Legislature(2011 - 2012)CAPITOL 120
02/14/2011 01:00 PM Senate JUDICIARY
| Audio | Topic |
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| Start | |
| Overview: Department of Law | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE JUDICIARY STANDING COMMITTEE
HOUSE JUDICIARY STANDING COMMITTEE
February 14, 2011
1:02 p.m.
MEMBERS PRESENT
SENATE JUDICIARY
Senator Hollis French, Chair
Senator Bill Wielechowski, Vice Chair
Senator Joe Paskvan
Senator John Coghill
HOUSE JUDICIARY
Representative Carl Gatto, Chair
Representative Steve Thompson, Vice Chair
Representative Wes Keller
Representative Bob Lynn
Representative Lance Pruitt
Representative Max Gruenberg
MEMBERS ABSENT
SENATE JUDICIARY
Senator Lesil McGuire
HOUSE JUDICIARY
Representative Lindsey Holmes
Representative Mike Chenault
COMMITTEE CALENDAR
OVERVIEW: DEPARTMENT OF LAW
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
JOHN BURNS, Attorney General Designee
Department of Law (DOL)
Anchorage, AK
POSITION STATEMENT: Delivered an overview of the Department of
Law.
Rick Svobodny, Deputy Attorney General
Department of Law (DOL)
Juneau, AK
POSITION STATEMENT: Answered questions about the Department of
Law Criminal Division.
ACTION NARRATIVE
1:02:30 PM
CHAIR CARL GATTO called the joint meeting of the Senate and
House Judiciary Standing Committees to order at 1:02 p.m.
Senators Wielechowski, Coghill, Paskvan, and French; and
Representatives Thompson, Keller, and Gatto were present at the
call to order.
^OVERVIEW: DEPARTMENT OF LAW
OVERVIEW: DEPARTMENT OF LAW
1:03:36 PM
CHAIR GATTO announced the business before the committees would
be to hear an overview of the Department of Law (DOL) by
Attorney General Designee John Burns.
REPRESENTATIVE PRUITT joined the committee.
JOHN BURNS, Attorney General Designee, Department of Law (DOL),
said it's a privilege to present an overview of the Department
of Law to the judiciary committees. While he is honored to
fulfill the position of Attorney General, it is not one he
sought. He informed the committees that as a lifelong Alaskan,
he is committed to bettering the state in a meaningful way.
Growing up in Nome gave him an appreciation for life in rural
Alaska, and provided an opportunity to spend time in unique
places like King Island and Diomede. In 1970 he moved to
Fairbanks and has resided there since except that he spent
summers working for Fish and Game in Western Alaska and Prince
William Sound. Since graduating from UAA and then Puget Sound
Law School approximately 25 years ago, he has been in private
practice specializing predominately in commercial law, doing
business transactions and insurance defense work. In the last
eight weeks he has met with members of the DOL in Anchorage,
Fairbanks and Juneau to become familiar with the issues. He has
also spent time in Nome, Bethel, and Barrow meeting with law
enforcement, DOL personnel, judges, Youth Court facilities, and
women's shelters to gain a better understanding of how the DOL
can meet the various needs.
1:06:51 PM
REPRESENTATIVE GRUENBERG joined the committee.
ATTORNEY GENERAL BURNS stated that his objective as Attorney
General is to uphold the constitution and laws of the state of
Alaska with dignity and integrity, consistent with his ethical
obligations as an attorney.
The mission of the Department of Law (DOL) is to prosecute crime
and provide legal services to state government for the
protection and benefit of Alaska's citizens. This is
accomplished by three divisions: the Criminal Division, the
Civil Division, and the Administrative Services Division. The
Criminal Division has 13 offices and the Civil Division has 14
sections.
DOL's core services are fourfold.
I. Protecting the safety and financial wellbeing of
Alaskans.
II. Fostering conditions for responsible development
of natural resources.
III. Protecting the fiscal integrity of the state.
IV. Promoting good governance.
1:08:21 PM
As of FY11, 284 attorneys provide services to the DOL. They hope
to add two more attorneys in FY12 for a total of 286. These will
be a district attorney in Kotzebue and a public records attorney
in Anchorage.
The FY12 budget request by core services includes:
· Sixty-two percent to protect Alaskans, predominantly
through the Criminal Division; and the Child Protection
Services Section, Commercial and Fair Business Section, and
Environmental Section within the Civil Division.
· Nineteen percent for state fiscal protection.
· Ten percent for governance.
· Nine percent for economic opportunity and resource
development.
1:09:48 PM
For FY10, the return on investment for the department was nearly
$7 to every $1 spent; costs were $85.4 million and collections
were $576 million. The benefits and collections were
concentrated in the Civil Division where the return was nearly
$12 to every $1 spent. The costs were $48.9 million and
collections were $576 million. To date for FY11 the awards and
collections total $108 million.
