Legislature(1995 - 1996)

04/19/1995 03:38 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                   SENATE RESOURCES COMMITTEE                                  
                         April 19, 1995                                        
                           3:38 P.M.                                           
 MEMBERS PRESENT                                                               
 Senator Loren Leman, Chairman                                                 
 Senator Drue Pearce, Vice Chairman                                            
 Senator Robin Taylor                                                          
 Senator Georgianna Lincoln                                                    
 Senator Lyman Hoffman                                                         
  COMMITTEE MEMBERS ABSENT                                                     
 Senator Steve Frank                                                           
 Senator Rick Halford                                                          
  COMMITTEE CALENDAR                                                           
 Mining Overview and Alaska Minerals Commission Report with Dr. Earl           
 SENATE RESOLUTION NO. 2                                                       
 Opposing a proposed international convention classifying coal as a            
 hazardous and noxious material.                                               
 SENATE BILL NO. 130                                                           
 "An Act relating to marine pilots and the Board of Marine Pilots;             
 extending the termination date of the Board of Marine Pilots; and             
 providing for an effective date."                                             
 CS FOR HOUSE BILL NO. 197(RES)                                                
 "An Act providing for exploration incentive credits for activities            
 involving locatable and leasable mineral and coal deposits on                 
 certain land in the state; and providing for an effective date."              
  PREVIOUS SENATE COMMITTEE ACTION                                             
 SR   2 - See Resources minutes dated 4/12/95.                                 
 SB 130 - See Resources minutes dated 3/20/95 and 4/12/95.  See                
          Resources Subcommittee minutes dated 3/23/95 and 4/6/95.             
 HB 197 - No previous action to record.                                        
  WITNESS REGISTER                                                             
 Earl Beistline                                                                
 Alaska Minerals Commission                                                    
 P.O. Box 80148                                                                
 Fairbanks, AK 99708                                                           
 Eric Neal MacKinnon                                                           
 Alaska Minerals Commission                                                    
 1114 Glacier Ave.                                                             
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Supported HB 197.                                      
 Karl Hanneman                                                                 
 Alaska Minerals Commission                                                    
 P.O. Box 10664                                                                
 Fairbanks, AK 99710                                                           
  POSITION STATEMENT:   Supported HB 197.                                      
 Charles Boddy                                                                 
 Alaska Coal Association                                                       
 Usibelli Coal Mine                                                            
 122 First Ave., #302                                                          
 Fairbanks, AK 99701                                                           
  POSITION STATEMENT:   Supported SR 2.                                        
 Tom Crafford, Manager                                                         
 Minerals and Coal                                                             
 Cook Inlet Region, Inc.                                                       
 2525 C St. #500                                                               
 Anchorage, AK 99503                                                           
  POSITION STATEMENT:   Supported SR 2.                                        
 Paul Valenti, Vice President                                                  
 141 Union Blvd., Suite 100                                                    
 Lakewood, CO 80228                                                            
  POSITION STATEMENT:   Commented on the mining industry.                      
 Doug Horswill, Vice President                                                 
 Environment and Public Affairs                                                
 5430 Cliff Ridge                                                              
 N. Vancouver, B.C.                                                            
  POSITION STATEMENT:   Commented on the mining industry.                      
 George Cole, Vice President                                                   
 Spokane, WA                                                                   
  POSITION STATEMENT:   Commented on the mining industry.                      
 Bill Jeffress                                                                 
 Fairbanks Gold Mining                                                         
 P.O. Box 73726                                                                
 Fairbanks, AK 99707-3725                                                      
  POSITION STATEMENT:   Commented on the mining industry.                      
 Steven Borrel                                                                 
 Alaska Miners Association                                                     
 501 West Northern Lights Blvd.                                                
 Anchorage, AK                                                                 
  POSITION STATEMENT:   Commented on the mining industry.                      
 John Walsh, Legislative Aide                                                  
 Representative Richard Foster                                                 
 State Capitol                                                                 
 Juneau, AK 99801-1182                                                         
  POSITION STATEMENT:   Sponsor of HB 197.                                     
