Legislature(2001 - 2002)
04/17/2002 03:35 PM Senate RES
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES COMMITTEE
April 17, 2002
3:35 p.m.
MEMBERS PRESENT
Senator John Torgerson, Chair
Senator Gary Wilken, Vice Chair
Senator Rick Halford
Senator Ben Stevens
Senator Kim Elton
Senator Georgianna Lincoln
MEMBERS ABSENT
Senator Robin Taylor
COMMITTEE CALENDAR
SENATE BILL NO. 360
"An Act establishing additional requirements for the
consideration of applications under the Right-of-Way Leasing Act
for an Alaska North Slope natural gas project, authorizing
expeditious priority treatment of all applications under that Act
and under other relevant state laws for issuance of a right-of-
way lease for that project, authorizing the commissioner of
natural resources to act to modify the terms of certain state oil
and gas leases related to the project and to act, with
legislative approval, to waive, reduce, or defer the collection
of royalties due the state, and authorizing the commissioner of
revenue to act, with legislative approval, to waive, reduce, or
defer the levy and collection of taxes by the state and
municipalities under the oil and gas exploration, production, and
pipeline transportation property tax related to the project,
authorizing the Alaska Railroad Corporation to provide financing
for the acquisition, construction, improvement, maintenance,
equipping, operation, or expansion of the project and related
facilities for the transportation of natural gas within and
outside the state by others and the corporation's issuance of its
bonds to finance the project and facilities, and limiting
consideration of judicial challenges to decisions made with
respect to that project under this Act; and providing for an
effective date."
MOVED CSSB 360(RES) OUT OF COMMITTEE
SENATE CONCURRENT RESOLUTION NO. 30
Relating to Alaska Salmon Day.
MOVED CSSCR 30(RES) OUT OF COMMITTEE
CS FOR HOUSE BILL NO. 206(RLS)
"An Act relating to a vessel-based commercial fisheries limited
entry system for the Bering Sea Korean hair crab fishery and for
weathervane scallop fisheries, to management of offshore
fisheries, and to the definition of 'person' for purposes of the
commercial fisheries entry program; and providing for an
effective date."
MOVED CSHB 206(RLS) OUT OF COMMITTEE
PREVIOUS COMMITTEE ACTION
SB 360 - See Resources minutes dated 4/15/02.
SCR 30 - See State Affairs dated 4/9/02.
HB 206 - See Resources minutes dated 3/20/02.
WITNESS REGISTER
Mr. Harold Heinze
Consultant to the Alaska Legislative Council
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on 'Legislator Attitudes on Issues
Related to North Slope Gas Development.'
Mr. Patrick Coughlin
Consultant to the Senate Resources Committee
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SB 360.
Ms. Sara Nielson
Staff to Senator Ben Stevens
Alaska State Capitol
Juneau, AK 99801-1182
POSITION STATEMENT: Commented on SCR 30.
Ms. Barbara Belknap, Executive Director
Alaska Seafood Marketing Institute (ASMI)
311 North Franklin Street, Ste 200
Juneau AK 99801
POSITION STATEMENT: Supported SCR 30.
ACTION NARRATIVE
TAPE 02-20, SIDE A
Number 001
CHAIRMAN JOHN TORGERSON called the Senate Resources Committee
meeting to order at 3:35 p.m. Senators Wilken, Halford, Stevens,
Elton and Chairman Torgerson were present. Chairman Torgerson
announced the committee would first hear a report by Harold
Heinze on some work he did for the Legislative Council.
MR. HAROLD HEINZE told members he completed his contract with the
Legislative Council in which he conducted a series of interviews
with about half of the legislature to identify areas of consensus
and areas of non-consensus related to a broad array of issues
surrounding North Slope natural gas. The first eight pages of his
report contain a summary of the results; the last eight pages
contain an appendix that represents the briefing package he used
to interview individual legislators. He noted page 4 contains
the areas of legislative consensus. He said the thing that struck
him is that everyone understands both the importance of North
Slope natural gas and the importance of the decisions that need
to be made by the legislature this year and into the future.
There was a very strong feeling in the legislature that a more
pro-active posture is needed. He said:
Quite frankly, most legislators felt that things were
kind of being pushed and tugged around the legislature
rather than the other way around and recognizing that
the legislature is the policymaker in this very basic
resource issue, folks thought it maybe ought to be the
other way around.
He identified four areas that were broadly accepted. On page 5,
he identified four areas that had a broad range of legislative
opinion. He found it difficult to find a consensus on those areas
based on the interviews he conducted.
MR. HEINZE told members the first interview question that seemed
to delineate people's viewpoint was: What are the producers up
to? He stated:
Some people felt that this was a big negotiation over
the last several years and on into the future. Some
people felt that the project had been studied, found to
be marginally economic and what you were seeing was a
reluctance to make a business decision in that marginal
world.
