Legislature(2015 - 2016)BUTROVICH 205
04/16/2015 03:30 PM Senate RESOURCES
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| Audio | Topic |
|---|---|
| Start | |
| HB137 | |
| Presentation: Aklng End of Session Update by Enalytica | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| += | HB 137 | TELECONFERENCED | |
| + | TELECONFERENCED |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
April 16, 2015
3:30 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Mia Costello, Vice Chair
Senator John Coghill
Senator Bert Stedman
Senator Bill Stoltze
Senator Bill Wielechowski
MEMBERS ABSENT
Senator Peter Micciche
COMMITTEE CALENDAR
PRESENTATION: AKLNG END OF SESSION UPDATE BY ENALYTICA
- HEARD
COMMITTEE SUBSTITUTE FOR HOUSE BILL NO. 137(FIN) AM
"An Act raising certain fees related to sport fishing, hunting,
and trapping; relating to the fish and game fund; providing for
the repeal of the sport fishing surcharge and sport fishing
facility revenue bonds; replacing the permanent sport fishing,
hunting, or trapping identification card for certain residents
with an identification card valid for three years; relating to
hunting and fishing by proxy; relating to fish and game
conservation decals; raising the age of eligibility for a sport
fishing, hunting, or trapping license exemption for state
residents; raising the age at which a state resident is required
to obtain a license for sport fishing, hunting, or trapping; and
providing for an effective date."
- HEARD & HELD
PREVIOUS COMMITTEE ACTION
BILL: HB 137
SHORT TITLE: HUNT/FISH/TRAP: FEES;LICENSES;EXEMPTIONS
SPONSOR(s): REPRESENTATIVE(s) TALERICO
03/06/15 (H) READ THE FIRST TIME - REFERRALS
03/06/15 (H) RES, FIN
03/20/15 (H) RES AT 1:00 PM BARNES 124
03/20/15 (H) Heard & Held
03/20/15 (H) MINUTE(RES)
03/25/15 (H) RES AT 6:00 PM BARNES 124
03/25/15 (H) Moved CSHB 137(RES) Out of Committee
03/25/15 (H) MINUTE(RES)
03/27/15 (H) RES RPT CS(RES) NT 2DP 3NR 2AM
03/27/15 (H) DP: OLSON, TALERICO
03/27/15 (H) NR: HERRON, JOSEPHSON, JOHNSON
03/27/15 (H) AM: SEATON, TARR
04/07/15 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/07/15 (H) Heard & Held
04/07/15 (H) MINUTE(FIN)
04/10/15 (H) FIN AT 1:30 PM HOUSE FINANCE 519
04/10/15 (H) Heard & Held
04/10/15 (H) MINUTE(FIN)
04/13/15 (H) FIN RPT CS(FIN) NT 5DP 5NR
04/13/15 (H) DP: PRUITT, WILSON, GATTIS, MUNOZ,
THOMPSON
04/13/15 (H) NR: SADDLER, GARA, GUTTENBERG, EDGMON,
NEUMAN
04/13/15 (H) FIN AT 9:00 AM HOUSE FINANCE 519
04/13/15 (H) Moved CSHB 137(FIN) Out of Committee
04/13/15 (H) MINUTE(FIN)
04/15/15 (H) TRANSMITTED TO (S)
04/15/15 (H) VERSION: CSHB 137(FIN) AM
04/15/15 (S) RES AT 3:30 PM BUTROVICH 205
04/15/15 (S) Scheduled but Not Heard
04/16/15 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
REPRESENTATIVE TALERICO, representing District 6
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Sponsor of HB 137.
JOSHUA BANKS, staff to Representative Talerico
Alaska State Legislature
Juneau, Alaska
POSITION STATEMENT: Answered questions about HB 137.
RICHARD BISHOP
Goldstream Valley
Fairbanks, Alaska
POSITION STATEMENT: Supported HB 137.
AL BARRETTE, representing himself
Fairbanks, Alaska
POSITION STATEMENT: Wanted to work over the Interim to make HB
137 a really good bill.
GEORGE PIERCE, representing himself
Kasilof, Alaska
POSITION STATEMENT: Agreed with some provisions of HB 137 but
not others.
EDDIE GRASSER, representing himself
Palmer, Alaska
POSITION STATEMENT: Supported HB 137 and provided some history
of its issues.
GARY STEVENS, lobbyist
Alaska Outdoor Council (AOC)
Chugiak, Alaska
POSITION STATEMENT: Talked about intensive management and the
surcharge that is not currently in HB 137.
RON SUMMERVILLE, representing himself
Juneau, Alaska
POSITION STATEMENT: Provided supporting testimony on HB 137.
THOR STACEY, lobbyist
Alaska Professional Hunters Association
Juneau, Alaska
POSITION STATEMENT: Supported HB 137.
DOUG LARSON, representing himself
Juneau, Alaska
POSITION STATEMENT: Felt the fee increases in HB 137 were not
adequate.
NIKOS TSAFOS, partner
enalytica
Consultant to the Legislature
Juneau, Alaska
POSITION STATEMENT: Provided an update on the AKLNG Project.
