Legislature(2001 - 2002)

04/17/2002 03:35 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    ALASKA STATE LEGISLATURE                                                                                    
                   SENATE RESOURCES COMMITTEE                                                                                 
                         April 17, 2002                                                                                         
                            3:35 p.m.                                                                                           
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator John Torgerson, Chair                                                                                                   
Senator Gary Wilken, Vice Chair                                                                                                 
Senator Rick Halford                                                                                                            
Senator Ben Stevens                                                                                                             
Senator Kim Elton                                                                                                               
Senator Georgianna Lincoln                                                                                                      
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Robin Taylor                                                                                                            
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
SENATE BILL NO. 360                                                                                                             
"An   Act    establishing   additional   requirements    for   the                                                              
consideration of  applications under the Right-of-Way  Leasing Act                                                              
for  an  Alaska  North  Slope  natural  gas  project,  authorizing                                                              
expeditious priority treatment of  all applications under that Act                                                              
and under  other relevant state laws  for issuance of  a right-of-                                                              
way  lease  for  that project,  authorizing  the  commissioner  of                                                              
natural resources to act to modify  the terms of certain state oil                                                              
and  gas  leases   related  to  the  project  and   to  act,  with                                                              
legislative approval,  to waive,  reduce, or defer  the collection                                                              
of royalties  due the state,  and authorizing the  commissioner of                                                              
revenue to  act, with legislative  approval, to waive,  reduce, or                                                              
defer  the  levy  and  collection   of  taxes  by  the  state  and                                                              
municipalities under the oil and  gas exploration, production, and                                                              
pipeline  transportation  property  tax related  to  the  project,                                                              
authorizing the  Alaska Railroad Corporation to  provide financing                                                              
for  the  acquisition,  construction,   improvement,  maintenance,                                                              
equipping,  operation, or  expansion  of the  project and  related                                                              
facilities  for  the  transportation  of natural  gas  within  and                                                              
outside the state by others and the  corporation's issuance of its                                                              
bonds  to  finance  the  project   and  facilities,  and  limiting                                                              
consideration  of  judicial  challenges  to  decisions  made  with                                                              
respect  to that  project under  this  Act; and  providing for  an                                                              
effective date."                                                                                                                
                                                                                                                                
     MOVED CSSB 360(RES) OUT OF COMMITTEE                                                                                       
                                                                                                                                
SENATE CONCURRENT RESOLUTION NO. 30                                                                                             
Relating to Alaska Salmon Day.                                                                                                  
                                                                                                                                
     MOVED CSSCR 30(RES) OUT OF COMMITTEE                                                                                       
                                                                                                                                
CS FOR HOUSE BILL NO. 206(RLS)                                                                                                  
"An Act  relating to a  vessel-based commercial fisheries  limited                                                              
entry system for  the Bering Sea Korean hair crab  fishery and for                                                              
weathervane   scallop  fisheries,   to   management  of   offshore                                                              
fisheries, and to  the definition of 'person' for  purposes of the                                                              
commercial  fisheries   entry  program;   and  providing   for  an                                                              
effective date."                                                                                                                
                                                                                                                                
     MOVED CSHB 206(RLS) OUT OF COMMITTEE                                                                                       
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
SB 360 - See Resources minutes dated 4/15/02.                                                                                   
                                                                                                                                
SCR 30 - See State Affairs dated 4/9/02.                                                                                        
                                                                                                                                
HB 206 - See Resources minutes dated 3/20/02.                                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
Mr. Harold Heinze                                                                                                               
Consultant to the Alaska Legislative Council                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on 'Legislator Attitudes on Issues                                                              
Related to North Slope Gas Development.'                                                                                        
                                                                                                                                
Mr. Patrick Coughlin                                                                                                            
Consultant to the Senate Resources Committee                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT:  Commented on SB 360.                                                                                     
                                                                                                                                
Ms. Sara Nielson                                                                                                                
Staff to Senator Ben Stevens                                                                                                    
Alaska State Capitol                                                                                                            
Juneau, AK  99801-1182                                                                                                          
POSITION STATEMENT: Commented on SCR 30.                                                                                      
                                                                                                                                
Ms. Barbara Belknap, Executive Director                                                                                         
Alaska Seafood Marketing Institute (ASMI)                                                                                       
311 North Franklin Street, Ste 200                                                                                              
Juneau AK 99801                                                                                                                 
POSITION STATEMENT: Supported SCR 30.                                                                                         
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 02-20, SIDE A                                                                                                            
Number 001                                                                                                                      
                                                                                                                              
CHAIRMAN  JOHN TORGERSON  called  the Senate  Resources  Committee                                                            
meeting to order  at 3:35 p.m. Senators Wilken,  Halford, Stevens,                                                              
Elton  and Chairman  Torgerson  were present.  Chairman  Torgerson                                                              
announced  the  committee would  first  hear  a report  by  Harold                                                              
Heinze on some work he did for the Legislative Council.                                                                         
                                                                                                                                
MR. HAROLD HEINZE told members he  completed his contract with the                                                              
Legislative Council  in which he conducted a series  of interviews                                                              
with about half of the legislature  to identify areas of consensus                                                              
and areas  of non-consensus  related  to a broad  array of  issues                                                              
surrounding North Slope natural gas.  The first eight pages of his                                                              
report  contain a summary  of the  results; the  last eight  pages                                                              
contain an appendix  that represents the briefing  package he used                                                              
to interview  individual legislators.   He  noted page  4 contains                                                              
the areas of legislative consensus.  He said the thing that struck                                                              
him  is that  everyone understands  both the  importance of  North                                                              
Slope natural  gas and the importance  of the decisions  that need                                                              
to  be made  by the  legislature this  year and  into the  future.                                                              
There was  a very strong  feeling in  the legislature that  a more                                                              
pro-active posture is needed. He said:                                                                                          
                                                                                                                                
     Quite frankly,  most legislators  felt that things  were                                                                   
     kind of being  pushed and tugged around  the legislature                                                                   
     rather than  the other way  around and recognizing  that                                                                   
     the legislature  is the policymaker  in this  very basic                                                                   
     resource issue,  folks thought it maybe ought  to be the                                                                   
     other way around.                                                                                                          
                                                                                                                                
He identified  four areas that were  broadly accepted. On  page 5,                                                              
he identified  four areas  that had a  broad range of  legislative                                                              
opinion. He found it difficult to  find a consensus on those areas                                                              
based on the interviews he conducted.                                                                                           
                                                                                                                                
MR. HEINZE told  members the first interview question  that seemed                                                              
to delineate  people's viewpoint  was: What  are the producers  up                                                              
to? He stated:                                                                                                                  
                                                                                                                                
     Some people  felt that this  was a big negotiation  over                                                                   
     the  last several  years and  on into  the future.  Some                                                                   
     people felt that the project  had been studied, found to                                                                   
     be marginally  economic and what  you were seeing  was a                                                                   
     reluctance to make a business  decision in that marginal                                                                   
     world.                                                                                                                     
                                                                                                                                
     There  was a  very broad  range  of opinion  as to  what                                                                   
     benefits   should   drive  Alaska's   decision   making,                                                                   
     especially  on  the routing.  Back  in the  appendix,  a                                                                   
     portion  of   that,  pages   A4  and  A5,  represent   a                                                                   
     delineation of  benefits and impacts  I had made  up and                                                                   
     those  were actually  lifted from  a legislative  report                                                                   
     that  had been  done in 1983  looking back  on the  TAPS                                                                   
     experience  and attempting  to  delineate  at that  time                                                                   
     both  the  benefits and  impacts  of what  had  happened                                                                   
     during the TAPS period.                                                                                                    
                                                                                                                                