 Deborah Vogt, Deputy Commissioner                                             
 Department of Revenue                                                         
 P.O. Box 110400                                                               
 Juneau, AK 99811-0400                                                         
  POSITION STATEMENT:   Commented on HB 197.                                   
 Jules Tileston, Director                                                      
 Mining and Water Management                                                   
 3601 C Street, Ste. 800                                                       
 Anchorage, AK 99503-5935                                                      
  POSITION STATEMENT:   Commented on HB 197.                                   
 Mike Spence                                                                   
 Paul Fuhs                                                                     
 Southwest Alaska Pilots Association                                           
 10652 Parker Lane                                                             
 Juneau, AK 99801                                                              
  POSITION STATEMENT:   Supported SB 130.                                      
  ACTION NARRATIVE                                                             
  TAPE 95-45, SIDE A                                                           
 Number 001                                                                    
  CHAIRMAN LEMAN  called the Senate Resources Committee meeting to             
 order at 3:38 p.m. and said they would first take up the Mining               
 Overview and the Alaska Minerals Commission Report.                           
 DR. EARL BEISTLINE, Alaska Minerals Commission, said they                     
 appreciated being able to meet with the committee.  He said the               
 Alaska Minerals Commission Report is required by state law and is             
 submitted to the governor and the legislature within 10 days of the           
 beginning of each year.  That has been done, he said.                         
 The report has several recommendations directed toward what would             
 stimulate the mining industry, removing any restraints along the              
 The members of the Minerals Commission with him were Del Ackels,              
 Eric Neal MacKinnon, Joe Fisher and Karl Hanneman.  Also present              
 was staff support through the Department of Commerce and Economic             
 Development, Dick Swainbank, Development Specialist.                          
          HB 197 MINERAL EXPLORATION INCENTIVE CREDITS                        
 NEAL MACKINNON, Minerals Commissioner, said he supported HB 197.              
 He said his company makes its living by exploring for properties              
 and then finding another company to come in with the big money it             
 takes to drill and carry it beyond the basic exploration part.  Not           
 only do they deal with properties in Alaska, they compete in a                
 world market.  They are finding that big companies who have a lot             
 of capital to expend in exploration are going to see more fertile             
 fields in South America.  There is some perception that Alaska is             
 not "open for business" and not friendly to mining.  HB 197 would             
 have a good psychological affect.  This is the critical money,                
 because it is high risk.  Another advantage the state would get in            
 return for the credit is data that is developed from the                      
 exploration projects, MR. MACKINNON said.                                     
 KARL HANNEMAN testified on geophysical, geological, aerial mapping            
 recommendations.  He said the 1991 Alaska Minerals Commission                 
 Report recommended for the first time that the state undertake this           
 geological and geophysical mapping program, because Alaska was                
 recognized as being the least geologically mapped of the 50 states.           
 To market Alaska as an exciting frontier for mineral exploration,             
 a complete and accurate geologic and geophysical data base would              
 send a positive signal to the mining industry that Alaska favors              
 mineral development.  Two objectives were outlined, then, he said.            
 The first short-term objective was to attract exploration dollars             
 that would result in private sector economic activity in Alaska -             
 often in rural Alaska.  The second objective was to find mines.               
 He said the state has developed a competent staff and a critical              
 amount of work needs to be done each year in order to make an                 
 efficient program.                                                            
 SENATOR TAYLOR said he thought if we could increase funding to                
 attract tourists to Alaska by $1 million this year, we should be              
 able to increase the funding by which we determine what                       
 mineralization we have here to attract anyone to look at.                     
        SR   2 OPPOSE COAL AS HAZARDOUS/NOXIOUS SUBSTNCE                      
 SENATOR LEMAN announced SR 2 to be up for consideration.                      