1:10:46 PM
SENATOR WIELECHOWSKI asked if the awards include the $500
million recovery from Mercer; and if the costs are all in-house
or a combination of in-house and outside counsel.
ATTORNEY GENERAL BURNS replied the FY10 data did include the
$500 million recovery from Mercer and the costs reflect both in-
house and outside counsel.
1:11:25 PM
SENATOR WIELECHOWSKI asked how much the state paid in attorney
fees to recover the $500 million.
ATTORNEY GENERAL BURNS said he understands it was a contingency
arrangement, but he would follow up with the information.
Collections fluctuate, but they are typically closer to $76
million.
The Criminal Division takes up the majority of the DOL budget
carrying out the core function of protecting Alaskans. He
highlighted the following:
· Thirteen District Attorney Offices are located in
Ketchikan, Kodiak, Kenai, Kotzebue, Barrow, Bethel,
Anchorage, Dillingham, Palmer, Fairbanks, Nome, and Sitka.
· The Office of Special Prosecutions handles cold cases;
Medicaid; welfare, PFD, insurance, and workers'
compensation fraud; cybercrimes; fish and game crimes;
environmental crimes; alcohol interdiction; criminal non-
payment of child support; and violations of state tax law.
· Appeals.
· The Rural Prosecution Unit assists rural offices when
workload demands outstrip available staff or expertise.
1:13:28 PM
ATTORNEY GENERAL BURNS displayed a state map that showed the
numbers of prosecutors in each of the statewide offices. Sitka,
Kotzebue, and Barrow each have one prosecutor; Kodiak,
Dillingham, and Nome each have two; Juneau and Ketchikan each
have three; Bethel has seven prosecutors; Kenai has nine; Palmer
has 11; Fairbanks has 14; and Anchorage has 35 prosecutors.
REPRESENTATIVE GRUENBERG asked if Bethel has seven prosecutors
because it's a heavy crime area compared to the rest of the
state.
ATTORNEY GENERAL BURNS replied he didn't have the statistics,
but that seems to be the case.
RICK SVOBODNY, Deputy Attorney General, Criminal Division,
Department of Law (DOL), said a lot of violent crimes are
committed in the Yukon/Kuskokwim Delta, which is an area that's
about the size of Oregon. When he last checked, Bethel had one
more sexual assault than the entire Anchorage area.
REPRESENTATIVE GRUENBERG highlighted that there are as many
district attorneys in Bethel as in the entire Southeast region.
He expressed concern and said he'd like to know more about
what's going on in that region.
CHAIR GATTO asked what population the Bethel office serves.
MR. SVOBODNY said he didn't know the population of the
Yukon/Kuskokwim Delta, but the Bethel office serves 47 villages.
By comparison, the Juneau office serves five locations.
1:16:39 PM
ATTORNEY GENERAL BURNS said he personally intended to spend a
significant amount of time addressing that issue.
The Civil Division has seven offices statewide with a number of
attorneys in each, predominantly in Fairbanks, Anchorage, and
Juneau. Six sections in the Civil Division handle the core
function of protecting Alaskans.
· Child Protection - 23 attorneys.
· Commercial and Fair Business - 18 attorneys.
· Human Services - 9 attorneys.
· Regulatory Affairs and Public Advocacy - 3 attorneys.
· Environmental Section - 10 attorneys.
· Labor and State Affairs - 19 attorneys.
Attorneys working in the Child Protection Section handle 3,000
Child in Need of Aid (CINA) cases every year; 2,000 of these
cases are ongoing at any time, rolling from year-to-year. Each
child protection attorney handles 113 cases, which exceeds the
recommended national average of 100 cases. These attorneys are
very busy and very successful. They prevailed in eleven of
eleven recent Alaska Supreme Court appeals of superior court
orders terminating parental rights. This says that the Office of
Child Services is doing an outstanding job in making the
determination as to which cases warrant moving forward.
1:19:28 PM
The Commercial and Fair Business Section handles consumer
complaints. The Consumer Protection Unit handled the DIRECTV
case; negotiated a $300,000 settlement from Publishers Clearing
House; a $425,000 settlement from Dannon Yogurt; and has thus
far recovered $13 million from "Average Wholesale Price," which
was drug litigation related to overcharging the Alaska Medicaid
program. These were all associated with false advertizing. The
unit also handled the lawsuit in which jewelers doing business
in Juneau falsely advertised "40-75% off" sales.
At the request of the Legislature, DOL in 2010 did a study to
determine why rural fuel costs were so high. The University of
Alaska Anchorage Institute of Social and Economic Research
(ISER) also did a study and concurred with DOL that there was no
evidence of price-fixing. Nevertheless, DOL continues to monitor
this issue.