JANAK MAYER, partner
enalytica
Consultant to the Legislature
Juneau, Alaska
POSITION STATEMENT: Provided an update on the AKLNG Project.
ACTION NARRATIVE
3:30:39 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:30 p.m. Present at the call to
order were Senators Stedman, Coghill, Stoltze, Costello, and
Chair Giessel.
HB 137-HUNT/FISH/TRAP: FEES;LICENSES;EXEMPTIONS
3:31:17 PM
CHAIR GIESSEL announced the consideration of HB 137 [CSHB
137(FIN)am was before the committee].
REPRESENTATIVE TALERICO, representing District 6, Alaska State
Legislature, Juneau, Alaska, sponsor of HB 137, explained that
this measure is a response from a lot of individuals who are
concerned about raising hunting and fishing license and tag
fees.
He explained that a deficiency exists between the cost of
management needs and the revenue that is brought in by the
license and tag fees. The biggest change HB 137 makes is that it
raises resident and non-resident fishing, trapping and
combination license fees to help deal with this deficiency. The
most significant change in any of the fees is to the non-
resident fee for big game tags. HB 137 also changes eligibility
for low income licenses: rather than inserting a number into
statute, it actually switches over to the federal poverty level,
which is currently set at $8,200 but changes on a routine basis.
This bill has gone through several iterations and now has a
voluntary fish and game conservation decal available potentially
for non-consumptive users of the resource, although a lot of
active hunters and fishermen may also purchase the decal to
continue to provide funding for wildlife conservation and
fisheries. The current fishing surcharge in the bill will be
combined with the fishing and license fee once the hatchery
bonds are paid. The fishing license fee won't increase, but the
$9 would remain with the current fee, which was added in the
House Finance Committee.
HB 137 raises eligibility for the hunting, fishing and trapping
license exemption from age 60 to 62 and requires renewal every
three years. This is over concerns that some people have been
issued a lifetime license and aren't Alaska residents anymore
but still come back to Alaska and use their lifetime license.
HB 137 also raises the age required for residents to obtain an
actual free license from 16 years old to 18 years, because these
people are still potentially high school students who may not be
out in the adult workforce.
REPRESENTATIVE TALERICO said it has been over 17 years since
non-resident fees had been raised and 24 years for resident
fees. He concluded that HB 137 is all about opportunity and the
ability to ensure that Alaska residents have those incredible
hunting and fishing opportunities ahead of them.
3:35:49 PM
CHAIR GIESSEL said to her this bill represents an effort by
Alaska Department of Fish and Game (ADF&G) to be more self-
supporting.
SENATOR STEDMAN asked for a walk-through and justification for
the significant change of 50 to 100 percent. He also wanted more
explanation on the bonded indebtedness of the hatcheries,
because he was under the impression that the embedded price
increase for sporting fishing licenses was to pay for those two
hatcheries - one in Fairbanks and one in Anchorage - would go
away when the bonds are paid.
SENATOR STOLTZE asked that the Department of Law (DOL) discuss
the Carlson issues at some point.
SENATOR GIESSEL responded that they will not exhaustively hear
the bill today, but there will be other opportunities.
3:38:33 PM
JOSHUA BANKS, staff to Representative Talerico, Alaska State
Legislature, Juneau, Alaska, said a legal opinion on the Carlson
cases from Legislative Legal was in their packets. According to
that opinion, the Carlson cases apply to commercial fishing and
not this bill. This bill deals solely with recreational hunting
and fishing.
SENATOR GIESSEL asked Representative Talerico if he would like
to address Senator Stoltze's questions.
REPRESENTATIVE TALERICO responded that Mr. Banks could rapidly
go through a sectional analysis.
MR. BANKS provided a sectional analysis of HB 137 as follows:
Section 1 repeals authorization for money from the Fish and Game
Funds to pay for hatchery bonds.
Section 2 raises the resident license requirement age to 18
years and the exemption age to 62.
3:40:05 PM
SENATOR WIELECHOWSKI joined the committee.
Section 3 raises the resident sport fishing license from $15 to
$20 and the fee for residents who are blind from $0.25 to $0.50.
Section 4 deals with the sport fishing surcharge, bonding that
with the resident sport fish license.
Section 5 raises the hunting license from $25 to $30.
Section 6 deals with the hunting and trapping combination
license from $39 to $45.
Section 7 raises the trapping license from $15 to $20.
Section 8 raises the hunting and fishing combination license
from $39 to $45.
Section 9 amends section 8 of this bill by combining the $9
surcharge into the resident hunting and fishing license.
Section 10 raises the hunting, trapping and fishing combination
license from $53 to $60. It also changes the low income license
eligibility so that a person is only eligible for the low income
license if they meet the federal poverty level requirement.
3:41:28 PM
Section 11 amends section 10 by adding a $9 surcharge into the
fishing, trapping, and hunting combination fee.
Section 12 amends the non-residents sport fishing license from
$50 to $60 for a 14-day license, from $30 to $40 for the 7-day
license, from $20 to $30 for the 3-day license and from $10 to
$15 for the 1-day license.
Section 13 adds the $9 surcharge into the non-resident sport
fishing license fees.