 CHARLES BODDY, Alaska Coal Association and Usibelli Coal Mine, said           
 other coal producing states are doing the same thing in their state           
 legislatures to get a message clearly sent to the U.S. Congress and           
 the administration of the significance of the international                   
 maritime organizations seeking to include coal as a hazardous and             
 noxious material.  This issue is of importance to the board rooms             
 of every coal producer in the U.S..  That the proposed tariff would           
 be $4 per ton every time it's loaded or unloaded, which happens at            
 least three times, is a lot considering they are fighting over                
 pennies to stay in the marketplace.                                           
 Every person dealing with coal as a bulk commodity for shipment has           
 come out against it.  The International Convention on Pollution               
 From Ships has never classified coal as a hazardous material.  All            
 of the treaties and conventions that deal with coal being shipped             
 or transported as a bulk commodity have always excluded coal as a             
 dangerous, hazardous, or noxious material, MR. BODDY said.                    
 There have been no spills of record that have ever seen any                   
 problems caused in either the marine environment or along any                 
 coastline ecosystems.                                                         
 MR. BODDY said the Clinton administration is divided on the issue.            
 The Department of Justice and the U.S. Coast Guard are inclined to            
 favor coal as a noxious and hazardous substance, although in a                
 different classification within the treaty system with more                   
 concerns revolving around the safety and health issues and                    
 spontaneous combustion.  The maritime administration for the U.S.             
 Department of Transportation, the Department of Commerce and the              
 Department of Energy all favor the exclusion.                                 
 SENATOR LEMAN said they would set SR 2 aside until a quorum was               
 present and announced the committee would continue with the mining            
 Number 408                                                                    
 JERRY BOOTH, Producers Council of Alaska, said they would have five           
 speakers today on a number of issues.                                         
 TOM CRAFFORD, Manager, Minerals and Coal, Cook Inlet Region                   
 Incorporated (CIRI), said through its mineral subsidiary, North               
 Pacific Mining Corporation, CIRI is active in a variety of minerals           
 and mining exploration projects in the state.  It holds the                   
 Illinois Creek Gold/Silver project near Galena, the Johnson River             
 Gold/Copper/Zinc deposit near the base of Iliamna Volcano, the Red            
 Mountain Chrome property near Seldovia, and is a 10% owner in the             
 Beluga Coal Company.                                                          
 Recently, CIRI has been the owner of some of the lands involved in            
 the Wishbone Hill Project.  These lands have been under lease to              
 Idemitsu, Inc. and on April 3 a letter of intent was signed for               
 CIRI to acquire the Wishbone Hill coal project from Idemitsu.  In             
 general most of the coal community is anticipating a $3 - $4 per              
 ton rise in the price of coal this year with possible increases to            
 come in the future.  With this type of indicator, the project could           
 soon achieve economic viability.  CIRI hopes to preserve the work             
 that has been done by Idemitsu by concluding the sales agreement on           
 the property by June.  Had Idemitsu "walked" from this project, all           
 the major permits it has would expire and throw the project back to           
 square one.                                                                   
 He echoed Mr. Boddy's comments regarding SR 2 and the                         
 classification of coal.  It would severely impact the marketability           
 of Wishbone Hill coal on the international scene.                             
 SENATOR LEMAN asked if CIRI needed to share the mineral resources             
 with the other corporations or was that only on native lands.  MR.            
 CRAFFORD replied that 7(i) profit-sharing only applies to ANCSA               
 lands and for the small portion of the project that is CIRI-owned             
 land which is ANCSA land there would be profit sharing.                       
 Number 518                                                                    
 PAUL VALENTI, Vice President, Operations, USMX, Inc., a Denver                
 based public company, explained that its two parcels, about 62,000            
 acres, are wholly owned by North Pacific Mining Company with USMX,            
 Inc. being the operator.  He said Anaconda first discovered the               
 property and explored it for five years.  They built quite a bit of           
 infrastructure and developed a 4500 ft. airstrip at the sight.                