ATTORNEY GENERAL BURNS made special mention of the Florida court
that threw out as unconstitutional the entire Patient Protection
and Affordable Care Act (PPACA). The court determined that the
valid portions could not be severed from the unconstitutional
aspects and therefore, the entire Affordable Care Act was
unconstitutional. DOL continues to advise the Department of
Health and Social Services (DHSS), the Division of Insurance,
and the Division of Retirement and Benefits on how PPACA, if it
is constitutional, will affect the Alaska. The Department of
Justice will probably appeal that decision, but because 13-14
other states have similar suits, the U.S. Supreme Court will
ultimately have to weigh in on the issue.
CHAIR GATTO asked if the state is investing funds to implement
part of the PPACA.
ATTORNEY GENERAL BURNS said he wasn't sure of the answer.
CHAIR FRENCH noted that when the Florida district court decision
was announced Governor Parnell indicated he would ask the
attorney general the legal status of the federal law. Senator
French asked what his advice is to the governor in the face of
that ruling.
ATTORNEY GENERAL BURNS said Alaska intervened in that case and
that remains the binding law, as relates to Alaska, at this
time. All the governors that were impacted by that decision sent
a letter urging the Obama administration to move forward with an
appeal directly to the Supreme Court. It's a matter that needs
to be addressed and it won't find resolution until it reaches
the highest court, he said.
CHAIR GATTO asked him to describe the term "nonseverability."
ATTORNEY GENERAL BURNS explained that the Florida district court
determined that the healthcare mandate was so intricately tied
to the other aspects of the Affordable Care Act, that it could
not be pulled out or severed and leave the remaining part able
to be enforced. The court couldn't make a determination as to
whether or not the PPACA could survive if the healthcare mandate
was severed and therefore it had to be thrown out entirely.
CHAIR FRENCH asked if the federal judge in Florida issued an
injunction against further application of the law.
ATTORNEY GENERAL BURNS answered no.
CHAIR FRENCH asked if it means that Alaska would be breaking the
law if it continued to abide by the PPACA, in light of his
advice to the governor that the decision by the judge in Florida
was binding on the state.
ATTORNEY GENERAL BURNS replied it was the decision of the
Florida court that the PPACA was unconstitutional so our
position is that we're not obligated to follow the PPACA.
CHAIR FRENCH asked if the governors who are party to the lawsuit
and also taking steps to ready their states for the PPACA were
breaking the law
ATTORNEY GENERAL BURNS replied, "Not at all." Each state is
taking different steps to evaluate the law and just how it will
be evaluated remains to be seen.
1:26:30 PM
CHAIR FRENCH said he's unclear as to the binding affect of the
Florida court ruling on the State of Alaska.
ATTORNEY GENERAL BURN replied the court's determination was that
it was unconstitutional. "That is the law as it relates to the
State of Alaska, its position vis-a-vis that act," he added.
CHAIR FRENCH noted the absence of an injunction, and asked if
he's saying that the State of Alaska is relieved of all its
obligations under the federal PPACA because of the decision in
Florida.
ATTORNEY GENERAL BURNS replied there is no obligation on the
State of Alaska to follow the federal mandate, but it could
elect to move forward and evaluate independently whether to
pursue a [healthcare] exchange.
CHAIR GATTO asked if an injunction was necessary, or was there
an implied consent that allows any state operating under the
PPACA to make an independent decision as to whether it will move
forward.
ATTORNEY GENERAL BURNS replied that's right; it was implied.
1:28:14 PM
REPRESENTATIVE LYNN joined the meeting.
SENATOR COGHILL asked if the reason that an injunction was not
issued related to the timeline.
ATTORNEY GENERAL BURNS said the court didn't indicate whether or
not the timelines were relevant to not issuing an injunction,
but a number of timelines do apply. The court emphasized and the
parties all recognized the importance of getting this decision
to the U.S. Supreme Court on an expedited basis because of the
potential cost.
SENATOR COGHILL asked if there was a reason the suit wasn't
filed under an original jurisdiction question rather than the
federal court.
ATTORNEY GENERAL BURNS said he didn't know.
CHAIR FRENCH said in the face of this decision in Florida he
hopes the governor doesn't decide that it is elective on him as
to whether or not to follow federal law and allow state
employees to keep their children on their health insurance until
age 26, starting in August 2011. I hope, he urged, that you
advise the governor that in the absence of an injunction, that I
believe that the State of Alaska has to continue to abide by
that federal law.
ATTORNEY GENERAL BURNS said he understands that the governor is
evaluating that point.
CHAIR GATTO asked if it's true that retired state employees
would not have the ability to keep a child on their retiree
state insurance policy until age 26; the cutoff would be age 23.
ATTORNEY GENERAL BURNS replied he didn't have an answer.
CHAIR GATTO said the State of Alaska was the only state that
declined $1 million to implement the mandated [healthcare
exchange,] indicating that the governor made a decision earlier
than the Florida court decision.