Section 14 raises the annual non-resident sport fishing license
from $100 to $150.
3:42:39 PM
Section 15 adds the $9 surcharge into the annual non-resident
fishing license.
Section 16 raises the non-resident hunting license from $85 to
$130.
Section 17 increases the non-resident hunting and trapping
combination license from $250 to $350.
Section 18 increases a number of the non-resident big game tag
fees for black bear from $225 to $600; brown or grizzly bear
from $500 to $1,200; bison from $450 to $900; caribou from $325
to $650: deer from $150 to $275; elk and goat will now be $575;
moose from $400 to $800; sheep from $425 to $850; wolverine from
$175 to $325; and musk ox from $1,100 to $2,200.
Section 19 makes multiple amendments. It conforms amendments to
raising the age for eligibility for a permanent license from 60
to 62 and raises the age one needs to have a license from 16
years to 18. It also raises the waterfowl conservation tag from
$5 to $10.
Section 20 raises the small game hunting license from $20 to
$30.
Section 21 raises the non-resident alien hunting license from
$300 to $600.
3:43:57 PM
Section 22 doubles the non-resident alien big game tag fees for:
black bear to $600; brown/grizzly bear and bison to $1,300;
caribou to $850; deer to $400, elk and goat to $800; moose to
$1,000; musk ox to $3,000; sheep to $1,100; and wolverine to
$500.
Section 23 raises the resident King salmon tag from $10 to $15
and makes conforming amendments to the blind license increase,
the exemption age to 62 and the license requirement age to 18
years.
Section 24 raises all six non-resident King salmon tag fees: $15
for 1 day; from $20 to $30 for 3-days; from $30 to $45 for 7-
days; from $50 to $75 for 14-days; the annual tag from $100 to
$150 and the annual non-resident military tag from $20 to $30.
3:45:11 PM
Section 25 has the new fish and game conservation decal, which
is voluntary, for $20. This section has intent language saying
that the legislature may appropriate these funds to Fish and
Wildlife Conservation programs.
Section 26 raises the required age to have a sport fishing,
hunting and trapping license from 16 years to 18. The provisions
in this section about non-residents are not amended. This
section also amends the age that a resident can get a free
hunting, fishing and trapping license from 60 years to 62. It
also creates a requirement that those eligible for this license
will have to renew it every three years starting in 2019.
Sections 27-31 make conforming amendments to raising the
eligibility age from 60 to 62.
Sections 28 and 29 allow a resident to hunt and fish on behalf
of a person with a developmental disability.
Section 32 is a number of repealed statutes regarding the fish
hatcheries and the surcharge.
3:46:37 PM
Section 33 creates transition language for those who are over 60
years and currently eligible for the free hunting and fishing
license so that they will continue to be eligible.
Section 34 requires the ADF&G commissioner to notify the Revisor
of Statutes when all costs associated with the fish hatchery
bonds under AS 37.15.765-799 are paid and all obligations are
fully met.
Section 35 crates a conditional effect so that sections 1, 4, 9,
11, 13, 15, and 32 of this bill will not be in effect until the
Revisor of Statutes is notified under section 34.
Section 36 adds uncodified language stating that sections 1, 4,
9, 11, 13, 15, and 32 will be in effect January 1 of the
calendar year following the notice in section 34.
Section 37 creates an effective date for the rest of the bill,
which is January 1, 2016.
3:47:53 PM
SENATOR STEDMAN said it's a good idea to hold this bill through
the interim and into next January because of its magnitude. They
should have a review of the Carlson case because most recognize
that it is a commercial issue, but there is concern over any
tie-ins with sport and unforeseen impacts. He agreed that the
DOL should be in front of them for a discussion. He would also
like having a review of the hatcheries' history and status. One
of the issues is the challenges Senator Stoltze has in his
district with sport fish and seeing if senators outside of that
area can come up with a better feel for what he struggling with
and some solutions, part of which is the hatchery. Both of those
items would tie into components of this bill. The fee structure
discussion and how ADF&G should be restructured could happen.
3:49:47 PM
CHAIR GIESSEL opened public testimony.
DICK ROHRER, representing himself, Kodiak, Alaska, said today he
was just listening to the issues related to HB 137.
3:50:16 PM
RICHARD BISHOP, Goldstream Valley, Fairbanks North Star Borough,
Alaska, supported HB 137. He is a retired game biologist and a
traditional hunter, fisher and trapper. He is an advocate for
sound fish and game management as well as the opportunity for
all Alaskans to take advantage of these resources.
He said HB 137 provides a needed boost to ADF&G funding that
will improve management of sport fish and wildlife resource
programs that benefit all Alaskans as well as visitors. It
provides the means to capture more of the available federal aid
(Pitman Robertson federal restoration dollars) to fish and
wildlife restoration. It will allow support of important
programs such as intensive game management, Endangered Species
Act issues and public education where federal aid dollars can't
be used.
3:54:05 PM
AL BARRETTE, representing himself, Fairbanks, Alaska, wanted to
work over the Interim to make HB 137 a really good bill.
