Legislature(2001 - 2002)

05/02/2001 04:25 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                    SENATE RESOURCES COMMITTEE                                                                                
                            May 2, 2001                                                                                         
                             4:25 p.m.                                                                                          
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator John Torgerson, Chair                                                                                                   
Senator Pete Kelly                                                                                                              
Senator Robin Taylor                                                                                                            
Senator Kim Elton                                                                                                               
Senator Georgianna Lincoln                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Drue Pearce, Vice Chair                                                                                                 
Senator Rick Halford                                                                                                            
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Confirmation Hearings: Mr. Russell Nelson, Board of Fisheries                                                                   
                        Dr. John White, Board of Fisheries                                                                      
                        Mr. Pat Pourchot, Commissioner, Department                                                              
                          of Natural Resources                                                                                  
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-36, SIDE A                                                                                                            
Number 001                                                                                                                      
                                                                                                                              
CHAIRMAN  JOHN  TORGERSON  called  the  Senate  Resources  Committee                                                          
meeting  to order  at 4:25  p.m. He  announced the  committee  would                                                            
start with  the confirmation of Mr.  Russell Nelson to the  Board of                                                            
Fisheries.                                                                                                                      
                                                                                                                                
MR.  RUSSELL  NELSON  said,  "The  Board  has  adopted  sustainable                                                             
fisheries  policies, which  ensures  that the  Alaska Department  of                                                            
Fish and Game and the Board  are proactive in conserving the fishery                                                            
resources into the future."                                                                                                     
                                                                                                                                
CHAIRMAN  TORGERSON asked if  he had any  particular agenda  for the                                                            
next three years if he was confirmed.                                                                                           
                                                                                                                                
MR.  NELSON  replied that  he  did  not, other  than  continuing  to                                                            
educate himself as much  as possible on each issue that comes before                                                            
the Board and  to try to make a sound decision based  upon the facts                                                            
the Board receives.                                                                                                             
                                                                                                                                
DR. JOHN  WHITE told  members that  he would like  to serve  another                                                            
term  on the  Board of  Fisheries  also. He  said he  would like  to                                                            
participate  on  the  Board  as  Alaska's  fishery   policies  reach                                                            
maturity.  Another goal  of his,  while  also serving  on the  North                                                            
Pacific Anadromous  Fish Commission  in an advisory capacity,  is to                                                            
bring together the coordinated  applied research in a fiscally sound                                                            
manner. His  other goal for the next  three years will be  to listen                                                            
to and interact with the public in the committee process.                                                                       
                                                                                                                                
CHAIRMAN  TORGERSON expressed  concern that  the Board of  Fisheries                                                            
takes up  issues out  of cycle,  a prime example  being Cook  Inlet,                                                            
which the Board  takes up every year. He stated, "Before  the ink is                                                            
dry,  you meet  again to  change the  management plan.  What do  you                                                            
intend to do about this in the future, if anything?"                                                                            
                                                                                                                                
DR. WHITE  responded  that an exhausting  review  of the Cook  Inlet                                                            
fisheries  has taken a place  and resulted  in a 20+ year plan  that                                                            
reflected best  efforts of the Board  since the 1970s, which  it has                                                            
updated. He remarked, "Board  members should be looking at different                                                            
ways of working  with different users."  He said that  it would help                                                            
the communities  to stabilize the different fisheries,  because they                                                            
are not an endless renewable resource.                                                                                          
                                                                                                                                
CHAIRMAN  TORGERSON  said the  Board of  Fisheries was  part of  the                                                            
problem because  it can't  even let the ink  dry on the decision  it                                                            
made before it meets in an emergency session to change the plan.                                                                
                                                                                                                                
DR.  WHITE  said he  tried  to address  the  Chairman's  concern  by                                                            
stating that  he hoped this would  be the time for them to  look for                                                            
stabilization of the fisheries.                                                                                                 
                                                                                                                                
SENATOR  LINCOLN asked  Dr. White  what role he  believes the  ADF&G                                                            
should  play in  the board  process and  how much  weight the  Board                                                            
gives to the information that is presented to it.                                                                               
                                                                                                                                
DR.  WHITE replied  that  the  Board gives  ADF&G's  information  an                                                            
extreme amount of weight.  ADF&G is the foremost purveyor of science                                                            
to the  Board. He  receives scientific  input from  other users  and                                                            
sometimes it is conflicting.                                                                                                    
                                                                                                                                
SENATOR  LINCOLN asked  how he  measures the  scientific  biological                                                            
data presented  to him by  ADF&G or the private  sector on  which he                                                            
bases his decisions.                                                                                                            
                                                                                                                                
DR.  WHITE  responded  that  to  continue  within   the sustainable                                                             
fisheries  policy  that  was  approved   last  month,  a  cautionary                                                            
principle  exists that  essentially  says,  when the  science is  in                                                            
doubt and there's a paucity  of information, the Board should err in                                                            
a conservative manner and try to protect the resource.                                                                          
                                                                                                                                
