Legislature(1995 - 1996)
04/24/1996 05:45 PM Senate RES
| Audio | Topic |
|---|
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
SENATE RESOURCES COMMITTEE
April 24, 1996
5:45 P.M.
MEMBERS PRESENT
Senator Loren Leman, Chairman
Senator Drue Pearce, Vice Chairman
Senator Steve Frank
Senator Rick Halford
Senator Robin Taylor
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Lyman Hoffman
COMMITTEE CALENDAR
Confirmation Hearing for Michele Brown, Commissioner, Department of
Environmental Conservation
SENATE BILL NO. 318
"An Act authorizing, approving, and ratifying the amendment of
Northstar Unit oil and gas leases between the State of Alaska and
BP Exploration (Alaska) Inc.; and providing for an effective date."
CS FOR HOUSE BILL NO. 394(FIN) am
"An Act authorizing shallow natural gas leasing from sources within
3,000 feet of the surface; relating to regulation of natural gas
exploration facilities for purposes of preparation of discharge
prevention and contingency plans and compliance with financial
responsibility requirements; addressing the relationship between
shallow natural gas and other natural resources; and adding, in the
exemption from obtaining a waste disposal permit for disposal of
waste produced from drilling, a reference to shallow natural gas."
PREVIOUS SENATE COMMITTEE ACTION
SB 318 - See Resources minutes dated 3/29/96, 3/30/96, 4/3/96,
4/11/96, 4/13/96, 4/15/96, 4/17/96, and 4/18/96.
HB 394 - No previous action to consider.
WITNESS REGISTER
Hans Neidig, Staff
Representative Scott Ogan
State Capitol Bldg.
Juneau, AK 99801-1182
POSITION STATEMENT: Staff to sponsor of HB 394.
Representative Scott Ogan
State Capitol Bldg.
Juneau, Alaska 99801-1182
POSITION STATEMENT: Sponsor of HB 394.
Earl Ausman
1503 West 33rd, Ste. 310
Anchorage, AK 99503
POSITION STATEMENT: Supported HB 394.
Dave Lappi
4900 Sportsman Dr.
Anchorage, AK 99507
POSITION STATEMENT: Supported HB 394.
James Hansen, Chief Petroleum Geophysicist
Division of Oil and Gas
Department of Natural Resources
3601 C St., Ste. 1380
Anchorage, AK 99503-5921
POSITION STATEMENT: Commented on HB 394.
ACTION NARRATIVE
TAPE 96-63, SIDE A
Number 001
CHAIRMAN LEMAN called the Senate Resources Committee meeting to
order at 5:45 p.m.
The following is a verbatim transcript of testimony on SB 318.
Number 236
SB 318 NORTH STAR OIL & GAS LEASE AMENDMENT
CHAIRMAN LEMAN:
We adopted a committee substitute at a previous meeting and
took comments from a number of people and what we have done is
prepared, in response to the comments, two options here. There is
a third option that we're also considering that it could go on
another bill that would deal with the issue.
The first option that's here in your packets that's listed as
alternative one, and I believe, those who are here have received
copies of it. If not, they are available here.
The committee adopted the previous version, but we have not
adopted this new one.
One of the comments we heard was, and it's probably the one
that caught people initially, was the 40 pages. The reality of it
is the first 20 pages of it were findings of the committee and so
what we've done here in this new version marked the F version,
dated today, is we've taken the first part out and prepared a
Findings of Fact of the Senate Resources Committee and that would
be a separate stand alone document. In addition to pulling it out,
we have worked with the Department of Natural Resources in
incorporating many comments. I don't remember, something like 50 or
so.
In addressing the concern the Department had that, while the
comments in most cases may have been accurate, they didn't fully
represent the entire picture. So in the interests of having a
balanced record, if you will, our intent was not to have an
imbalanced record. But we incorporated the Department's comments
and I believe we have something that, at least, the Department
would agree is much closer to what we agree is the record of the
hearings.
The other major change in it is we removed I believe in two
places the word irrevocable when it referred to the commitment of
full funding or the project sanction. That word in its context was
a sticking point for many people. And I believe in removing it, it
doesn't really change what is happening, but I think it helps to
provide comfort to those who are questioning what would happen if,
for some reason, the price of oil would drop to $6, we're still
going to force BP to develop a project that would no longer be
economic. So that was removed.
There is one other area and let me note that there were
numerous comments since the last CS was issued regarding the issues
of Alaska hire, Alaska contracting, and the requirement for
fabrication in Alaska. All of those points were expressed by
members of this committee, I believe, unanimously by members either
here in the committee meeting or to me in other forums as being
important issues that needed to be addressed and concern that the
agreement that presently exists is either not enforceable or has,
as Senator Lincoln has commented several times, has too many weasel
words. Without us getting into the details of that, those were
changed a little bit. And this CS that we have as a proposal -
there was a slight change that dealt with, not only contractors,
but also vendors, suppliers, and consultants. Page 9, lines 26 and
following it, says for work in connection with this lease, lessee
shall purchase materials and services from Alaska vendors,
suppliers, and consultants, and shall contract with Alaska firms
for fabricating the modules for on site production and processing
facilities in Alaska. This shows up also on page 13.
So we have, there's that and then the other draft committee
substitute more than one committee member had expressed interest in
a committee substitute that said essentially produce a record of
the committee hearings and come down to the end and the conclusion
is that the legislature does not approve or disapprove nor ratify
the amendments. We've reviewed them and essentially it's the
administration's call.
Those are two options. The third option, and I don't know if
it's in drafting, but it's one if it found a vehicle it would
probably be HB 191. That would be the appropriate one to put it
on. It would deal with amendments to essentially last year's HB
207 process which provides a mechanism for the commissioner to
follow in doing royalty modifications and it would go in and make
changes that would - the process for net profit share changes would
follow a similar process to that. So those are three options that
I lay before the committee.
SENATOR TAYLOR:
I think my preference at this point would be to move option G.
It's the briefest of the three and really takes no position on the
part of the legislature which was my position at the beginning of
the hearings. I didn't feel we had a role to play in the process.
I know both the administration and BP would like our blessing and
if that is the only other alternative that's available, then I
guess we could move the original bill as it was submitted, but I
don't believe the votes exist for that. So as a compromise I would
submit, I would move that we adopt committee substitute, workdraft
G, Chenoweth.
CHAIRMAN LEMAN:
I hear objection to that.
SENATOR LINCOLN:
I object to that, Mr. Chairman for just purposes of
explanation. Does this alternative two or G as noted - does this
in any way change the contract that has been negotiated by the
administration?
CHAIRMAN LEMAN:
Alternative two? No, it does not.
SENATOR LINCOLN:
Could you explain, and maybe you did before I walked in, on
page 3, line 9. I don't know if you explained that portion that I
believe this was not in the original bill that says the
Commissioner does not have legislative authority.
CHAIRMAN LEMAN:
It says legislative authorization.
SENATOR LINCOLN:
That was not in the original?
CHAIRMAN LEMAN:
I'm quite certain it was not.
SENATOR LINCOLN:
Could you explain why that was added in.
CHAIRMAN LEMAN:
It's just a statement of fact. This is what we heard from
both the Department of Law and the Division that they said they
believed the Commissioner does not have the authorization. That's
why they came to the legislature.
SENATOR LINCOLN:
Why was it necessary to put it in as part of a bill?
CHAIRMAN LEMAN:
Mr. Eason, do you want to respond to that?