There was a very broad range of opinion as to what
benefits should drive Alaska's decision making,
especially on the routing. Back in the appendix, a
portion of that, pages A4 and A5, represent a
delineation of benefits and impacts I had made up and
those were actually lifted from a legislative report
that had been done in 1983 looking back on the TAPS
experience and attempting to delineate at that time
both the benefits and impacts of what had happened
during the TAPS period.
Some legislators thought a big part of the pipeline would come in
terms of the construction impacts on the economy in the
generation of work and money during that period of time. At the
other extreme were people who really felt the whole payoff of the
whole idea would be in the generation of other industries that
would use the natural gas and create jobs and industry here in
Alaska. What that told him was that each legislator would be
looking at different lines on the "benefit statement" so it is
important that all of those lines be on the page.
He said a regional difference was apparent because of the more
direct interaction in Fairbanks with the gas line. The
legislators from that area took a much more aggressive approach
to almost every issue related to the gas line.
Regarding how hard the legislature should push the project, there
was a sense of urgency, but it was balanced with a strong feeling
that the private sector needs to be given a chance to work the
issues. He said at the time he did the interviews, he presumed
that the initiative would qualify. He discussed it with every
legislator he interviewed and did not ask what they thought
should happen. He said the legislature has the opportunity during
this session to deal with the route issue through legislation.
He said that pages 6 and 7 represent his attempt to translate the
areas of consensus and non-consensus into suggestions that are
strategy oriented for the natural gas issue.
His first suggestion is that the strategy needs to focus on
defining what information the legislature needs to make
decisions. He didn't think the legislature could reference an
exact list at this point of what they need to know before making
a decision. Defining that information would be a very proactive
step. Answering those questions is the responsibility of the
sponsor, whoever is putting forward a project. If they cannot
answer those questions, their project probably isn't ready to
move forward.
Communication is a paramount issue. While there has been a
tremendous amount of information that has come from all of the
committee hearings, it is not a process that necessarily fosters
communication with other legislators or with the public at large.
He urged them to consider other efforts in addition to the
hearing process to keep improving the communication.
MR. HEINZE said that finally, it seemed that legislators had the
patience to give the private sector one more try even if the
producers feel they cannot move forward on the project. He
thought most legislators would like to see at least one group
have the chance to move the cause forward. He said he would be
happy to answer questions.
SENATOR ELTON said he noted the report says, on page 6, that if a
project proponent can't answer the questions, they're probably
not ready. He said he sometimes feels that they can answer the
questions, but are reluctant to and asked how legislators can
tell the difference.
MR. HEINZE replied, as an example, in the course of the hearings,
there has been concern expressed by a lot of communities about
how they would fit into the logistics plan. They question where
the pipe will be brought in and how it would be moved. He noted,
"If someone cannot answer that question, I think it's pretty
common sense they have not studied the project to a depth that
they have a project." He thought it comes down to the level of
detail and how reasonable the questions are. He continued:
Training plans, logistics plans, those kinds of things,
I think are very reasonable requirements that you may
want to set and, once set, I would expect a proponent
of a project to tell you that information if they want
your support.
CHAIRMAN TORGERSON thanked Mr. Heinze for his work and announced
an at ease at 3:47 p.m.
SB 360-ALASKA NATURAL GAS PROJECT ACT
CHAIRMAN TORGERSON called the meeting back to order at 3:50 p.m.
and announced SB 360 to be up for consideration. He said he
wanted to go into the details today. He announced that Bill
Britt, Mark Meyers, and a representative of the Alaska Railroad
Corporation were available to answer questions. He said they had
crafted nine or ten amendments on different subjects so that the
committee could debate each subject as the amendments are
introduced. He noted he would have Mr. Coughlin review each
amendment for the committee.
SENATOR WILKEN moved to adopt Amendment 1, L.1 Chenoweth, which
reads as follows:
22-LS1649\L.1
Chenoweth
10/30/02
A M E N D M E N T 1
TO: SB 360
Page 8, line 21, following "commissioner.":
Insert "(a)"
Page 9, following line 6:
Insert a new subsection to read:
"(b) For the purpose of determining under (a) of this
section that, in an application pending on the effective
date of this Act for a lease under this chapter for an
Alaska North Slope natural gas project, an applicant has
complied with the requirements of AS 38.35.240 by obtaining
all certificates described in AS 38.35.240(b) - (d), the
commissioner
(1) shall consider the application to be in
compliance with the requirements of that section if the
applicant has filed for all certificates described in
AS 38.35.240(b) - (d) and has included, with or as part of
the filing for the certificates, the applicable plans,
studies, and stipulations described in that section; and
(2) may not decide that an application determined
to be in compliance under (1) of this subsection is no
longer in compliance with the requirements of AS 38.35.240
unless a certificate described in AS 38.35.240(b) - (d) is
denied by the applicable authority."