SENATOR LINCOLN  asked how he determined when science  was in doubt.                                                            
                                                                                                                                
DR.  WHITE responded  that  many times  it's very  obvious,  because                                                            
there  are many different  opinions  about issues,  like  allocation                                                            
issues. He made  determinations from ADF&G's information  based upon                                                            
what he considered to be their recommendations.                                                                                 
                                                                                                                                
SENATOR LINCOLN  asked Dr. White if  he viewed the reclassification                                                             
from personal  use to subsistence use in the Chitina  dipnet fishery                                                            
as  precedent  setting  and  what  involvement   he  had  with  that                                                            
reclassification.                                                                                                               
                                                                                                                                
DR. WHITE responded that  the issue of a Chitina subsistence fishery                                                            
was  brought up  at the  Valdez  meeting. The  Board  looked at  the                                                            
history of  that fishery  for over 30 years  and determined  that it                                                            
qualified  as  a  subsistence  fishery.  He  did not  think  it  was                                                            
precedent setting.                                                                                                              
                                                                                                                                
SENATOR LINCOLN  asked how much weight he gave to  public testimony.                                                            
                                                                                                                                
DR. WHITE answered, "A  great deal." He explained the board received                                                            
limited  testimony  from tribal  parties  along  the river  and  had                                                            
additional hearings  for people who could not attend  the main ones.                                                            
                                                                                                                                
SENATOR  LINCOLN  asked Dr.  White  how important  he  believes  the                                                            
multiple  use approach  is to achieve  the maximum  benefit for  the                                                            
people  of the state,  especially  those with an  economic stake  of                                                            
those uses.                                                                                                                     
                                                                                                                                
DR. WHITE  replied,  "It is  the duty of  the board  to balance  the                                                            
development  of all those fisheries  for the maximum benefit  to the                                                            
people  of  the  state  of  Alaska  within  the  confines  of  sound                                                            
sustainable management for future generations' use."                                                                            
                                                                                                                                
SENATOR LINCOLN  asked Dr. White to  respond to the large  number of                                                            
letters in opposition to his nomination.                                                                                        
                                                                                                                                
DR.  WHITE  responded  that  he  has  been  involved  in  allocative                                                            
decisions that  were very contentious.  He wouldn't pretend  to make                                                            
very many  people happy when  he makes decisions  that were  not for                                                            
their betterment.                                                                                                               
                                                                                                                                
SENATOR LINCOLN  asked if he thought  he had been fair to  all folks                                                            
across the state.                                                                                                               
                                                                                                                                
DR. WHITE said,  "I endeavor to be as fair as possible  and not only                                                            
fair, but to try  to balance in the best possible  way, that I could                                                            
within my conscience, the allocation decisions I've made."                                                                      
                                                                                                                                
SENATOR LINCOLN  asked Dr.  White why, now  that he has been  on the                                                            
board  for six  years  and  knows that  it  can be  contentious  and                                                            
extremely time  consuming, he would  want to put himself  before the                                                            
public again and what his  goals would be for his next term if he is                                                            
confirmed.                                                                                                                      
                                                                                                                                
DR. WHITE responded  that his primary  goals will be to look  at the                                                            
management plan that he  has already worked on in different parts of                                                            
the state,  hear about their effects  and try to provide  continuity                                                            
in review of  those management plans,  adding amendments  to them so                                                            
that they reach full maturity.  "My second is to hopefully bring the                                                            
research institutions  that need to get science before  the Board of                                                            
Fisheries  better  coordinated.  That  would  be the  North  Pacific                                                            
Anadromous Fish Commission,  the North Pacific Research Board, North                                                            
Pacific  Council,  the  Board  of  Fisheries  and,  for  once,  have                                                            
coordinated  research  plans that  address the  difficult  decisions                                                            
that the board makes. Finally,  I would like to be involved with you                                                            
in further maturation  of the sustainable fisheries  projects to see                                                            
it to maturity…"                                                                                                                
                                                                                                                                
CHAIRMAN TORGERSON  said he would read him part of  a statement that                                                            
followed an emergency  out-of-cycle meeting (in February)  and asked                                                            
Dr. White to comment on it.                                                                                                     
                                                                                                                                
     He  [Dr.  White],  along with  the  other  board members,                                                                  
     wasted  20 million  pinks  in Cook  Inlet. He  also,  with                                                                 
     other  board members, disallowed  a sport fish harvest  on                                                                 
     the record run of coho.                                                                                                    
                                                                                                                                
CHAIRMAN  TORGERSON said,  "Before anybody  can implement them,  you                                                            
guys take  credit for  record runs  and then you  don't let  anybody                                                            
harvest  them. Are we  going to  have the same  situation again  and                                                            
again or what are we going to do about this?"                                                                                   
                                                                                                                                