JIM EASON:
It was simply a statement of fact.
CHAIRMAN LEMAN:
Would you come to the table?
MR. EASON:
For the record, Mr. Chairman and members of the committee, my
name is Jim Eason and the answer is that it was inserted, as the
Chairman has noted, simply as a statement of fact based upon the
testimony of the Department of Law as well, I believe, the
Department of Natural Resources during the hearings on the bill.
CHAIRMAN LEMAN:
We have a motion before us to adopt a new committee substitute
and there was objection to that. We're certainly going to have
discussion on that. Senator Lincoln.
SENATOR LINCOLN:
I had another question. I have a letter of intent that I
would like to go with the piece of legislation. Would that occur -
would my motion then occur after this is adopted or do I amend the
motion?
CHAIRMAN LEMAN:
I would prefer that that would accompany whatever bill this
committee would report. Let's decide what the bill's going to look
like and then we can send along a letter of intent from the
committee.
SENATOR LINCOLN:
That would be fine. I don't know if we've got copies. I
remove my objection, Mr. Chairman.
CHAIRMAN LEMAN:
Is there further discussion regarding the motion. Let me note
that it's my opinion that even though there's some benefit to this
approach and I agree with much of what Senator Taylor said. And
maybe we'll hear from others what their reaction might be and I'm
not sure what their reaction might be. Maybe the best thing to do
is to take testimony and see. I would guess their reaction would
be that they think the legislature is somehow shirking its duty
even though in reality it may not be. Without putting words in
other's mouths we can run up the flag pole.
SENATOR TAYLOR:
If I could just respond briefly to that. This reminds me of
another major piece of legislation that I inherited during the last
year. I was told I couldn't fix it and I couldn't kill it and as
a consequence, I needed to move it. It appears to me that there's
a lot of fixes being offered and don't think those fixes are
probably going to fly. I certainly don't want to see a project of
this magnitude killed because of the actions we take here and as a
consequence I don't feel that there's much other options. I
haven't from the beginning felt that the legislature had a true
option to be involved in this process. As both parties to the
agreement, the Governor and BP have indicated very clearly that we
were to review and somehow bless this, but we were not to in any
way affect or change it. And I think proposition G basically says
that, that we have reviewed it and we are not changing it and we
are not taking any particular position on it, either endorsing or
not endorsing it. That the parties are free to go forward just as
they have. Administrations have done these types of agreements in
the past and have not needed or sought legislative confirmation.
And if such has not been necessary in the past, I don't see why
it's necessary now. And if we're not going to be allowed to change
it or modify it in any way, then I don't really see where the
legislature truly needs to take a position on it. I know it may be
"prudent" for some people to seek legislative approval, but I don't
wish to do disservice to their agreement and I'm fearful that if we
do attempt to make major modifications, that we may very well end
up doing that.
So that's why I proposed that solution.
CHAIRMAN LEMAN:
In response, I concur because the fairly minor modifications
that we did propose in the other committee substitute, or at least
what I believe is minor, in that it merely restated what this
committee heard either in written testimony or in verbal, that met
with resistance from BP and they said they wouldn't move forward.
And I didn't want to stop a project and so there is some merit to
this approach. I believe it accomplishes that. However, I still
believe the other approach would be superior and I would hope that
BP would rethink its position if that were to be passed by the
legislature. Is there further discussion regarding the motion to
adopt version G as the committee substitute for mark up purposes.
SENATOR PEARCE:
Mr. Chairman, I would object only because I agree with what
you said. Let's hold off on the motion and get testimony.
CHAIRMAN LEMAN:
O.K. I think that's fair. We'll, if that's o.k. with you,
Senator Taylor?
SENATOR TAYLOR:
Oh, certainly, I'd like to hear their reaction, too.
CHAIRMAN LEMAN:
We'll hear from others and their reactions to the two
alternatives we have here and then if they'd like to respond to
what we can call alternative three which would be a somewhat
modified HB 207 approach. It would be a similar process that is
outlined in the bill last year. There would need to be some
changes to that approach because obviously the provision on this
being noneconomic couldn't apply to this and that wouldn't apply
and perhaps there would be some change to that. But otherwise it
would be a procedure that the legislature and the administration
last year agreed on a process that would be followed for
modifications.
SENATOR FRANK:
What did you say about...?
CHAIRMAN LEMAN:
I said that it couldn't apply specifically to the changing of
these net profit share leases because the testimony showed that
they were indeed economic. It wasn't that they were noneconomic.
Last year's HB 207 applied to conditions when they were
noneconomic.
SENATOR FRANK:
You mean this project is economic?
CHAIRMAN LEMAN:
We heard that from both the Department and from BP.
Further committee discussion? Who'd like to start it off in
giving his reaction to these committee substitutes?
SENATOR FRANK:
It seems like a legal question to me.
CHAIRMAN LEMAN:
Director Boyd?
KEN BOYD:
You were staring right at me, Mr. Chairman. I'd like to bring
Patrick Coughlin, if I could, to the table, please .
CHAIRMAN LEMAN:
Please do.
MR. BOYD:
Mr. Chairman, for the record, my name is Ken Boyd. I'm the
Director of the Division of Oil and Gas. I do believe Senator
Frank is right, that it is a legal question. I'm not certain where
that leaves us. It seems to me, at least, without an ability to
make a decision or to go forward. It's been said that we don't
have the authority to do this under existing law. I think I won't
take it any farther than that right now. I'll ask Patrick if he
wants to make any comments again. Patrick is a lawyer, but he's
not a lawyer. He works for the Division of Oil and Gas.
PATRICK COUGHLIN:
My only comment would be that if you adopt work draft G that
I think it would mean that the amendment would be, essentially
never take effect. Because the current amendment states that these
amendments take effect when and if an act substantially similar to
the act attached is exhibit D and incorporated by reference takes
effect. The key provision in that act which is incorporated is
that the legislature, it states, approves and ratifies the
amendment. And what I read as G, it basically says the legislature
does not approve it or disapprove it and does not ratify it.
Therefore, I would conclude that the amendment would never take
effect.
CHAIRMAN LEMAN:
Would it be possible, Mr. Coughlin, to have a new agreement
that did not have that provision in it - for the legislature if
that were the case?
MR. COUGHLIN:
Again, I think as Commissioner Shively has indicated, and Mr.
Baldwin has testified, that we question whether we have authority
to enter into such an agreement without legislative approval. If,
for example, you follow the third alternative and you gave us some
general authority, I suppose we could go back and try to negotiate
a deal, in that instance. I think the point is that, I don't think
it will be the Department's view, that I don't think we could go
back and renegotiate. I mean, in essence, just do this deal and
say it's effective today because we don't think we have authority
and that's why. We thought authority was lacking and that's why we
came to the legislature.
SENATOR TAYLOR:
Maybe I misunderstood the comments by the Attorney General
when he was here, but I thought the words he used were the
legislature's authorization was not legally necessary, but that it
would be prudent. In fact, he used the word prudent two or three
times in his written opinion. I can understand that prudent might
very well mean giving a greater feeling of comfort or security as
regards the legislature, but it certainly isn't anything that was
either legally necessary or mandated within existing statutes.
Because if that were the case, he would have said so.
MR. COUGHLIN:
Mr. Chairman, Senator Taylor, I think you would have to ask
Mr. Baldwin that question.
CHAIRMAN LEMAN:
Is Mr. Baldwin on line?
