Legislature(2001 - 2002)
03/16/2001 03:47 PM Senate RES
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ALASKA STATE LEGISLATURE
SENATE RESOURCES COMMITTEE
March 16, 2001
3:47 p.m.
MEMBERS PRESENT
Senator John Torgerson, Chair
Senator Drue Pearce, Vice Chair
Senator Pete Kelly
Senator Robin Taylor
Senator Kim Elton
MEMBERS ABSENT
Senator Rick Halford
Senator Georgianna Lincoln
COMMITTEE CALENDAR
SENATE BILL NO. 121
"An Act adding, for purposes of the Alaska Right-of-Way Leasing
Act, a definition of 'substantial change' as applied to an amended
right-of-way lease application; and providing for an effective
date."
HEARD AND HELD
SENATE BILL NO. 125
"An Act prescribing a definition of 'damages' that a landowner may
claim for injury to or interference with the owner's use of
property by a person entering upon the land under the state
reservation of oil, gas, mineral, material, or related interests,
addressing the determination of the form, amount, and security of
the surety bond determined by the director of lands to secure the
landowner payment for damages, directing preparation of notice to
the landowner for subsurface activities on the land, and setting a
limitation on actions against a landowner resulting from entry upon
land under the state reservation of interests."
SCHEDULED BUT NOT HEARD
SENATE JOINT RESOLUTION NO. 15
Relating to imports of salmon from Chile.
MOVED SJR 15 OUT OF COMMITTEE
CS FOR HOUSE JOINT RESOLUTION NO. 10(FSH)
Relating to the management of the Bering Sea/Aleutian Islands and
Gulf of Alaska groundfish fisheries and the protection and
restoration of the Steller sea lion.
MOVED CSHJR 10 (FSH) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
SB 121 - No previous action to record.
SJR 15 - No previous action to record.
HJR 10 - No previous action to record.
WITNESS REGISTER
Ms. Annette Kreitzer
Staff to Senator Leman
State Capitol Bldg.
Juneau AK 99811
POSITION STATEMENT: Provided sponsor statement for SB 121.
Mr. Jim Eason
Foothills Pipe Lines Ltd.
3100 707 Eighth Ave. S.W.
Calgary, Alberta T2P 3W8
POSITION STATEMENT: Commented on SB 121.
Mr. Bill Britt
State Pipeline Coordinator
Department of Natural Resources
411 W 4th Ave., 2nd Floor
Anchorage AK 99501
POSITION STATEMENT: Commented on SB 121.
Mr. Ian Fisk
Staff to Senator Austerman
State Capitol Bldg.
Juneau AK 99811
POSITION STATEMENT: Commented on SJR 15.
Mr. Paul Shadura, II
Kenai Peninsula Fishing Association
P.O. Box 1632
Kenai AK 99611
POSITION STATEMENT: Supported SJR 15.
Mr. Jerry McCune
United Fishermen of Alaska
211 4th St., #110
Juneau AK 99811
POSITION STATEMENT: Supported SJR 15.
Representative Drew Scalzi
State Capitol Bldg.
Juneau AK 99811
POSITION STATEMENT: Sponsor of HJR 10.
ACTION NARRATIVE
TAPE 01-21, SIDE A
Number 001
SB 121-RIGHT-OF-WAY LEASING ACT
CHAIRMAN JOHN TORGERSON called the Senate Resources Committee
meeting to order at 3:47 pm and announced SB 121 to be up for
consideration.
MS. ANNETTE KREITZER, staff to Senator Leman, sponsor of SB 121,
said that commercialization of North Slope gas is a legislative
priority. She explained SB 121 provides certainty to any person
with rights-of-way under the state's Right-of-Way Leasing Act. She
explained:
If a person files an amendment to the pipeline
application, that supposes a net increase in the amount
of acreage leased for the right-of-way that is 10 percent
greater than the original application. That is sufficient
change subjecting the amendment to all the provisions of
AS 38.35. If a person files an amendment to a pipeline
application that proposes changes to the design of the
pipeline that would use less effective environmental or
safety mitigation measures or less advanced technology
than in the original application, that is a substantial
change subjecting the amendment to all the conditions of
AS 38.35. When the state calculates whether or not
additional state acreage must be part of the 10 percent
calculation, it must exclude acreage attributable to an
amendment of an existing right-of-way across federal
lands originally issued by the federal government whether
or not the state or the federal government administers
the land. Likely, that would involve an applicant
aligning with the federal and state rights-of-way. The
state must also not count land under a federal right-of-
way grant that has been transferred to the state for its
administration.