DR. WHITE  replied  that he  didn't agree  with the  facts in  those                                                            
comments.  He thought the  Board acted in  the best possible  manner                                                            
with  the  information  it  had at  the  time.  There  was  evidence                                                            
presented  and no one ever  indicated there  was any other  evidence                                                            
that  the prevailing  species  available to  be harvested  was  coho                                                            
salmon. He  maintained, "We've had  several years of very  difficult                                                            
coho  production in  the Inlet.  I don't  think it  was the  board's                                                            
intent in any  way to let unforgone harvest. It certainly  wasn't my                                                            
intent."                                                                                                                        
                                                                                                                                
CHAIRMAN TORGERSON  said that was  the end result and now  the board                                                            
has a plan so  that if this happens again next year,  the same thing                                                            
is in place. He  asked why, when the board saw that  is was probably                                                            
off by  a million  percent,  it didn't  allow a  sport fish  harvest                                                            
allowed or commercial harvest  allowed for those pinks. He noted the                                                            
board could have had another emergency meeting.                                                                                 
                                                                                                                                
Number 1500                                                                                                                     
                                                                                                                                
DR. WHITE  replied  that the  season was  practically  over and  the                                                            
board will  hear the information  again. It  has requested  that the                                                            
department bring  it management plans for pink and  chum salmon that                                                            
have  a rational  basis for  that management.  He  looks forward  to                                                            
receiving  that  information,   as  there  has  been  a  paucity  of                                                            
information.                                                                                                                    
                                                                                                                                
CHAIRMAN TORGERSON  retorted, "That's the prime reason  that meeting                                                            
every other  month on Cook Inlet issues,  or any place, is  just not                                                            
good policy."                                                                                                                   
                                                                                                                                
SENATOR  LINCOLN asked,  regarding  personal use  fisheries, if  the                                                            
board has a plan for the rest of the fisheries within the state.                                                                
                                                                                                                                
DR. WHITE replied, "No,  mam. There is no plan. At the present time,                                                            
I think that's  a function of budgetary  restraints. I think  it's a                                                            
function  of how we arranged  with our  federal counterparts  within                                                            
those budget restraints.  If I heard correctly that  you think there                                                            
should be, I would agree with that...."                                                                                         
                                                                                                                                
SENATOR LINCOLN said:                                                                                                           
                                                                                                                                
     Don't  interpret  my  question  to  mean  that  I support                                                                  
     expanding  the personal  use fisheries  in the state to  a                                                                 
     subsistence use, because  I think that there's certainly a                                                                 
     conflict there when we have  the federal interpretation of                                                                 
     the  preference  to  rural  residents  who  are primarily                                                                  
     Natives. There's been great concern about that.                                                                            
                                                                                                                                
DR. WHITE  said that  wasn't his  inference, but  rather that  there                                                            
should  be some sort  of comprehensive  planning  between state  and                                                            
federal people in every cross jurisdictional situation.                                                                         
                                                                                                                                
SENATOR LINCOLN  said they know the  state has not done anything  on                                                            
the  subsistence  issue  and that  it  has continued  to  allow  the                                                            
federal government to handle  our fisheries on federal areas. If the                                                            
state does  nothing, she asked, would  the federal boards  take more                                                            
of an active role and how  would his board interact with the federal                                                            
board.                                                                                                                          
                                                                                                                                
DR. WHITE responded:                                                                                                            
                                                                                                                                
     As you may well know, at  the present time there's special                                                                 
     action  requests going to the  federal court for both  the                                                                 
     Yukon and the Kuskokwim  drainages to reduce sport fishing                                                                 
     or  to  eliminate  sport fishing  on  federal  lands.  The                                                                 
     simple  momentum  of  federal  government  involvement  is                                                                 
     going  to  increase. As  that  momentum  increases,  their                                                                 
     funding  is  going to  increase.  The  loss of  our  human                                                                 
     resources  within   the department   to  their  system  is                                                                 
     probably going  to increase as it has in the past  several                                                                 
     years as a  coincidental nature of a lot of people  coming                                                                 
     up  in the late  70s and early  80s to  the Department  of                                                                 
     Fish and Game  and their ability to retire and  go over to                                                                 
     the federal system. They  are presently paying 125 percent                                                                 
     of what  state salaries are.  We are experiencing a  brain                                                                 
     drain  in our  whole department.  The sheer  momentum  and                                                                 
     weight  of influences is going  to have an eroding effect                                                                  
     on  the  State  of Alaska's  ability  to  manage  its  own                                                                 
     fisheries resource.                                                                                                        
                                                                                                                                
CHAIRMAN  TORGERSON  thanked  Dr. White  and  Mr. Nelson  for  their                                                            
comments. He  said, "Whatever happens  in the confirmation  process,                                                            
you've got  tough jobs,  both of you,  and I want  to thank  you for                                                            
serving."                                                                                                                       
                                                                                                                                
He  announced  that  Commissioner  designee  to  the  Department  of                                                            
Natural Resources,  Pat Pourchot,  would come before the  committee.                                                            
                                                                                                                                