SENATOR TAYLOR:
I asked his boss, the Attorney General, and that was the
answer I got, I thought. I know it's all on record. We could look
back in our packets and dig out the written opinion, but I think
the written opinion very clearly stated the word prudent.
MR. BOYD:
Mr. Chairman, Senator Taylor, we're not disagreeing with you.
We just don't, you know, I think that's a prudent thing to do,
also.
CHAIRMAN LEMAN:
Do you have any other comments regarding the three
alternatives and do you agree with my early assessment that the
committee findings more accurately reflect the record, at least
from the Department's viewpoint.
MR. BOYD:
Mr. Chairman, I really do appreciate the fact that, you know,
that staff took the time to sit down with us and go through all
this and I also appreciate the fact that you decided to pull these
out, separate them. I think this is a good history and a good
explanation of the way the world has been, was, and we obviously
haven't had a chance to look at it in any great detail, but we
worked with your staff last night for several hours and I'm sure,
as you said, we found a balance. Whether the balance is a little
bit here, a little bit there, is a fine point. I believe we
reached an agreement on everything. Again, I do appreciate the
time it's taken to do that and the fact that you've pulled it out
into a separate document I think is helpful and useful.
CHAIRMAN LEMAN:
Of the three alternatives, do you have a preference? Number
three, I guess what I'm hearing, you believe it renders - it
basically makes the agreement ineffective. How about alternative
one?
MR. BOYD:
Mr. Chairman, I think I have one that says BP won't do it, we
can't do it, and I'm not sure how the third alternative will work.
SENATOR TAYLOR:
Kind of what I was faced with, too.
CHAIRMAN LEMAN:
Further questions from committee members? O.K.
SENATOR FRANK:
What's the problem with your approach from BP. You've
characterized it as just putting in writing what they've said
they'd do and they don't want to be in a straight jacket on that or
what?
CHAIRMAN LEMAN:
Well, that's my understanding. I guess I'm most reluctant to
say what others intend, but I believe this committee substitute
says what they said in the record, both verbally and in writing.
It restates it. It helps clarify those areas that committee
members thought needed to be clarified.
What BP has told me is that they don't want to reopen the
negotiations even though I believe these are fairly modest changes
and wouldn't require a substantial revision to the agreement, but
it gives that additional security that so many of us really want -
primarily dealing with Alaska hire.
SENATOR FRANK:
What does the Alaska hire provision say?
CHAIRMAN LEMAN:
The old one or the new one?
SENATOR FRANK:
The new one, I guess.
CHAIRMAN LEMAN:
The new one just says to the extent allowed by law they will
do it. And the other one - I don't have the language in front of
me - but it had a number of...
SENATOR FRANK:
Senator Lincoln, was your letter of intent directed at the
original or at the - you call them weasel words - do you think the
weasel words were in the original bill or in this unpopular CS?
SENATOR LINCOLN:
Well, Mr. Chairman, if I might respond to that, I think that,
you know, in the alternative two, as it's being referred to, that
the local hire is not in here at all, that I can read. And that's
the one that's before us right now. That's the motion that's been
made. And the letter of intent that I'm going to propose speaks
very strongly about the local hire provision as well as what the
Alaska firms and Alaska businesses mean. It's almost too bad that
we can't introduce this now, that we can discuss this all at the
same time. I think Alaska hire is going to be a subject that's
going to be brought up.
CHAIRMAN LEMAN:
I don't mind your discussing the letter of intent now.
SENATOR LINCOLN:
If I might, then, Mr. Chairman, the first page of it and I
don't know if there's copies up here for the audience if they need
it, but there's two full pages and the first page talks about what
the Alaska resident is and that the individual has to demonstrate
that they've been in the State for one year before the date of hire
and that demonstration could be through, and I've laid out those
four things. One is that registered to vote in Alaska for the year
previous to the date of hire, attending school in Alaska within the
year previous to the date of hire, possessing a driver's license,
fishing, trapping, or hunting license for at least a year before
the date of hire, receive an Alaska Permanent Fund Dividend for the
year previous to the date of hire, and then it talks about the
availability. And availability could mean anywhere in the State,
not just necessarily the - at first I wanted to put it in the area
that the work was being done and then decided that might be too
confining. So it is anywhere within Alaska and then the second
page talks about the phrases Alaska contractors, Alaska firms, and
that the Alaska business license has to be held for one year before
performing any work in connection with the Northstar lease, and
they also have to maintain for one year a place of business within
the State that deals in the supply, services, or construction of
the nature required for the project before performing any work in
connection with the Northstar leases. And then the third part is
that - there's four sections on that - and what the proprietor and
being an Alaska resident, etc.
So I had the chairman also look at the letter of intent and
see if there was anything that was offensive in the language or
something that I've missed with the discussion that we have had in
this committee.
It is a letter of intent. It is, as we all know, letters of
intent are not binding, but it certainly gives the direction to
Northstar that this is what we've been talking about - that it is
local hire and not someone who's been here for 30 days or 60 days
or 90 days and having a different criteria and the businesses that
are used. So I think it gives a very clear picture of what our
intentions are.
CHAIRMAN LEMAN:
I think it's a well written letter and I'm not sure who wrote
it, but it says here DNR, Office of the Commissioner and if
somebody in your office. I commend whoever did.
SENATOR LINCOLN:
I think it was a combination of many folks, Mr. Chairman, that
had input into this and I appreciate all that input, as well as
your office.
CHAIRMAN LEMAN:
Thanks, and my understanding, at least what I was told
verbally is that BP and other contractors have looked at this and
didn't have any objection to it.
SENATOR LINCOLN:
I did share it and I did fail to say that I did share it with
the Presdient of BP and asked them to look at it. I also did give
it to some of the union folks to look at it and some of the
contractors to look at it and see if there were any other changes
they would propose in here. I have not heard back that it was
offensive to anyone.
CHAIRMAN LEMAN:
Senator Frank.
SENATOR FRANK:
I guess I'm a little confused. If they are o.k. with this
language that's quite specific, why would they object to more
general language that just said you have to comply with the law of
resident hire?
CHAIRMAN LEMAN:
I don't know. But I think that is a good question and you
might want to ask it when we get BP up here.
Senator Taylor.
SENATOR TAYLOR:
I certainly wouldn't want to try to answer for them, but a
letter of intent is a little like a letter from the chaplain. A
letter of the chaplain is about as effective is a letter of intent.
It's going to get brought up maybe in a court suit, if in fact,
somebody needs to discern what the intention of the legislature was
at the time. It certainly can be helpful in interpreting
legislative...
SENATOR FRANK:
It doesn't interpret any law, because there's...
SENATOR TAYLOR:
As a consequence, since it doesn't do that and since it's only
a letter of intent, it probably doesn't have a major impact upon
the legislation. I support the concept.
SENATOR FRANK:
It couldn't have any impact...not to be, you know...
SENATOR LINCOLN:
I understand.
SENATOR TAYLOR:
If we had adopted a different version, it might very well
relate directly to the provisions within it.
SENATOR FRANK:
If you adopted this version, then you'd have this reference
and it might tie together and, in fact, make some sense.
SENATOR TAYLOR:
Sure.
SENATOR LINCOLN:
Mr. Chairman, I did have an amendment that was written to be
part of the findings, but that really is nonbinding. It's just
putting it in there that, I think, that we're finding in some of
the drafts that we have before us and, as I said, that this
probably is not binding, but certainly what we have with resident
and that being one year, and that you have to show proof. I don't
think that's as strong in our statutes with what a resident is. It
just varies.