Section 2 is a conforming amendment to the commissioner's
analysis and public hearing section of the Right-of-Way
Act. SB 121 continues the public process, but does not
[indisc].
MR. JIM EASON, Foothills Pipe Lines Ltd., testified in support of
SB 121 and said the following:
Let me begin by describing Foothills and summarizing its
role in efforts to commercialize Alaska's North Slope gas
reserves. Foothills is jointly owned by Westcoast Energy
Ltd. and TransCanada PipeLines Limited, the two major
players in the Canadian gas pipeline business. Canadian
gas accounts for almost 20 percent of all gas consumed in
the United States and all of that gas currently moves
through pipelines owned in whole or in part by
TrnasCanada and Westcoast. Foothills corporate mission is
very specific - to build and operate the Alaska Natural
Gas Transportation System, better known as the Alaska
Highway Pipeline Project. Foothills was a leader in this
project, which was conceived twenty-five years ago and we
remain just as committed today to completing that
project.
The Alaska Highway Pipeline Project was approved in
accordance with the Alaska Natural Gas Transportation Act
of 1976 in the U.S., the 1078 Northern Pipeline Act in
Canada and the 1977 agreement applicable to the Northern
natural gas pipeline between the two countries. As
approved, the Alaska Highway Pipeline Project is a 4,800-
mile international pipeline project commencing at Prudhoe
Bay and terminating in the Midwest and California market
areas. It is important to note that the southern part of
this pipeline has been constructed and is in full
operation.
A substantial amount of work in addition to constructing
the pre-built portion of the project has been completed
by the Alaska Highway Pipeline Project sponsors to date.
Significantly, among other permits in the U.S., the
project holds a federal right-of-way grant issued in 1980
by the Department of the Interior's Bureau of Land
Management. That grant does not expire until December
2010 and may be renewed at the request of the project
sponsors. On state side, the project has a pending State
of Alaska right-of-way lease application. Recently, we
have initiated discussions with state officials toward
completing the pending application.
I would like now to turn to our specific comments on SB
121. It responds to a potential problem that has been
identified in Alaska state law affecting applications for
state right-of-way leases. Specifically, AS 38.35.050(c)
currently provides that "Any amendment to an application
is subject to all provisions of the Right-of-Way Leasing
Act applying to the original application."
The potential problem arises from the fact that the words
"substantial change" as applied to an amended right-of-
way lease application are not currently defined in
statute. As a result, should any party desire to delay or
obstruct the issuance of a state right-of-way lease, they
are free to argue that any change to an application after
it is submitted constitutes a substantial change.
Without clear policy direction from the legislature,
administrative appeals and litigation over which changes
are substantial are likely, with the result being that
the courts ultimately get to decide the issue on a case-
by-case basis.
SB 121 proposes a definition for substantial change that
is intended to provide clear guidance for all parties of
interest, including applicants, the reviewing and
authorizing agencies and the public. As fully explained
below, Foothills supports Senator Leman's efforts to
amend AS 38.35.050(c) to avoid ambiguity and to minimize
the risk of specious litigation by providing clear
standards for determining whether or not changes to a
right-of-way lease application are substantial.
We believe that defining substantial change in the
context of an amendment of an application will provide
several important benefits for all projects that must
procure a right-of-way lease across state lands, as well
as for the State of Alaska. These benefits include:
· More timely processing of lease applications, especially
where much work has already been done in support of an
application; typically, an application for a major pipeline
can take as much as a couple of years or longer.
· Increased certainty; and
· Reduced potential of delay in authorizing and constructing
projects of benefit to all Alaskans.
Under Senator Leman's proposed language, an amendment to
an original application would constitute a substantial
change in the application under either of two
circumstances:
· If the amendment proposes a least a 10 percent net
increase in the amount of state acreage to be leased for
the right-of-way when compared to the amount of acreage
in the original application;
· If the amendment proposes a change in the design of the
pipeline that would use less effective environmental or
safety mitigation measures or less advanced technology
than proposed in the original application.
We believe this approach to defining substantial change
is compatible with the state's goals as set out in its
Right-of-Way Leasing Act, that is, that 'the development,
use, and control of a pipeline transportation system be
directed to make the maximum contribution to the
development of the human resources of this state, the
increase in the standard of living for all of its
resident, the advancement of existing and potential
sectors of its economy, the strengthening of free
competition in its private enterprise system, and the
careful protection of its incomparable natural
environment.' Equally important, we believe that
incorporation of these proposed definitions will not
diminish meaningful agency and public review of an
applicant's amended right-of-way lease application.