COMMISSIONER-DESIGNEE  PAT POURCHOT said it was a  great honor to be                                                            
appointed  last  September.   He said  the  Department   of  Natural                                                            
Resources  (DNR) has enjoyed  a good working  relationship  with the                                                            
legislature this  year in trying to address problems  like the water                                                            
permitting  problem and  some personnel  issues in  the Oil and  Gas                                                            
Division. With  some of the resources  the legislature has  provided                                                            
them  this year,  DNR  hopes  to come  back  with some  results  and                                                            
measures by  which to judge its performance.  He hoped to  assist in                                                            
that process.                                                                                                                   
                                                                                                                                
SENATOR  ELTON  noted that  one  of  his first  political  jobs  was                                                            
working for then Representative  Pat Pourchot and anything good they                                                            
had seen  from him  was because  of Mr. Pourchot.  He was  impressed                                                            
with him then and he remains impressed with him now.                                                                            
                                                                                                                                
CHAIRMAN TORGERSON  asked him to comment  on the Kenai area  plan in                                                            
relation  to putting  8,000  acres  into  parks, which  he  opposes,                                                            
because he doesn't want  to totally lock it up. He asked some of his                                                            
folks  to  create  a new  classification  of  land  that  would  put                                                            
restrictions  on it for  habitat issues,  but to  not lock it  up so                                                            
that nothing  can ever be done. This  issue concerns area  plans all                                                            
over  the state.  He said  they are  going  to be  forced to  return                                                            
federal money  that's strictly  for the purpose  of buying  land. He                                                            
asked Commissioner  Pourchot if he  thought it would work  and if he                                                            
supported it.                                                                                                                   
                                                                                                                                
COMMISSIONER-DESIGNEE   POURCHOT  replied  that he  hadn't  had  the                                                            
discussion  about the Charisma  (ph) area with  his people.  He said                                                            
that  he is  willing to  work  with Senator  Torgerson  and look  at                                                            
alternative  land  classifications  that  might  afford  the  needed                                                            
protections for that valuable  watershed, but might allow some other                                                            
compatible uses.                                                                                                                
                                                                                                                                
CHAIRMAN TORGERSON  said he didn't  want to focus on the  Kenai, but                                                            
it was  a great example.  "It ties  up two lakes,  miles and  miles,                                                            
hundreds  of  miles  of  shoreline,  six  thousand  acres  worth  of                                                            
shoreline  of Kenai  Lakes,  Trail  Lakes and  others."  He said  he                                                            
understands protection  and habitat, but locking it up completely is                                                            
a vote of no confidence for future generations.                                                                                 
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT responded  that last year  there was                                                            
the expectation  there was  going to be money  for land acquisition                                                             
among other  things. His department  ended up with no more  money to                                                            
do anything than what they  had been getting in the past through the                                                            
Land  and   Water  Conservation  Fund.   They  got  a  little   more                                                            
preservation  money.  He is  very  cautious  about promises  of  new                                                            
money.  However,  most of  DNR's priorities,  if  they  do get  some                                                            
money, is  typically split  between localities.  The localities  get                                                            
about half and the state gets about half. He explained:                                                                         
                                                                                                                                
     The  half the state  gets is  really targeted  to not  the                                                                 
     8,000  acres  or  the  big  new  park  areas.   It's  very                                                                 
     strategic  to key inholdings  that are in high recreation                                                                  
     areas, like in the Chena  Recreation area. It's a very key                                                                 
     parcel for  public recreation along the highway  and along                                                                 
     the river.  They are fairly small discrete areas  in terms                                                                 
     of the  land acquisition  that they  are looking at.  This                                                                 
     happens  to be  state  land on  Charisma, which  makes  it                                                                 
     perhaps,  larger than  it would be.  I can't envision  the                                                                 
     purchase  of a large  acreage like that  through a carrot                                                                  
     type  program  or  a  land  and water  conservation   fund                                                                 
     program.                                                                                                                   
                                                                                                                                
CHAIRMAN TORGERSON said he could.                                                                                               
                                                                                                                                
SENATOR TAYLOR mentioned  EVOS bought 600,000 acres of private land.                                                            
                                                                                                                                
CHAIRMAN  TORGERSON  reiterated  that  people  want  protection  for                                                            
habitat, but people also  believe that we should look at a different                                                            
classification.                                                                                                                 
                                                                                                                                
SENATOR  LINCOLN  said  she  didn't'  doubt  that  he  would  do  an                                                            
excellent  job as commissioner  and asked how  he would do  things a                                                            
little bit differently in diversifying the economic benefits to                                                                 
Alaskans and maybe agriculture, mining and other areas for                                                                      
industry.                                                                                                                       
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT replied:                                                                                         
                                                                                                                                
     DNR cannot  make things economic and they can't  start the                                                                 
     business,  but they can provide  the resource base or  the                                                                 
     land  base, the  mineral base,  the oil and  gas base,  on                                                                 
     which  people then have  an opportunity  to do things.  We                                                                 
     have  been  in recent  years  and will  continue  to  move                                                                 
     fairly aggressively on several  fronts. One is oil and gas                                                                 
     leasing.  We are holding  four area  wide lease sales  per                                                                 
     year,  now. The Foothills  one will  be about adjournment                                                                  
     day, May  7th or 8th. The North  Slope one in November  we                                                                 
     sold about  713,000 acres of new leased land into  oil and                                                                 
     gas leasing.                                                                                                               
                                                                                                                                
