Legislature(1999 - 2000)
03/27/2000 03:25 PM Senate RES
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SENATE RESOURCES COMMITTEE
March 27, 2000
3:25 p.m.
MEMBERS PRESENT
Senator Rick Halford, Chairman
Senator Pete Kelly
Senator Jerry Mackie
Senator Lyda Green
MEMBERS ABSENT
Senator Robin Taylor
Senator Georgianna Lincoln
Senator Sean Parnell
COMMITTEE CALENDAR
SENATE BILL NO. 283
"An Act relating to the accounting for and appropriations of state
land disposal program revenue; and providing for an effective
date."
-HEARD AND HELD
SENATE BILL NO. 258
"An Act relating to registration for commercial set gillnet fishing
sites; relating to leases for shore fisheries development; and
providing for an effective date."
-HEARD AND HELD
SENATE BILL NO. 38
"An Act relating to certain audits regarding oil and gas royalty
and net profits and to audits regarding costs relating to
exploration incentive credits and oil and gas exploration licenses;
and providing for an effective date."
-HEARD AND HELD
SENATE BILL NO. 257
"An Act relating to notice requirements for certain final findings
concerning the disposal of an interest in state land or resources
for oil and gas; relating to administrative appeals and petitions
for reconsideration of decisions of the Department of Natural
Resources; and providing for an effective date."
-MOVED SB 257 OUT OF COMMITTEE
PREVIOUS SENATE COMMITTEE ACTION
SB 283 - No previous action to consider.
SB 258 - See Resources Committee minutes dated 3/20/00.
SB 38 - No previous action to consider.
SB 257 - No previous action to consider.
WITNESS REGISTER
Mr. Bob Loeffler, Director
Department of Natural Resources
Division of Mining, Land, and Water
3601 C St. Ste 800
Anchorage, AK 99503-5935
POSITION STATEMENT: Supported SB 283 and SB 257.
Mr. Kevin Banks
Division of Oil and Gas
Department of Natural Resources
550 West 7th Ave., Suite 800
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 38.
Mr. Jim Hansen, Lease Sale Manager
Division of Oil and Gas
Department of Natural Resources
550 West 7th Ave., Suite 800
Anchorage, AK 99503
POSITION STATEMENT: Supported SB 257.
ACTION NARRATIVE
TAPE 00-14, SIDE A
Number 001
SB 283-NAT RES.REVENUE: FISH/TIMBER/LAND
CHAIRMAN HALFORD called the Senate Resources Committee meeting to
order at 3:25 p.m. and announced SB 283 to be up for consideration.
MR. BOB LOEFFLER, Director of the Division of Mining, Land, and
Water in the Department of Natural Resources (DNR), said this is a
simple bill. Many Alaskans consider the sale of state lands to
private citizens to be one service their government should provide.
Unfortunately, it costs a lot to sell land despite the fact that
sales bring a profit to the treasury. This bill is an attempt to
solve that problem by providing a stable funding source and
assuring that the land disposal program provides a return to the
State beyond the cost of selling land. By using a separate
accounting system, DNR hopes this bill will provide a mechanism to
enable the legislature to understand the fiscal consequences of
land sales. The program receipts would have to be appropriated by
the legislature to the land sales program each year.
CHAIRMAN HALFORD commented that SB 283 will create a new state land
disposal revenue category in designated program receipts. It will
ensure funding for a program that generates revenue.
SENATOR MACKIE asked how much land DNR sold last year.
MR. LOEFFLER answered that in 1999, DNR sold 120 parcels, equaling
about 2,000 acres worth $1.5 million. The actual revenue will be
received in years to come. In fiscal year 1999, $2.4 million was
received based on land sales from previous years.
SENATOR MACKIE asked if the program has an ongoing revenue stream
because of the time period provided to pay for the land.
MR. LOEFFLER said that is correct and that contracts extend from
two to 20 years.
SENATOR MACKIE asked if any amount over $5 million would go
directly to the general fund and why DNR chose $5 million.
MR. LOEFFLER said DNR believes the program should return revenue
not just for the sake of more land sales, but also because the
privatization of state land should provide a return for all
Alaskans. DNR ran a number of different projections and found that
once the fund reaches $5 million, DNR could have a reasonably large
land sale program and earn tens of thousands in interest per year.
CHAIRMAN HALFORD said he supports a maximum of $5 million,
otherwise the program will accumulate a lot of money and be
targeted for something else. He asked Mr. Loeffler what his
position would be if the committee added another program to this
bill that follows the same program receipt format.
MR. LOEFFLER responded he thought that would be fine.
CHAIRMAN HALFORD said the committee would hold SB 283 for further
work.
SB 258-SET NET SITES/ SHORE FISHERIES DEVELOPMT
CHAIRMAN HALFORD announced SB 258 to be up for consideration. He
noted that during a previous hearing, the committee heard very
strong opposition to doing away with the shore fishery lease
program and creating a registration program. He would like to
change the bill to create the same kind of provisions to preserve
and protect the shore fishery leases with designated program
receipts. They currently generate $360,000 per year while the
program costs $300,000. It would have the same kind of "dumping"
provision as SB 283 so that it will not create a large fund that
will be targeted for other purposes. He felt it is ridiculous to
repeal a program that is making money and is supported by the
users. He said he would like to prepare a committee substitute and
bring it before the committee. He noted that, regarding timber
sales, one problem is whether DNR has any.