SENATOR FRANK:
I'm not even sure, I'm not sure, I think we have residency
laws, there's lots of different residency requirements in different
sections of the statute. I'm not sure what our resident hire
TAPE 96-63, SIDE B
laws are. I'd have to review them. I haven't looked at them for
several years, and I'm not sure what the status is. There have
been previous attempts to have local hire laws on the books, and
some have been struck down by the court and some not. And some of
it relates to whether they're having to do with State owned
resources. That's a separate issue, I think. I think, before I
could even know what I was talking about I'd want to review the
local hire law that's on the books, that ...
SENATOR LINCOLN:
It's weak.
SENATOR FRANK:
Yeah, I imagine it is.
CHAIRMAN LEMAN:
O.K., I'm going to get a word in edgewise and then Senator
Taylor. On page 2, under 3 (d) it says is a joint venture composed
entirely of ventures that qualify under then has a string of
letters and numbers and I am not sure what that refers to and I
guess I - we probably ought to clarify that. It may refer to
something else in statute or it may be a typo. I'm not sure; it's
not real clear to me.
SENATOR LINCOLN:
It's, Mr. Chairman, if you go back to section 1, I think it's
referring to that paragraph there, under the second paragraph,
AS36.10.005...
CHAIRMAN LEMAN:
Well, maybe that's something, you know, the letter of intent,
yeah, we should probably clarify that because with the exception of
that I think the letter is understandable.
Senator Taylor.
SENATOR TAYLOR:
I guess my concern is not so much with the letter because, as
I said, I strongly support local hire and I voted along with the
rest of you every time we tried to change it and watched every time
when the courts threw it out. That...I guess this is typical, I
think, of the minutia that we get ourselves involved in as soon as
we attempt to restructure what is a rather complex agreement. And
that as we enter into that process, I might add, we're very
unwelcome in the process. We're not helping, nobody wants us in
there. And as a consequence, I think, as soon as we enter that
thing you're either going to have to go in for a penny or go in for
a pound. And if you want to go in and restructure this whole
thing, then we'll probably need a 40 some page bill here. I'm only
advocating that I don't think we really have the time or the energy
to embroil ourselves in it and that if, in fact, it's going to
further jeopardize the process that has gone on, we may be doing a
disservice to either the administration or to the company. I just
don't feel it's appropriate in light of the fact that we've had a
legal opinion from our Attorney General that it's not necessary
that we act. It's only prudent. In fact, when I just reviewed Mr.
Baldwin's comments before the committee, he referred to legislative
action as a vaccination. A vaccination that would assist in
providing some security against some claim that might be brought at
a later time by a challenge to the agreement. That's why I think
as soon as you enter this door, you enter an entire plethora of
problems and complexities that I don't think we can resolve here.
SENATOR FRANK:
That kind of brings to mind another question. If your
assertion is that they don't require - that they now are currently
authorized to make these agreements without the legislature, then
what is the effect of the legislature taking action that would
approve this agreement subject to modifications? What would be the
effect of that? Would they, could they, then, in your opinion,
ignore the legislature's approval under modified terms and go back
to the original terms and approve the project under those terms or
would they be prohibited from doing so? Or do you know?
SENATOR TAYLOR:
I really don't, but my assumption is from their own comments,
that as bizarre as that sounds, I think that's very possible, that
the legislature could approve this agreement, add some very
specific restrictions within it, and I think they could disregard
it because I don't think it was necessary in the first place. I
think they told us that.
SENATOR FRANK:
Have we had our attorneys look at this?
CHAIRMAN LEMAN:
Yes.
SENATOR FRANK:
And have they rendered an opinion?
CHAIRMAN LEMAN:
Do you remember?...
ANNETTE KREITZER:
There were several legal opinions.
CHAIRMAN LEMAN:
Several legal opinions and I will just add that we have a
letter from Mr. Baldwin that I received yesterday that suggested a
challenge of the separation of powers, but he also came up with a
way to cure that by putting the restriction on DNR and not on BP.
And that was what my idea was in the beginning - that we could deal
with it that way. He suggested, without suggesting details, he
suggested a methodology for doing that. Mr. Baldwin is not with us
today. I believe he's in Anchorage.
While we are pulling that up, Mr. Luttrell, would you like to
join us and give some comment. While we've been talking about you
in your presence, we would just as soon hear from you and certainly
want to be constructive in this deliberation.
The question I have...I've outlined three options. We have
two here and the third I hope you can understand it. I can just
put it in concept. It would be approximately the same process that
would be followed in the HB 207 approach with the exception that
for this modification the portion regarding a noneconomic
determination obviously would not fit. And that would have to be
modified. Otherwise the other process that a commissioner would
have to step through for showing things, that process would still
be just as valid for this as it was for making the Badami type
evaluations or the Cook Inlet...
MR. LUTTRELL:
Well, Mr. Chairman, it's hard for me to comment about a bill
that's as imaginary as the revenues that might come out of
Northstar. So until I see such a bill, I couldn't actually endorse
it or comment in any way. Relative to the other two options which
you are putting on the table today, I don't think they would
actually achieve what, I think, BP is trying to achieve or the
State's trying to achieve and that is the development of Northstar.
As you know, before we made written comments to you about
effectively option one saying that we did not feel we could reopen
negotiations or change the agreement. I note that you yourself
said that the changes are minor and I wonder why if they're minor
why they are so important. But that's a separate issue.
Option two is something which essentially does not ratify the
agreement in any way and I'm pretty sure that BP would not proceed
with development under those conditions. I'm not 100 percent sure
until I get a chance to go back and talk to my people in London
about it. But it would be my guess.
So effectively you have not presented an option which would
lead to the development of Northstar. There is, however, an option
which allows you to go ahead with Northstar and that is to go back
to the original bill which I would say is option four which is not
in deliberations with the committee right now.
CHAIRMAN LEMAN:
Let me just check with the committee members. Do we have
support from four people here to go back to the original bill and
essentially with adopting committee findings and go with that
approach, approving the existing one.
SENATOR FRANK:
Mr. Chairman, I wouldn't want to do that until I understood
more clearly what's so offensive or what elements of the
alternative one that has the Alaska hire and the Alaska fabrication
language in it. Now, I'm under the impression that we've gotten
indication from the Support Industry Alliance that they don't want
that language in there, insuring Alaska fabrication, I think, I'm
not sure if that's true or not, but, is that right?
CHAIRMAN LEMAN:
We do. Have we shared the letters we've received. So it
should be in your packets. I received a call from Keith Burke, the
Executive Director of the Alliance and he said, interestingly
enough, that he'd - the Alliance doesn't need the assurance of
Alaska hire...
SENATOR FRANK:
Alaska fabrication.
CHAIRMAN LEMAN:
Alaska contracting and Alaska fabrication. I asked him to
send a letter and I haven't received it to the best of my
knowledge, but some other contractors who either are or
anticipating that they will receive contacts have sent letters
saying much the same thing. So they are comfortable enough to have
expressed it that...
SENATOR FRANK:
Is it the Alaska hire or the Alaska fabrication that's of
greater concern?
MR. LUTTRELL:
Both of those elements are of concern to BP the way they are
currently written in the original CS.