     On the mining  front we are enjoying - of course,  we have                                                                 
     a lot  of land open  for claims taking.  Last year we  had                                                                 
     12,000 mining claims staked,  an all time record. So state                                                                 
     land  is open and  available for staking.  We don't  offer                                                                 
     that  in the  same way  as oil  and gas leasing.  Some  of                                                                 
     those  prospects, as you know  in your district, Pogo  and                                                                 
     others,   have  very   high  potential.   We  work  in   a                                                                 
     collaborative  way  with  potential developers,  bringing                                                                  
     agencies  together.   We have  a  large  mine  permitting                                                                  
     process  that seems to  work real well.  We permitted  the                                                                 
     Fort  Knox  Gold Mine  that  way.  That  is an  effort  to                                                                 
     achieve  the  objectives  you  are  talking  about  in  an                                                                 
     efficient  way, but bringing in all the parties  in things                                                                 
     like that.                                                                                                                 
                                                                                                                                
     In  agriculture,  we are  going to  continue  to have  two                                                                 
     parts.  One, we  have resold  almost all  the agriculture                                                                  
     parcels we took back or  defaulted over the years with the                                                                 
     exception  of odd  lot parcels.  So, we're  trying to  get                                                                 
     agriculture lands back into  production, back into private                                                                 
     hands.  You established a new  land disposal category  and                                                                 
     retooled  one and we are now  into our first big cycle  to                                                                 
     reoffer state  land for private use, both subdivision  and                                                                 
     remote parcel. We are going  to have a twin component of a                                                                 
     land  disposal process  that will be  ongoing and you  all                                                                 
     set up a way  of funding that in advance and we're  pretty                                                                 
     optimistic  that will be an ongoing tool for getting  land                                                                 
     in private hands…                                                                                                          
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT said that sometimes we don't have                                                                
the resources, but he is trying to have an ongoing offering in the                                                              
case of  timber, of 40 -  50 million board  feet per year  primarily                                                            
for value added local processing  so that people can count on it. He                                                            
paralleled  that to other  resource areas.  He wants predictability                                                             
and stability in the things the state does.                                                                                     
                                                                                                                                
SENATOR LINCOLN  said she hears the permitting process  is very time                                                            
consuming. Although she  knew that some of it was budget driven, she                                                            
thought it needed to be more streamlined.                                                                                       
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT agreed with her and  added that they                                                            
have a  statutory framework  to a  lot of their  processes that  are                                                            
followed up by regulations  that offer the opportunity for people to                                                            
challenge decisions.  He said there  was a sizeable workload  in the                                                            
process and  when they go to court,  they take even longer.  He said                                                            
the  small day-to-day  transactions  go  quickly  without  a lot  of                                                            
controversy. The department  knows it's going to court in some cases                                                            
and then  becomes even more  deliberative and  cautious in  both the                                                            
process  and  the  findings.  He pointed  out,  "The  best  interest                                                            
findings become  more comprehensive so that we don't  get tripped up                                                            
by not  addressing something  and there's more  and more things  the                                                            
courts tell us we have to address all the time."                                                                                
                                                                                                                                
CHAIRMAN  TORGERSON asked  if he  was going  to try  to negotiate  a                                                            
better deal with the new President to open the NPRA.                                                                            
                                                                                                                                
TAPE 01-36, SIDE B                                                                                                            
                                                                                                                              
COMMISSIONER-DESIGNEE POURCHOT  said that Governor Knowles talked to                                                            
the President  about that  on his last trip  to D.C. He also  talked                                                            
with  Secretary  Gail  Norton   and  the  Secretary  of  Energy  and                                                            
reiterated those topics.  He said, "It was appropriate that a couple                                                            
of years go by  and we have a first sale. Now, we're  going to be in                                                            
the second drilling  season. We think it is appropriate  for them to                                                            
go back and look at leasing some more of the NPRA area."                                                                        
                                                                                                                                
CHAIRMAN TORGERSON  asked if he had produced any maps  of additional                                                            
leasing grounds.                                                                                                                
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT  said he would have to check on that.                                                            
                                                                                                                                
CHAIRMAN TORGERSON said:                                                                                                        
                                                                                                                                
     The  question is, are  we going to go  in there and  start                                                                 
     drilling  where there's a high  probability of oil or  are                                                                 
     we going to push these guys  off into the desert somewhere                                                                 
     that  there isn't  anything  there? This  is  one of  your                                                                 
     major positions to try to  get them to do that and I would                                                                 
     be interested in knowing what that is.                                                                                     
                                                                                                                                
CHAIRMAN  TORGERSON said that  he talked  to the Commissioner  about                                                            
the Netricity  resolution on  the sale of  natural gas on the  North                                                            
Slope and made  sure he agreed with what they were  doing. He wanted                                                            
to know how  they were going to proceed  on things like determining                                                             
the price  of gas. He said  the oil companies  were saying  that the                                                            
state couldn't  take its share of royalty oil. "We're  going to have                                                            
to flex  a little  muscle here  and assert  our powers  as an  owner                                                            
state, it seems to me. Tell me what's going to happen there."                                                                   
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT answered:                                                                                        
                                                                                                                                
