explain the  volumetric development                                                                    
of a geothermal resource.                                                                                                       
                                                                                                                                
Senator Olson spoke of the  modification of the federal rate                                                                    
and wondered if other  geothermal projects would receive the                                                                    
same break.  Mr. Pawlowski  referred to  Section 2,  page 2,                                                                    
lines  3  -  5,  which   directs  the  Commissioner  of  the                                                                    
Department of  Natural Resources to offer  the royalty rates                                                                    
to any exiting lessee.                                                                                                          
                                                                                                                                
Co-Chair Stedman noted  two zero fiscal notes,  one from the                                                                    
Department  of  Revenue  and  one  from  the  Department  of                                                                    
Natural Resources.                                                                                                              
                                                                                                                                
9:42:37 AM                                                                                                                    
                                                                                                                                
PAUL    THOMSEN,    DIRECTOR,   ORMAT    TECHNOLOGY,    (via                                                                    
teleconference),  related that  his company  has leased  the                                                                    
acreage  of  Mt.  Spurr  in   order  to  develop  the  first                                                                    
commercial  geothermal power  plant in  Alaska. He  spoke in                                                                    
support of  the bill.  He agreed  with bringing  the royalty                                                                    
rate  down  to the  federal  level  in  order to  allow  the                                                                    
development to  be more competitive  and allow a  savings to                                                                    
ratepayers.                                                                                                                     
                                                                                                                                
Senator Olson  asked what  the risks to  the project  are if                                                                    
the bill  does not  get passed.  Mr. Thomsen  explained that                                                                    
since  they  do not  export  and  they  are operating  in  a                                                                    
regulated  market,  if the  royalty  rate  is high,  then  a                                                                    
higher rate will be charged to  the utility. He said if rate                                                                    
is where it  is today, it would require the  utility to fund                                                                    
a power purchase price at  14 cents. The project already has                                                                    
a low rate of return.  He maintained that the ratepayers are                                                                    
looking for a lower range.                                                                                                      
                                                                                                                                
Senator Olson  asked where else  in the United  States there                                                                    
are geothermal  projects and what  their royalty  rates are.                                                                    
Mr.  Thomsen  replied  that  there  are  power  projects  in                                                                    
Hawaii, California,  and Nevada. There are  also third-party                                                                    
projects  in Wyoming  and Utah.  Almost all  are on  federal                                                                    
lands  operated by  the Bureau  of Land  Management and  pay                                                                    
federal   royalty   rates.   California   and   Hawaii   are                                                                    
exceptions. California  has a very  high royalty rate  of 10                                                                    
percent, but  on a very  small project. Western  states tend                                                                    
to have a high state royalty rates.                                                                                             
                                                                                                                                
9:47:18 AM                                                                                                                    
                                                                                                                                
CATHY  FOERSTER, ENGINEERING  COMMISSIONER,  ALASKA OIL  AND                                                                    
GAS  CONSERVATION (AOGCC),  (via teleconference),  explained                                                                    
that the royalty portion of  the bill does not affect AOGCC.                                                                    
The part of the bill  that does affect AOGCC transfers some,                                                                    
but  not all,  authority  for the  regulation of  geothermal                                                                    
operations from  DNR to  AOGCC. The  authorities transferred                                                                    
are  the  authority  to  regulate  drilling  and  production                                                                    
operations,  the authority  to  protect correlative  rights,                                                                    
and  the   authority  to  prevent  physical   waste  of  the                                                                    
resource.  The   DNR  will   retain  its   authorities  over                                                                    
correlative  rights and  prevention of  waste pertaining  to                                                                    
state  lands. These  authorities are  consistent with  AOGCC                                                                    
oil and gas operations.                                                                                                         
                                                                                                                                
Ms.  Foerster continued  to say  that AOGCC  already has  in                                                                    
place  the  expertise to  take  on  these authorities.  Most                                                                    
importantly,  AOGCC has  experienced drilling  engineers who                                                                    
know  what to  look for  when approving  a drilling  or well                                                                    
work   permit  to   ensure  safety   and  good   operational                                                                    
practices, and experienced field inspectors.                                                                                    
                                                                                                                                
Co-Chair  Stedman  pointed  out  that the  bill  before  the                                                                    
committee  is Version  E, the  original  bill. He  requested                                                                    
comments on the lease rates.                                                                                                    
                                                                                                                                
9:50:05 AM                                                                                                                    
                                                                                                                                
Ms.  Foerster addressed  the question  about  the impact  on                                                                    
geothermal operations if  the bill does not  pass. She noted                                                                    
that there  would be  an additional  cost to  DNR to  hire a                                                                    
contract for the needed expertise previously described.                                                                         
                                                                                                                                