ATTORNEY GENERAL BURNS said, "I'm not aware of any decline."
1:31:58 PM
SENATOR WIELECHOWSKI asked, since the governor has declined to
work under the federal law, if he would advocate for the
governor to propose legislation to provide healthcare for
children up to age 26, ban discrimination against preexisting
conditions, and prohibit lifetime monetary limits on healthcare.
ATTORNEY GENERAL BURNS replied he had had no conversation with
the governor on that and did not know his position.
CHAIR GATTO asked if it's his job to defend the state's
position, but not to take a position himself.
ATTORNEY GENERAL BURNS replied he would defend the state's
position to the extent that the position was constitutional and
consistent with the statutes.
1:33:20 PM
He continued with the overview.
The Human Services Section defends the Department of Health and
Social Services in lawsuits related to foster care, public
assistance and Medicaid overpayments. Recently an independent
auditor indicated that there had been excessive charges and DOL
was able to recover $1.9 million.
The Environmental Section filed litigation against BP
Exploration Alaska to recover civil assessments and revenue
losses related to the 2006 Prudhoe Bay pipeline shutdown due to
corrosion. The Environmental Section also handled the Cruise
Ship Initiative. HB 134 regulating wastewater discharges allowed
cruise ship owners and operators until 2016 to fully comply with
the new water quality standards.
The Regulatory Affairs and Public Advocacy (RAPA) Section
advocates the public interests in regulated utility matters
before the Regulatory Commission of Alaska (RCA). For example,
DOL was instrumental in the evaluation of the Cook Inlet Natural
Gas Storage Alaska (CINGSA). The RCA approved that facility on
January 31, 2011. The DOL through RAPA is also monitoring the
$5.7 million in refunds that the RCA ordered Enstar to return to
eligible customers as a result of overbilling.
1:37:07 PM
The Department of Law played a key role in developing the 10-
year Sexual Assault Domestic Violence Initiative. They are
collaborating with agencies and non-profits to support the
initiative, doing public services announcements like "Choose
Respect", and sponsoring pro-bono summits.
Four sections within the Civil Division handle the second core
function of fostering responsible development.
· Oil Gas and Mining - 14 attorneys.
· Transportation and Public Facilities - 8 attorneys.
· Environmental - 10 attorneys.
· Natural Resources - 13 attorneys.
DOL, through the Oil Gas and Mining Section, is continuing to
pursue resolution of the Point Thomson litigation with
ExxonMobil.
The Transportation and Public Facilities Section is advising the
Department of Transportation and Public Facilities (DOTPF) and
defending the state on building projects such as Goose Creek
Prison, the Alaska Marine Highway System headquarters and
Ketchikan dry dock expansion, the Juneau access road, the Knik
Arm Crossing, and instate gas pipeline and propane projects.
DOL, through the Environmental Section, prevailed in the U.S.
Supreme Court, which allowed the Kensington Mine to open. This
resulted in jobs for 300 workers during construction and 200
workers during production, 85 percent of which are Alaska-hire.
CHAIR GATTO noted that the 25-30 legislators who visited
Kensington yesterday learned what a great resource it is for the
state. It cost $450 million to put the mine in place and it is
expected to generate about $1 billion per year before expenses.
ATTORNEY GENERAL BURNS added that DOL received many letters of
appreciation for its efforts to open the mine. A similar
positive result was the Red Dog Mine. The Environmental
Protection Agency (EPA) withdrew key components of the water
pollution discharge permit and DOL assisted the Department of
Environmental Conservation (DEC) in promulgating new
regulations. This allowed the mine to continue operation and
preserved 516 direct and 2,800 ancillary jobs. In a side note he
related how the mine came to be named after a bush pilot's red
dog.
1:41:16 PM
The Oil Gas and Mining Section within DOL fostered responsible
development defending the Outer Continental Shelf (OCS) leases
in court challenges including Lease 193 and Interior's approval
of Shell's Beaufort and Chukchi Sea OCS exploration plans. This
is an example of the state working in tandem with the federal
government for positive results. Likewise, DOL challenged the
Interior Department's purported imposition of a moratorium on
development in Alaska and the OCS. The court recently dismissed
Alaska v. Salazar, based on the fact that the Interior
Department unequivocally asserted in filings that there was no
moratorium.
1:42:24 PM
Through the DOL Natural Resources Section, the state partners
with the U.S. Forest Service (USFS) in management of the Tongass
National Forest. DOL has supported "Tongass Exemptions" to the
USFS "Roadless Rule," and USFS authorization of the Logjam
timber sale. If successful, this will preserve jobs.