     Those are  great questions and some of them we're  looking                                                                 
     at seriously for the first  time. It's been theoretical in                                                                 
     the past.  We are going to obviously be looking  at taking                                                                 
     in advance  of other production  state royalty gas on  the                                                                 
     North  Slope.  One of  the key  questions is  arriving  at                                                                 
     value  or price.  There's a  number of  problems with  the                                                                 
     proposal they have. We have  a whole process as we do with                                                                 
     royalty  oil  that  we  will be  going  through  that  are                                                                 
     statutory  - is it in the best  interest to sell our  gas,                                                                 
     is  there any reason  it shouldn't  be competitive sales.                                                                  
     You then make  a series of findings based on some  studies                                                                 
     based  on other  studies the  legislature  has funded  for                                                                 
     instate  demand of gas. I think  we want to dovetail  some                                                                 
     of those  findings with  this since this  is one of  maybe                                                                 
     several  instate  uses  of natural  gas.  Then,  it  would                                                                 
     presumably  go to the royalty board, under statute,  for a                                                                 
     review if we would arrive  at some proposed sale which I'm                                                                 
     not saying  that, but that would  conclude, obviously,  on                                                                 
     something coming before  the legislature for approval. But                                                                 
     those critical  questions you alluded to - price,  state's                                                                 
     best interest, other uses  of gas - we're going to have to                                                                 
     study  through  those  and  take  a  lot  of  things  into                                                                 
     consideration and crunch the numbers.                                                                                      
                                                                                                                                
     I will say,  though, just on the surface, as you  know, we                                                                 
     sell gas now  on the North Slope to the producers  to burn                                                                 
     for  generating  electricity  on the  North Slope  and  we                                                                 
     charge about $1.10 mcf or  so for that gas. That's a value                                                                 
     that  we have  now and  is far  above the  value that  was                                                                 
     initially  proposed by Netricity. We would hate  to get in                                                                 
     a  position   where  that  value  goes  down  to  another                                                                  
     established  value. That's the  grossest of concerns  that                                                                 
     you would  look at. What happens  to your other potential                                                                  
     gas   sales  that   you're   interested   in.  Obviously,                                                                  
     protecting  the  state's  interest  in the  long  term  is                                                                 
     foremost on our minds here.                                                                                                
                                                                                                                                
Number 2300                                                                                                                     
                                                                                                                                
CHAIRMAN TORGERSON  said the first step is to find  out if the state                                                            
can legally  take the gas  prior to a sale.  He thought the  rest of                                                            
the  steps  weren't  necessary   once  you  get  through  the  legal                                                            
questions.  He  thought  the  Commissioner  would  have to  be  very                                                            
assertive in getting the legal opinion on this issue.                                                                           
                                                                                                                                
He also said  they run up against  the confidentiality requirements                                                             
on a lot of data  after a well has been drilled. State  law requires                                                            
that data be kept confidential  for two years, but the Department of                                                            
Natural Resources  can extend  that out. He  wanted to know  reasons                                                            
why they would release the information as well as why not.                                                                      
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT replied that he didn't  know all the                                                            
reasons. He said  the Kick well was the most notable  of those wells                                                            
and he  has heard an  explanation  of why it  was different,  but he                                                            
couldn't   repeat  it.   He  said   there  are   other  extenuating                                                             
circumstances  for proprietary information  where there are  related                                                            
ongoing leasing considerations.  He said he would go back and get an                                                            
answer to Senator  Torgerson's question of whether  it's serving the                                                            
public's interest.                                                                                                              
                                                                                                                                
CHAIRMAN TORGERSON asked  what is happening with Pt. Thompson, which                                                            
has been under lease for  25 years and the data is frozen. The state                                                            
just keeps extending it out.                                                                                                    
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT  explained that the Pt. Thompson unit                                                            
has  unusual  conditions  that  do  not allow  the  state  to  force                                                            
production  from the unit.  He explained, "It's  part of the  lease,                                                            
it's a contractual  obligation that  we have to live with.  It's not                                                            
like some of the  other leases where it's produced  or you lose your                                                            
leases. These leases at  Pt. Thompson were different. We've tried to                                                            
work with  the owners for  19 years and there  have been some  wells                                                            
drilled, but obviously  there's no production. The  owners have come                                                            
in for  inclusion  of some  other adjacent  leases  for an  enlarged                                                            
unit."                                                                                                                          
                                                                                                                                