Some legislators thought a big part  of the pipeline would come in                                                              
terms  of  the   construction  impacts  on  the   economy  in  the                                                              
generation of  work and money during  that period of time.  At the                                                              
other extreme were people who really  felt the whole payoff of the                                                              
whole idea  would be  in the generation  of other industries  that                                                              
would use  the natural gas  and create  jobs and industry  here in                                                              
Alaska.  What that  told him  was  that each  legislator would  be                                                              
looking at  different lines  on the "benefit  statement" so  it is                                                              
important that all of those lines be on the page.                                                                               
                                                                                                                                
He said  a regional  difference was apparent  because of  the more                                                              
direct   interaction  in   Fairbanks  with   the  gas  line.   The                                                              
legislators from  that area took  a much more aggressive  approach                                                              
to almost every issue related to the gas line.                                                                                  
                                                                                                                                
Regarding how hard the legislature  should push the project, there                                                              
was a sense of urgency, but it was  balanced with a strong feeling                                                              
that the  private sector needs  to be given  a chance to  work the                                                              
issues. He  said at the  time he did  the interviews,  he presumed                                                              
that  the initiative  would qualify.  He discussed  it with  every                                                              
legislator  he  interviewed and  did  not  ask what  they  thought                                                              
should happen. He said the legislature  has the opportunity during                                                              
this session to deal with the route issue through legislation.                                                                  
                                                                                                                                
He said that pages 6 and 7 represent  his attempt to translate the                                                              
areas of  consensus and  non-consensus into  suggestions  that are                                                              
strategy oriented for the natural gas issue.                                                                                    
                                                                                                                                
His  first suggestion  is  that the  strategy  needs  to focus  on                                                              
defining   what  information   the  legislature   needs  to   make                                                              
decisions.  He didn't  think the  legislature  could reference  an                                                              
exact list at this  point of what they need to  know before making                                                              
a decision.  Defining that information  would be a  very proactive                                                              
step.  Answering  those questions  is  the responsibility  of  the                                                              
sponsor,  whoever is  putting forward  a project.  If they  cannot                                                              
answer  those questions,  their project  probably  isn't ready  to                                                              
move forward.                                                                                                                   
                                                                                                                                
Communication  is  a  paramount  issue.  While there  has  been  a                                                              
tremendous amount  of information  that has come  from all  of the                                                              
committee hearings,  it is not a process that  necessarily fosters                                                              
communication with other legislators  or with the public at large.                                                              
He  urged  them to  consider  other  efforts  in addition  to  the                                                              
hearing process to keep improving the communication.                                                                            
                                                                                                                                
MR. HEINZE said  that finally, it seemed that  legislators had the                                                              
patience  to give  the private  sector one  more try  even if  the                                                              
producers  feel  they  cannot  move forward  on  the  project.  He                                                              
thought  most legislators  would like  to see  at least one  group                                                              
have the  chance to move  the cause forward.  He said he  would be                                                              
happy to answer questions.                                                                                                      
                                                                                                                                
SENATOR ELTON said he noted the report  says, on page 6, that if a                                                              
project  proponent can't  answer the  questions, they're  probably                                                              
not ready.  He said he  sometimes feels  that they can  answer the                                                              
questions,  but are  reluctant to  and asked  how legislators  can                                                              
tell the difference.                                                                                                            
                                                                                                                                
MR. HEINZE replied, as an example,  in the course of the hearings,                                                              
there has  been concern  expressed by a  lot of communities  about                                                              
how they  would fit into the  logistics plan. They  question where                                                              
the pipe will be  brought in and how it would  be moved. He noted,                                                              
"If  someone cannot  answer  that question,  I  think it's  pretty                                                              
common sense  they have  not studied the  project to a  depth that                                                              
they have  a project." He  thought it comes  down to the  level of                                                              
detail and how reasonable the questions are. He continued:                                                                      
                                                                                                                                
     Training plans, logistics plans,  those kinds of things,                                                                   
     I think  are very reasonable  requirements that  you may                                                                   
     want to  set and, once set,  I would expect  a proponent                                                                   
     of a project  to tell you that information  if they want                                                                   
     your support.                                                                                                              
                                                                                                                                
CHAIRMAN TORGERSON  thanked Mr. Heinze for his  work and announced                                                              
an at ease at 3:47 p.m.                                                                                                         
                                                                                                                                
              SB 360-ALASKA NATURAL GAS PROJECT ACT                                                                         
                                                                                                                                
CHAIRMAN TORGERSON called  the meeting back to order  at 3:50 p.m.                                                              
and  announced SB  360  to be  up for  consideration.  He said  he                                                              
wanted  to go  into  the details  today.  He announced  that  Bill                                                              
Britt, Mark  Meyers, and a  representative of the  Alaska Railroad                                                              
Corporation were available  to answer questions. He  said they had                                                              
crafted nine or  ten amendments on different subjects  so that the                                                              
committee  could  debate  each  subject   as  the  amendments  are                                                              
introduced.  He  noted he  would  have  Mr. Coughlin  review  each                                                              
amendment for the committee.                                                                                                    
                                                                                                                                
SENATOR WILKEN  moved to adopt  Amendment 1, L.1  Chenoweth, which                                                              
reads as follows:                                                                                                               
                                                      22-LS1649\L.1                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                      A M E N D M E N T  1                                                                                  
                                                                                                                                
TO: SB 360                                                                                                                      
                                                                                                                                
Page 8, line 21, following "commissioner.":                                                                                   
     Insert "(a)"                                                                                                               
                                                                                                                                
Page 9, following line 6:                                                                                                       
     Insert a new subsection to read:                                                                                           
          "(b)  For the purpose of determining under (a) of this                                                                
     section  that, in  an application  pending  on the  effective                                                              
     date  of this  Act  for a  lease under  this  chapter for  an                                                              
     Alaska  North Slope  natural  gas project,  an applicant  has                                                              
     complied with  the requirements of AS 38.35.240  by obtaining                                                              
     all  certificates  described in  AS 38.35.240(b)  - (d),  the                                                              
     commissioner                                                                                                               
               (1) shall consider the application to be in                                                                      
     compliance  with  the requirements  of  that  section if  the                                                              
     applicant  has  filed  for   all  certificates  described  in                                                              
     AS 38.35.240(b)  - (d) and has  included, with or as  part of                                                              
     the  filing  for  the  certificates,  the  applicable  plans,                                                              
    studies, and stipulations described in that section; and                                                                    
               (2)  may not decide that an application determined                                                               
     to  be in  compliance  under  (1) of  this  subsection is  no                                                              
     longer in  compliance with  the requirements of  AS 38.35.240                                                              
     unless a  certificate described  in AS 38.35.240(b) -  (d) is                                                              
     denied by the applicable authority."                                                                                       
                                                                                                                                