3:54:46 PM
GEORGE PIERCE, representing himself, Kasilof, Alaska, agreed
with some provisions of HB 137 but not others. He said "no" to a
sockeye stamp; it's ridiculous. The people of Alaska own those
resources and shouldn't have the fees raised. The personal use
fishery is subsistence and residents are entitled to the fish
and game first.
He wished someone would amend the bill to raise hunting and
fishing fees on guide services that take non-residents out and
make tons of money on them. He also urged a review of guide fees
to know how much they really do pay.
He said this bill does not need to be fast-tracked. Over 90
percent of testimony has come from the guides who want to raise
fees for residents. He agreed with raising fees on non-residents
by 100 percent but not on residents.
3:56:34 PM
TOM BROOKOVER, Director, Division of Sport Fish, Alaska
Department of Fish and Game (ADF&G), Anchorage, Alaska, said he
was available for questions on HB 137.
3:57:00 PM
EDDIE GRASSER, representing himself, Palmer, Alaska, supported
HB 137 and provided some history of the issue. Over 100 years
ago, people like Teddy Roosevelt initiated a process that was to
become known as the North American Model for Wildlife
Conservation, which is "undoubtedly the most successful
conservation structure that has been devised by mankind," he
said. It took things like wild turkey, black tail deer, Rocky
Mountain elk, from virtually being on the verge of extinction to
thriving populations.
One of the central ingredients of this model is that sportsmen
agreed to pay for it. That is what this legislation is doing.
They are coming to the legislature and asking for these license
fee increases. They know that in order to go hunting and fishing
somebody has to manage those resources and do it in a way that
the harvestable surplus is known. Without adequate funding the
department can't do that. If people think they can go hunting
and fishing anyway even if they don't pay, the state could fall
back on precautionary rule and not allow expanded seasons and
harvest limits that people enjoy right now, because of programs
like intensive management.
MR. GRASSER thanked Representative Talerico for introducing this
legislation and looked forward to working on it in the Interim.
4:01:14 PM
GARY STEVENS, lobbyist, Alaska Outdoor Council (AOC), Chugiak,
Alaska, said he wanted to talk about intensive management and
the surcharge that is not currently in HB 137. AOC is grateful
for the agency funding of intensive management (IM) programs
during times of financial prosperity. Now that it's not the
case anymore, AOC's membership is willing to step up and help
pay for the continued funding for IM programs that benefit all
Alaskan hunters. After all, hunters are taking a public resource
for personal use and it only makes sense that they would help
fund the department to ensure that the IM programs, which
include predator/prey management, habitat improvement, survey
and inventory assessments that continue when the state is
lacking the necessary funding. It's critical to the future of
the ADF&G and management of the state's renewable resources.
MR. STEVENS related that AOC has 48 different club members in
the state representing about 10,000 people. The $10-IM surcharge
that is not part of the bill now has a three-year sunset and
legislative oversight. It's critical to take advantage of the PR
funds that are absolutely necessary for reasonable management of
the state's resources. At their annual meeting in February, 21
clubs were represented; they went through HB 137 and didn't
support it as written but were willing to work on it in the
Interim.
4:03:33 PM
RON SUMMERVILLE, representing himself, Juneau, Alaska, said he
is also a member of the Territorial Sportsmen, and became
interested in the license increase issue in HB 137 mainly
because he was here when Governor Hickel asked the department to
take a 5 percent decrease; he wanted 5 percent decreases for
four years. Both sport fish and wildlife had some general fund
(GF) monies that maintained commercial fisheries weirs, counting
towers and other things and that just disappeared. This year's
budget takes another $3 to $4 million in general fund monies out
of sport fish and wildlife, and he predicted that would continue
until those divisions were gone.
MR. SUMMERVILLE said he talked his organization into looking at
ways to convince the legislature to allow them to pay more fees
to carry on these programs. It's been 22 years since general
license fees have increased and they want to increase them
enough to not only meet present demand but a little out into the
future, too. They found that it takes a 63 percent increase in
all those fees just to bring them up to inflation level. With
ADF&G and 30 other organizations, a compromise was developed in
which residents take a 80 percent increase and non-residents and
tag fees a 100 percent increase, and 50 percent for general
licenses. The reason is to have something that is consistent.
He displayed a graph showing a $10 million separation between
the Pittman Roberts monies available and how much the department
has been able to obligate. That has to be obligated in a two-
year period or else it reverts back to the federal government.
He said, "We're way behind the power curve right now on matching
federal monies." He also displayed a map of the IM predator
control programs that are required by the legislature, and he
asked the House Finance Committee, if they don't get license
increases this year, which one of those programs they want to
see disappear and in what order, because the only money that can
be used to match those programs is either Fish and Game Fund
money or GF money. If a bill is not passed this year, some of
those programs will be lost.
4:08:56 PM
THOR STACEY, Alaska Professional Hunters Association, Juneau,
Alaska, supported HB 137. They would like the freedom from oil
revenue to manage Alaska's wildlife, one of the constitutionally
defined resources that shall be conserved and managed on a
sustained yield basis.
He said 90 percent of Alaska's hunting guides are Alaska
residents who rely on non-resident clients. Given that
relationship between resident guides and a resident industry
that relies on non-resident hunters, it takes a stiff upper lip
to support a 100 percent fee increase on non-resident tag fees
knowing that resident guides have to sell those increases.