The proposed amendment would further define how an
increase in state acreage would be calculated for the
purposes of determining substantiality. Specifically, in
calculating the percentage increase in acreage due to an
amendment, the following would each be excluded from that
calculation. First, acreage attributable to an amendment
to a right-of-way grant across federal land originally
issued by the federal government, whether administered by
the state or federal government, would be excluded.
Secondly, land subject to an existing federal right-of-
way grant held by the applicant that is transferred to
the state for its administration would also be excluded.
We believe these exclusions to be appropriate, as they
take out of the calculation land that is already subject
to a federal right-of-way lease and lands that may come
to be administered by the State of Alaska. Such land
should be taken out of the calculation because it would
not have been subject to an initial state lease
application. It includes such land in the calculation of
whether or not there has been a 10 percent increase in
the amount of state land covered by an application would
penalize unfairly those applicants that successfully
procured a right-of-way grant across federal land that
subsequently comes to be administered by the State of
Alaska.
Number 700
SENATOR ELTON said he could see many reasons for getting an
amendment, for example, rerouting a pipeline through a community.
If the net acreage gain on the new route is less than 10 percent,
he asked if that would preclude the need to do an amendment.
MS. KREITZER answered that it would not be considered to be a
substantial change if it was less than 10 percent.
SENATOR ELTON added, "Even though it would be a substantial change
to the neighborhood."
MS. KRIETZER said they had discussed this scenario with the
department and Mr. Britt could speak better to the question.
MR. BILL BRITT, State Pipeline Coordinator, said that Senator Elton
is correct that a rerouting of a pipeline would not be captured by
the bill in front of them.
CHAIRMAN TORGERSON asked what kind of mitigation measures a
community would take if it didn't want it.
MR. BRITT responded that:
AS 38.35 gives the commissioner a great amount of power
to place stipulations on right-of-way leases to deal with
a variety of public health, safety and environmental
issues. So we could certainly be responsive to any
concern that came out at any one process. Their normal
process would be to analyze an application. Our version
of a best interest finding is called a commissioner's
analysis and proposed decision. We public notice the
availability of that commissioner's analysis and proposed
decision along with [a] draft lease and receive comments
on it through a comment period or a public hearing or
both. So we can receive comments from the public very
late in the process and alter the right-of-way lease in
response to those.
SENATOR ELTON said he imagined this would tilt the balance back
toward the company that had the right-of-way in any kind of
community discussion on a pipeline reroute.
MR. BRITT responded, "It's important to remember that the
discussion is regarding an applicant, not an actual lessee. After
a lease is executed, we are dealing with different questions.
This only regards changes to an application."
Number 1000
MR. EASON added that it is important to focus on the provision of
what the substantial change does that they are trying to define.
He explained:
As the statute reads today, the undefined substantial
change triggers all the provisions of the chapter, which
quite literally means that you go back to square one and
file a new application, not just notify people of a
change in the application, and do every procedural step
that's outlined in Title 38.35. This could, again,
conceivably include steps that have gone on for 18 or
more months with a very public process. I certainly stand
to be corrected, but it was my understanding that the
intent is not to limit or change public notice so that
people should be aware of changes regardless of whether
there are substantial changes or changes that rise to the
judgment of the commissioner as requiring public notice.
It's just a question of whether or not a change is
substantial enough to trigger all the provisions of the
chapter being required to be done again.
My understanding of the example you gave of rerouting
that might occur that brings a project closer or within a
community can happen in either of two ways. It can happen
because an applicant has requested it or it can happen
because the agencies require it. It's conceivable that an
applicant proposes something that avoids all communities,
but it could be determined for reasons of Fish and Game
or DEC or others that the preferable route is actually
closer to the community. My belief would be that under
those circumstances, those kinds of changes would be
publicly noticed and you would have an opportunity to
discuss them and review them in the context of the
application as well as the finding.
SENATOR ELTON asked if this had ever been an issue to his
knowledge - where someone has defined substantial change in a way
that has caused economic hardship or regulatory hardship.