Page 13, line 15, following "schedule.":                                                                                        
     Insert "For the purpose of determining  under this subsection                                                              
that, in an application pending on  the effective date of this Act                                                              
for a lease under  AS 38.35 for the pipeline project  described in                                                              
this subsection,  an applicant has complied with  the requirements                                                              
of  AS 38.35.240  by  obtaining   all  certificates  described  in                                                              
AS 38.35.240(b)  -  (d), the  agency  responsible  for making  the                                                              
consistency determination                                                                                                       
          (1)  shall consider the application to be in compliance                                                               
with the requirements  of AS 38.35.240 if the  applicant has filed                                                              
for all  certificates described in  AS 38.35.240(b) - (d)  and has                                                              
included, with or as part of the  filing for the certificates, the                                                              
applicable  plans, studies,  and  stipulations  described in  that                                                              
section; and                                                                                                                    
     (2)  may  not decide that an application determined  to be in                                                              
compliance  under   (1)  of  this  subsection  is   no  longer  in                                                              
compliance  with   the  requirements  of  AS 38.35.240   unless  a                                                              
certificate  described  in  AS 38.35.240(b)  - (d)  is  denied  by                                                              
applicable authority.                                                                                                           
                                                                                                                                
CHAIRMAN TORGERSON  announced an  at-ease from  3:52 to  3:54 p.m.                                                              
He then explained  that SB 360 has provisions  that require anyone                                                              
who wants to  take advantage of the benefits offered,  the limited                                                              
judicial review,  the railroad or  royalty reductions,  etc., must                                                              
provide a certificate for local hire,  instate access and shipping                                                              
royalty gas. However, inadvertently,  he was putting a larger than                                                              
expected burden on the pipeline companies  that have submitted and                                                              
are currently working on a application.  Amendment 1 is transition                                                              
language so that they are still required  to get the certificates,                                                              
but they don't have to get them right away.                                                                                     
                                                                                                                                
MR.  PATRICK   COUGHLIN,  consultant   to  the  Senate   Resources                                                              
Committee,  said  the  intent  is that  the  companies  that  have                                                              
already filed their  application could get the  benefits merely by                                                              
filing for  the certificate.  They would  be deemed in  compliance                                                              
unless ultimately those certificates  [indisc.] and could carry on                                                              
with their work.                                                                                                                
                                                                                                                                
CHAIRMAN   TORGERSON   said  there   was   some   fear  that   the                                                              
Administration  might  read  it  a  little  differently  and  stop                                                              
everything until a certificate was issued.                                                                                      
                                                                                                                                
SENATOR ELTON restated for clarity:                                                                                             
                                                                                                                                
      This changes none of the benefits that may accrue. It                                                                     
      only allows those who already have a work in progress                                                                     
     before the department to take advantage of it.                                                                             
                                                                                                                                
CHAIRMAN TORGERSON  said it  deems them  in compliance  until they                                                              
come in  compliance before  they're turned down  for not  being in                                                              
compliance.  They  have 90  days  to get  that  done  in the  bill                                                              
already.  He asked  if there  was  any objection  to Amendment  1.                                                              
There were none and it was adopted.                                                                                             
                                                                                                                                
SENATOR WILKEN  moved to adopt  Amendment 2, L.3  Chenoweth, which                                                              
reads as follows:                                                                                                               
                                                                                                                                
                                                      22-LS1649\L.3                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  2                                                                                  
                                                                                                                                
TO SB 360:                                                                                                                      
Page 11, line 10:                                                                                                               
     Delete "a new subsection"                                                                                                  
     Insert "new subsections"                                                                                                   
                                                                                                                                
Page 11, following line 21:                                                                                                     
     Insert a new subsection to read:                                                                                           
          "(c)  The corporation may retain any consideration in                                                                 
     excess of the consideration necessary to meet the payments                                                                 
     and to maintain the reserves that are required by (b) of                                                                   
     this section."                                                                                                             
                                                                                                                                
Page 12, line 9:                                                                                                                
     Delete "The"                                                                                                               
     Insert "Except as provided in AS 42.40.630(c), the                                                                         
                                                                                                                                
CHAIRMAN TORGERSON explained that  on page 12, line 9, a provision                                                              
in the bill said that the proceeds  from the sale of the bonds can                                                              
only be  spent by other  than the corporation  for the  Alaska gas                                                              
pipe line. He noted:                                                                                                            
                                                                                                                                
     It's anticipated  that the  corporation would,  in fact,                                                                   
     probably  make  some money  on  this, depending  on  the                                                                   
     negotiations that they do when  they enter into contract                                                                   
     negotiations  or bond negotiations  with the  companies.                                                                   
     But, in  any event,  there's probably  going to be  some                                                                   
     amount above  and beyond the  amount that is  needed for                                                                   
     the  actual administration  of the  fees. This makes  it                                                                   
     clear that  the corporation can keep anything  in excess                                                                   
     of  what it  required to  maintain the  reserves and  so                                                                   
     forth.                                                                                                                     
                                                                                                                                
SENATOR ELTON restated for clarification  that this allows them to                                                              
retain only what  they negotiate between the project  sponsors and                                                              
themselves.                                                                                                                     
                                                                                                                                
CHAIRMAN TORGERSON  said that  is a  fair way to  put it.  He said                                                              
there will  be a  fee associated  with the  administration  of the                                                              
bonds and more than  likely, the Railroad may or  may not get more                                                              
than  the actual  costs.  He  wants the  Railroad  to  be able  to                                                              
negotiate to  the best of  their ability.  He asked if  there were                                                              
any objections to  adopting Amendment 2. There  were no objections                                                              
and Amendment 2 was adopted.                                                                                                    
                                                                                                                                
SENATOR WILKEN  moved to adopt  Amendment 3, L.4  Chenoweth, which                                                              
reads as follows:                                                                                                               
                                                                                                                                
                                                      22-LS1649\L.4                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  3                                                                                  
                                                                                                                                
TO: SB 360                                                                                                                      
Page 2, line 14, following "the":                                                                                               
     Insert "exploration,"                                                                                                      
                                                                                                                                
Page 3, line 8, following "development,":                                                                                       
     Delete "and production"                                                                                                    
     Insert "production, and transportation"                                                                                    
                                                                                                                                
MR. COUGHLIN explained  that Amendment 3 is a  technical amendment                                                              
to  make   two  corrections.  On   page  2,  line  14,   the  word                                                              
"expiration"  was  left  out and  on  page  3,  line 8,  the  word                                                              
"transportation" was left out.                                                                                                  
                                                                                                                                
CHAIRMAN  TORGERSON   asked  if  there  were  any   objections  to                                                              
Amendment 3. There were no objections and it was adopted.                                                                       
                                                                                                                                
SENATOR WILKEN  moved Amendment 4,  L.8 Chenoweth, which  reads as                                                              
follows:                                                                                                                        
                                                                                                                                
                                                      22-LS1649\L.8                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  4                                                                                  
                                                                                                                                
                                                                                                                                
TO: SB 360, as amended by the adoption  of amendment 22-LS1649\L.2                                                              
                                                                                                                                
Page 4, line 31:                                                                                                                
     Delete "a new subsection"                                                                                                  
     Insert "new subsections"                                                                                                   
                                                                                                                                
In amendment L.2, page 1, following line 20, insert:                                                                            
          "(ff)  The commissioner may not negotiate or take other                                                               
     action  under  (ee)  of  this   section  unless  the  project                                                              
     applicant  has  met  all  requirements  of  AS 38.35.240  and                                                              
     obtained  all  certificates  described  in that  section  not                                                              
     later than June 30, 2003."                                                                                                 
                                                                                                                                