Page 13, line 15, following "schedule.":
Insert "For the purpose of determining under this subsection
that, in an application pending on the effective date of this Act
for a lease under AS 38.35 for the pipeline project described in
this subsection, an applicant has complied with the requirements
of AS 38.35.240 by obtaining all certificates described in
AS 38.35.240(b) - (d), the agency responsible for making the
consistency determination
(1) shall consider the application to be in compliance
with the requirements of AS 38.35.240 if the applicant has filed
for all certificates described in AS 38.35.240(b) - (d) and has
included, with or as part of the filing for the certificates, the
applicable plans, studies, and stipulations described in that
section; and
(2) may not decide that an application determined to be in
compliance under (1) of this subsection is no longer in
compliance with the requirements of AS 38.35.240 unless a
certificate described in AS 38.35.240(b) - (d) is denied by
applicable authority.
CHAIRMAN TORGERSON announced an at-ease from 3:52 to 3:54 p.m.
He then explained that SB 360 has provisions that require anyone
who wants to take advantage of the benefits offered, the limited
judicial review, the railroad or royalty reductions, etc., must
provide a certificate for local hire, instate access and shipping
royalty gas. However, inadvertently, he was putting a larger than
expected burden on the pipeline companies that have submitted and
are currently working on a application. Amendment 1 is transition
language so that they are still required to get the certificates,
but they don't have to get them right away.
MR. PATRICK COUGHLIN, consultant to the Senate Resources
Committee, said the intent is that the companies that have
already filed their application could get the benefits merely by
filing for the certificate. They would be deemed in compliance
unless ultimately those certificates [indisc.] and could carry on
with their work.
CHAIRMAN TORGERSON said there was some fear that the
Administration might read it a little differently and stop
everything until a certificate was issued.
SENATOR ELTON restated for clarity:
This changes none of the benefits that may accrue. It
only allows those who already have a work in progress
before the department to take advantage of it.
CHAIRMAN TORGERSON said it deems them in compliance until they
come in compliance before they're turned down for not being in
compliance. They have 90 days to get that done in the bill
already. He asked if there was any objection to Amendment 1.
There were none and it was adopted.
SENATOR WILKEN moved to adopt Amendment 2, L.3 Chenoweth, which
reads as follows:
22-LS1649\L.3
Chenoweth
10/30/02
A M E N D M E N T 2
TO SB 360:
Page 11, line 10:
Delete "a new subsection"
Insert "new subsections"
Page 11, following line 21:
Insert a new subsection to read:
"(c) The corporation may retain any consideration in
excess of the consideration necessary to meet the payments
and to maintain the reserves that are required by (b) of
this section."
Page 12, line 9:
Delete "The"
Insert "Except as provided in AS 42.40.630(c), the
CHAIRMAN TORGERSON explained that on page 12, line 9, a provision
in the bill said that the proceeds from the sale of the bonds can
only be spent by other than the corporation for the Alaska gas
pipe line. He noted:
It's anticipated that the corporation would, in fact,
probably make some money on this, depending on the
negotiations that they do when they enter into contract
negotiations or bond negotiations with the companies.
But, in any event, there's probably going to be some
amount above and beyond the amount that is needed for
the actual administration of the fees. This makes it
clear that the corporation can keep anything in excess
of what it required to maintain the reserves and so
forth.
SENATOR ELTON restated for clarification that this allows them to
retain only what they negotiate between the project sponsors and
themselves.
CHAIRMAN TORGERSON said that is a fair way to put it. He said
there will be a fee associated with the administration of the
bonds and more than likely, the Railroad may or may not get more
than the actual costs. He wants the Railroad to be able to
negotiate to the best of their ability. He asked if there were
any objections to adopting Amendment 2. There were no objections
and Amendment 2 was adopted.
SENATOR WILKEN moved to adopt Amendment 3, L.4 Chenoweth, which
reads as follows:
22-LS1649\L.4
Chenoweth
10/30/02
A M E N D M E N T 3
TO: SB 360
Page 2, line 14, following "the":
Insert "exploration,"
Page 3, line 8, following "development,":
Delete "and production"
Insert "production, and transportation"
MR. COUGHLIN explained that Amendment 3 is a technical amendment
to make two corrections. On page 2, line 14, the word
"expiration" was left out and on page 3, line 8, the word
"transportation" was left out.
CHAIRMAN TORGERSON asked if there were any objections to
Amendment 3. There were no objections and it was adopted.
SENATOR WILKEN moved Amendment 4, L.8 Chenoweth, which reads as
follows:
22-LS1649\L.8
Chenoweth
10/30/02
A M E N D M E N T 4
TO: SB 360, as amended by the adoption of amendment 22-LS1649\L.2
Page 4, line 31:
Delete "a new subsection"
Insert "new subsections"
In amendment L.2, page 1, following line 20, insert:
"(ff) The commissioner may not negotiate or take other
action under (ee) of this section unless the project
applicant has met all requirements of AS 38.35.240 and
obtained all certificates described in that section not
later than June 30, 2003."