 Based upon drilling and recent engineering studies, they have                 
 developed a minable reserve of approximately four and a half                  
 million tons of ore containing roughly 300,000 oz. of gold and 8              
 million oz. of silver.                                                        
 The ore would be mined with conventional open-pit methods.  It                
 would be mined six months a year, ore would be trucked from the pit           
 to a heap leach pad for processing.  The ore would be stacked                 
 behind an engineered dam on a double synthetic-lined compacted sub-           
 base.  Gold and silver will be recovered from the ore by using                
 dilute cyanide solution which would be pumped to a process plant to           
 recover.  The cyanide solution is recirculated and stays within a             
 contained system.  All of the mine and process facilities will                
 emphasize protection of ground and surface water quality.  They               
 will employ 100 people and during the mine life will employ a small           
 work force of 40 - 50 people.  Reclamation will start as soon as              
 the mining.  The company received an award in Nevada in 1992 for              
 reclamation efforts at its Green Springs Mine.  This week they have           
 received an award from the state of Utah for reclamation efforts at           
 the Gold Strike Mine.                                                         
 Project permiting is under way and they hope to get them in early             
 1996, producing their first gold and silver in late 1996.                     
 SENATOR LEMAN said this was encouraging to him and probably rural             
 Alaska in terms of job opportunities.  He asked if they were                  
 getting offers from people who were interested in working.                    
 MR. VALENTI replied that last week a group representing USMX toured           
 six villages and there was a lot of interest in the villages about            
 the employment opportunities for which his company would provide a            
 considerable amount of training.                                              
 DOUG HORSWILL, Vice President, Environment and Public Affairs,                
 Cominco Alaska, Unlimited, said he was here on behalf of Sharla               
 McKay, their environmental supervisor at the Red Dog Mine.  The               
 efforts at the operation over the last year and a half are very               
 intensive to bring the operation up to planned production levels.             
 It is now capable of producing 2,000 tons per day concentrate which           
 is somewhat over the design capacity.                                         
 TAPE 95-45, SIDE B                                                            
 Number 563                                                                    
 Right now the zinc market is at 45 - 50 cents and they go between             
 making some money and losing money.  They need to bring their                 
 break-even costs down even further to make sure they and their                
 shareholders (and Nana shareholders) gain the benefits they all               
 expected originally from the project.  At the present time they               
 have a work force of about 350, 51% are Nana shareholders.  They              
 have a plan in place to try to increase that number over time.                
 They have a very positive relationship with state agencies.                   
 Particularly important to them is the relationship with the                   
 northern region habitat branch of ADF&G which has been extremely              
 helpful in solving problems in helping them define areas of joint             
 They are in the last stages of a five-year process of permit                  
 renewal of a water permit.  There are some EPA issues they still              
 have to deal with in the next few weeks.  They need to be able to             
 discharge water, ultimately at the rate of intake for rainfall in             
 the area.  Over the time since start-up, they have spent $40                  
 million on environmental enhancements.                                        
 Number 563                                                                    
 SENATOR TAYLOR asked him if the water permit was still in review if           
 they started five years ago.  MR. HORSWILL explained that the                 
 initial permit expired in 1991 and the effort to renew it has been            
 under way since then.  He said they would like to have the permit             
 within two weeks, although he didn't think it was possible.                   
 GEORGE COLE, Vice President, Exploration, Cominco American, said              
 they have had an exploration presence in Alaska since the late                
 1970's.  In 1995 they will put approximately one third of their               
 U.S. exploration dollars into Alaska on 10 projects - three gold,             
 six zinc, and one copper project.  Approximately 20 people,                   
 including contractors, will be employed by the exploration group in           
 Alaska during 1995.  None of the exploration programs are in the              
 advanced stage of exploration, but they hope by the end of next               
 year or this time next year they will be in a more advanced state.            
 BILL JEFFRESS, Chief, Environmental Services, Fairbanks Gold                  
 Mining, said they are wholly-owned by AMEX Gold and are developing            
 the Fort Knox project.  He said they have all of their permits                
 after a three-year process.  Currently, they have about 150                   
 employees on-site.  By the middle of the summer that number will              
 increase to 500.  They will be in production by 1996 and will have            
 a permanent work force of 250 people.  He said this is a long-term            
 operation with a mine life of 12 - 16 years with a potential for              
 additional reserves that could extend the mine life.  The project,            
 itself, is entirely on state and private land.  They will be                  
 processing 36,000 tons of ore a day.  This will be the largest gold           
 milling project in North America.  They will be mining an equal               
 amount of waste material.                                                     
 Number 496                                                                    
 STEVEN BORREL, Executive Director, Alaska Miners Association, said            
 he thought this was probably the most exciting time for the mineral           
 industry in the state since the early part of the century.                    