DOL is also seeking to develop a comprehensive strategy to deal
with issues related to the Endangered Species Act. It is
challenging a number of unwarranted listings and unwarranted
critical habitat designations. These listings and designations
can have a significant effect on transportation, resource
development, sport and subsistence hunting and fishing. ESA
listing petitions that have been sought include polar bears,
beluga whales in Cook Inlet, Steller sea lions, humpback whales,
Pacific walrus, ringed and bearded seals, and SE Alaska Pacific
herring. These have significant impact to the state. Critical
habitat designations have been made for the Cook Inlet beluga
whale and 187,000 square miles of the state have been designated
as critical habitat for the polar bear. The state filed intent
to sue challenging this critical habitat designation for the
polar bear. The Arctic Slope Regional Corporation, North Slope
Borough, and industry have also filed separate notices of intent
to sue.
In addition to the listings, a number of lawsuits and appeals
are appending for the polar bear, beluga whales, Steller sea
lions, humpback whales, and ribbon seal. The state has been
petitioning to de-list the eastern stock of the Steller sea lion
based on population densities. The effect of the western stock
listing was a fishery closure, which significantly impacted the
community of Adak.
DOL has budgeted $1,396,875 in FY11 to challenge the ESA
listings. The budget for FY12 is roughly the same, but the
actual amount will depend on the additional listings that come
forward.
1:46:39 PM
The Oil Gas and Mining Section also assists DNR and DEC in
requesting prompt federal review of challenges to petroleum
exploration in the National Petroleum Reserve-Alaska (NPR-A).
The Clean Water Act wetlands fill permit for the CD-5 project
was initially denied despite overwhelming stakeholder support.
However, that decision was remanded to the Corps for further
evaluation. DOL is optimistic that the Corps will act promptly
to reevaluate that permit.
Likewise, DOL advised DNR on responses to BLM Wilderness and
"Wild Lands" designations. Interior Secretary Salazar ordered
the evaluation of 72 million acres of federal land in Alaska for
wilderness characteristics. The potential of that would be
creation of a de-facto wilderness in Alaska without
congressional oversight. This affects permitting and right of
way determinations. The U.S. Fish and Wildlife Service is
evaluating revisions to the Arctic National Wildlife Refuge
(ANWR) Comprehensive Conservation Plan. DOL provided legal
advice to the governor who wrote to urge President Obama to
respect ANILCA
1:48:18 PM
The Environmental Section of DOL continues to assist DEC in
requesting EPA action on Shell Oil's Clean Air Act permit
application. Because of the delays, Shell has indicated that
nothing will be done in 2011. The Alaska congressional
delegation unanimously denounced the EPA action in this
instance.
The Environmental and Natural Resources Sections of DOL continue
to work on aspects of the Clean Water Act. Under a memorandum of
agreement (MOA) with the Army Corps of Engineers, the EPA can
invoke 404(c) to veto Corps permit decisions. This authority has
been used very sparingly, but the EPA indicated it would
evaluate the Pebble Mine in this regard.
The Environmental Section also defended the state in the Nunamta
Aulukestai v. State suit alleging constitutional violations in
statutes and regulations that authorize temporary land and water
use permits for mineral exploration at the Pebble project. The
plaintiffs want these temporary permits to be publicly noticed
and best interest findings to be established before permits are
issued.
The Natural Resources Section is defending Alaska fisheries
management. The state intervened in the Upper Cook Inlet Drift
Association v. Locke lawsuit where UCIDA wanted to preempt ADF&G
management of salmon fisheries in Cook Inlet. The expectation is
that this will be resolved amicably.
1:52:13 PM
Four sections within the Civil Division handle the third core
function of protecting fiscal integrity.
· Collections and Support - 8 attorneys.
· Oil Gas and Mining - 14 attorneys.
· Labor and State Affairs - 19 attorneys.
· Torts and Workers' Compensation - 15 attorneys.
The Collections and Support Section collects criminal fines and
surcharges owed to the state and restitution owed to third
parties. In FY10 they collected $7.3 million, $1.1 million of
which was for victim restitution. A pie chart reflected the
following recoveries for FY10: civil - $32,121.23; cost of
appointed counsel - $758,197.26; cost of incarceration -
$798,070.89; correctional facility surcharge - $285,276.80;
court fines - $3,026,028.55; forfeited bonds - $31,473.67; minor
offense - $1,228,392.06; criminal restitution - $85,919.46; and
juvenile restitution - $329,867.60.
State operating revenues come from oil and gas corporate income
taxes, production taxes, property taxes and royalties on Alaska
North Slope crude oil. The Oil Gas & Mining Section collected
nearly $82 million in additional taxes and royalties in calendar
year 2010 and $95.9 million in FY11 through February 8, 2011.
1:53:32 PM
SENATOR WIELECHOWSKI said testimony in the Senate Resources
Committee indicates that virtually every day the state is
blowing the statute of limitations for filing lawsuits on
royalty cases due to a lack of computer equipment, proper
auditing equipment, and databases. He asked if this was a DNR
issue or if DOL had suggestions on how this can be remedied.