In amendment L.2, page 4, following line 24, insert:                                                                            
          "(e)  The commissioner may not negotiate or take other                                                                
     action to  develop a contract  under this section  unless the                                                              
     project  applicant,  or lessee  if  applicable,  has met  all                                                              
     requirements  of AS 38.35.240  and obtained all  certificates                                                              
    described in that section not later than June 30, 2003."                                                                    
                                                                                                                                
CHAIRMAN  TORGERSON  explained  that  Amendment 4  adds  a  sunset                                                              
provision  to the  bill. Ken  Thompson recommended  a sunset.  The                                                              
legislature has always put expiration  dates in other gas acts. He                                                              
added,  "This basically  says that  this is alive  and well  until                                                              
June 30, 2003."                                                                                                                 
                                                                                                                                
SENATOR HALFORD moved to change the year 2003 to 2005.                                                                          
                                                                                                                                
SENATOR ELTON objected  and asked if there was a  reason they were                                                              
predicating it on getting the certificates rather than applying.                                                                
                                                                                                                                
CHAIRMAN TORGERSON  responded, "The way the bill  reads, you can't                                                              
get the certificates until you apply."                                                                                          
                                                                                                                                
MR.  COUGHLIN  added  that  you can't  apply  until  you  get  the                                                              
certificates,  which  is  at  the  beginning  of  the  application                                                              
process.                                                                                                                        
                                                                                                                                
SENATOR LINCOLN asked if extending  the date to 2005 will slow the                                                              
process down  because the producers  could say they have  an extra                                                              
three years so they wouldn't have to act until the last year.                                                                   
                                                                                                                                
CHAIRMAN  TORGERSON said  he didn't  have an answer  for that.  He                                                              
said he was  not bothered by  2005, but would prefer  2004 because                                                              
it would put a little pressure on the producers.                                                                                
                                                                                                                                
SENATOR  HALFORD said  this is  a  much bigger  process than  they                                                              
thought and 2005  isn't that far away on the scale  of things, but                                                              
he didn't have a problem with whatever the committee wanted.                                                                    
                                                                                                                                
SENATOR LINCOLN  pointed out that they  could go with 2004  and it                                                              
would  be easier  to amend  it to 2005  later than  the other  way                                                              
around.                                                                                                                         
                                                                                                                                
SENATOR ELTON said he would support 2005.                                                                                       
                                                                                                                                
CHAIRMAN  TORGERSON   asked  if  there  were  any   objections  to                                                              
Amendment 4. There were no objections and it was adopted.                                                                       
                                                                                                                                
SENATOR WILKEN  moved Amendment 5,  L.9 Chenoweth, which  reads as                                                              
follows:                                                                                                                        
                                                                                                                                
                                                      22-LS1649\L.9                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  5                                                                                  
                                                                                                                                
                                                                                                                                
TO: SB 360, as amended by adoption of amendment 22-LS1649\L.2                                                                   
                                                                                                                                
In amendment L.2,                                                                                                               
Page 2, line 27, following "incorporated":                                                                                      
     Insert "into the contract                                                                                                  
                    (A)"                                                                                                        
                                                                                                                                
Page 2, line 28:                                                                                                                
     Delete "into the contract;"                                                                                                
     Insert "; and                                                                                                              
                    (B)  for a contract that waives, reduces, or                                                                
          defers   royalty  or  tax   payments,  a   mechanism  to                                                              
          recapture  all  or any  portion of  the  royalty or  tax                                                              
          payments  that are waived,  reduced, or deferred  by the                                                              
          operation  of  a  contract  provision if  the  price  of                                                              
          natural  gas  increases  above the  projected  price  of                                                              
          natural  gas upon which  the findings and  determination                                                              
          made under (7) of this subsection are based;"                                                                         
                                                                                                                                
CHAIRMAN  TORGERSON noted  that  this was  another  recommendation                                                              
from Ken Thompson.                                                                                                              
                                                                                                                                
MR. COUGHLIN  explained the bill  currently provides that  the DNR                                                              
commissioner could  waive, reduce  or defer royalty  under certain                                                              
circumstances so the purpose of this amendment is:                                                                              
                                                                                                                                
     If that reduction,  I'll just call of  them collectively                                                                   
     a reduction in  royalty, were based on a  gas price, say                                                                   
     of  $3  and the  gas  price  averaged  $4 an  mcf,  this                                                                   
     amendment would  require that a  mechanism be put  in to                                                                   
     place  in the  royalty reduction  to  recapture some  of                                                                   
     that foregone royalty. It's  similar to a provision that                                                                   
     we have in the current royalty reduction bill.                                                                             
                                                                                                                                
CHAIRMAN TORGERSON  said this  is a  "no-brainer" for him  because                                                              
they have  discussed the  severance and  royalty schemes  with the                                                              
Department  of Revenue  and they  all  have a  sliding scale  that                                                              
gives up on  the low end and  recoups on the high end.  He assumed                                                              
that's  what would  happen, but  there  has been  concern that  if                                                              
specific language wasn't put in, someone may not know.                                                                          
                                                                                                                                
SENATOR ELTON  thought they might  be inserting it into  the wrong                                                              
spot.                                                                                                                           
                                                                                                                                
MR.  COUGHLIN explained  that  this amendment  was  drafted to  an                                                              
amendment that would be offered later.  "It would really go in the                                                              
current bill  on page  5, lines 10  - 15…In  essence, it  would be                                                              
inserted as a (c) after (b).                                                                                                    
                                                                                                                                
SENATOR  WILKEN  moved and  asked  unanimous consent  to  withdraw                                                              
Amendment 5. There were no objections and it was withdrawn.                                                                     
                                                                                                                                
SENATOR WILKEN moved  Amendment 6, L.12 Chenoweth,  which reads as                                                              
follows:                                                                                                                        
                                                                                                                                
                                                     22-LS1649\L.12                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  6                                                                                  
                                                                                                                                
TO:  SB 360                                                                                                                     
Page 7, line 29, following "by":                                                                                                
     Insert "the state or"                                                                                                      
                                                                                                                                
Page 7, line 30, following "the":                                                                                               
     Insert "pipeline portion of the"                                                                                           
                                                                                                                                
Page 8, lines 2 - 5:                                                                                                            
     Delete all material and insert:                                                                                            
                         "(i)  the rates for expansion of the                                                                   
               natural gas transportation service are designed to                                                               
               ensure the recovery, on an incremental or rolled-                                                                
               in basis, of the costs associated with the                                                                       
               expansion, including a reasonable rate of return                                                                 
               on the applicant's investment;"                                                                                  
                                                                                                                                
Page 8, line 7, following "in the":                                                                                             
     Insert "pipeline portion of the"                                                                                           
                                                                                                                                
Page 8, line 7, following "use of the":                                                                                         
     Insert "pipeline portion of the"                                                                                           
                                                                                                                                
Page 8, line 10, following "operation of the":                                                                                  
     Insert "pipeline portion of the"                                                                                           
                                                                                                                                
CHAIRMAN TORGERSON  said this  is a  technical amendment  from the                                                              
Administration.                                                                                                                 
                                                                                                                                
MR. COUGHLIN said that both the Commissioner  of DNR and the Chair                                                              
of  the RCA  felt  it  was appropriate  to  make some  very  minor                                                              
amendments that attempt  to mimic the federal law,  which uses the                                                              
word "project". In the definition  section of SB 360 it is defined                                                              
more broadly  than just  a pipeline and  the provisions on  page 8                                                              
address basically the pipeline. He  explained the amendment merely                                                              
replaces  the word  "project" with  "the pipeline  portion of  the                                                              
project."                                                                                                                       
                                                                                                                                