 Twenty people are being brought here from the mine in McGrath to              
 attend the training program at Greens Creek and Echo Bay.  So the             
 Juneau area can benefit other areas of the state.  Last year a                
 major company was exploring in the middle of winter and MR. BORREL            
 was optimistic that others would realize they didn't have to shut             
 down exploration in the middle of winter as they have done in the             
 He pointed out that another drilling program at Nome started,                 
 partially based on some data from the airborne-geophysical program.           
 Alaska still has the perception for many companies, though, of                
 being a bad place to do business.  Several things happening in the            
 legislature are a positive signal to change that, like the                    
 incidental discharges bill.  He said that the airborne-geophysical            
 survey has resulted in the staking of over 81 square miles of                 
 claims in the Fairbanks district.  More money has already been                
 spent in the Fairbanks district by private industry than the cost             
 of the entire program and the serious exploration work hasn't even            
 started, yet.                                                                 
 He was grateful that the Mental Health Trust dispute was settled,             
 because that was the reason the Wishbone Coal project stopped for             
 so long.                                                                      
          HB 197 MINERAL EXPLORATION INCENTIVE CREDITS                        
  SENATOR LEMAN announced HB 197 to be up for consideration.                  
 JOHN WALSH, Legislative Aide to Representative Richard Foster, said           
 HB 197 helps make Alaska as attractive as possible for investment             
 dollars to come in and help us develop our resource potential.                
 Native corporations are going to need to partner-in with                      
 professional mining companies and this is a positive way to keep              
 them going.                                                                   
 SENATOR LEMAN asked if HB 197 was fairly consistent with the                  
 credits.  MR. WALSH said that was correct and added that these are            
 the same credits that were in the bill last year, although there is           
 another provision for corporate income tax in the current bill.               
 DEBRA VOGT, Deputy Commissioner, Department of Revenue, said they             
 do have some concerns with HB 197, primarily in the income tax                
 area.  She explained that regarding mining, there are two taxes -             
 corporate income tax and the mining license tax.  Both taxes are              
 net income taxes, neither tax will tax an activity until it shows             
 a profit.  Additionally, the natural resource extraction                      
 calculation accounts for exploration costs by bringing those costs            
 forward until the beginning of production and allowing them to be             
 amortized and depleted against income.  So every expense that is              
 addressed by this legislation is already deductible under both the            
 mining license tax and the corporate income tax.  She agreed with             
 Mr. Walsh that the mining license tax has a three and one-half year           
 tax exemption.  The Department of Revenue believes the tax                    
 structure for the mining industry in Alaska is pretty fair.                   
 Number 260                                                                    
 Any perception that Alaska is not welcoming to the mining industry            
 is just that - a perception.  Mining taxes and corporate income tax           
 paid by mining companies in this past year totaled about $300,000.            
 The state is not collecting a lot of money from the mining                    
 industry, she said.                                                           
 One of the largest problems the department has with the legislation           
 is with the way it works vis-a-vis the income tax.  We have an                
 income tax system that a lot of states use that does not tax based            
 on what you might consider to be your own business sense of profit            
 and loss in this state.  When a corporation does business in more             
 than one state, a method has to be found for determining how much             
 of that income was earned in Alaska and how much was earned                   
 someplace else.  The mining license tax does look only at Alaska              
 activities.  The corporate income tax taxes a part of income based            
 on a formula looking at your nationwide activities.  It's called              
 the water's edge reporting method which looks at the percentage of            
 sales in Alaska and compares it to the sales everywhere else in the           
 states that you do business.  That fraction is then added to the              
 percentage of your property that's in Alaska vs. the property in              
 other states and your payroll in Alaska vs. your payroll                      
 everywhere.  Those three fractions are added and divided by three;            
 that answer is averaged to come up with one fraction that is                  
 applied against your overall United States income to determine the            
 amount of income  we  say you earned in Alaska for tax purposes.            