In amendment L.2, page 4, following line 24, insert:
"(e) The commissioner may not negotiate or take other
action to develop a contract under this section unless the
project applicant, or lessee if applicable, has met all
requirements of AS 38.35.240 and obtained all certificates
described in that section not later than June 30, 2003."
CHAIRMAN TORGERSON explained that Amendment 4 adds a sunset
provision to the bill. Ken Thompson recommended a sunset. The
legislature has always put expiration dates in other gas acts. He
added, "This basically says that this is alive and well until
June 30, 2003."
SENATOR HALFORD moved to change the year 2003 to 2005.
SENATOR ELTON objected and asked if there was a reason they were
predicating it on getting the certificates rather than applying.
CHAIRMAN TORGERSON responded, "The way the bill reads, you can't
get the certificates until you apply."
MR. COUGHLIN added that you can't apply until you get the
certificates, which is at the beginning of the application
process.
SENATOR LINCOLN asked if extending the date to 2005 will slow the
process down because the producers could say they have an extra
three years so they wouldn't have to act until the last year.
CHAIRMAN TORGERSON said he didn't have an answer for that. He
said he was not bothered by 2005, but would prefer 2004 because
it would put a little pressure on the producers.
SENATOR HALFORD said this is a much bigger process than they
thought and 2005 isn't that far away on the scale of things, but
he didn't have a problem with whatever the committee wanted.
SENATOR LINCOLN pointed out that they could go with 2004 and it
would be easier to amend it to 2005 later than the other way
around.
SENATOR ELTON said he would support 2005.
CHAIRMAN TORGERSON asked if there were any objections to
Amendment 4. There were no objections and it was adopted.
SENATOR WILKEN moved Amendment 5, L.9 Chenoweth, which reads as
follows:
22-LS1649\L.9
Chenoweth
10/30/02
A M E N D M E N T 5
TO: SB 360, as amended by adoption of amendment 22-LS1649\L.2
In amendment L.2,
Page 2, line 27, following "incorporated":
Insert "into the contract
(A)"
Page 2, line 28:
Delete "into the contract;"
Insert "; and
(B) for a contract that waives, reduces, or
defers royalty or tax payments, a mechanism to
recapture all or any portion of the royalty or tax
payments that are waived, reduced, or deferred by the
operation of a contract provision if the price of
natural gas increases above the projected price of
natural gas upon which the findings and determination
made under (7) of this subsection are based;"
CHAIRMAN TORGERSON noted that this was another recommendation
from Ken Thompson.
MR. COUGHLIN explained the bill currently provides that the DNR
commissioner could waive, reduce or defer royalty under certain
circumstances so the purpose of this amendment is:
If that reduction, I'll just call of them collectively
a reduction in royalty, were based on a gas price, say
of $3 and the gas price averaged $4 an mcf, this
amendment would require that a mechanism be put in to
place in the royalty reduction to recapture some of
that foregone royalty. It's similar to a provision that
we have in the current royalty reduction bill.
CHAIRMAN TORGERSON said this is a "no-brainer" for him because
they have discussed the severance and royalty schemes with the
Department of Revenue and they all have a sliding scale that
gives up on the low end and recoups on the high end. He assumed
that's what would happen, but there has been concern that if
specific language wasn't put in, someone may not know.
SENATOR ELTON thought they might be inserting it into the wrong
spot.
MR. COUGHLIN explained that this amendment was drafted to an
amendment that would be offered later. "It would really go in the
current bill on page 5, lines 10 - 15…In essence, it would be
inserted as a (c) after (b).
SENATOR WILKEN moved and asked unanimous consent to withdraw
Amendment 5. There were no objections and it was withdrawn.
SENATOR WILKEN moved Amendment 6, L.12 Chenoweth, which reads as
follows:
22-LS1649\L.12
Chenoweth
10/30/02
A M E N D M E N T 6
TO: SB 360
Page 7, line 29, following "by":
Insert "the state or"
Page 7, line 30, following "the":
Insert "pipeline portion of the"
Page 8, lines 2 - 5:
Delete all material and insert:
"(i) the rates for expansion of the
natural gas transportation service are designed to
ensure the recovery, on an incremental or rolled-
in basis, of the costs associated with the
expansion, including a reasonable rate of return
on the applicant's investment;"
Page 8, line 7, following "in the":
Insert "pipeline portion of the"
Page 8, line 7, following "use of the":
Insert "pipeline portion of the"
Page 8, line 10, following "operation of the":
Insert "pipeline portion of the"
CHAIRMAN TORGERSON said this is a technical amendment from the
Administration.
MR. COUGHLIN said that both the Commissioner of DNR and the Chair
of the RCA felt it was appropriate to make some very minor
amendments that attempt to mimic the federal law, which uses the
word "project". In the definition section of SB 360 it is defined
more broadly than just a pipeline and the provisions on page 8
address basically the pipeline. He explained the amendment merely
replaces the word "project" with "the pipeline portion of the
project."