Also, Amendment  6 changes  the language on  page 8, line  3, from                                                              
"transportation  service will insure"  to "transportation  service                                                              
are designed to insure". On page  7, the bill as currently drafted                                                              
allowed  an  entity  desiring  to ship  natural  gas  through  the                                                              
pipeline  to apply for  an expansion.  This bill  would give  that                                                              
same right to  the state. It may  or may not be a shipper,  but it                                                              
has an interest in seeing the pipeline expanded.                                                                                
                                                                                                                                
CHAIRMAN  TORGERSON   asked  if  there  were  any   objections  to                                                              
Amendment 6. There were no objections and it was adopted.                                                                       
                                                                                                                                
SENATOR WILKEN moved  Amendment 7, L.13 Chenoweth,  which reads as                                                              
follows:                                                                                                                        
                                                                                                                                
                                                     22-LS1649\L.13                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                      A M E N D M E N T  7                                                                                  
                                                                                                                                
TO:  SB 360                                                                                                                     
Page 5, lines 1 - 25:                                                                                                           
     Delete all material and insert:                                                                                            
          "(ee)     In  conjunction   with  the  development   and                                                              
     construction  of an Alaska North  Slope natural  gas project,                                                              
     as  defined by  AS 38.35.259, that  requires the  grant of  a                                                              
     right-of-way  lease  under  AS 38.35  for which  the  project                                                              
     applicant  has complied  with AS 38.35.240  and obtained  all                                                              
    certificates described in that section, the commissioner                                                                    
               (1)  may, notwithstanding any contrary provision                                                                 
     in this chapter, negotiate, with the consent of the lessee,                                                                
                    (A)  to modify any provision of an oil and                                                                  
          gas  lease entered  into  under this  section, except  a                                                              
          provision  described  in  (B) of  this  paragraph,  that                                                              
          impedes development of the project; and                                                                               
                    (B)  to waive, reduce, or defer the payment                                                                 
          of  all or  any portion  of  the royalty  due the  state                                                              
          under this chapter; a waiver,  reduction, or deferral of                                                              
          the royalty due may be  made by the commissioner only if                                                              
          the project  applicant, or a lessee that  has contracted                                                              
          with  the  applicant to  ship  natural  gas through  the                                                              
          project, shows,  by clear and convincing  evidence, that                                                              
          construction  and  operation of  the  project would  not                                                              
          otherwise be economically feasible; and                                                                               
               (2)  shall transmit to the commissioner of revenue                                                               
     any  proposed  terms  relating   to  the  lease  and  royalty                                                              
     developed under this subsection  that should be included in a                                                              
     contract developed under AS 43.56.185."                                                                                    
                                                                                                                                
Page 12, line 15, through page 13, line 4:                                                                                      
     Delete all material and insert:                                                                                            
             "Sec.  43.56.185.    Action by  the  commissioner  to                                                            
     develop a  contract covering certain tax laws;  submission to                                                            
     governor   for  action;   legislative  action.     (a)     In                                                            
     conjunction  with  the  development and  construction  of  an                                                              
     Alaska  North  Slope  natural  gas  project,  as  defined  by                                                              
     AS 38.35.259,  that  requires  the grant  of  a  right-of-way                                                              
     lease  under AS 38.35 for  which the  project applicant  or a                                                              
     lessee that  has contracted to  ship natural gas  through the                                                              
     project  has  complied  with AS 38.35.240  and  obtained  all                                                              
     certificates described in that  section, the commissioner may                                                              
     negotiate terms for inclusion in a contract to                                                                             
               (1)  waive, reduce, or defer the payment of all or                                                               
     any portion of the tax levied  by the state or a municipality                                                              
     of the state under this chapter;                                                                                           
               (2)  make certain adjustments regarding the oil                                                                  
     and gas lease under AS 38.05.180(ee); and                                                                                  
               (3)  make or amend  other terms and conditions that                                                              
     are necessary  to carry out  the purposes of  AS 38.35.235 or                                                              
     that are in the best interests of the state.                                                                               
          (b)  The commissioner may develop a proposed contract                                                                 
     described in (a) of this section only if                                                                                   
               (1)    the  commissioner  has  consulted  with  any                                                              
     affected municipality,  has considered and prepared  a report                                                              
     on the socioeconomic  effects of the project  on any affected                                                              
     municipality,   and   has   considered   how   any   affected                                                              
     communities will provide services required by the project;                                                                 
               (2)  the commissioner  has considered whether other                                                              
     jurisdictions  in  which the  project  will  be located  have                                                              
     granted financial incentives;                                                                                              
               (3)   the  project  applicant shows,  by clear  and                                                              
     convincing evidence,  that construction and operation  of the                                                              
     project would not otherwise be economically feasible;                                                                      
               (4)   the  commissioner and  the project  applicant                                                              
     have entered  into an agreement to begin  construction of the                                                              
     project by a date certain; and                                                                                             
               (5)     the  commissioner   has  incorporated   any                                                              
     proposed terms relating to the  oil and gas lease and royalty                                                              
     developed under AS 38.05.180(ee) into the contract.                                                                        
          (c)  If the commissioner develops a proposed contract                                                                 
     under (a) and (b) of this section, the commissioner shall                                                                  
               (1)   make preliminary  findings and  a preliminary                                                              
     determination that the proposed  contract is in the long-term                                                              
     fiscal  interests  of the  state,  furthers  the purposes  of                                                              
     AS 38.35.235,  and  is in  the best  interest  of the  state,                                                              
     including  a description  of the principal  factors,  such as                                                              
     the  projected price  of gas,  projected  production rate  or                                                              
     volume   of   gas,   projected    recovery,   and   projected                                                              
     development,  construction, and  operating costs,  upon which                                                              
     the findings are based;                                                                                                    
               (2)     give  reasonable   public  notice   of  the                                                              
     preliminary  findings  and determination,  conduct  a  public                                                              
     hearing,  and give a  reasonable opportunity  of at  least 30                                                              
     days,  for  receipt  of public  comment  on  the  preliminary                                                              
     findings and determination;                                                                                                
               (3)   make  copies  of the  proposed contract,  the                                                              
     commissioner's  preliminary findings  and determination,  and                                                              
     the  supporting   financial,   technical,  and  market   data                                                              
     available to the public and to                                                                                             
                    (A)  the presiding officer of each house of                                                                 
          the legislature;                                                                                                      
                    (B)  the chairs of the finance and resources                                                                
          committees of the legislature; and                                                                                    
                    (C)  the chairs of the special committees on                                                                
          oil and gas, if any, of the legislature;                                                                              
               (4)   if the legislature  is not in  session, offer                                                              
     to appear  before the Legislative Budget and  Audit Committee                                                              
     to  provide  the committee  a  review of  the  commissioner's                                                              
     preliminary   findings   and  determination,   the   proposed                                                              
     contract,  and  the  supporting   financial,  technical,  and                                                              
     market data;  if the Legislative  Budget and  Audit Committee                                                              
     accepts  the commissioner's offer,  the committee  shall give                                                              
     notice  of the  committee's  meeting to  the  public and  all                                                              
     members of the legislature;                                                                                                
               (5)  within 30 days after the close of the public                                                                
     comment period under (2) of this subsection,                                                                               
                    (A)  prepare a summary of the public comments                                                               
          received  in response to  the proposed contract  and the                                                              
          preliminary findings and determination;                                                                               
                    (B)  after consultation with the commissioner                                                               
          of natural resources, if  appropriate, prepare a list of                                                              
          proposed  amendments, if any,  to the proposed  contract                                                              
          that  the  commissioner   determines  are  necessary  to                                                              
          respond to public comments;                                                                                           
                    (C)  make final findings and a determination                                                                
          as  to whether  the proposed contract  and any  proposed                                                              
          amendments  prepared under  (B) of  this paragraph  meet                                                              
          the requirements and purposes of AS 38.35.235; and                                                                    
                    (D)  after considering the material described                                                               
          in  (A)  -  (C)  of  this  paragraph  and  securing  the                                                              
          agreement of the other  parties to the proposed contract                                                              
          regarding any proposed  amendments prepared under (B) of                                                              
          this  paragraph,  issue   final  findings  and  a  final                                                              
          determination; and                                                                                                    
               (6)  transmit the proposed contract to the                                                                       
     governor, who  may transmit  the contract to  the legislature                                                              
     together  with a  request for  authorization  to execute  the                                                              
     contract.                                                                                                                  
          (d)   A  contract developed  under this  section is  not                                                              
     binding  upon  or  enforceable  against the  state  or  other                                                              
     parties to the contract unless  the governor is authorized to                                                              
     execute  the  contract  by law.    The  state and  the  other                                                              
     parties to  the contract may  execute the contract  within 60                                                              
     days  after the  effective date  of the  law authorizing  the                                                              
     contract.                                                                                                                  
          (e)   A person may not  bring an action  challenging the                                                              
     constitutionality  of a  law authorizing  a contract  enacted                                                              
     under  this  section  or the  enforceability  of  a  contract                                                              
     executed  under a  law authorizing  a contract enacted  under                                                              
     this section  unless the action is commenced  within 120 days                                                              
     after the  date that the contract  was executed by  the state                                                              
     and the other parties to the contract."                                                                                    
                                                                                                                                