ATTORNEY GENERAL BURNS said he was unaware that the state was
blowing statutes of limitations, but he would meet with Tina
Kobayashi, the head of the Oil Bas & Mining Section, to check on
that.
SENATOR WIELECHOWSKI reiterated that it might be a Department of
Natural Resources issue.
SENATOR PASKVAN agreed that this was an internal issue that
bears scrutiny. The statute of limitations passed and the state
didn't know if monies were owed because audits hadn't been
conducted. The question was whether to conduct an audit when
something was past the statute of limitations, if at the end of
the audit there was no capacity to do anything other than in the
general context that if an audit is completed, the state
generally seeks and recovers additional monies.
1:55:48 PM
ATTORNEY GENERAL BURNS directed attention to a pie chart of oil,
gas, and mining decisions and settlements FY00-FY10 totaling
$1.95 billion. This was a combination of oil and gas taxes,
tariffs, royalties, and non oil and gas taxes, which would be
property-related. The next slide shows the breakdown of oil,
gas, and mining decisions and settlements FY11 through February
8, 2011 totaling $95.9 million.
1:56:26 PM
CHAIR GATTO asked if the state ever loses these lawsuits and if
the totals reflect total wins or the balance of the wins minus
the losses.
ATTORNEY GENERAL BURNS replied he was not aware that the state
had ever lost a case wholesale, but the state often asserts that
a significantly larger amount was owed than was recovered. He
understands that a vast majority of these cases are settled.
CHAIR GATTO recalled a large case of pipeline tariff overcharges
in which the state gave up recovery beyond a certain look-back
period. He asked if the state was being efficient in its actions
this time.
ATTORNEY GENERAL BURNS agreed that the issue needed to be
evaluated to determine if the state was losing money. If it was,
quick and decisive corrective measures are in order.
CHAIR GATTO surmised that there might be a benefit to adding
attorneys to pursue these law suits; the Legislature would make
a decision about that addition to the DOL budget.
ATTORNEY GENERAL BURNS reiterated that he would follow up and
find the answers to those issues.
SENATOR WIELECHOWSKI expressed concern that some leaseholders
were sitting on their leases. He asked if DOL had taken steps to
ensure that the leaseholders of mining leases and oil and gas
leases were fully engaged in their duty to produce.
ATTORNEY GENERAL BURNS replied he assumes that DNR would be
reviewing the leases from that perspective, but he didn't know
that for certain. The Department of Law was not reviewing leases
from that perspective at this time.
2:00:41 PM
DOL is currently engaged in TAPS tariff litigation questioning
the rates for 2005. Other ongoing litigation relates to the TAPS
Strategic Reconfiguration case, which is currently before the
Federal Energy Regulatory Commission (FERC) and the Regulatory
Commission of Alaska (RCA). The state challenged TAPS owners for
including hundreds of millions of dollars in imprudent capital
project expenditures in the tariffs. The status of that case is
that an eight-week hearing before FERC and RCA was scheduled for
November 2011.
The ongoing litigation in which DOL is representing the
Department of Revenue (DOR) in superior court on the 2006 TAPS
property tax valuation is currently on appeal. That
determination could have significant financial ramifications to
municipalities. There is also an eight-week trial set for
September 2011 regarding TAPS property tax litigation for 2007-
2009. Ms. Kobayashi will give a presentation to the House
Finance Committee tomorrow on the specific issues relative to
oil and gas and how it affects that budget component.
2:02:51 PM
The Commercial and Fair Business Section and the Labor and State
Affairs Section worked on the cruise ship initiative and
passenger tax issues. The cruise ship initiative made income
from cruise ship water activities subject to Alaska net income
tax and imposed a gambling tax and a $46 head tax. When the
cruise industry sued over the head tax, DOL defended the
Department of Revenue and assisted in negotiating a settlement.
The Legislature passed a new law reducing the head tax to $34.50
and the cruise industry dropped their lawsuit. This will
preserve payment of about $34 million per year to defray costs
of services and facilities to accommodate passenger visits.
CHAIR GATTO said in addition to the reduction in the head tax,
the state agreed to pay what had been an additional $15 local
head tax in Juneau and Ketchikan and so much per port of call.
In the end, it looked like this essentially wiped out the head
tax and conceivably the state was subsidizing the cruise ships.
He asked Mr. Burns if he had followed the math as that
legislation passed in the waning hours of the 26th legislative
session.
ATTORNEY GENERAL BURNS replied the only thing he knew about that
issue was that the current tax is $34.50.
SENATOR WIELECHOWSKI agreed that the state came out on the short
end of the stick; that decision was based on the legal advice to
settle the case. The result was supposed to be that more cruise
ships would come back but he was only aware that one did so. He
asked if more did in fact return.
ATTORNEY GENERAL BURNS offered to find out how many cruise ships
came back.