Also, Amendment 6 changes the language on page 8, line 3, from
"transportation service will insure" to "transportation service
are designed to insure". On page 7, the bill as currently drafted
allowed an entity desiring to ship natural gas through the
pipeline to apply for an expansion. This bill would give that
same right to the state. It may or may not be a shipper, but it
has an interest in seeing the pipeline expanded.
CHAIRMAN TORGERSON asked if there were any objections to
Amendment 6. There were no objections and it was adopted.
SENATOR WILKEN moved Amendment 7, L.13 Chenoweth, which reads as
follows:
22-LS1649\L.13
Chenoweth
10/30/02
A M E N D M E N T 7
TO: SB 360
Page 5, lines 1 - 25:
Delete all material and insert:
"(ee) In conjunction with the development and
construction of an Alaska North Slope natural gas project,
as defined by AS 38.35.259, that requires the grant of a
right-of-way lease under AS 38.35 for which the project
applicant has complied with AS 38.35.240 and obtained all
certificates described in that section, the commissioner
(1) may, notwithstanding any contrary provision
in this chapter, negotiate, with the consent of the lessee,
(A) to modify any provision of an oil and
gas lease entered into under this section, except a
provision described in (B) of this paragraph, that
impedes development of the project; and
(B) to waive, reduce, or defer the payment
of all or any portion of the royalty due the state
under this chapter; a waiver, reduction, or deferral of
the royalty due may be made by the commissioner only if
the project applicant, or a lessee that has contracted
with the applicant to ship natural gas through the
project, shows, by clear and convincing evidence, that
construction and operation of the project would not
otherwise be economically feasible; and
(2) shall transmit to the commissioner of revenue
any proposed terms relating to the lease and royalty
developed under this subsection that should be included in a
contract developed under AS 43.56.185."
Page 12, line 15, through page 13, line 4:
Delete all material and insert:
"Sec. 43.56.185. Action by the commissioner to
develop a contract covering certain tax laws; submission to
governor for action; legislative action. (a) In
conjunction with the development and construction of an
Alaska North Slope natural gas project, as defined by
AS 38.35.259, that requires the grant of a right-of-way
lease under AS 38.35 for which the project applicant or a
lessee that has contracted to ship natural gas through the
project has complied with AS 38.35.240 and obtained all
certificates described in that section, the commissioner may
negotiate terms for inclusion in a contract to
(1) waive, reduce, or defer the payment of all or
any portion of the tax levied by the state or a municipality
of the state under this chapter;
(2) make certain adjustments regarding the oil
and gas lease under AS 38.05.180(ee); and
(3) make or amend other terms and conditions that
are necessary to carry out the purposes of AS 38.35.235 or
that are in the best interests of the state.
(b) The commissioner may develop a proposed contract
described in (a) of this section only if
(1) the commissioner has consulted with any
affected municipality, has considered and prepared a report
on the socioeconomic effects of the project on any affected
municipality, and has considered how any affected
communities will provide services required by the project;
(2) the commissioner has considered whether other
jurisdictions in which the project will be located have
granted financial incentives;
(3) the project applicant shows, by clear and
convincing evidence, that construction and operation of the
project would not otherwise be economically feasible;
(4) the commissioner and the project applicant
have entered into an agreement to begin construction of the
project by a date certain; and
(5) the commissioner has incorporated any
proposed terms relating to the oil and gas lease and royalty
developed under AS 38.05.180(ee) into the contract.
(c) If the commissioner develops a proposed contract
under (a) and (b) of this section, the commissioner shall
(1) make preliminary findings and a preliminary
determination that the proposed contract is in the long-term
fiscal interests of the state, furthers the purposes of
AS 38.35.235, and is in the best interest of the state,
including a description of the principal factors, such as
the projected price of gas, projected production rate or
volume of gas, projected recovery, and projected
development, construction, and operating costs, upon which
the findings are based;
(2) give reasonable public notice of the
preliminary findings and determination, conduct a public
hearing, and give a reasonable opportunity of at least 30
days, for receipt of public comment on the preliminary
findings and determination;
(3) make copies of the proposed contract, the
commissioner's preliminary findings and determination, and
the supporting financial, technical, and market data
available to the public and to
(A) the presiding officer of each house of
the legislature;
(B) the chairs of the finance and resources
committees of the legislature; and
(C) the chairs of the special committees on
oil and gas, if any, of the legislature;
(4) if the legislature is not in session, offer
to appear before the Legislative Budget and Audit Committee
to provide the committee a review of the commissioner's
preliminary findings and determination, the proposed
contract, and the supporting financial, technical, and
market data; if the Legislative Budget and Audit Committee
accepts the commissioner's offer, the committee shall give
notice of the committee's meeting to the public and all
members of the legislature;
(5) within 30 days after the close of the public
comment period under (2) of this subsection,
(A) prepare a summary of the public comments
received in response to the proposed contract and the
preliminary findings and determination;
(B) after consultation with the commissioner
of natural resources, if appropriate, prepare a list of
proposed amendments, if any, to the proposed contract
that the commissioner determines are necessary to
respond to public comments;
(C) make final findings and a determination
as to whether the proposed contract and any proposed
amendments prepared under (B) of this paragraph meet
the requirements and purposes of AS 38.35.235; and
(D) after considering the material described
in (A) - (C) of this paragraph and securing the
agreement of the other parties to the proposed contract
regarding any proposed amendments prepared under (B) of
this paragraph, issue final findings and a final
determination; and
(6) transmit the proposed contract to the
governor, who may transmit the contract to the legislature
together with a request for authorization to execute the
contract.