MR. COUGHLIN  explained  that Amendment  7 addresses a  producer's                                                              
concern  that if  royalty relief  or  tax changes  are made,  they                                                              
would like  those changes to be  put into a contract.  Amendment 7                                                              
would accomplish  that and basically  sets the process up  so that                                                              
royalty reduction  would be negotiated with the  DNR commissioner.                                                              
If there  is agreement  on  that, it would  then  be put into  the                                                              
ultimate contract  that the DOR commissioner would  be negotiating                                                              
and he is responsible for changes to [indisc.] laws. He stated:                                                                 
                                                                                                                                
     If the  DOR commissioner  were to  find that changes  to                                                                   
     the  tax law or  royalty laws  would be  in the  state's                                                                   
     best interests,  it would advance  the project;  it sets                                                                   
     forth  a process  that's  followed thereafter.  That  is                                                                   
     that  the   Department  of  Revenue  commissioner   will                                                                   
     prepare  a preliminary best  interest finding.  In fact,                                                                   
     the process  would be sort  of like the royalty  in-kind                                                                   
     contracts. The commissioner  would prepare a preliminary                                                                   
     best interest  finding. He would  then put that  out for                                                                   
     public  comment,  he  would conduct  a  public  hearing.                                                                   
     After that,  if the legislature  was not in  session, he                                                                   
     would offer  to appear before  LB&A to make  an overview                                                                   
     presentation of  the contract. Following  an opportunity                                                                   
     for  public comments,  he would then  prepare a  written                                                                   
     final finding  of determination.  In that finding  he is                                                                   
     required  to address  or summarize  the public  comments                                                                   
     and  additionally,  if  the  commissioner  felt  it  was                                                                   
     appropriate  to make  any changes  to  the contract,  he                                                                   
     would  discuss  those changes  and  why they  are  being                                                                   
     made. Then,  the commissioner of Revenue  would transmit                                                                   
     that  contract  to the  governor  who  sends it  to  the                                                                   
     legislature   and  the   contract   would  only   become                                                                   
     effective upon legislative approval.                                                                                       
                                                                                                                                
MR.  COUGHLIN  explained  that the  proposed  amendment  that  was                                                              
discussed  before would  require that  if a  waiver, reduction  or                                                              
deferral  of royalty  were issued,  there  would have  to be  some                                                              
mechanism to capture the upside.                                                                                                
                                                                                                                                
CHAIRMAN TORGERSON  said Amendment  7 also  has the same  property                                                              
tax  provision   where   the  commissioner   has  to  engage   the                                                              
municipalities, prepare  a socio-economic impact study  and decide                                                              
whether  or not  it's  a good  idea  to waive  municipal  property                                                              
taxes.                                                                                                                          
                                                                                                                                
SENATOR ELTON commented  that there were some changes  that he had                                                              
concerns with,  although he wouldn't  object to the  amendment. He                                                              
would be  more comfortable with  "waive" rather than  "reduce." He                                                              
said further, "I'm still not willing  to buy off yet on the notion                                                              
that  the   commissioner  can  impose   a  tax  decision   on  the                                                              
municipalities that is now exclusively theirs."                                                                                 
                                                                                                                                
CHAIRMAN  TORGERSON   added  that  it  would  come   back  to  the                                                              
legislature.                                                                                                                    
                                                                                                                                
SENATOR  ELTON responded  that the  net effect  is that  something                                                              
that is  now exclusively  the authority  of a  municipality  is no                                                              
longer exclusive.                                                                                                               
                                                                                                                                
CHAIRMAN  TORGERSON  said  he didn't  think  it  was in  the  best                                                              
interest of anybody  to just go out and reduce  taxes, unless they                                                              
had gone  through the  five things listed  there. He  thought that                                                              
they had to at least have the discussion  with the municipalities.                                                              
He  said  this  project  might  not  be  economical  without  this                                                              
provision.                                                                                                                      
                                                                                                                                
He asked if there  were any objections to Amendment  7. There were                                                              
no objections and it was adopted.                                                                                               
                                                                                                                                
SENATOR WILKEN moved  to adopt Amendment 8, L.14  Chenoweth, which                                                              
reads as follows:                                                                                                               
                                                                                                                                
                                                     22-LS1649\L.14                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  8                                                                                  
                                                                                                                                
                                                                                                                                
TO:  SB  360,  as  amended  by  the   adoption  of  amendment  22-                                                              
LS1649\L.13                                                                                                                     
Page 4, line 31:                                                                                                                
     Delete "a new subsection"                                                                                                  
     Insert "new subsections"                                                                                                   
                                                                                                                                
In amendment L.13, page 1, following line 20:                                                                                   
     Insert a new subsection to read:                                                                                           
          "(ff) The commissioner may request from an applicant or                                                               
     lessee  any information  and  records  that the  commissioner                                                              
     determines may  be necessary to  carry out a duty  under (ee)                                                              
     of this  section.  Information  and records requested  by the                                                              
     commissioner,   and  working   documents   that  analyze   or                                                              
     incorporate  the requested information  and records  that are                                                              
     prepared by the commissioner                                                                                               
               (1)  shall, notwithstanding any other provision of                                                               
     law, be kept  confidential until the commissioner  of revenue                                                              
     makes and  publishes preliminary  findings and  a preliminary                                                              
     determination  under  AS  43.56.185(c)  if  the  information,                                                              
     records,    or   working    documents   contain    sensitive,                                                              
     proprietary, or  privileged information and the  applicant or                                                              
     lessee  requests that  the information,  records, or  working                                                              
     documents be kept confidential;                                                                                            
               (2)  are public records when the commissioner of                                                                 
     revenue  makes  and  publishes  preliminary  findings  and  a                                                              
     preliminary determination under AS 43.56.185(c)."                                                                          
                                                                                                                                