SENATOR WIELECHOWSKI said he'd like to know because the state
gave back tens of millions of dollars in exchange for agreeing
to settle the lawsuit. To his knowledge there's never been a
follow-up as to what the state actually received.
2:06:33 PM
He continued the presentation.
The Labor and State Affairs Section handled the state's lawsuit
against Mercer, the actuary for the state PERS and TRS pension
plans. The suit was settled and Mercer paid $500 million.
The Natural Resources Section represented the state in Carlson
v. State. This was a 26 year lawsuit by nonresident fishermen
who sought refunds of commercial fishing permit fees, which were
three times higher than resident fees. The court ruled against
the state and the principal in that judgment was $12 million.
Adding the interest and attorney fees brought the total to $82.3
million. The state appealed to the supreme court the 11 percent
prejudgment interest and the attorney fees. A successful outcome
could mean a $60 million savings for the state. The judgment was
fully funded and it just awaits a final determination by the
court as to the appropriate interest rate.
2:08:02 PM
SENATOR PASKVAN asked if the $60 million potential savings
reflected the difference between a 3.5 interest rate as opposed
to an 11 percent rate.
ATTORNEY GENERAL BURNS answered yes, and the amount of attorney
fees, which were calculated on the full amount.
CHAIR GATTO asked if there was ever any question about the
legality of charging nonresident commercial boats more.
ATTORNEY GENERAL BURNS replied he only knows the facts as they
exist today, but the focus of the appeal was the 11 percent
prejudgment interest that was compounded quarterly.
2:09:33 PM
The Transportation Section is handling litigation involving the
boat builder and the manufacturer of the fast ferries, M/V
Fairweather and M/V Chenega. The state wasn't able to resolve
this and had to file a lawsuit to preserve the statute of
limitations. The M/V Fairweather is currently out of service but
neither vessel lived up to what was represented.
REPRESENTATIVE GRUENBERG asked if those ferries would have made
money for the state, had they been operating. He added that he
was thinking about consequential damages.
ATTORNEY GENERAL BURNS replied he doesn't know that the state is
pursuing damages as much as it is focused on getting those
ferries to perform as warranted.
REPRESENTATIVE GRUENBERG commented that he hopes the state is
looking for all the damages it can get. "If not, I would like to
know why not," he said.
ATTORNEY GENERAL BURN assured him that it was a component of the
damage claim.
CHAIR FRENCH commented that it might save money to keep them
tied up.
CHAIR GATTO said he understands that the state collects about
$.35 for every $1 that it spends to operate these ferries.
2:12:40 PM
ATTORNEY GENERAL BURNS said regardless of whether or not they
make money, these ferries aren't living up to what was
represented.
ATTORNEY GENERAL BURNS said the last slide regarding protecting
fiscal integrity reflects that DOL successfully defended over
200 tort claims with no adverse judgments against the state. DOL
is obviously doing a good job handling those cases but this also
indicates that the other departments are doing a very good job.
This also speaks to the good communication between the DOL and
the agencies. This includes the Department of Corrections, the
Office of Child Services, and the other agencies that have
historically been named defendants.
CHAIR GATTO asked if the state was released from the obligation
of medical care once a prisoner is released from incarceration.
ATTORNEY GENERAL BURNS offered to look into that, but his sense
was that the obligation to provide services would end upon
release.
2:15:20 PM
Three sections within the Civil Division handle the fourth core
function of promoting good governance.
· Natural Resources - 13 attorneys.
· Opinions, Appeals and Ethics - 11 attorneys.
· Labor and State Affairs - 19 attorneys.
The DOL was heavily involved in the 2010 federal elections
lawsuits related to a write-in candidate's name, Miller public
records, Miller state, Miller federal, Voting Rights Act, and
others. Legislation has been introduced to address some of the
issues that came up in that last election.
The Labor and State Affairs Section also defended and settled
the Nick v. State elections lawsuit in Western Alaska. The
result was that enhancements to the language assistance for
Yup'ik speaking voters will be available at elections in the
Bethel area.
The Opinions, Appeals and Ethics Section and the Labor and State
Affairs Section defended the initiative process in Planned
Parenthood v. Campbell and "The Natural Right to Life
Initiative." DOL also provided advice on the Executive Branch
Ethics Act; new regulations were adopted including standards
governing state reimbursement of attorneys fees incurred by
state officers exonerated in an ethers complaint proceeding.
They also do ethics training for senior managers and boards and
serve advisory opinions and investigations. The Opinions,
Appeals and Ethics Section is also involved in the issues
related to the burgeoning public records requests, including
requests for 26,500 pages of former Governor Palin's emails. The
definitive date for production through the Governor's Office is
May 31, 2011. In 2010, forty-three additional and separate
public records requests were directed to the DOL. This process
includes privilege reviews and deliberative protections.