CHAIRMAN TORGERSON  interrupted to  say that it doubles the  size of                                                            
their units.  He stated, "Unless you're  going to change  it, it has                                                            
the  same  underlying  agreements  where  there's   not production,                                                             
there's  no  timeline  to  do  anything,  there's  no  dates  to  do                                                            
anything.  It's just here,  I'm going  to give you  more land,  if I                                                            
understand it right."                                                                                                           
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT  responded, "If we would agree to put                                                            
the additional leases into  the unit for sound geologic and economic                                                            
reasons,  we  do  have  the  ability  to  negotiate   the  terms  of                                                            
development  and production. We can't  dictate them, but  there is a                                                            
leverage point  of if you want these leases in and,  by the way, you                                                            
don't want  them released  for new leasing,  which we will  have the                                                            
opportunity if  they don't become part of the unit  in a year or two                                                            
- they vary...."                                                                                                                
                                                                                                                                
CHAIRMAN  TORGERSON  asked  if those  come  to the  legislature  for                                                            
approval.                                                                                                                       
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT replied DNR makes  that decision and                                                            
that,  "We   are  actively   and  aggressively   involved   in  that                                                            
negotiation."                                                                                                                   
                                                                                                                                
CHAIRMAN TORGERSON said  he appreciated that and noted, "You call it                                                            
a  plan  for development.   Most of  us  call  it a  plan  for  non-                                                            
development,  because that is what  it is." He said to let  him know                                                            
if they need  legislative help on  it. He didn't think letting  them                                                            
not develop Pt. Thompson was in the best interests of the state.                                                                
                                                                                                                                
SENATOR LINCOLN  asked why we would want to expand  the area and not                                                            
have a time frame  for production. She noted, "It  just makes common                                                            
sense."                                                                                                                         
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT replied:                                                                                         
                                                                                                                                
     We would on the expanded  area. We can't legally reach the                                                                 
     core  area, but they  link together  in terms of ultimate                                                                  
     production.   So if  you  could  reach   an agreement   on                                                                 
     ultimate exploration and  production of the adjacent area,                                                                 
     presumably,  they would  be produced  in conjunction  with                                                                 
     that old core area.                                                                                                        
                                                                                                                                
SENATOR  LINCOLN asked  if they could  include Pt.  Thompson  in the                                                            
adjacent negotiation.                                                                                                           
                                                                                                                                
COMMISSIONER-DESIGNEE   POURCHOT  replied  that he  has  asked  that                                                            
question and the  legal answer is that we won't be  able to reach in                                                            
and change the legal terms of the original leases.                                                                              
                                                                                                                                
CHAIRMAN TORGERSON asked if the leases expire soon.                                                                             
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT  replied  that some  of the  outline                                                            
leases have  expired and are on an  appeal status. All of  them will                                                            
expire within two years.                                                                                                        
                                                                                                                                
CHAIRMAN TORGERSON asked if that included the entire unit.                                                                      
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT  replied  it was  just the  outlying                                                            
areas.                                                                                                                          
                                                                                                                                
CHAIRMAN TORGERSON  asked if the major unit had an  expiration date.                                                            
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT replied, "No, because  they are in a                                                            
unit  so it  stays there.  We  can't reach  production  or  drilling                                                            
requirements because of the nature of the agreement."                                                                           
                                                                                                                                
CHAIRMAN TOGERSON  said he thought DNR could figure  out a way to do                                                            
it and he encouraged  him to do so. He stated, "If  they're going to                                                            
claim it's uneconomical,  let's condemn it and sell it to Phillips."                                                            
                                                                                                                                
CHAIRMAN TORGERSON  asked about "discovery royalty  reduction" under                                                            
leases approved by unit.                                                                                                        
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT said,  "There is the Sambuca  well -                                                            
we  made  a decision  on  that  to not  grant  a  discovery  royalty                                                            
reduction.  It was appealed. I heard  the appeal several  weeks ago.                                                            
We're in the process of  putting together a decision on that appeal.                                                            
The Oil and Gas Division denied the discovery well credit."                                                                     
                                                                                                                                
CHAIRMAN  TORGERSON asked  where the  state got  that authority.  He                                                            
thought it had been repealed.                                                                                                   
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT replied:                                                                                         
                                                                                                                                
     Although  the legislature,  prior to  the big Prudhoe  Bay                                                                 
     lease  sale,  repealed  that law,  leases  predating  '68,                                                                 
     predominantly in the '65  - '66, contained in those leases                                                                 
     provisions for the discovery  credit. These old leases are                                                                 
     scattered around Prudhoe Bay.                                                                                              
                                                                                                                                
CHAIRMAN TORGERSON asked how much money he was talking about.                                                                   
                                                                                                                                
COMMISSIONER-DESIGNEE   POURCHOT   replied  the  discovery   royalty                                                            
reduces the typical  12.5 percent lease for 10 years  from discovery                                                            
down to five percent royalty. He noted:                                                                                         
                                                                                                                                
     It depends on their production.  It's millions. It applies                                                                 
     to  the  one  lease,  not  to  the  whole   unit,  but  an                                                                 
     interesting  twist  here  is  that  it  applies  to  every                                                                 
     reservoir  that's under the lease,  regardless, as in  the                                                                 
     Sambuca case where there's oil on different levels.                                                                        
                                                                                                                                