In amendment L.13, page 4, following line 19:                                                                                   
     Insert a new subsection to read:                                                                                           
          "(f)  The commissioner may request from a project                                                                     
     applicant or  from a lessee affected by  AS 38.05.180(ee) and                                                              
     (ff) and  this section any  information and records  that the                                                              
     commissioner determines may  be necessary to carry out a duty                                                              
     under  this section.   Information  and records requested  by                                                              
     the  commissioner,  and  working documents  that  analyze  or                                                              
     incorporate  the requested information  and records  that are                                                              
     prepared by the commissioner                                                                                               
               (1)  shall, notwithstanding any other provision of                                                               
     law, be  kept confidential until  the commissioner  makes and                                                              
     publishes    preliminary   findings    and   a    preliminary                                                              
     determination under  (c) of this section if  the information,                                                              
     records,    or   working    documents   contain    sensitive,                                                              
     proprietary, or  privileged information and the  applicant or                                                              
     lessee   requests that the  information, records,  or working                                                              
     documents be kept confidential;                                                                                            
               (2)  are public records when the commissioner                                                                    
     makes and  publishes preliminary  findings and  a preliminary                                                              
     determination under (c) of this section."                                                                                  
                                                                                                                                
MR. COUGHLIN  explained that Amendment  8 provides  that documents                                                              
that are  supplied to either  the commissioners  of DOR or  DNR as                                                              
part of an application for a change  to either royalty or tax laws                                                              
would  be  held  confidential  until  such time  as  there  is  an                                                              
agreement with  the company,  in which case  that would be  at the                                                              
preliminary finding stage. At that  point, the commissioner of DOR                                                              
would make  the documents available  that support his  decision as                                                              
to whether they are confidential or not.                                                                                        
                                                                                                                                
CHAIRMAN  TORGERSON  said they  basically  didn't  want the  issue                                                              
tried in the press or other places.                                                                                             
                                                                                                                                
SENATOR  HALFORD  asked  whether   certain  documents  that  don't                                                              
support the commissioner's decision would remain confidential.                                                                  
                                                                                                                                
MR. COUGHLIN replied that is not  what it says; it says all of the                                                              
documents will be available following a decision.                                                                               
                                                                                                                                
SENATOR ELTON asked if this had been  an issue with Foothills work                                                              
or other applications that DNR has considered in the past.                                                                      
                                                                                                                                
CHAIRMAN  TORGERSON said  the  short answer  is  no, because  they                                                              
haven't asked for royalty relief.                                                                                               
                                                                                                                                
4:20 p.m.                                                                                                                       
                                                                                                                                
MR.  COUGHLIN added  that  when he  was  Deputy  Director for  the                                                              
Division  of Oil  and  Gas he  received  applications for  royalty                                                              
relief and that information was kept confidential.                                                                              
                                                                                                                                
CHAIRMAN TORGERSON asked if there were any objections to                                                                        
Amendment 8. There were no objections and it was adopted.                                                                       
                                                                                                                                
SENATOR WILKEN moved to adopt Amendment 9, L.15 Chenoweth, which                                                                
reads as follows:                                                                                                               
                                                     22-LS1649\L.15                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  9                                                                                  
                                                                                                                                
TO:  SB 360                                                                                                                     
Page 8, lines 2 - 15:                                                                                                           
     Delete all material and insert:                                                                                            
                         "(i)   the  rates  for expansion  service                                                              
               are  designed   to  ensure  the  recovery,   on  an                                                              
               incremental   or  rolled-in  basis,  of   the  cost                                                              
               associated   with   the  expansion,   including   a                                                              
               reasonable rate of return on the investment;                                                                     
                         (ii)    the  rates  do  not  require  the                                                              
               existing  shippers on the  pipeline portion  of the                                                              
               project to subsidize expansion shippers;                                                                         
                         (iii)   the proposed shipper  will comply                                                              
               with, and the proposed  expansion and the expansion                                                              
               of  service  will  be  undertaken  and  implemented                                                              
               based on, terms that  are consistent with the then-                                                              
               effective  tariff of  the pipeline  portion of  the                                                              
               project;                                                                                                         
                         (iv)   the  proposed facilities  will not                                                              
               adversely   affect   the  financial   or   economic                                                              
               viability of the pipeline portion of the project;                                                                
                         (v)   the  proposed  facilities will  not                                                              
               adversely  affect  the  overall operations  of  the                                                              
               pipeline portion of the project;                                                                                 
                         (vi)   the  proposed facilities  will not                                                              
               diminish  the contract rights of  existing shippers                                                              
               to previously subscribed certificated capacity;                                                                  
                         (vii)      all  necessary   environmental                                                              
               reviews have been completed;  and                                                                                
                         (viii)   the expansion is required by the                                                              
               present and future public convenience."                                                                          
                                                                                                                                
MR. COUGHLIN explained:                                                                                                         
                                                                                                                                
     On  page 8,  one  of the  purposes we  had  in mind  was                                                                   
     trying  to exactly  mimic the  language  of the  current                                                                   
     version of the  federal energy law that has  been passed                                                                   
     by the Senate in terms of how  can you get an expansion.                                                                   
     If you  meet these criteria,  you can get  an expansion.                                                                   
     When that  went over to legislative drafting,  it didn't                                                                   
     come back the same way. Some  of the verbs and names had                                                                   
     been  changed. So,  this change does  not really  change                                                                   
     any of the  substance. It's just an attempt  to actually                                                                   
     make  the  language  be  as close  as  possible  to  the                                                                   
     federal law. Both the producer,  in particular, the DNR,                                                                   
     expressed some  concern if there  were any variances  to                                                                   
     that language.                                                                                                             
                                                                                                                                
SENATOR  LINCOLN thought  some of  the  wording wasn't  consistent                                                              
with what they had just discussed in Amendment 6.                                                                               
                                                                                                                                
MR. COUGHLIN explained  that Amendment 9 was written  assuming the                                                              
committee  would   adopt  amendment   6.  It  addresses   the  one                                                              
definitional  problem of  having defined  the project larger  than                                                              
they wanted  to. This amendment  inserts "the pipeline  portion of                                                              
the project" for  "project" on line 14. Otherwise  it's consistent                                                              
with federal law.                                                                                                               
                                                                                                                                
CHAIRMAN TORGERSON  said she had  a good point and  apologized for                                                              
the confusion. He asked if there  were any objections to Amendment                                                              
9.                                                                                                                              
                                                                                                                                
SENATOR ELTON  said it  would be  helpful for  Mr. Coughlin  to go                                                              
through  the  amendments  to  check   for  consistency  after  the                                                              
drafters are done.                                                                                                              
                                                                                                                                
CHAIRMAN TORGERSON  said they sent over the language  they wanted,                                                              
but the  drafter had  changed some  of the words  to make  it read                                                              
better. He  commented, "So  we're going  from federal legalese  to                                                              
state legalese."                                                                                                                
                                                                                                                                
SENATOR WILKEN moved to adopt Amendment 10.                                                                                     
                                                                                                                                
MR. COUGHLIN explained that Amendment  10 makes it clear that they                                                              
are not  giving the  commissioner of DNR  the authority  to change                                                              
oil  royalties. They  are just  dealing with  gas royalties  since                                                              
they are dealing with a gas project.                                                                                            
                                                                                                                                