 This is not a method used by taxpayers to look at themselves; it is           
 used by taxing authorities and almost every state uses it, because            
 it's a lot simpler than trying to untangle intercorporate affairs             
 of multi-state taxpayers and using separate accounting (which is              
 used with only oil companies).  This technique bears no                       
 relationship to the concepts presented in HB 197.                             
 The bill twice asks the department to relate the income generated             
 by the mining activity to the site of the mine and the idea is that           
 incentives are accumulated for a particular site.  Formula                    
 apportionment isn't going to tell you how much money the site made.           
 The Knowles Administration is opposed to the legislation, primarily           
 because of the inclusion of AS 43.20 at all and basically the                 
 double deduction of being able to deduct the exploration expenses             
 and then later getting a credit for the same expense.  The taxpayer           
 will make money from the state for each dollar.                               
 SENATOR LEMAN asked her if she had any suggestions that might help            
 accomplish what the prime sponsor wants accomplished.  MS. VOGT               
 said she hadn't discussed specific amendments, but certainly taking           
 AS 43.20 out of the legislation would be a great improvement.  She            
 said it would also be simple to draft an amendment that would not             
 permit a deduction for the same expenses that were used for a                 
 credit.  The difficulty is that the deduction part applies to the             
 taxes, not to the royalty and rent parts.  The legislation lumps              
 together all the taxes and allows you to take half of the amount              
 against any of liabilities.                                                   
 Number 160                                                                    
 SENATOR LEMAN asked if any mining companies in Alaska were paying             
 corporate income taxes.  MS. VOGT said she thought so.  She added             
 that the mining definition includes sand and gravel.                          
 SENATOR LEMAN asked how Alaska compared with other states for the             
 mining business.  MS. VOGT said she didn't know that and offered to           
 bring that information back to him.                                           
 SENATOR TAYLOR said there are other factors at play, not just tax             
 issues, to make a reputation.  He said incentives were given years            
 and years ago.                                                                
 MR. BORREL strongly supported HB 197 as it reads.  He thought it              
 would encourage international mining companies.  He said they have            
 been working hard to change the perception that Alaska is a                   
 difficult place to do business and he thought this would go a long            
 way toward that.  He noted that only exploration expenses were                
 addressed in this bill and that there are many other costs                    
 involved.  Also, he noted that these credits could not be used                
 unless the project goes into production.  Part of the reason the              
 State of Alaska has such little income from the mining industry is            
 because there's effectively no mining in the state.  The credits              
 are applied against new revenue streams and don't touch existing              
 Another aspect is that by far most projects will never become an              
 operating mine, and therefore, most of those expenditures that have           
 been certified will never actually appear as a credit against a               
 project.  Another measure of how few projects would have already              
 benefited from this is that there are only three mines in the state           
 that are year-round operating mines that could have qualified for             
 this had it been in place at the time of exploration.                         
 MR. BORREL said he thought it was correct that the oil exploration            
 incentives bill that was passed last year has exactly the same                
 language regarding state income tax as this bill has.                         