At the same time, they are not asking for the state to help sell
their hunts. They are confident they can continue to do business
as before and generate more revenue for the state.
MR. STACEY said they are asking to pay more to ADF&G to maintain
Alaska's primacy of wildlife management in the state. If they
don't have the money to do inventory counts and rely on the
federal land managers to do those things, Alaska's fate will be
dictated by somebody else. The industry feels it's their job and
their obligation as sportsmen ask to pay more. He wanted this
body to recognize that they are working with a coalition of
groups that includes resident interests. This is a good will
effort by Alaska hunters and sportsmen and by industry.
4:11:33 PM
He explained that the House Finance Committee Substitute for HB
137 increased some fees beyond the 100 percent level for non-
residents on black and brown bears. These are issues of fairness
and good faith. This is a good faith effort to free Alaska's
wildlife management from the vagaries of oil price and oil
production.
4:12:31 PM
DOUG LARSON, representing himself, Juneau, Alaska, felt the fee
increases in HB 137 were not adequate. He has lived, hunted and
fished in Alaska all his life. He served as director of the
Division of Wildlife Conservation in 2007-2010. As a result, he
understands the challenges that go on with the budgets for that
division and to some degree the Division of Sportfish. He
understands the importance of general funds and the graciousness
the legislature has had in the past to provide CIPs for things
like intensive management (IM) and other wildlife related
programs, which includes Endangered Species listing prevention
research and inventory work.
He supports the Sportsmen's Coalition proposed rates and felt
the amounts in the existing bill are insufficient to maintain
those viable programs. He encouraged increasing rates,
particularly on the resident side.
He heard that legislators don't want to raise resident fees too
much and can appreciate that. However, it's important to note
that non-resident hunters make up less than 20 percent of the
hunters in Alaska each year and take relatively few game, but
they contribute 75 percent of the Fish and Game Fund. Resident
hunters make up about 80 percent of the hunters in Alaska each
year and contribute about 25 percent to the Fish and Game Fund
and there is a similar relationship on the sport fishing side.
This isn't so much a reflection of inappropriately high non-
resident fees, which, in fact, are lower relative to other
states'. That is why the coalition supports a 100 percent
increase for non-residents. Rather, it's really a function of
inappropriately low rates now.
MR. LARSON said he is retired now and his income is less than
when it was while he was working. Nonetheless, like many other
Alaskans, he is willing and prepared to dig deeper into his own
pocket to pay a higher amount to ensure that programs like
survey and inventory, intensive management, protections against
ESA listings and access defense are viable.
This isn't the first time this issue has come up. However, up
until now, agreement couldn't be found among user groups. At
this point, there is strong board support for a higher resident
and non-resident increase.
He said the term "IM" conjures up anxiousness in many peoples'
minds, but the fact of the matter is that funds that would come
in through something like a surcharge would be used not only for
IM, but for habitat to see whether predator control is even the
appropriate measure to take.
4:16:51 PM
MR. LARSON said the state receives $2-3 million annually from
federal/state wildlife grants, separate from Pittman Roberts
Funds, but those need to be matched by state dollars. That's
where the idea of a conservation pass comes in, because those
funds could help match those dollars which are used for a
variety of things including research to ensure that species that
are not hunted, trapped or fished are not listed as endangered.
There are many examples where funds from those sources have been
resulted in preemption of ESA listings; they include yellow-bill
loons, black oyster catchers, bats, kitlets, murlets, and
Steller sea lions. More recently, funds have been used to study
Southeast Alaska's wolves to inform a petition that is currently
out to list the wolf as endangered under the ESA. That research
is costly and requires detailed in formation in order to stand
up to legal challenges. He said listings of game or non-game
species have huge implications for hunting, fishing, and
trapping as well as for mineral and oil exploration and
extraction, and timber harvestings.
MR. LARSON said he served on the Governor's wildlife transition
team, a team of people with a broad array of backgrounds and
interests. However, there was consensus on a number of items
including the need to increase license fees and to do so
sufficiently, the need to diversify revenue sources (where the
concept of a conservation pass is important), and expand and
enhance intensive management, not just predator control. In
other words, get more information about habitats, predator/prey
dynamics and assessments. An IM surcharge would help with that
specifically.
4:19:16 PM
REPRESENTATIVE TALERICO closed saying he appreciated having the
bill before the committee. He has talked to people throughout
his district and they are where they want to be in the current
bill.
4:20:03 PM
CHAIR GIESSEL said she appreciated his courage in bringing this
issue up and held HB 137 in committee. She said this issue will
have to be addressed as state revenue decreases.
4:20:26 PM
At ease from 4:20 to 4:21 p.m.
^Presentation: AKLNG End of Session Update by enalytica
Presentation: AKLNG End of Session Update by enalytica
4:21:42 PM
CHAIR GIESSEL announced the end of session AKLNG update by
enalytica.