SENATOR FRANK:
I don't understand Alaska hire law. I'd have to review it,
but what do you find offensive about what appears to me a simple
statement that you would qualify or comply with Alaska resident
hiring to the maximum extent...
MR. LUTTRELL:
Mr. Chairman, Senator Frank, I would be pleased to come back
with you with a clear understanding from my lawyers about the
specifics of the language and I will try to get that done for you
by tomorrow, but we have not gone into that conversation in detail
and I would not want to speak, because I am also not expert in
Alaskan law.
SENATOR FRANK:
Are there other elements in the CS or is it just those, the
fabrication and Alaska hire, that are of concern.
MR. LUTTRELL:
Because the CS is slightly different than the one that we saw
a week ago, it's hard for me to comment about that. At the time
there were several items. But I will bring back an analysis of all
the places where we see differences.
SENATOR FRANK:
I didn't really focus on it that much. Informally, could you
just say what...
MR. LUTTRELL:
I know there was one issue about irrevocability which is what
Senator Leman says is now out of there, but I haven't read it.
SENATOR FRANK:
The sanction date - was that a problem, too?
MR. LUTTRELL:
The sanction date has always been a problem. Not the sanction
date, the effective date...
CHAIRMAN LEMAN:
BP and Mr. Luttrell came back with a letter saying that he
didn't like the effective date because it caused him concern about
when somebody could bring challenge to the project. Our attorney,
Tam Cook said that wouldn't make any difference. The day that the
bill is signed by the Governor would be the date that would start
and our Supreme Court has so ruled and I'd be happy to get you a
copy of that memo. So, in reality, it wouldn't have that effect at
all.
SENATOR FRANK:
Could we, Mr. Chairman, I don't know what you were planning to
do, if you were planning to move the bill today or what, but, and
I guess I could do it independently, but I would like to
understand, and maybe there is somebody from the Department of
Labor that would be able to enlighten us a bit on how that Alaska
resident hiring law does work. If it has any teeth or not. Or if
it's just window dressing, I'd like to know.
CHAIRMAN LEMAN:
Let me just tell you my intent. I had hoped to report a bill
today. I'm looking for some direction from this committee as to
what we can report. And what I've said is we get four votes to
report a bill, we will report that bill.
My other option is tomorrow I'll move to waive this bill and
you'll get it and we'll send you our notebooks and have fun.
SENATOR LINCOLN:
Mr. Chairman , I would like also, if this is not going to
out of the committee today, I would very much like to hear the
response to the letter of intent and how you would intend to
implement the letter of intent as it is stated.
MR. LUTTRELL:
Again, Mr. Chairman, we will respond to your request.
CHAIRMAN LEMAN:
And when might we receive that response?
MR. LUTTRELL:
By the end of the week.
SENATOR TAYLOR:
...point started to inquire of the committee. I only moved
that one because I thought it was probably the least offensive and
easiest to discuss. It was the smallest one. And it characterized
my real problem.
If there aren't sufficient votes for that, was it your intent
then to go back and...
CHAIRMAN LEMAN:
We never voted. I was starting to do an informal inquiry if
there were four votes to move essentially the original bill with,
perhaps, the modified findings that we have and attaching the
committee record. But the bottom line would be right here - not
withstanding any other provision of law the first amendment is
approved and ratified. Are there four votes for that version?
SENATOR LINCOLN:
For the original version, Mr. Chairman?
CHAIRMAN LEMAN:
The original version, with the modifications of the findings
as this committee...
SENATOR PEARCE:
While, it's true that someone testified that they didn't like
it, but you never took the vote.
CHAIRMAN LEMAN:
That is correct.
SENATOR LINCOLN:
Tell me what we've got - I realize there is a motion on the
floor - but what versions we've got - the original and we've got
alternative one and we've got alternative two.
CHAIRMAN LEMAN:
That's what we have before us.
SENATOR LINCOLN:
And what I've heard is that alternative one BP is not
accepting. Alternative two that it doesn't - it virtually doesn't
ratify anything. So that doesn't work either. So then the third
option we have before us is exactly as you've pointed out going
back to the original, making some - an amendment to that, I guess
and then moving it on to the Finance Committee. Is that correct?
CHAIRMAN LEMAN:
That is correct.
SENATOR LINCOLN:
O.K. I understand what we've got in front of us, now.
CHAIRMAN LEMAN:
I would propose that option would be to take section one in
version F and it would replace section one in the original bill and
I believe that would accomplish the same thing. That's the fall
back position.
Senator Taylor, do you wish to renew your motion to adopt
version G as the committee substitute before us?
SENATOR TAYLOR:
I think it's still before you.
CHAIRMAN LEMAN:
It is before us. Is there any other committee discussion?
SENATOR FRANK:
I frankly would prefer version F or alternative one and try to
get the information from BP as to what their concerns are with
resident hire. I think that my personal concern is that we have
strong language for resident hire. I'm not sure that this language
is strong enough, but I'd like to get into that issue. The Alaska
contractor issue I see as a separate issue. If enough of those
companies come forward and say we're not concerned about that, I
could probably say o.k.
If, you know, if I don't really have a problem with the
sanctioning issue. If they don't go forward, they don't go
forward. I'm not that concerned about that. I think they want to
go forward. I think we want them to, you know, if we do it, I
think they'll have economic motivation to go forward. So I'm not
that concerned. I'm not hung up on that. My concern is that we
analyze the deal from an economic standpoint and make sure that the
State's interests are well protected. They have offered a greater
royalty, a supplemental royalty. I haven't really made up my mind
if that's adequate. It may be.
And then the Alaska hire issue is important. It's important
to my community. I want to make sure that we've got something that
will work in that regard. I think that the version, quite
honestly, that is alternative two is not productive. I don't know
what will happen. I think that we may not appreciate this thing
being dropped in our lap, but it has been dropped here, and I think
that many of us were concerned last year about having legislative
approval for some of these deals. And to suggest now that we don't
want that responsibility, I think, is contrary to that and if we
don't have enough information to approve it, we shouldn't approve
it. If we are confident it's a good deal for the State or an
acceptable thing for the State, then we should approve it.
So I would prefer to move, if we're going to move a bill
today, that we move out the alternative one, move it to the next
committee. I believe that's Finance. And not move the other one.
Now, if we're not ready to move a bill and want to do some
further work, I would be fine with that, too. I think we can do
productive work on the Alaska resident hire issue, try to work with
BP on language that will be effective. I'd like to hear from
Department of Labor as to how they enforce Alaska hire as it is.
And learn a little bit more about that. That's my long winded
position.
CHAIRMAN LEMAN:
Further discussion before we take the vote?
SENATOR TAYLOR:
Just in closing on my motion. The State has entered into a
previous agreement similar to this involving the same type of
leasing proposition. They didn't need legislative authority or
blessing at the time. I don't believe we're sitting here today...
SENATOR FRANK:
Why don't we just let it die in committee then?
SENATOR TAYLOR:
I appreciate his comment. I think it is very valid. I really
do and that may end up being an alternative and it certainly is an
alternative. And I think some people are probably considering it.
I don't think we need to be involved in this other than for
political coverage. And had I heard any other words than the words
that I've heard from our lawyers that we're only here because it's
prudent to be here and I think once they asked the legislature to
involve itself in this transaction, both parties must be willing to
stand back and allow us to become players in the process. And if
they're not willing to allow us to become players in the process,
then we're going to be stonewalled by both the administration and
by BP, then the only alternative is either to bless this thing over
which we have no control or to be blamed for being the ones that
killed the proposition. I don't like either of those options.