Co-Chair Stedman clarified that the  bill would be set aside                                                                    
and brought back later.                                                                                                         
                                                                                                                                
9:50:52 AM                                                                                                                    
                                                                                                                                
KEVIN BANKS,  DIRECTOR, DIVISION OF OIL  AND GAS, DEPARTMENT                                                                    
OF NATURAL  RESOURCES (via teleconference),  explained DNR's                                                                    
involvement and  how the bill  would affect  the department.                                                                    
He related that  DNR has the authority  to manage geothermal                                                                    
lands in  Alaska and to  take care of safety  issues related                                                                    
to  geothermal drilling.  The current  bill  would create  a                                                                    
situation where DNR would be  competitive with federal lands                                                                    
that  could  be  developed   for  geothermal  resources.  He                                                                    
acknowledged  that the  economics  of  a geothermal  project                                                                    
differ  substantially  from  an  oil and  gas  project.  The                                                                    
development  of   a  geothermal  resource  will   depend  on                                                                    
establishing  fairly   long-term  contracts   with  existing                                                                    
utilities.  The price  of the  electricity sold  to in-state                                                                    
utilities  must  be  competitive with  existing  sources  of                                                                    
energy.                                                                                                                         
                                                                                                                                
Mr.  Banks  thought  that   Ormat  provided  an  interesting                                                                    
discussion of the three parts  of their economics and costs.                                                                    
He offered to discuss those if requested.                                                                                       
                                                                                                                                
Mr. Banks noted  that there were 16 previous  lease sales on                                                                    
Mt. Spurr. He said there was  a proposal to put forth a best                                                                    
interest  finding  on a  lease  sale  at Mt.  Augustine.  He                                                                    
pointed  out  that DNR  also  has  oversight at  the  Naknek                                                                    
Project.                                                                                                                        
                                                                                                                                
9:53:59 AM                                                                                                                    
                                                                                                                                
Mr. Pawlowski thanked the committee for hearing the bill.                                                                       
                                                                                                                                
SB  243  was  HEARD  and   HELD  in  Committee  for  further                                                                    
consideration.                                                                                                                  
                                                                                                                                
SENATE BILL NO. 279                                                                                                           
                                                                                                                                
     "An Act relating to regulation of residential mortgage                                                                     
     lending, including the licensing of mortgage lenders,                                                                      
     mortgage brokers, and mortgage loan originators, and                                                                       
     compliance with certain federal laws relating to                                                                           
     residential mortgage lending; and providing for an                                                                         
     effective date."                                                                                                           
                                                                                                                                
9:54:26 AM                                                                                                                    
                                                                                                                                
Co-Chair  Hoffman  MOVED  to ADOPT  CSSB  279,  labeled  26-                                                                    
LS1295\S, Bannister, 3/19/10.                                                                                                   
                                                                                                                                
Co-Chair Stedman OBJECTED.                                                                                                      
                                                                                                                                
DARWIN  PETERSON, STAFF,  CO-CHAIR STEDMAN,  SPONSOR, listed                                                                    
the four changes  in Version S, which were  suggested by the                                                                    
Conference of  State Bank Supervisors  and were  shared with                                                                    
the Department of  Law and with the  bill's sponsor, Senator                                                                    
Paskvan.  The  first change  has  to  do with  the  approval                                                                    
authority for  education courses. Under the  Secure and Fair                                                                    
Enforcement  for  Mortgage  Licensing (SAFE)  Act  of  2008,                                                                    
courses required for  pre-licensing and continuing education                                                                    
courses have  to be approved  by the registry.  The previous                                                                    
version  of  the bill  had  the  Department  of Law  as  the                                                                    
authority  that approved  those  courses. The  change is  on                                                                    
page  7, lines  10  and 11,  and  lines 18  and  19. In  the                                                                    
previous  version of  the bill  there was  a subsection  (e)                                                                    
that would have followed line 19, but now has been deleted.                                                                     
                                                                                                                                
Mr. Peterson  turned to the  second change which  deals with                                                                    
approval authority for licensing tests.  It is found on page                                                                    
7, lines 23  - 25. The SAFE Act provides  that the licensing                                                                    
test will be developed by SAFE  and that the test will cover                                                                    
both  federal  and  state  law.  The  previous  version  had                                                                    
references to two different tests.                                                                                              
                                                                                                                                
Mr. Peterson  related that the  third change has to  do with                                                                    
disqualifying  felony convictions  and is  found on  page 9,                                                                    
line 20.  The previous version  of the  bill said that  if a                                                                    
person was  convicted of  a felony that  involved an  act of                                                                    
fraud, dishonesty,  a breach of trust,  or money laundering,                                                                    
within  seven  years,  the   person  was  disqualified  from                                                                    
licensing for  life. Now, a  person convicted of  any felony                                                                    
within  seven years  cannot  qualify for  a  license, and  a                                                                    
person  convicted of  any  felony that  involves  an act  of                                                                    
fraud, dishonesty,  a breach of  trust, or  money laundering                                                                    
is disqualified from obtaining a license for life.                                                                              
                                                                                                                                