NIKOS TSAFOS, partner, enalytica, Consultant to the Legislature,
Juneau, Alaska, said he would provide an update on where they
think the AKLNG Project stands now. He said they had been
monitoring the events in Juneau and want to offer an external
audit of the governor's new idea. The project is in the Pre-FEED
stage and has a healthy agenda of things to get agreement on
over the next year and a half in order to put a series of
agreements before this body that would move the project forward.
He said property tax was on the list that was meant to happen
this session. The broad understanding was that maybe there would
be a bill to authorize the administration to negotiate a
property tax agreement that included payment in lieu of taxes;
but that didn't quite happen. The bigger question is if Plan B
that was put forward by the governor affected the big picture of
AKLNG. The governor introduced a new idea that has raised
questions about alignment between the state and the producers,
and it has raised questions about alignment within the state
between the legislature and the administration. They have
announced a 45-day review process of AKLNG and it's not quite
clear how that affects this timetable.
4:25:20 PM
He offered three broad takeaways:
1. It seems the state alignment in this project is becoming a
major risk factor.
2. Ending up with a process with the state pursuing two projects
at the same time will undermine both.
3. Good news is that they think some of the underlying concerns
that have led to development of Plan B can be easily addressed
within the context of AKLNG. The overarching concern is that the
state not be held back by any one of the producers not wanting
to move forward, and there are contractual ways to get around
that as well.
4:26:54 PM
He wanted to talk about two things: risk analysis and if there
is another way. If your job is analyzing LNG markets, what
things do you look at? How do counter-parties, potential buyers,
investors, competitors, or financier look at LNG projects? The
answer is grouped into five broad categories. You ask:
1. Will the gas supply be reliable?
2. Are the sponsors credible?
3. Is there stakeholder buy-in? Is there a broad process to
reconcile differences? An Environmental Impact State process?
Judicial review?
4. Does the ecosystem support development? Are there roads and
bridges and railways to support the development of a project?
5. Is the project commercially viable? Is the price worth the
risk and is it attractive enough relative to other prices tags?
MR. TSAFOS said Mr. Mayer would walk them through an assessment
of these five factors relative to where they were on January 1
with AKLNG, where they would have been looking at the Plan B
idea and how things look when the two are put together.
4:29:46 PM
JANAK MAYER, partner, enalytica, consultant to the Legislature,
Juneau, Alaska, said AKLNG Project is a very strong project on
its own. The gas supply from Prudhoe Bay is reliable; Pt.
Thomson has a new resource that is more technically complex but
is well within the capability of the operator to produce. This
gets a green light.
Are the sponsors credible? The three major oil and gas companies
are three of the largest and most experienced international LNG
players. It's unusual to have this much capability and expertise
on one project. They are well capitalized. What has truly
surprised both of them is just how committed the three companies
are to this project - spending and expertise - considering the
long history of failed negotiations.
CHAIR GIESSEL said an April 10 letter from governor expressed
concern about what if one company pulls out and asked if he
would address that now.
MR. MAYER said he saw that as a valid concern and there are very
established ways in the industry of dealing with that rather
than trying to create a separate project.
4:33:17 PM
Stakeholder buy-in for this project is a remarkable. The
alignment is amazing for anyone familiar with the history of oil
and gas development in Alaska - one of combined interest but too
frequently distrust and an antagonistic relationship of
negotiating against each other to try to get something done. He
was struck last year with how much that was beginning to change
with the structure in which the state was an equal co-partner.
The ecosystem clearly supports development in a way that it
doesn't in many places in the world in terms of established
roads, facilities and infrastructure and a highly capable oil
and gas workforce. The major question mark about the project at
this point is one of estimated cost, what that will end up
being, what the oil prices is eventually and how this will
competes with other projects elsewhere in the world on a cost
basis. This gets a yellow light with a lot of green in the all
the other areas.
4:35:04 PM
In talking about a Plan B, Mr. Mayer clarified that the term
"standalone" is no reference to the Alaska Standalone Pipeline
Project (ASAP). They use the term to mean a lone project to
commercialize North Slope gas and as if there were no AKLNG.
Their assessments where generous where they had questions.
A reliable gas supply gets a yellow, because all three major
resource holders must be involved. Otherwise where would the gas
come from and who would have the title? When looking at these
companies or any major oil and gas players around the world,
it's very rare that these companies are involved in LNG projects
and sell from the upstream perspective and sell their gas only
at the wellhead - in fact, he couldn't think of any examples.
These are companies that understand to get the maximum value
from that gas they need to participate through a lot more of the
value chain and these companies have a price at which they will
be willing to do that. But it is clear if gas was produced under
a duty to produce, it would take a decade of litigation that
might not be successful.
Are the sponsors credible? That was marked red, because they
don't know who the project sponsors will be. The State of Alaska
would be one and it has substantial resources (probably second
in the AKLNG consortium in terms of balance sheet strength), but
it does not have a lot of experience in bringing a project of
this size and technical complexity on line.