That's why I felt that this one was a better response at this point
- was to say we've reviewed it and we're not taking a position on
it. And I don't want - out of that - for people to imply that
we're either opposed to it or supportive of it. That's
specifically is the last paragraph. And if we're not going to be
allowed to participate, I think that's the only thing we can send
them, in all honesty. If others feel we can participate, and that
somehow out of this negotiated process we may be able to strengthen
provisions that many of our constituencies are concerned about,
then I'd be willing to go forward with that also. I was just
hoping to get us off dead center and move the process along.
SENATOR LINCOLN:
Mr. Chairman, I hear rustling on the teleconference here. Can
you tell me who else is on line. Is there somebody else that we
said we were going to hear testimony from folks, I'd like to know.
CHAIRMAN LEMAN:
I'm not aware that anybody else is on line waiting to testify
on this. I haven't received notification of it.
SENATOR LINCOLN:
Question.
CHAIRMAN LEMAN:
We're ready for a vote. There's objection to the motion. All
in favor of adopting version G.
Senator Pearce.
SENATOR PEARCE:
Last year we passed 207 which some of us like better than
others of us. As part of 207, however, one of the things that we
did specify before there could be a royalty reduction in 38.05.180,
probably 1(c) little i was that after much tinkering in the Senate
Finance Committee was that the mechanism has to provide that the
value of the potential revenue increase that resulted from the
action had to exceed the value of the potential revenue losses.
And then we went on to say in the next subparagraph that in
addition to the royalty percentage adjustment that a further
adjustment based on projected rate of volume from the field could
be included and I personally think in this case that if asked if I
am going to accept the agreement that was negotiated between the
Commissioner and the company, I think it is inadequate because it
doesn't include a volume adjustment in case the field is much
larger than what is predicted in this on the table.
I am willing to vote to neither approve or disapprove it and
let the Governor take his chances and I, frankly, don't see the
legal problem with that. But I'm not going to vote for anything
that's on the table for that very reason. I think that the State
stands to leave a substantial amount of money beyond the $4 million
that is clearly on the table if the field is larger than is
predicted by the company. We have no way to look at the data and
figure out whether that makes sense or doesn't make sense.
So, that's why I thought G was a possible alternative.
SENATOR FRANK:
I have just a little response to that. Though - that may be
true that the agreement isn't satisfactory in regards to upside
potential, but I don't feel comfortable about just washing our
hands of it and letting the Governor take his chances. I think the
Governor has made his call and he supports it. And I think that if
we don't do that, if we do nothing, I think the Governor will go
forward, probably, and who knows what the public opinion will be,
but I think we will have missed our opportunity to take our
responsibility. It's been not only granted to us by the
constitution, but in this case, given to us by the Governor. And
I think we should exercise it, make a judgement call on the issue,
and then see if it's still an attractive deal.
I think we should approve it on terms that we think are
adequate and right now they've said let's take it or leave it and
I think it's very appropriate for us to say, well, these are the
terms under which we would approve it. Because we're being asked
to approve it. And I get the sense that there isn't enough support
to approve it without an amendment and so I think we should, even
though the company doesn't appreciate it or want us to do it, I
think it's incumbent upon us to say if we don't think it's good
enough or right, that we should say these are the terms under which
we would.
SENATOR LINCOLN:
Question.
CHAIRMAN LEMAN:
The motion is for the adoption of version G, Chenoweth,
4/24/96 version. It is the three page version. There was
objection. Please call the role.
SENATOR HALFORD:
Yes.
SENATOR TAYLOR:
Yes.
SENATOR LINCOLN:
No.
SENATOR PEARCE:
Yes.
SENATOR FRANK:
No.
CHAIRMAN LEMAN:
No. Three, three, the motion fails. Do I have a motion to
adopt version F.
SENATOR FRANK:
So move.
CHAIRMAN LEMAN:
We have a motion before us to adopt version F.
Senator Taylor.
SENATOR TAYLOR:
I thought from the Chair's previous indication that you had
intended to drop back to the original.
SENATOR LINCOLN:
That's what I thought, too.
CHAIRMAN LEMAN:
We can do it in this order and my intention would be that that
would be the third. If this fails, we would go to that as the
third vote.
SENATOR PEARCE:
What does F do?
CHAIRMAN LEMAN:
F is the version much like we distributed last week except it
takes the findings of the committee out and creates a separate
document which I believe we can all agree on those. It also takes
out the word irrevocable. It takes that out in two places. It
makes a slight change to the Alaska hire provisions, but it
accomplishes the same thing.
SENATOR PEARCE:
So it still changes the agreement?
CHAIRMAN LEMAN:
That is correct. It does change the agreement.
SENATOR PEARCE:
And the effect of that if it changes it, according to the
testimony is that it kills the deal.
SENATOR FRANK:
I don't know that they said that today. He said he was going
to get back to us with the concerns they had about the Alaska
resident hire. I guess the way I look at it is that it's the law
and they don't have to follow the law? I mean I don't know. Maybe
their response is they have to follow the law anyway, so it's
inoperative and then, at least for myself, I said I was willing to
listen to the testimony from the companies likely to work on it and
if they're not interested in it, I guess, I don't think we're going
to hear from workers - that no, no, don't worry about putting in
the resident hire language. We don't care. We're confident. I
don't know that we're going to hear from the majority on that. So
I think that's probably the sticking point for me. But I'm willing
to consider taking out the company stuff if we get these letters
that we're hearing about from Alaska Support Industry and others
that they don't want this language in there. That's something that
we should consider separately. And then the other issues - the
sanctioning issue. Maybe we don't need to have that. That was
something I don't fully understand, perhaps. So, I think, yes, we
may put out a document that is different, but I think that's more
appropriate than just saying we neither approve or disapprove and
we don't do anything.
CHAIRMAN LEMAN:
Whatever version we adopt would be available for further
amendments and I understand and believe that there are some
amendments that are already prepared that could be offered to that
version and you would be welcome to offer other amendments to mark
it up.
SENATOR HALFORD:
Just with regard to the specifics in this version, for
example, page 12, it says paragraph 31 is replaced in its entirety
as follows and then it adds a paragraph. What is the difference in
paragraph 31 originally and this fabrication question where it says
lessee agrees to utilize on-site production for processing modules
for development and basically the other measure on the same thing
is to build the modules in Alaska. What's the difference, just in
real short terms, between that and what was in the original
agreement?
CHAIRMAN LEMAN:
Mr. Eason, would you cover that? I didn't bring my marked up
copy of the original up with me and I probably should have. Could
you step through and explain the differences.
MR. EASON:
Mr. Chairman, members of the committee, in order to do that
we'll need not a marked up copy of the original bill, but we will
need the original lease form which is a 1980 lease. And I believe
you have a copy.
SENATOR HALFORD:
I mean I'm looking for just a - I can go back and look it up
and do a side by side, but I thought there would be a fairly simply
couple of sentences that summarized the differences.
MR. EASON:
Unfortunately, I think Senator Pearce may have added some
documents here as time went on....We're in luck.