(d) A contract developed under this section is not
binding upon or enforceable against the state or other
parties to the contract unless the governor is authorized to
execute the contract by law. The state and the other
parties to the contract may execute the contract within 60
days after the effective date of the law authorizing the
contract.
(e) A person may not bring an action challenging the
constitutionality of a law authorizing a contract enacted
under this section or the enforceability of a contract
executed under a law authorizing a contract enacted under
this section unless the action is commenced within 120 days
after the date that the contract was executed by the state
and the other parties to the contract."
MR. COUGHLIN explained that Amendment 7 addresses a producer's
concern that if royalty relief or tax changes are made, they
would like those changes to be put into a contract. Amendment 7
would accomplish that and basically sets the process up so that
royalty reduction would be negotiated with the DNR commissioner.
If there is agreement on that, it would then be put into the
ultimate contract that the DOR commissioner would be negotiating
and he is responsible for changes to [indisc.] laws. He stated:
If the DOR commissioner were to find that changes to
the tax law or royalty laws would be in the state's
best interests, it would advance the project; it sets
forth a process that's followed thereafter. That is
that the Department of Revenue commissioner will
prepare a preliminary best interest finding. In fact,
the process would be sort of like the royalty in-kind
contracts. The commissioner would prepare a preliminary
best interest finding. He would then put that out for
public comment, he would conduct a public hearing.
After that, if the legislature was not in session, he
would offer to appear before LB&A to make an overview
presentation of the contract. Following an opportunity
for public comments, he would then prepare a written
final finding of determination. In that finding he is
required to address or summarize the public comments
and additionally, if the commissioner felt it was
appropriate to make any changes to the contract, he
would discuss those changes and why they are being
made. Then, the commissioner of Revenue would transmit
that contract to the governor who sends it to the
legislature and the contract would only become
effective upon legislative approval.
MR. COUGHLIN explained that the proposed amendment that was
discussed before would require that if a waiver, reduction or
deferral of royalty were issued, there would have to be some
mechanism to capture the upside.
CHAIRMAN TORGERSON said Amendment 7 also has the same property
tax provision where the commissioner has to engage the
municipalities, prepare a socio-economic impact study and decide
whether or not it's a good idea to waive municipal property
taxes.
SENATOR ELTON commented that there were some changes that he had
concerns with, although he wouldn't object to the amendment. He
would be more comfortable with "waive" rather than "reduce." He
said further, "I'm still not willing to buy off yet on the notion
that the commissioner can impose a tax decision on the
municipalities that is now exclusively theirs."
CHAIRMAN TORGERSON added that it would come back to the
legislature.
SENATOR ELTON responded that the net effect is that something
that is now exclusively the authority of a municipality is no
longer exclusive.
CHAIRMAN TORGERSON said he didn't think it was in the best
interest of anybody to just go out and reduce taxes, unless they
had gone through the five things listed there. He thought that
they had to at least have the discussion with the municipalities.
He said this project might not be economical without this
provision.
He asked if there were any objections to Amendment 7. There were
no objections and it was adopted.
SENATOR WILKEN moved to adopt Amendment 8, L.14 Chenoweth, which
reads as follows:
22-LS1649\L.14
Chenoweth
10/30/02
A M E N D M E N T 8
TO: SB 360, as amended by the adoption of amendment 22-
LS1649\L.13
Page 4, line 31:
Delete "a new subsection"
Insert "new subsections"
In amendment L.13, page 1, following line 20:
Insert a new subsection to read:
"(ff) The commissioner may request from an applicant or
lessee any information and records that the commissioner
determines may be necessary to carry out a duty under (ee)
of this section. Information and records requested by the
commissioner, and working documents that analyze or
incorporate the requested information and records that are
prepared by the commissioner
(1) shall, notwithstanding any other provision of
law, be kept confidential until the commissioner of revenue
makes and publishes preliminary findings and a preliminary
determination under AS 43.56.185(c) if the information,
records, or working documents contain sensitive,
proprietary, or privileged information and the applicant or
lessee requests that the information, records, or working
documents be kept confidential;
(2) are public records when the commissioner of
revenue makes and publishes preliminary findings and a
preliminary determination under AS 43.56.185(c)."