CHAIRMAN TORGERSON  asked what their basis for denial  was and if it                                                            
was in the basic lease.                                                                                                         
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT replied:                                                                                         
                                                                                                                                
     The Oil and  Gas decision was based on the fact  that they                                                                 
     believed  this  represented   just another   component  or                                                                 
     another  pool of  the larger  Kuparuk Reservoir  and  that                                                                 
     every time somebody finds  a different isolated pool, even                                                                 
     if  it's isolated  by pressure  and even  looks different                                                                  
     chemically,  if it's  still in  the general  structure  of                                                                 
     things,  the Oil and  Gas Division ruled  that it did  not                                                                 
     constitute  a discovery  as we  believe  the original  law                                                                 
     intended.  It has changed. The  rationale for why we  have                                                                 
     granted  some and not others  is that, frankly, we know  a                                                                 
     whole lot  more about North Slope geology and  geophysical                                                                 
     exploration.  There's a thousand  holes being drilled.  We                                                                 
     just  know more  so that the  discovery  well royalty  was                                                                 
     really geared  to raw areas, frontier areas, where  people                                                                 
     were drilling  wildcat wells.  We wanted to encourage  and                                                                 
     reward  discoveries. Just  finding an  isolated pocket  of                                                                 
     oil  may or may not  meet the original  intent of what  we                                                                 
     think the royalty reduction was geared for.                                                                                
                                                                                                                                
CHAIRMAN TORGERSON  asked if the Governor was going  to sign SB 164,                                                            
the over-the-top route bill.                                                                                                    
                                                                                                                                
COMMISSIONER-DESIGNEE  POURCHOT  answered that  he didn't know  what                                                            
the Governor was going to do.                                                                                                   
                                                                                                                                
CHAIRMAN TORGERSON  said he wrote  the Commissioner a letter  on the                                                            
Stampede Road  Subdivision in Denali National Park.  He heard rumors                                                            
that the department was  going to give the land to the University of                                                            
Alaska, who  would sell it to the  Park Service for an extension  to                                                            
Denali National Park. He  asked if his department was working on it.                                                            
                                                                                                                                
COMMISSIONER-DESIGNEE POURCHOT replied:                                                                                         
                                                                                                                                
     We  are no longer  working on  it. Several  people in  the                                                                 
     department  spent considerable time in July, August,  part                                                                 
     of  September  working  with  the  University  of Alaska,                                                                  
     seeing if we could come  up with a land package that would                                                                 
     satisfy  their needs, might satisfy  the Administration's                                                                  
     needs  on  a  land settlement  of  some  kind.  We looked                                                                  
     throughout  the state to try to find lands to  accommodate                                                                 
     a number of concerns from  a lot of quarters. Short of the                                                                 
     Board  of Regents,  at the  DNR level  and Administration                                                                  
     level,  we came up with a draft  package of lands that  we                                                                 
     were in  general agreement with  what might meet people's                                                                  
     objectives.  It included several  townships, about 90,000                                                                  
     acres that are called Wolf  Townships on state land on the                                                                 
     north  side of Denali  Park and the  University was  quite                                                                 
     interested  in those  lands.  They don't  have particular                                                                  
     economic  value  to the  state  through DNR  multiple  use                                                                 
     management.  They have  considerable  interest, at least,                                                                  
     from the Park  Service. It's part of their park  ecosystem                                                                 
     drainage,  there's a  wolf pack  that runs  in and out  of                                                                 
     there  and it probably has value  from a land acquisition                                                                  
     standpoint, as a component of the Park.                                                                                    
                                                                                                                                
     We were  concerned about several  things from the DNR  and                                                                 
     state standpoint  - access - and we wrote up a  big caveat                                                                 
     on the Stampede Trail right-of-way  potential rail access,                                                                 
     local  uses. Anything  that would happen  to the land,  we                                                                 
     wanted  to have  a writing  covenant to  protect existing                                                                  
     public uses of the area.  So we had a bunch of that set up                                                                 
     that  we were concerned  with, but the  idea would be,  as                                                                 
     you stated, that could yield  up to $90 million as part of                                                                 
     an  endowment  for the  University  of Alaska.  There  was                                                                 
     considerable interest. I  would quickly add, this idea was                                                                 
     floated  by the Fairbanks delegation  and we stopped  work                                                                 
     on this shortly thereafter.                                                                                                
                                                                                                                                
CHAIRMAN TORGERSON said:                                                                                                        
                                                                                                                                
     Back  to my new  classification  of land -  there are  all                                                                 
     kinds of sneaky  deals out there and he wants  to lock the                                                                 
     land up, which is what the  National Parks would have done                                                                 
     with  it.  Then  there  would be  no  snow  machining,  no                                                                 
     hunting, no fishing, no nothing in there.                                                                                  
                                                                                                                                
CHAIRMAN TORGERSON  said they didn't  have a quorum at present,  but                                                            
would make  the motion to move the  nominees' names on to  the joint                                                            
session at the  next meeting. He adjourned the meeting  at 5:30 p.m.                                                            
                                                                                                                                
                                                                                                                                

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