Mr. Peterson  reported that  the fourth  change is  found in                                                                    
the definition section  of the bill on page 37  and page 40.                                                                    
The  previous   version  of  the  bill   had  two  different                                                                    
definitions  for  mortgage  loan  and  residential  mortgage                                                                    
loan, which was inconsistent with the SAFE Act.                                                                                 
                                                                                                                                
9:59:21 AM                                                                                                                    
                                                                                                                                
Senator Thomas  asked how the department  would establish by                                                                    
regulation the amount of the  required bond as referenced in                                                                    
Section 14, page 8.                                                                                                             
                                                                                                                                
SENATOR JOE PASKVAN, SPONSOR, deferred to his staff.                                                                            
                                                                                                                                
PATRICE   WALSH,  DIVISION   OF   BANKING  AND   SECURITIES,                                                                    
DEPARTMENT  OF COMMERCE,  COMMUNITY &  ECONOMIC DEVELOPMENT,                                                                    
(DCCED), spoke of  a planned increase in the  bond amount to                                                                    
about $75,000.                                                                                                                  
                                                                                                                                
Co-Chair Stedman WITHDREW his  OBJECTION to adopting the new                                                                    
CS. There being NO OBJECTION, it was so ordered.                                                                                
                                                                                                                                
10:01:46 AM                                                                                                                   
                                                                                                                                
Senator Egan moved to adopt Amendment 1:                                                                                        
                                                                                                                                
     Page 3, line 15, following "of":                                                                                           
     Insert "the Internet,"                                                                                                     
                                                                                                                                
     Page 4, line 3, following "individual":                                                                                    
     Insert "seller"                                                                                                            
                                                                                                                                
     Page 11, line 6:                                                                                                           
     Delete "suspended, or"                                                                                                   
     Insert "is suspended, is"                                                                                              
                                                                                                                                
     Page 12, following line 1:                                                                                                 
     Insert a new subsection to read:                                                                                           
     "(c) The department shall approve or deny the                                                                              
     application for renewal of a license not later than 60                                                                     
     days after the renewal application is filed."                                                                              
                                                                                                                                
     Page 12, line 22:                                                                                                          
     Delete "and [,]address[,]"                                                                                               
     Insert ",the licensee's address,"                                                                                        
                                                                                                                                
     Page 14, line 14, following "department":                                                                                  
     Insert "that is made in a record"                                                                                        
                                                                                                                                
     Page 20, line 6:                                                                                                           
     Delete "section"                                                                                                           
     Insert "chapter"                                                                                                           
                                                                                                                                
     Page 30, line 19:                                                                                                          
     Delete "a"                                                                                                               
                                                                                                                                
Co-Chair Stedman OBJECTED.                                                                                                      
                                                                                                                                
JESSE  KIEHL,  STAFF,  SENATOR   EGAN,  explained  that  the                                                                    
amendment  cleans  up  a  few  errors  and  minor  technical                                                                    
issues,   clarifies  some   language,   and  makes   several                                                                    
substantive changes to the bill.  The first change begins on                                                                    
page 3, line 15, where internet  sites are added to the list                                                                    
of communications  that would count as  advertising mortgage                                                                    
loan services.  The second  change is  in Section  20, which                                                                    
begins on  page 11. This  change gives the department  a 60-                                                                    
day deadline to act  on a renewal application, significantly                                                                    
longer  than the  current 30-day  deadline. The  longer time                                                                    
frame is  appropriate because the  new federal  law shortens                                                                    
licenses  to one  year,  instead of  two.  The third  change                                                                    
appears in Section 30, which is  on page 14 of Version S. It                                                                    
requires the  department's approval  of a change  in control                                                                    
be provided in a record.  That avoids a potential unintended                                                                    
consequence of  verbal approvals being acceptable.  The bill                                                                    
defines "record" very broadly, but it has to be traceable.                                                                      
                                                                                                                                
Co-Chair  Stedman WITHDREW  his  OBJECTION  to Amendment  1.                                                                    
There being NO OBJECTION, it was so ordered.                                                                                    
                                                                                                                                
10:04:07 AM                                                                                                                   
                                                                                                                                
Co-Chair Stedman  noted one fiscal note  from the Department                                                                    
of  Commerce,   Community,  and  Economic   Development  for                                                                    
$131,000 to  cover the cost  of one  additional occupational                                                                    
licensing position.                                                                                                             
                                                                                                                                