In amendment L.13, page 4, following line 19:
Insert a new subsection to read:
"(f) The commissioner may request from a project
applicant or from a lessee affected by AS 38.05.180(ee) and
(ff) and this section any information and records that the
commissioner determines may be necessary to carry out a duty
under this section. Information and records requested by
the commissioner, and working documents that analyze or
incorporate the requested information and records that are
prepared by the commissioner
(1) shall, notwithstanding any other provision of
law, be kept confidential until the commissioner makes and
publishes preliminary findings and a preliminary
determination under (c) of this section if the information,
records, or working documents contain sensitive,
proprietary, or privileged information and the applicant or
lessee requests that the information, records, or working
documents be kept confidential;
(2) are public records when the commissioner
makes and publishes preliminary findings and a preliminary
determination under (c) of this section."
MR. COUGHLIN explained that Amendment 8 provides that documents
that are supplied to either the commissioners of DOR or DNR as
part of an application for a change to either royalty or tax laws
would be held confidential until such time as there is an
agreement with the company, in which case that would be at the
preliminary finding stage. At that point, the commissioner of DOR
would make the documents available that support his decision as
to whether they are confidential or not.
CHAIRMAN TORGERSON said they basically didn't want the issue
tried in the press or other places.
SENATOR HALFORD asked whether certain documents that don't
support the commissioner's decision would remain confidential.
MR. COUGHLIN replied that is not what it says; it says all of the
documents will be available following a decision.
SENATOR ELTON asked if this had been an issue with Foothills work
or other applications that DNR has considered in the past.
CHAIRMAN TORGERSON said the short answer is no, because they
haven't asked for royalty relief.
4:20 p.m.
MR. COUGHLIN added that when he was Deputy Director for the
Division of Oil and Gas he received applications for royalty
relief and that information was kept confidential.
CHAIRMAN TORGERSON asked if there were any objections to
Amendment 8. There were no objections and it was adopted.
SENATOR WILKEN moved to adopt Amendment 9, L.15 Chenoweth, which
reads as follows:
22-LS1649\L.15
Chenoweth
10/30/02
A M E N D M E N T 9
TO: SB 360
Page 8, lines 2 - 15:
Delete all material and insert:
"(i) the rates for expansion service
are designed to ensure the recovery, on an
incremental or rolled-in basis, of the cost
associated with the expansion, including a
reasonable rate of return on the investment;
(ii) the rates do not require the
existing shippers on the pipeline portion of the
project to subsidize expansion shippers;
(iii) the proposed shipper will comply
with, and the proposed expansion and the expansion
of service will be undertaken and implemented
based on, terms that are consistent with the then-
effective tariff of the pipeline portion of the
project;
(iv) the proposed facilities will not
adversely affect the financial or economic
viability of the pipeline portion of the project;
(v) the proposed facilities will not
adversely affect the overall operations of the
pipeline portion of the project;
(vi) the proposed facilities will not
diminish the contract rights of existing shippers
to previously subscribed certificated capacity;
(vii) all necessary environmental
reviews have been completed; and
(viii) the expansion is required by the
present and future public convenience."
MR. COUGHLIN explained:
On page 8, one of the purposes we had in mind was
trying to exactly mimic the language of the current
version of the federal energy law that has been passed
by the Senate in terms of how can you get an expansion.
If you meet these criteria, you can get an expansion.
When that went over to legislative drafting, it didn't
come back the same way. Some of the verbs and names had
been changed. So, this change does not really change
any of the substance. It's just an attempt to actually
make the language be as close as possible to the
federal law. Both the producer, in particular, the DNR,
expressed some concern if there were any variances to
that language.
SENATOR LINCOLN thought some of the wording wasn't consistent
with what they had just discussed in Amendment 6.
MR. COUGHLIN explained that Amendment 9 was written assuming the
committee would adopt amendment 6. It addresses the one
definitional problem of having defined the project larger than
they wanted to. This amendment inserts "the pipeline portion of
the project" for "project" on line 14. Otherwise it's consistent
with federal law.
CHAIRMAN TORGERSON said she had a good point and apologized for
the confusion. He asked if there were any objections to Amendment
9.
SENATOR ELTON said it would be helpful for Mr. Coughlin to go
through the amendments to check for consistency after the
drafters are done.
CHAIRMAN TORGERSON said they sent over the language they wanted,
but the drafter had changed some of the words to make it read
better. He commented, "So we're going from federal legalese to
state legalese."
SENATOR WILKEN moved to adopt Amendment 10.
MR. COUGHLIN explained that Amendment 10 makes it clear that they
are not giving the commissioner of DNR the authority to change
oil royalties. They are just dealing with gas royalties since
they are dealing with a gas project.