MR. EASON replied:
My research of the files, and I have been able to locate
two instances in the Pipeline Office's administration
that actually addresses this question, one is a written
decision affecting not the application, but an existing
conditional lease that was issued to Yukon Pacific. In
that case, the application process had been completed and
the commissioner had actually issued the lease. Yukon
Pacific came back, as I recall, some years later, maybe a
couple of years or longer, and addressed the commissioner
with a revised project, which increased the pipeline
pressure. I believe it increased the pipeline size. It
changed the number of compression stations and it changed
the location of the compression stations, but it was
their belief that those were not substantial changes
because the changes actually resulted in less land being
used than originally proposed, even though the system
looked quite different. There's a written finding that
the commissioner confirmed the calculation was the issue.
If it used less acreage, even though there had been
changes that in your view or others' view may very well
signal substantial changes, but there weren't.
I believe there is another instance with, I believe it
was, Badami where two alternative pipelines were
proposed, a buried pipeline and an elevated pipeline. I
apologize, I can't remember which one went in which
direction or whether they finally went from buried to
raised or raised to buried, but my understanding is that
the pipeline office determined that was a substantial
change requiring all the provisions of the chapter.
All that is sort of preliminary to the answer from our
perspective that's probably more important. In some
respects, these projects may have not have risen in
profile to invite litigation and quite honestly, in our
review of the statutes we were surprised that this term
had been in the statute since its adoption without
definition. We think that the uncertainty surrounding
that is enough given the high profile nature of a project
to deliver gas from Alaska that we see it as a great risk
and we think Alaskans should see it as a great risk - the
policy direction for what constitutes a substantial
change is not set so we don't have, perhaps, years of
delay by people being asked to refile and refile and
begin the process again for whatever change may come.
CHAIRMAN TORGERSON asked Mr. Britt if he supported the bill.
MR. BRITT responded that they are neutral, but they think it's a
good idea for the legislature to define the term. He said:
There are three instances they can think of that would be
captured by the bill. Two of those come up, one is
routing and the other is a change from below ground to
above ground mode or vice versa and the third one that
hasn't been mentioned yet would be a change from a 12-
inch to 48-inch pipeline. Presumably that would not be
captured by these amendments.
SENATOR TAYLOR asked if he had any other suggestions for the
committee with regards to routing and pipe size. "It seems odd
that we should have to do this for every aspect of the pipeline…"
MS. KREITZER responded that they attempted to look at the routing
issue and tried to deal with that problem and it just made the
problem worse. The routing seems to be the highest concern.
Regarding the pipeline issue, she thought the department had
already answered that with its action in the Yukon Pacific case.
"It has already said that is not a substantial change. So we're
sort of codifying what they have already done."
SENATOR TAYLOR said he wanted it on the record that this is based
on a previous decision.
CHAIRMAN TORGERSON asked if the original pipeline was 12 inches.
MR. EASON replied that it was somewhere between 42 - 48 inches.
He didn't anticipate quadrupling it. "The technology is not
there."
MS. KREITZER added that a potential amendment the committee might
consider to make it clearer is on page 2, line 5 to insert, "The
acreage attributable to an amendment of a right-of-way originally
issued by the federal government."
CHAIRMAN TORGERSON said it already seemed clear to him, but they
would consider it, if that's what they need to do. He announced
they would hold the bill for further work.
SJR 15-CHILEAN FARMED SALMON
CHAIRMAN TORGERSON announced SJR 15 to be up for consideration.
MR. IAN FISK, staff to Senator Austerman, sponsor of SJR 15, said
he would answer the committee's questions.
CHAIRMAN TORGERSON stated there were a couple of letters of support
for SJR 15.
Number 1500
MR. PAUL SHADURA II, Kenai Peninsula Fishing Association, supported
SJR 15. He said they are the largest setnet representation group in
Cook Inlet. He said they target markets all over the world, but
that is no good if they are forced out of their own markets with
unfair practices. SJR 15 takes a big step in protecting the
marketing of wild Alaskan salmon.
MR. JERRY MCCUNE, United Fishermen of Alaska, said this resolution
was prepared in anticipation of a meeting in Florida on the pre-
Chilean trade agreement on March 26. He said:
Chile is dragging down everybody's price for salmon. The
last time there was a study, there was 3 percent
overproduction to the United States. They are flooding
the market and the United States with fillets. We feel
that's unfair competition to us. When they first started
they said they weren't going to put salmon on the market
at the same time we did, but they've gotten so big
now…The Japanese actually own a lot of the farms in Chile
now that are overproducing. We would like to see some
fair competition in that arena.