MR. MAYER said successful LNG projects around the world are done
by established players with a lot of experience. He couldn't say
much about REI, an entity with which the administration had
signed an MOU to look at some of these things, because he hadn't
come across them in any other context. As far as they can tell,
REI is a small Japanese consortium of municipalities that would
like to purchase LNG, but doesn't necessarily have previous
experience in doing so and certainly not in actually building a
liquefaction project. It seems that the desired intent is to
involve other entities at the buyer level in such a project and
being generous in thinking about who this might involve, it
could bring on board some of the most established utilities, the
biggest buyers of LNG in Japan, Korea, and China. They
participate in liquefaction projects around the world but do so
as small equity owners. These are not companies that have any
substantial experience operating or being the driving force
behind a project of this magnitude.
He could think of two examples of companies that have played a
major role in LNG projects and those are primarily upstream
companies not utilities.
4:41:18 PM
SENATOR WIELECHOWSKI asked for an explanation of the red dot.
MR. MAYER answered the idea is as they think about the range of
possible participants, including the State of Alaska, in the
world of what is required to get a LNG project off the ground,
it is not a credible combination of sponsors.
MR. TSAFOS added that it is a niche space and credibility means
something very specific. This isn't meant to disparage the State
of Alaska, because it would apply to a lot of players that could
be very established in other areas.
SENATOR WIELECHOWSKI asked if it is safe to assume that the red
dot means in his opinion that the SOA is incapable of building
its own gasline.
MR. TSAFOS answered a project that is primarily driven by the
SOA as a majority owner would have a huge uphill battle
convincing counterparties this is something they should sign up
for. It isn't insurmountable, but a lot of time would be spent
and teams of people brought on to convince other people. It has
happened before, but it's not easy and it is time consuming.
4:44:47 PM
MR. MAYER said on the question of stakeholder buy-in and
thinking of this in a standalone world where there is no other
competing project - this is the only way of commercializing
North Slope reserves - gets a green, because clearly the state
and its partners would be highly bought into that as long as one
could assume the gas supply was a soluble problem. Ecosystem is
the same in both cases and gets a green and commercial viability
gets a yellow, because it is yet to be proven in either case.
MR. MAYER said looking at these side-by-side, each one is
negatively impacted. The risks to both are exacerbated by the
existence of the other. Will the gas supply be reliable? Plan B
gets a clear red as long as AKLNG exists and is progressing,
because it is one project in which the resource holders are
active participants and trying to push ahead and another project
that is trying to develop the same gas reserves at the same time
that has already been committed to this other project. It is
hard to see how one could approach anyone - financiers or the
Department of Energy - for an export license.
Where they previously marked this as a green for AKLNG, it now
gets a yellow, because at the same as the resource holders and
sponsors are developing this the state seems to be involved in
another competing project.
4:47:46 PM
SENATOR WIELECHOWSKI asked who they talked to in preparation for
this audit.
MR. TSAFOS replied they have long made a living out of analyzing
projects and have followed Alaska gas line developments for a
long time. They talked to the people they always talk to: the
legislature, the administration, the oil companies, and people
who are truly third parties. They didn't do a dedicated survey.
4:49:49 PM
MR. MAYER added that as external industry analysts, they have
both thought through the key enablers or things that hinder a
project for many years on every LNG project around the world.
Looking at these things and explaining how they think about them
is a core part of what they do.
SENATOR WIELECHOWSKI asked if they have a list of their detailed
billing records of who they talked to in preparing this
document.
MR. MAYER responded that in preparing this document, they talked
with themselves and debated with themselves passionately how
they saw these things, but there were no specific conversations
with anyone that lead to particular items in the document other
than a request for a presentation.
SENATOR WIELECHOWSKI asked if they talked to the producers who
are involved in the AKLNG project or members of the Alaska
Natural Gasline Development Association (ANGDA).
MR. TSAFOS responded that this risk assessment was done between
the two of them in their offices in Washington, D.C., when news
came out of Plan B. As they formed their opinions, they talked
to a lot of people. They don't necessarily ask these people
specific questions, but they talk to legislators and oil
companies and live in a world where they interact with people
who are monitoring and working on projects. This specific
assessment was done in isolation.
SENATOR WIELECHOWSKI said he had a hard time understanding that
there is absolutely no chance that either project will go
forward. BP and ConocoPhillips have not expressed that concern.
MR. MAYER responded that they wouldn't say there is no chance at
all of either project going ahead, but the risks to both
projects are substantially exacerbated by being pursued side-by-
side. The state is co-venturers with the oil companies and so
the companies have to be more diplomatic about what they say.
Enalytica can be less diplomatic, because they know some of the
companies involved will be more measured about what they say
because they have very important relationships to maintain.
4:54:36 PM
SENATOR WIELECHOWSKI asked if any producers told him they had
concerns about the governor's plan.
MR. MAYER answered the general tenor of conversations not
conveyed in public comments with producers is concern about
where they are headed.
SENATOR COGHILL remarked that a difference between the state and
its AKLNG partners is that their board of directors gets to meet
in their offices without the cameras watching them.
CHAIR GIESSEL asked if the Department of Energy (DOE) authorized
an export license to projects that don't have gas in hand.