CHAIRMAN TORGERSON asked if there were any objections to
Amendment 10. There were no objections and it was adopted.
SENATOR WILKEN moved to adopt Amendment 5, L.9 Chenoweth, which
reads as follows:
22-LS1649\L.9
Chenoweth
10/30/02
A M E N D M E N T 5
TO: SB 360, as amended by adoption of amendment 22-LS1649\L.2
In amendment L.2,
Page 2, line 27, following "incorporated":
Insert "into the contract
(A)"
Page 2, line 28:
Delete "into the contract;"
Insert "; and
(B) for a contract that waives, reduces, or
defers royalty or tax payments, a mechanism to
recapture all or any portion of the royalty or tax
payments that are waived, reduced, or deferred by the
operation of a contract provision if the price of
natural gas increases above the projected price of
natural gas upon which the findings and determination
made under (7) of this subsection are based;"
TAPE 02-20, SIDE B
CHAIRMAN TORGERSON asked if there were any objections to
Amendment 5. There were no objections and it was adopted.
SENATOR WILKEN moved to report CSSB 360(RES) from committee with
individual recommendations. There were no objections and it was
so ordered.
SCR 30-ALASKA SALMON DAY
CHAIRMAN TORGERSON announced SCR 30 to be up for consideration.
MS. SARA NIELSON, staff to Senator Ben Stevens, said that SCR 30
proclaims June 30, 2002 as Alaska Salmon Day. It recognizes that
the salmon industry has a huge part of all Alaskan's lives and
will raise public awareness of one of Alaska's most important
industries by promoting and celebrating the catching and eating
of salmon. Alaska is the largest commercial wild salmon fishery
in the world. In the last decade state salmon harvest totaled
more than $4.5 billion, making it extremely vital to Alaska's
economy. Last year almost 450,000 resident and non-resident
licenses were issued for sport fishing.
CHAIRMAN TORGERSON asked why this resolution is being sent to
Alaska's congressional delegation instead of someone in Alaska.
He noted, "They're not going to celebrate salmon day back there."
SENATOR STEVENS said he would entertain some instate suggestions
as well.
CHAIRMAN TORGERSON said it should be sent to organized fishing
groups and maybe hatcheries.
MS. BARBARA BELKNAP, Executive Director, Alaska Seafood Marketing
Institute (ASMI), thanked Senator Stevens for introducing this
resolution. ASMI is trying to augment its promotions with seafood
stores and retailers this summer and actually wanted a National
Alaska Salmon Day declared by the President, but wasn't able to
do that. She said ASMI would also send the resolution to chambers
and tourism bureaus.
SENATOR WILKEN asked why it wouldn't be an Alaskan Salmon Week.
MS. BELKNAP answered that ASMI wants to have a "kick off" with
particular retailers. She got the idea from British Columbia,
which established last year as the Year of the Bear. Everyone who
went through there was inundated with information about bears.
She thought it would be terrific to have the Year of the Salmon
here, but it was too late to go that far and ASMI didn't have the
budget to make it what they would like.
CHAIRMAN TORGERSON asked that copies go to ASMI with instructions
to distribute the resolution throughout the state and to Senators
Frank Murkowski and Ted Stevens.
MS. BELKNAP replied that she would be happy to do that.
SENATOR ELTON said on page 1, line 15 there are two extraneous
words "to and".
SENATOR LINCOLN commented that the resolution emphasizes just
catching and eating, not marketing of salmon.
MS. BELKNAP said ASMI wanted to expand this into something
statewide that would actually celebrate the industry as well and
the cultural importance of salmon.
SENATOR WILKEN moved to insert, "Alaska Seafood Marketing
Institute" on page 2, lines 5 - 7.
SENATOR ELTON asked if they could also send a copy to the
Governor.
SENATOR WILKEN moved to add the Governor to the list of
recipients. There were no objections and it was so ordered.
SENATOR STEVENS moved to pass CSSCR 30(RES) from committee with
individual recommendations and its attached zero fiscal note.
There were no objections and it was so ordered.
CSHB 206(RLS)-LIMITED ENTRY FOR COMM. FISHERIES
CHAIRMAN TORGERSON announced CSHB 206(RLS) to be up for
consideration and said he had already taken public testimony and
that no amendments had been proposed. He noted that there was
quite a bit of opposition to the bill since the committee heard
it - a few petitions signed by about 10 people each and a number
of individual letters.
SENATOR ELTON moved to pass CSHB 206(RLS) from committee with
individual recommendation and the attached zero fiscal note.
SENATOR HALFORD objected.
A roll call vote was taken and the motion carried with Senators
Lincoln, Elton, Stevens and Wilken in favor and Senators Halford
and Torgerson opposed.
There being no further business to come before the committee,
CHAIRMAN TORGERSON adjourned the meeting at 4:43 p.m.
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