CHAIRMAN  TORGERSON   asked  if  there  were  any   objections  to                                                              
Amendment 10. There were no objections and it was adopted.                                                                      
                                                                                                                                
SENATOR WILKEN  moved to adopt  Amendment 5, L.9  Chenoweth, which                                                              
reads as follows:                                                                                                               
                                                                                                                                
                                                      22-LS1649\L.9                                                             
                                                          Chenoweth                                                             
                                                           10/30/02                                                             
                                                                                                                                
                      A M E N D M E N T  5                                                                                  
                                                                                                                                
                                                                                                                                
TO: SB 360, as amended by adoption of amendment 22-LS1649\L.2                                                                   
In amendment L.2,                                                                                                               
Page 2, line 27, following "incorporated":                                                                                      
     Insert "into the contract                                                                                                  
                    (A)"                                                                                                        
                                                                                                                                
Page 2, line 28:                                                                                                                
     Delete "into the contract;"                                                                                                
     Insert "; and                                                                                                              
                    (B)  for a contract that waives, reduces, or                                                                
          defers   royalty  or  tax   payments,  a   mechanism  to                                                              
          recapture  all  or any  portion of  the  royalty or  tax                                                              
          payments  that are waived,  reduced, or deferred  by the                                                              
          operation  of  a  contract  provision if  the  price  of                                                              
          natural  gas  increases  above the  projected  price  of                                                              
          natural  gas upon which  the findings and  determination                                                              
          made under (7) of this subsection are based;"                                                                         
                                                                                                                                
                                                                                                                                
TAPE 02-20, SIDE B                                                                                                            
                                                                                                                              
CHAIRMAN  TORGERSON   asked  if  there  were  any   objections  to                                                              
Amendment 5. There were no objections and it was adopted.                                                                       
                                                                                                                                
SENATOR WILKEN moved  to report CSSB 360(RES)  from committee with                                                              
individual recommendations.  There were  no objections and  it was                                                              
so ordered.                                                                                                                     
                                                                                                                                
                    SCR 30-ALASKA SALMON DAY                                                                                
                                                                                                                              
CHAIRMAN TORGERSON announced SCR 30 to be up for consideration.                                                                 
                                                                                                                                
MS. SARA NIELSON,  staff to Senator Ben Stevens,  said that SCR 30                                                              
proclaims June 30,  2002 as Alaska Salmon Day.  It recognizes that                                                              
the salmon  industry has  a huge part  of all Alaskan's  lives and                                                              
will  raise public  awareness of  one of  Alaska's most  important                                                              
industries by  promoting and celebrating  the catching  and eating                                                              
of salmon.  Alaska is the  largest commercial wild  salmon fishery                                                              
in the  world. In  the last  decade state  salmon harvest  totaled                                                              
more  than $4.5  billion, making  it extremely  vital to  Alaska's                                                              
economy.  Last  year  almost  450,000  resident  and  non-resident                                                              
licenses were issued for sport fishing.                                                                                         
                                                                                                                                
CHAIRMAN  TORGERSON asked  why this  resolution is  being sent  to                                                              
Alaska's congressional  delegation instead  of someone  in Alaska.                                                              
He noted, "They're not going to celebrate  salmon day back there."                                                              
                                                                                                                                
SENATOR STEVENS  said he would entertain some  instate suggestions                                                              
as well.                                                                                                                        
                                                                                                                                
CHAIRMAN TORGERSON  said it  should be  sent to organized  fishing                                                              
groups and maybe hatcheries.                                                                                                    
                                                                                                                                
MS. BARBARA BELKNAP, Executive Director,  Alaska Seafood Marketing                                                              
Institute  (ASMI), thanked  Senator Stevens  for introducing  this                                                              
resolution. ASMI is trying to augment  its promotions with seafood                                                              
stores and  retailers this summer  and actually wanted  a National                                                              
Alaska Salmon  Day declared by the  President, but wasn't  able to                                                              
do that. She said ASMI would also  send the resolution to chambers                                                              
and tourism bureaus.                                                                                                            
                                                                                                                                
SENATOR WILKEN asked why it wouldn't be an Alaskan Salmon Week.                                                                 
                                                                                                                                
MS. BELKNAP  answered that  ASMI wants to  have a "kick  off" with                                                              
particular  retailers. She  got the  idea  from British  Columbia,                                                              
which established last year as the  Year of the Bear. Everyone who                                                              
went through  there was  inundated with  information about  bears.                                                              
She thought  it would be terrific  to have the Year of  the Salmon                                                              
here, but it was too late to go that  far and ASMI didn't have the                                                              
budget to make it what they would like.                                                                                         
                                                                                                                                
CHAIRMAN TORGERSON asked that copies  go to ASMI with instructions                                                              
to distribute the resolution throughout  the state and to Senators                                                              
Frank Murkowski and Ted Stevens.                                                                                                
                                                                                                                                
MS. BELKNAP replied that she would be happy to do that.                                                                         
                                                                                                                                
SENATOR ELTON  said on page  1, line  15 there are  two extraneous                                                              
words "to and".                                                                                                                 
                                                                                                                                
SENATOR  LINCOLN commented  that  the resolution  emphasizes  just                                                              
catching and eating, not marketing of salmon.                                                                                   
                                                                                                                                
MS.  BELKNAP  said  ASMI  wanted to  expand  this  into  something                                                              
statewide that would  actually celebrate the industry  as well and                                                              
the cultural importance of salmon.                                                                                              
                                                                                                                                
SENATOR  WILKEN   moved  to  insert,  "Alaska   Seafood  Marketing                                                              
Institute" on page 2, lines 5 - 7.                                                                                              
                                                                                                                                
SENATOR  ELTON  asked  if they  could  also  send  a copy  to  the                                                              
Governor.                                                                                                                       
                                                                                                                                
SENATOR  WILKEN  moved  to  add   the  Governor  to  the  list  of                                                              
recipients. There were no objections and it was so ordered.                                                                     
                                                                                                                                
SENATOR STEVENS  moved to pass  CSSCR 30(RES) from  committee with                                                              
individual  recommendations  and its  attached  zero fiscal  note.                                                              
There were no objections and it was so ordered.                                                                                 
                                                                                                                                
         CSHB 206(RLS)-LIMITED ENTRY FOR COMM. FISHERIES                                                                    
                                                                                                                                
CHAIRMAN  TORGERSON   announced  CSHB   206(RLS)  to  be   up  for                                                              
consideration and  said he had already taken public  testimony and                                                              
that no  amendments  had been proposed.  He noted  that there  was                                                              
quite a bit  of opposition to  the bill since the  committee heard                                                              
it - a few  petitions signed by about 10 people  each and a number                                                              
of individual letters.                                                                                                          
                                                                                                                                
SENATOR  ELTON moved  to pass  CSHB 206(RLS)  from committee  with                                                              
individual recommendation and the attached zero fiscal note.                                                                    
                                                                                                                                
SENATOR HALFORD objected.                                                                                                       
                                                                                                                                
A roll call  vote was taken  and the motion carried  with Senators                                                              
Lincoln, Elton, Stevens  and Wilken in favor and  Senators Halford                                                              
and Torgerson opposed.                                                                                                          
                                                                                                                                
There  being no  further business  to come  before the  committee,                                                              
CHAIRMAN TORGERSON adjourned the meeting at 4:43 p.m.                                                                           

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