MR. TSAFOS replied that in general, the DOE doesn't issue
exports. The vast majority of applications it gets are from
projects in the Lower 48 where pipelines are flying left and
right. So, the DOE doesn't necessarily think about gas in the
context of one project; they think about the aggregate gas
supply. But in the case of Alaska that doesn't have a readily
available resource, they do look at the resource base. The Port
Authority made an application that was dismissed by the DOE and
that was one of the reasons; it is the only application he could
find that had been dismissed by the DOE over the last four or
five years.
SENATOR WIELECHOWSKI asked how much enalytica had been paid by
the Alaska Legislature in the last year and what their hourly
is.
MR. MAYER answered that Legislative Budget and Audit (LB&A)
Committee employees them and can provide the full details of
their contract, but their current arrangement is a fixed
retainer whereby they do five days of work every month and for
work over and above, that they have a daily rate.
SENATOR WIELECHOWSKI asked how much they have received in the
last year of their hourly rate.
4:59:06 PM
CHAIR GIESSEL said LB&A had approved the contract, which is in
the public record.
MR. MAYER said sponsor credibility is a big green light for
AKLNG in isolation, because three of the world's biggest LNG
companies are involved. But the idea they want to convey is that
while Plan B exists, there is a fundamental question from
outside counterparties - buyers, investors, analysts - as to the
commitment of the State of Alaska to this project. When that
becomes a fundamental question, there is the concomitant
question of how long do these three major companies remain as
committed as they are. The fundamental point is that sponsor
credibility is substantially diminished by having one of the key
sponsors, the State of Alaska, no longer clearly dedicated to
this one project and by the ever-increasing likelihood that
others will slow the pace of spending and investment if their
co-venturer is not clearly completely dedicated to the project.
Clearly, he said, on stakeholder buy-in there is the problem of
alignment between the SOA and the companies as well as alignment
between the branches of the state, itself: the executive and the
legislature.
Finally, the eco-system remains one that is highly conducive to
development, but ultimately they mark commercial viability in
both cases as red, because suddenly it becomes difficult to see
how the timeline of development milestones happens concurrently.
5:01:45 PM
MR. TSAFOS asked them to imagine him setting up a Greek
restaurant in Anchorage with Akis (Akis is the Resources
Committee aide) as his partner. So he starts setting it up. Then
he finds out a month later that Akis is actually developing
another Greek restaurant in the same spot. If that were to
happen, the first question would be why am I out there if Akis
is trying to put another project together behind his back? That
is the context of where he thought this may head. The AKLNG
partners will see getting edged out at some point as a huge
risk.
5:03:59 PM
SENATOR HUGGINS joined the audience.
MR. TSAFOS stepped back from his bluntness, saying that the good
news is that the governor has one thing clearly right. A major
risk is that one year from now one company bails. But this is
not unprecedented, he said. If the project is good but one
partner isn't quite there yet, that happens quite often. There
are three ways to deal with that: you try to change the rules or
wait. But the optimum option is finding a way to buy them out.
That happened in Angola with ExxonMobil; it happened in Sabine
Pass where the first set of buyers weren't quite there and new
buyers were found. It also happened at Pt. Thomson when Chevron
wasn't excited about moving on. So, instead of stalling the
whole thing, their share was bought out. It's a pretty typical
part of joint venture agreements; you take out the weak link.
CHAIR GIESSEL said the governor expressed significant concern in
the April 10th letter that AKLNG is working backwards, because
the markets haven't been involved and asked him to comment on
that.
5:08:55 PM
MR. TSAFOS said he didn't agree with the governor. The vast
majority of LNG projects really start from the resource holders.
He could only think of two or three where the market has been a
driving force behind developing a project.
MR. MAYER said engaging the market is critically important,
which is why AKLNG partners were making trips to Asia last year
to meet with prospective buyers and that is why a former Chevron
LNG marketer is part of the Department of Revenue team.
CHAIR GIESSEL said cost would have to enter into the picture if
one was approaching buyers.
MR. TSAFOS agreed and added that at this stage talking to the
market will get some interest, but they will only want to be
kept in the loop until there is real information.
SENATOR COSTELLO asked if these questions are ones they ask of
any project or were they specifically asked in relation to
AKLNG versus the ASAP project.
MR. TSAFOS answered that these are generic questions and
explained that they try to take a very structured approach for
development of mega projects and quite a few things don't apply
in the context of Alaska.
5:13:24 PM
SENATOR WIELECHOWSKI asked what percentage of their income is
from the State of Alaska.
MR. MAYER said he couldn't give him a precise figure as they
work with a number of clients around the world.
SENATOR WIELECHOWSKI asked if they had filed financial
disclosure forms with the State of Alaska.
MR. MAYER said he hadn't and wasn't aware of any need to do so,
and he wasn't aware of any particular interest he has that would
require disclosure.
SENATOR WIELECHOWSKI said consultants of the state are required
to file financial disclosure. He asked if the State of Alaska
makes up a large percentage of their income.
MR. MAYER said they have been doing this work for many years in
a number incarnations and Alaska has in previous times been a
major client but by no means a very significant one. They have a
number of other clients now, but Alaska is the biggest one.
CHAIR GIESSEL thanked the participants.
5:15:13 PM
ADJOURNMENT
CHAIR GIESSEL adjourned the Senate Resources Committee meeting
at 5:15 p.m.