CHAIRMAN LEMAN:
I might note one other change that I failed to mention
earlier, but in this paragraph we previously said that this was in
concert with BP's assertions that it would not be claiming any
money from the State of Alaska or any of its contractors for doing
preparing for fabrication work. We put in there that no State
monies would be used to which the response was does that mean we
couldn't get bonding through AIDA, you know, revenue bonds, and
that was not the intent to deny that. But, so the language there
has been changed. It says BP Alaska will reimburse the State for
any public funds expended to prepare, develop, or operate any sites
or facilities necessary for fabrication. I think that accommodates
those contractors who were concerned about that and it clearly
would allow AIDA bonding and those types of things, but they would
just need to pay off the revenue bond.
MR. EASON:
Mr. Chairman, members of the committee, paragraph 31 in the
1980 prelease form reads as follows: Local Hire: The lessee is
encouraged to hire Alaska residents, to the extent they are
available and qualified, to perform work done in Alaska in
connection with this lease. The lessee shall submit annually to
the Director, Division of Minerals and Energy Management, for
transmission to the Alaska Department of Labor, a report that
details the specific measures the lessee and its contractors and
subcontractors have taken or are planning to take to recruit
qualified Alaska residents for available jobs, and describes the on
the job training opportunities. The report must also include
statistical data concerning the number of residential personnel
hired within the past year for Alaska opportunities.
SENATOR HALFORD:
All of the fabrication questions are totally absent in the
area being amended.
MR. EASON:
Mr. Chairman, Senator Halford, that's correct. There's no
mention of fabrication or any requirement for fabrication in the
original lease forms. As the record established, I believe, in
testimony the parties, DNR, and BP negotiated an amendment to
paragraph 31 of the 1983 lease forms and its parallel provision in
the 1980 lease forms which did include language which, I believe,
their transmittal - the Governor's transmittal letter - suggested,
in fact, required in-state fabrication of modules and development
of, in this State, industry. And again, I believe, one of the
findings that the committee has made, as I recall, that based upon
the testimony the provisions of the fabrication requirements, as
well as the local hire, or Alaska hire requirements as originally
drafted in the Governor's bill were unenforceable. And the
amendments that have been done in this CS and version alternative
one, pardon me, as well as the very similar ones in the CS the
Committee adopted earlier for work do expand on and make specific
the requirement, the obligation, as a mandatory obligation to
construct facilities, to install them, and the reason that was
done, Mr. Chairman and members, is because of the apparent
importance that was attached to those obligations and those
benefits in the negotiations between the parties.
CHAIRMAN LEMAN:
I might note that the Governor's transmittal letter talked
about fabrication within Alaska and so that was being portrayed as
being a benefit of these modifications and so...
SENATOR TAYLOR:
I just wanted to follow up on that briefly. I thought I heard
you use the words, and this was one thing as I was reading through
the new amended version, that we've got reports going to the
Presdient of the Senate, Speaker of the House, they have to tell us
how they're doing it; the Division of Oil and Gas gets a report.
How would we enforce these? I mean these people are going to
invest so many hundreds of millions of dollars to develop this oil
field and do we take the field back if they haven't hired enough
folks? How do we enforce it? If they didn't hire enough Alaskans?
I mean whenever I look at one of these things, I'm always concerned
about how you do make the thing work and I don't know what
enforcement provisions we would have.
MR. EASON:
Mr. Chairman, Senator Taylor, one alternative, certainly in a
document like this is to specify the performance standards, the
measurements that you expect and require monitoring and compliance
with those standards. One of the things that was done in the
course of the testimony was representations were made as to the
number of hires that were likely to result both as temporary hires
and as permanent hires after construction of facilities and in
addition there was represents about the dollar amount that would be
expended instate for the construction and fabrication of modules
and their installation.
One approach, if someone is interested in tying this to a
performance standard, that of course the committee could consider,
is to define some level of employees and some level of investment
and take either that full amount or some percentage of it that you
wanted to see as actually as invested and spent in the State and
establish that as a contract term. That's one alternative.
Short of that I think that the best we can do, at least I can
say the best I would feel I could do short of doing that, if it
were an obligation I was entering into in an agreement and I was
entering into it on a personal level, is to take the steps we have
taken in the drafting of the original CS and version, alternative
one, and that is to at least make the language comport with what
was represented to be intent of the parties and that is to make it
shall, when the language formally was shall use best efforts and to
hope with the language that precedes that saying that whatever you
do in the implementation of this agreement, it has to be in
conformance with valid federal and state laws and hope for the
best.
SENATOR TAYLOR:
That's an awful long answer to whether you can enforce it or
not. We were talking about how it was unenforceable. I thought
you had used that phrase. Is this more enforceable than the
unenforceable provision that was there before?
MR. EASON:
Mr. Chairman, Senator Taylor, I will make a further disclaimer
for the record. I am not an attorney and I think that you would
need to consult with your legal services people for an answer
that's more definitive. I do believe, again based upon
representations that have been made on the record, that there was
some discussion of this issue in the negotiations among the parties
and you may want to explore further whether or not there were
drafts, as I recall there probably were drafts, of alternative for
these paragraphs and you might want to ask about what the State
felt it might be able to enforce and how it felt it might get more
enforceability compared to where it ended up in the negotiated
paragraphs.
SENATOR TAYLOR:
Did I misunderstand you to say that this provision was not
enforceable?
MR. EASON:
Mr. Chairman, Senator Taylor, the provision, I think the
comments I made were, as far as the enforceability, was that both
the Department of Law and the Department of Natural Resources
testified that the language of their original bill, 318 as
originally submitted, is not enforceable in regards to Alaska hire
and construction of fabrication modules.
SENATOR TAYLOR:
I guess that was my understanding also cause I was here when
they gave that testimony. It seems as though we can tie a lot of
whistles and bells onto this thing, but if none of them are
enforceable, they're not going to have much effect or if, in the
alternative, some of them are enforceable, why would you invest
$300 million, or whatever this thing is going to be, with the
possible chance occurring in the future that somehow you have
violated one of these intent standards and you could lose your
entire investment. There seems to be two sides to that concern and
why would we want to pass a bill that's unenforceable in the first
place.
SENATOR LINCOLN:
This was the reason I put together this letter of intent and
I know that that's unenforceable as well, but the weasel words, as
I call them, I still read that in here that to the extent they are
available and qualified and they may, that when necessary they
shall employ and train when necessary residents of Alaska, recruit
qualified Alaska residents for available jobs and so there's still
a lot of areas in here that I have concern with and I don't think
that this is enforceable and unfortunately the amendment that I
have that would have put it in, directly into the bill, it was
unenforceable. And this does not still say what a resident is.
And that's why I clearly laid out what the term resident that we're
implying would mean. But in here resident still could mean
somebody who qualifies for a permanent fund, somebody who qualifies
for whether it's a 30 day, 60 or a year. So I don't believe
there's a fear here on residency and the use of businesses. I
don't know why BP would be concerned about having this in here
because it really doesn't say much. It doesn't have the meat that
I think that we've heard over and over again the concern about the
local hire and utilizing Alaskan businesses.
SENATOR FRANK:
Well, I think you could make it enforceable and I have no
experience in writing contracts, but it seems like if you could
measure the results and there's been some discussion about having
measurable data, then I don't think you would have a situation
where you'd just lose your investment. I guess I would envision
some adjustment to their royalty provision, if that's what we're
talking about. We're talking about a net profits, getting away
from a net profit share, going to a supplemental royalty, then I
would probably have something in there if it didn't meet the
thresholds, that your royalty was adjusted and so there was a
financial incentive to achieve those goals. Something like that.
CHAIRMAN LEMAN:
The question before us is the adoption of version F. Do we
have further discussion on the motion? Are we ready for the vote?