 TAPE 95-46, SIDE A                                                            
 Number 001                                                                    
 MS. VOGT responded that the tax in Title 41 is a tax credit for oil           
 exploration activities and is applicable against AS 43.20, the                
 income tax, but it is not related to the site.  It is simply a tax            
 credit up to a cap which is a very specific dollar amount - a total           
 of $5 million per project and a total of $30 million per company              
 taken anywhere.                                                               
 Jules Tileston, Director, Mining and Water Management, said there             
 are two distinct elements of the bill, one dealing with the income            
 tax and the other dealing with rents and royalties.  His comments             
 deal only with the rents and royalties.  He said the bill has                 
 addressed most of his areas of concern on its way through the                 
 legislature.  The coal industry now pays a 5% adjusted gross value            
 royalty and a $3 per acre rental.  Cost for transportation from the           
 mine mouth to the point of sale and for benefication costs are                
 already deductible from the contract sales prices.  A mechanism for           
 royalty reduction is available if the coal operation is                       
 unprofitable.  For that reason, they believe coal should not be               
 MR. TILESTON said clarification was needed on page 3, line 9 which            
 addresses a series of things you must do.  One of the items is a              
 definite advantage to industry and the public when the credit is              
 actually applied for and implemented that the data used for credit            
 be made available.  He recommended after the word, "consultant" on            
 line 9 add "and exploration activity data that will in the future             
 be made available under Section 2(a)" so there is a clear linkage             
 between the provision of the data and the application of the                  
 credit.  There were additions in the bill that have already been              
 made that provide for identifying the data on an annual basis so              
 there is no confusion of what is available.                                   
 Their second concern is that the Division operates largely on                 
 program receipts from rentals.  They are concerned that as the                
 present levels of funding go down, particularly from oil and gas,             
 that deductions may affect their ability to provide continued                 
 service at the level they are providing now to the industry.                  
 Therefore, they propose that the rental offset not apply for those            
 elements only.                                                                
 Their last concern was with the definition of a site.  Most mining            
 companies hold numerous 40-acre mining claims.  Some mining leases            
 are also 40-acres in size, but may range up to several thousand               
 acres in size.  The rentals change according to whether the claim             
 has been located for five or ten years.  The bill should make it              
 clear that it's the area of operation which is only defined at the            
 permit time and that only those exploration credits which have                
 previously been approved that go to that site are the ones that can           
 be used.                                                                      
 MR. TILESTON said there was definitely a glimmer of hope from DNR's           
 perspective on this legislation.  SENATOR LEMAN asked MS. VOGT if             
 there might be some hope from the Department of Revenue if they put           
 in a cap and deal with the income taxes.  MS. VOGT answered there             
 would be from DOR, but she couldn't say about Governor Knowles.               
 SENATOR LEMAN said they would set HB 197 aside for now.                       
 SENATOR LEMAN announced an at ease from 5:25 p.m. - 5:30 p.m.                 
                      SB 130 MARINE PILOTS                                    
 SENATOR LEMAN announced SB 130 to be up for consideration, noting             
 there was a subcommittee report.                                              
 SENATOR PEARCE moved to adopt the subcommittee's CS to SB 130.                
 There were no objections and it was so ordered.                               
 Number 245                                                                    
 SENATOR PEARCE moved to adopt amendment #1 which reinstates the               
 maximum tariff procedure.  SENATORS TAYLOR and LINCOLN objected.              
 LEMAN voted yes; and the amendment failed.                                    
 Number 277                                                                    
 SENATOR PEARCE offered amendment #3.  SENATOR LINCOLN objected.               
 SENATOR PEARCE said that there was a tremendous amount of testimony           
 on cross-regionalization in 1991 when they first worked on this               
 issue.  Present law says it leaves that question up to the Board,             
 and the Board has that authority under the language that's being              
 deleted in this amendment.  She did not support the amendment, but            
 did support the language in the present bill that does change and             
 give the Board a different kind of latitude that will allow                   
 continued safety aspects.                                                     
 SENATOR LEMAN said he disagreed, because the Board would still have           
 the ability to establish the procedures by which somebody would get           
 LEMAN voted yes; and the amendment failed to pass.                            
 MIKE SPENCE and PAUL FUHS, Southwest Alaska Pilots Association,               
 indicated their support of SB 130.                                            
 SENATOR TAYLOR moved to pass CSSB 130(RES) from committee with                
 individual recommendations.  There were no objections and it was so           
 Number 333                                                                    
 SENATOR TAYLOR moved to adopt the CSSR 2(RES).  There were no                 
 objections and it was so ordered.                                             
 SENATOR TAYLOR moved to pass CSSR 2 (RES) from committee with                 
 individual recommendations.  There were no objections and it was so           
 SENATOR LEMAN adjourned the meeting at 5:50 p.m.                              

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