2:18:28 PM
ATTORNEY GENERAL BURNS said the challenges in FY12 will be
essentially the same, and DOL will continue to focus on its
mission and core objectives. In addition, DOL will have
increased involvement with federal agencies such as BLM, EPA,
U.S. Fish and Wildlife, and ESA on issues related to natural
resource development. This is a clear recognition that the State
of Alaska must dialog early-on to address the issues and be
involved in the public process as opposed to litigating. DOL
will continue to work with ADF&G, DNR, and other stakeholders to
work with the federal government and to collectively address
responsible development. While there's been some uncertainty
about the federal government's objective related to natural
resource development, it's a misperception that the State of
Alaska is anti federal government because the relationship has
got to be symbiotic. However, when the federal government's
policy is unclear, it creates uncertainty within the arena of
development generally. For example, federal involvement in the
planning process for the NPRA and the ANWAR Coastal Plain study
could lead to a recommendation of Wilderness designation
effectively precluding development. Also, the BLM recent notice
of wetlands and wilderness policy for evaluating lands under its
management could have impact. The new ocean zoning and possible
incursion into what traditionally has been state water resource
management. Likewise, the federal policy on the Tongass National
Forest appears to be changing.
The federal government owns 60 percent of the land in the state
of Alaska and has a right to do what it is doing. But the state
also has a significant interest because it receives revenue
sharing when resources are developed. The state received nearly
105 million acres in conjunction with the Statehood Act, but the
federal government permitting policies are impacting the state's
ability to develop those resources. The EPA's Clean Water Act
Section 404(c) designation, for example, is significant.
2:23:18 PM
Examples of successful state-federal cooperation include the DEC
air permitting program for facility and construction operation,
except OCS; DEC assumption of the National Pollutant Discharge
Elimination System (NPDES) permit program under the federal
Clean Water Act; and the cleanups at federal facilities under
the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA). Clearly, the relationship is not always
adversarial. The state is trying to engage proactively and
maximize opportunities of good science benefitting good science.
Specific examples of state cooperation with federal programs
include the defense of the Army Corps of Engineers Clean Water
Act permit authorizing disposal of mine tailings, allowing
Kensington Mine to open; work with EPA to incorporate revised
DEC regulations into the Red Dog Mine Clean Water Act permit;
support for the U.S. Forest Service authorization of the Logjam
timber sale; and Outer Continental Shelf (OCS) challenges.
Areas where the state is challenging federal overreach include
the critical habitat designations under the Endangered Species
Act; the Clean Water Act Section 404(c) fill permit elevated
scrutiny of the CD-5 Pebble permit and the Tanana River Bridge;
the EPA intervention under the Clean Air Act on Shell Oil
Beaufort Sea drilling plans; Wilderness and "Wild Lands" and the
constitutionality of the Patient Protection and Affordable Care
Act.
2:26:07 PM
DOL is working to address these issues by developing a
comprehensive 5-year interdepartmental plan. The executive
agencies will also collaborate with tribes, Native
organizations, and attorneys general in other states.
2:27:19 PM
CHAIR GATTO asked if the 2477 access was different or
essentially the same as it was in 2003.
ATTORNEY GENERAL BURNS said he wasn't part of any decisions in
2003, but DOL is working with DNR to evaluate and identify the
areas that qualify for 2477 access and prioritize the benefits
of access and potential success. There is no sense in spending
lots of money on 2477 if the probability of proving up is
minimal.
REPRESENTATIVE GRUENBERG said that for some time he had been
interested in a lawsuit in which a number of attorneys general
joined to help the owners of unclaimed WW II bonds regain their
property. The suit, which is worth millions upon millions
nationally, alleges that the war bonds went unclaimed because
the federal government neglected to notify owners of their
existence. Alaska didn't join that claim, but assistant attorney
general Chris Poag is looking at the potential for commencing a
new lawsuit. Alaska is one of the four jurisdictions where this
could be done. He suggested the committee ask for a written
status report on this issue.
2:31:06 PM
ATTORNEY GENERAL BURNS said he understands that no decision has
been made, but it will be evaluated further and he would get a
response.
REPRESENTATIVE GRUENBERG said he had also been working with Mr.
Poag to deal with the fact that there is no statutory mechanism
for the state to follow up to ensure that grants are
administered properly and that people don't take advantage of
unsophisticated grantees.
2:32:35 PM
SENATOR PASKVAN said the state provides a 20 percent capital
credit for capital expenditures and he believes it's important
for the state in its analysis of the statute of limitations
issue to find out what is being deducted as a capital
expenditure. This is a significant issue right now because the
state doesn't know if the billions of dollars that are being
spent as capital expenditures are for ordinary maintenance.
ATTORNEY GENERAL BURNS said okay.
CHAIR GATTO thanked Attorney General Burns for the presentation.
2:33:49 PM
There being no further business to come before the committee,
Chair Gatto adjourned the meeting at 2:33 p.m.
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