SENATOR ELTON commented that he used to troll and it's somewhat
misleading on page 2, lines 4 and 14 where it seems to imply to the
world that you can't get fresh salmon between the months of October
and May. In fact, you can't get a lot of it, but it's the best
fresh salmon you can get with the possible exception of Copper
River reds. He didn't want to propose an amendment, but he wanted
them to acknowledge that we can get fresh salmon most of the year.
MR. FISK responded that is definitely correct and out of respect to
the troll fleet, Senator Elton's comments are welcome.
SENATOR TAYLOR moved to pass SJR 15 from committee with individual
recommendations. There were no objections and it was so ordered.
HJR 10-GROUNDFISH FISHERIES AND STELLER SEA LION
CHAIRMAN TORGERSON announced HJR 10 to be up for consideration.
REPRESENTATIVE DREW SCALZI, sponsor of HJR 10, testified:
Upon passage of Magnuson Stevens Fisheries Conservation
Management Act, fisheries in the U.S. waters became
governed by regional councils and they were set up to
make sound decisions based on biological data and
economic viability to the coastal communities. The North
Pacific Fisheries Management Council has done a very good
job in managing the largest fisheries in the United
States waters, which are predominantly carried in the
Bering Sea and Gulf of Alaska.
In 1973, the U.S. Congress also passed the Endangered
Species Act, which was a noble attempt to place safety
measures around species deemed threatened to the point of
extinction. The Western Steller Sea Lion in Alaska has
become identified as such an endangered species.
Nevertheless, the fisheries management by the North
Pacific Fisheries Management Council was challenged in
court by Green Peace and a stay was issued in a Ninth
Circuit Court requiring that a biological opinion to
determine what measures are deemed necessary to protect
the Steller.
The National Marine Fisheries Service was charged with
the task of formulating the biological opinion [BIOP],
which set in motion a number of restrictions on our U.S.
and Alaskan fisheries. In defense of NMFS [National
Marine Fisheries Service], the task was to prove a
negative. That is a conclusion proving there was no
conflict between commercial fishing and the Stellar Sea
Lion and if there was a conflict, what mitigation
measures they were going to use to offset that.
Four hundred and sixty-three pages of the BIOP sited
numerous assumptions on the feeding habits of the Steller
regime shifts that have taken place in the last 20 years
- predation by Orcas upon the Steller and the
identifiable conflicts between commercial fishing and the
Steller Sea Lion. In conclusion, the scientists could not
determine 100 percent cause and effect of any one
component, but rather drew assumptions that many factors
may have resulted in decline of the Steller. To err on
the side of conservation, the BIOP concluded that
shutting down a large portion of our fisheries may bring
the North Pacific Fisheries Management Council in
compliance with the Endangered Species Act. Frustration
with the process as the preponderance of evidence citing
the decline of the Steller could find no conclusion,
because the evidence of NMFS was based on assumptions,
not facts, but assumptions.
This resolution asks that we base our management on good
science and conclude a reasonable outcome. There must be
a decision made to reasonably change the sustained yield
principal of fisheries management in U.S. waters and the
assumptions that are cited in the BIOP need to be proven
and from there we'll draw a reasonable fisheries
management plan. To this end we are thankful to Senator
Stevens. We are fortunate to have $3.5 million of federal
appropriation that has been distributed among the
scientific community including the National Academy of
Sciences to conduct a peer review of the BIOP and produce
the necessary research upon which to base a legitimate
decision.
Dr. Bob Small, Marine Mammals Coordinator for Fish and
Game is a member of the Governor's Steller Sea Lion
restoration team and will speak about the state and
federal research that's planned. It's ironic that Green
Peace, in their effort to shut down the fisheries,
initially targeted the large factory trawlers. These 200-
300 ft. vessels are going to be little affected by this
act at all. It's going to be the small coastal vessels
that are going to take the brunt of this - the vessels
out of Seward, Homer, Kodiak, King Cove, Sand Point,
Dutch Harbor. They are all ill equipped to fish in the
winter waters. We know that this natural phenomenon has
altered affects on all living creatures on the earth,
including mankind himself. Many civilizations have come
and gone due to regime shifts. All we're asking in this
resolution is that we manage our fisheries with good
science.
SENATOR TAYLOR moved and asked for unanimous consent to pass HJR
10 from committee with individual recommendations. There were no
objections and it was so ordered.
CHAIRMAN TORGERSON adjourned the meeting at 4:24 pm.
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