10:04:33 AM                                                                                                                   
                                                                                                                                
Co-Chair  Hoffman MOVED  to  report CSSB  279  (FIN) out  of                                                                    
Committee, as  amended, with individual  recommendations and                                                                    
the accompanying fiscal note. There being NO OBJECTION, it                                                                      
was so ordered.                                                                                                                 
                                                                                                                                
CSSB 279 (FIN) was REPORTED out of Committee with a "do                                                                         
pass" recommendation and with FN 1 (CED).                                                                                       
                                                                                                                                
SB 305 was SCHEDULED but not HEARD.                                                                                             
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
The meeting was adjourned at 10:05 AM.                                                                                          
                                                                                                                                
                                                                                                                                

Document Name Date/Time Subjects
AHFC Vets Loan Activity.pdf SFIN 3/29/2010 9:00:00 AM
SB 217
SB217 AHFC Vets Sec Analysis.pdf SFIN 3/29/2010 9:00:00 AM
SB 217
SB 217 Vets Bonds Sponsor Statement.pdf SFIN 3/29/2010 9:00:00 AM
SB 217
00 Sponsor Statement CSSB219.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
04 Summary of Changes_E.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
05 Sectional Analysis.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
06 Alaska Data Graphs.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
07 TBI Scorecard and Dashboard 032009.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
08 Medicaid BrainInjury Program Costs.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
09 StateofAlaska_Services_Congenital_Degenerative_BrainInjury.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
10 Acquired Brain Injury Definition.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
11 Letters of Support.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
13 Summary of Changes_S.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
SB 219 Amendment 1.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
Explanation of CS SB 279 (S FIN).doc SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 About the SAFE Act by HUD.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 Back-Up.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 Letters of Support.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 SAFE Mortgage Licensing Act.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 Sectional Analysis.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 Sponsor Statement.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
SB 279 Talking Points by Lorie Hovanec.pdf SFIN 3/29/2010 9:00:00 AM
SB 279
AG Opinion 02.19.10.PDF SFIN 3/29/2010 9:00:00 AM
SB 284
CSSB284(JUD) Sectional Analysis.pdf SFIN 3/29/2010 9:00:00 AM
SB 284
Explanation of Changes CSSB284 JUD.doc SFIN 3/29/2010 9:00:00 AM
SB 284
Leg. Legal Opinion 01.25.10.PDF SFIN 3/29/2010 9:00:00 AM
SB 284
Leg. Legal Opinion 03.17.10.PDF SFIN 3/29/2010 9:00:00 AM
SB 284
00 Sponsor Statement SB 117.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 117
03 SB 117 Summary of Changes.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 117
04 SB 117 Sectional Analysis.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 117
05 Costco Letter SB 117.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 117
07 Elerding Attachment.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 117
NCSL Ignition Interlock Device.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 239
SB 239 Sponsor Statement.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 239
SB 239 Support Letter APOA.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 239
Akutan Support Letter.pdf SFIN 3/29/2010 9:00:00 AM
SB 243
Changes to SB 243 in Version E.docx SFIN 3/29/2010 9:00:00 AM
SB 243
Geothermal Royalty Rates.docx SFIN 3/29/2010 9:00:00 AM
SB 243
Ormat SB242 and SB243 for Senate Resouce Hearing 11-Mar-10 ver0 (2).pptx SFIN 3/29/2010 9:00:00 AM
SB 242
SB 243
SB 243 Sectional.pdf SFIN 3/29/2010 9:00:00 AM
SB 243
USGS Geothermal Packet.pdf SFIN 3/29/2010 9:00:00 AM
SB 243
HB 300 Budget Amendments 0326Pkt#1.pdf SFIN 3/29/2010 9:00:00 AM
HB 300
HB 300 Buget Amendment Pkt #2 0326.pdf SFIN 3/29/2010 9:00:00 AM
HB 300
SB117-Stedman.pdf SFIN 3/29/2010 9:00:00 AM
SFIN 4/2/2010 9:00:00 AM
SB 117
CS Senate Bill 279--Talking Points (S FIN).pdf SFIN 3/29/2010 9:00:00 AM
SB 279
CS for SB 279 (S FIN).pdf SFIN 3/29/2010 9:00:00 AM
SB 279
CSSB217(FIN)-New DOR-AHFC-3-28-10.pdf SFIN 3/29/2010 9:00:00 AM
SB 217
SB 217 Proposed CS Version R SFIN 032910.pdf SFIN 3/29/2010 9:00:00 AM
SB 217
SB 219 Proposed CS Version P SFIN 032910.pdf SFIN 3/29/2010 9:00:00 AM
SB 219
SB 284 amendment 1 032910.pdf SFIN 3/29/2010 9:00:00 AM
SB 284
SB 279 Amendment 1 032910 .pdf SFIN 3/29/2010 9:00:00 AM
SB 279