Is there continued objection to version F?
TAPE 96-64, SIDE A
SENATOR FRANK:
Yes.
SENATOR HALFORD:
Yes.
SENATOR TAYLOR:
No.
SENATOR LINCOLN:
No.
CHAIRMAN LEMAN:
Yes.
SENATOR PEARCE:
Yes.
CHAIRMAN LEMAN:
The vote is four to two and the motion carries and we have
before us version F. Do we have any amendments by committee
members? I believe that there were some prepared that somebody
wanted and whoever wants, offer those.
SENATOR LINCOLN:
Mr. Chairman, I'm not sure how the letter of intent is going
to fit into alternative one now, but if there is some...I think the
residency question still fits in there and perhaps even what the
intent is for Alaska contractors and Alaska firms might also fit in
there and I do apologize if I can just make a technical correction
under D that was in question. It should have read under D that
qualify under one and then delete cc. Then it would read one,
three, and that should have been A and where the C is 1A, B, and C
and that coincides with those that are stated above.
So, Mr. Chairman, since it is a letter of intent, I would move
the letter of intent for SB 318, alternative 1 or F version and
then since it is a letter of intent, I think it can be modified
then to conform to that particular version and I so move.
CHAIRMAN LEMAN:
I'll just...Is there any objection to the adoption of the
letter of intent to accompany this version of the bill? Hearing
none, the letter of intent will accompany it. I'll just note that
I went through today and made the changes I thought were necessary
to make it conform to this and if you or others find that it
doesn't conform, I believe we could change it either in the next
committee or we can change it, maybe, before it gets to the floor.
O.K. we have a bill before us and a letter of intent. Just
before we do an at ease, I'd like to just - if we could adopt the
Findings of Fact of the Senate Resources Committee to accompany
this. Could we have a motion to adopt these findings.
SENATOR HALFORD:
I would so move, but what are we doing with them?
CHAIRMAN LEMAN:
Well, this becomes then part of our committee record and I
would suggest that we print them in the Supplemental Journal and
they are referenced in this version of the bill. They become some
of the basis for any decisions that we make.
SENATOR HALFORD:
I would move that we adopt them.
CHAIRMAN LEMAN:
Is there any objection? O.K., the Findings of Fact are
adopted and we'll take a brief at ease.
We're back on the record and we'll call the meeting back to
order. I'm going to set aside SB 318 for just a few minutes and
take up HB 394...
HB 394 SHALLOW NATURAL GAS LEASING
HANS NEIDIG, Staff to Representative Scott Ogan, said the purpose
of this bill is to encourage development of shallow natural gas as
an alternative fuel source in rural Alaska. HB 394 accomplishes
this by relieving the tremendous monetary and regulatory burdens
that currently plague independent gas developers in Alaska.
He said that this is important to the State because rural Alaska
has numerous problems in dealing with remediation of fuel tanks.
SENATOR LEMAN asked Representative Ogan if he objected to the
changes in the proposed CS.
REPRESENTATIVE OGAN said he didn't have any objections to the
changes. He added the State spends $20 million per year on the
power cost equalization. There is an approximately $500 million
problem with bioremediation although we are not solely responsible
for that.
EARL AUSMAN said he does a lot of work in rural communities on
energy related matters. He strongly supported this bill saying it
could have long reaching positive effects on Alaska, especially
people in rural Alaska.
DAVE LAPPI strongly supported HB 394 saying it is good for Alaska,
especially rural Alaska and the independent oil and gas industry.
He thought this would make an impact on the State budget with the
oil spill problems we have in rural Alaska. He thought it would
help avoid future oil spills by not barging diesel fuel up and down
rivers in the middle of summer (because of flooding).
JAMES HANSEN, Division of Oil and Gas, said he thinks that shallow
gas leasing is a good idea, but they feel a new program like this
needs to be examined to insure that it does what they want it to.
They want a straight forward process, something that is easy,
simple to implement, and not encumbered by unnecessary
administrative bureaucracy. He emphasized that it needs thorough
examination. He said it would be good to not have to draft new
regulations for this because that is a tremendous process in
itself.
REPRESENTATIVE OGAN noted that Mr. Dave Hutchins from the Alaska
Rural Electric Association wanted to express his support of the
bill, but he had to leave.
SENATOR LEMAN said they would set aside HB 394 and take it up again
on Friday.
SENATOR LEMAN asked Mr. Ausman if he had any objections to the
changes proposed in the CS. MR. AUSMAN said he had no objections
to the changes.
SENATOR LEMAN announced an at ease and called the meeting back to
order at 8:00 p.m.
CHAIRMAN LEMAN:
We'll take up SB 318. We have, if we can remember the F
version before us. Are there any amendments by committee members
to SB 318?
SENATOR HALFORD:
I would move the bill with individual recommendations and the
accompanying letter of intent from Senator Lincoln, and the
findings.
SENATOR LINCOLN:
I object, Mr. Chairman.
CHAIRMAN LEMAN:
There's objection. Would you like to speak to your objection?
SENATOR LINCOLN:
Well, Mr. Chairman, the only reason I'm objecting is that I
thought we were going to get back to the original version of it and
I guess that was my understanding that we were going to do that.
I think we should have addressed the original version rather than
this one. And that's the only reason I'm objecting.
CHAIRMAN LEMAN:
I'll just say that when I was counting votes, I thought that
you were one who wanted to see this and from what you told me
before and I was just a little bit surprised.
SENATOR LINCOLN:
Well, Mr. Chairman, we did not have the testimony at that time
and after listening to the testimony, I'm not sure we're going to
get to this point as it is. So I didn't hear all of the other...I
think one of the members of this committee said well, let's talk
about this a little bit more. Let's hear what they've got to say
and get some more information back on it, but if that's not the
intent, then I would object.
SENATOR TAYLOR:
Just briefly, I had announced before I made the motion to
adopt the three page version, but I didn't believe the votes
existed in the committee for the original bill or I would have
moved that. I still don't think it's necessary, but for that
reason I would join you in that objection. I think that we may end
up finding ourselves in a more difficult pot of water than we're in
right now. I applaud the effort. I think...but I don't think the
parties involved will allow the legislature to participate. So
that's the only comments I have.
CHAIRMAN LEMAN:
I didn't think there were four votes in this committee to move
the original version and, you know, that would have been the next
position. Were there four votes to move the original version?
SENATOR LINCOLN:
But, Mr. Chairman, you were talking about not only just the
original version, but some amendments to the original version.
CHAIRMAN LEMAN:
Original version with new section 1 with the 14 findings.
SENATOR LINCOLN:
That's right.
SENATOR HALFORD:
Whatever version is before it, I adopted...
SENATOR TAYLOR:
We have adopted a version...
CHAIRMAN LEMAN:
We have a motion to report CSSB 318 (RES) F version. Is there
further objection to the motion.
SENATOR PEARCE:
Yes.
SENATOR FRANK:
Yes.
SENATOR HALFORD:
Yes.
SENATOR TAYLOR:
No.
SENATOR LINCOLN:
No.
CHAIRMAN LEMAN:
Yes. Motion carries four to two. Is there any further
business to come before us? So CSSB 318 (RES) is reported from the
Resources Committee and is on its way to the Finance Committee.
CHAIRMAN LEMAN adjourned the meeting at 8:10 p.m.
| Document Name | Date/Time | Subjects |
|---|