SENATOR TAYLOR commented that every time DNR wants to do a timber
sale, the legislature has to take capital budget funds that could
have been used to get federal funding. Then, any revenue generated
by the sale gets put in the general fund and disappears.
CHAIRMAN HALFORD asked if there is any revenue from timber sales
right now.
SENATOR KELLY said there has been for the last four years but
right now is a down time.
SENATOR MACKIE said this is a good suggestion for the shore lease
program, as well as for timber sales, and he would support putting
all three programs into one bill if it can be done.
CHAIRMAN HALFORD expressed concern about adding things to the shore
fishery lease program bill that might be controversial and create
problems.
SENATOR LINCOLN commented that she thought they should keep the
shore fishery lease program bill as a separate piece of
legislation.
CHAIRMAN HALFORD said the shore fishery lease program and land sale
program could be combined into one bill. In both programs, the
activity generates the money. He said his concern about the timber
sales program is that it needs to be a piece of the puzzle that is
ready to go. He announced they would prepare a committee substitute
for whatever they can make work and hear it on Wednesday.
SB 38-OIL & GAS AUDITS
CHAIRMAN HALFORD announced SB 38 to be up for consideration.
MR. KEVIN BANKS, Division of Oil and Gas, DNR, said SB 38 is a
housekeeping bill that transfers the authority to audit royalty
revenue that comes to DNR via lease contracts and other methods
from the Department of Revenue (DOR) to DNR. It also provides DNR
with tools to conduct the audits effectively. DNR's current
statute (AS 38) has a confidentiality requirement but it contains
no criminal penalties for misconduct. Under SB 38, DNR's audit
requirements would be tighter and would reflect those in AS 43,
which governs the audits done by DOR.
SB 38 also gives subpoena authority to DNR when conducting an
audit, which DOR now has. The fiscal note reflects a cost of
$233,000 to pay for the transfer of staff from DOR to DNR.
CHAIRMAN HALFORD asked why the money in the fiscal note is listed
as permanent fund corporate receipts.
MR. BANKS replied that's because last year DOR identified the
positions as funded with permanent fund revenue. Those same funds
will be coming DNR's way.
CHAIRMAN HALFORD said he would want to know that the permanent fund
is the potential beneficiary to determine whether that is the right
funding source.
MR. BANKS explained that DNR has some staff who "check the
checkers" on current audits. They are also doing contract reviews
for royalty settlements and looking at various royalty and kinds of
audits that are not now covered by AS 43. With the combination of
staff, including those from DOR, it would approximately equal the
portion of the revenue stream that goes to the permanent fund,
about 27 percent of their royalty revenue. After transfer of this
authority, they would have seven or eight people on staff doing
audits. Three of them would be funded by this $233,000.
CHAIRMAN HALFORD asked if three-eighths of the activity is to the
benefit of the permanent fund.
MR. BANKS agreed that is about right but it is possible that more
is coming out of the permanent fund than it receives in terms of
benefits. He said it is a hard number to arrive at.
SENATOR GREEN asked if SB 38 will allow DNR and DOR to exchange
information and thereby increase the exposure of very confidential
information to more eyes or whether that is not a consideration in
this bill.
MR. BANKS replied that under current law, DNR has access to audit
reports and summaries. In addition, according to Department of Law
opinions written in the 1980's, for the purposes of conducting
DNR's royalty function, DNR should have access to any information
it deems necessary. His staff would have to meet the requirements
for maintaining confidentiality of information received from DOR
and be subject to AS 43 criminal penalties.
CHAIRMAN HALFORD said it looks like, in either case, the penalty is
a felony for disclosing the information. He said he didn't have
any trouble with this legislation but would hold it until
Wednesday.
SB 257-DEPT NAT RES ADMIN APPEALS/ OIL & GAS
CHAIRMAN HALFORD announced SB 257 to be up for consideration.
MR. LOEFFLER, DNR, explained that SB 257 is a simple bill that
creates a uniform appeal process and fixes a technical error with
respect to the Division of Oil and Gas's public notice problems.
DNR's current requirements for appeals are sometimes found in Title
38 and sometimes found in the Administrative Procedures Act.
Because of the different requirements, the effect is to have
multiple tracks with slightly different requirements, which makes
it possible for a person to appeal multiple times. The second
problem is that the appeal processes set out in Title 38 have a
slightly different time line than those in Title 46. Some have a
30-day notice requirement and some have a 20-day notice
requirement, which confuses the public. SB 257 creates a standard
appeal process that allows one appeal to the commissioner. If a
person is dissatisfied with the commissioner's decision, the case
can be taken to court.
MR. JIM HANSEN, lease sale manager in the Division of Oil and Gas,
said the technical correction pertains to a notice that goes out 30
days prior to issuing a final best interest finding prior to a
lease sale. Currently, when DNR issues the preliminary finding, it
notices that the final finding will be issued a certain number of
days after the public comment period. In addition, DNR must issue
a notice of the final finding 30 days prior to it. DNR notices the
sale when the finding comes out. Right now the public gets three
notices - one is redundant and confuses the public.
SENATOR MACKIE moved SB 257 from committee with individual
recommendations. There were no objections and it was so ordered.
CHAIRMAN HALFORD adjourned the meeting at 3:52 p.m.
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