SENATE BILL NO. 136 "An Act relating to resource development and to grants for the purpose of promoting resource development from appropriations of a portion of the revenue derived from the extraction of certain state natural resources." This was the first hearing for this bill in the Senate Finance Committee. PAT CARTER, staff to Senator Drue Pearce, testified that this legislation establishes the Resource Development Board, which is tasked primarily with facilitating public education and promoting responsible resource development. He suggested, "If you begin with the premise that Alaska is going to be largely dependent on natural resource extraction for the foreseeable future to fuel our state's economy, it would therefore make sense to invest in that future by providing financial support to most of those activities." Mr. Carter pointed out recent studies show that resource extraction and the tourism industry play a significant role in the workforce and therefore the economy. He noted the majority of jobs from the tourism industry are low paying and seasonal, and that the studies show diversified jobs are necessary to sustain a healthy economy. However, he charged that the majority of the "environmental community" does not support this concept since "they continue to oppose nearly all development of our natural resources while offering no economical alternative plan." Mr. Carter stated the intent of this legislation is to "strike a balance" between development and protection of the environment and "avoid the extreme positions." He suggested the best way to protect the environment is through a strong diversified economy. Mr. Carter asserted that Alaska's environmental protection laws are among the strongest in the world. However, he stressed that by opposing natural resource extraction, the environmental community continues to "push development offshore to third world countries assuring the exploitive development in the absence of adequate environmental protection laws." Mr. Carter emphasized the approximate $6.5 million investment made in the tourism industry and additional financial support provided to the seafood industry through the Alaska Seafood Marketing Institute (ASMI). He stressed these efforts are to strengthen the state's economy. He added that the promotion of the diverse mineral resources, timber and oil and gas development would be a "wise investment". Mr. Carter concluded the creation of the Resource Development Board would further the constitutional mandate to develop natural resources by making them available for maximum use in an environmentally responsible manner. Senator Austerman noted the language in the bill does not appear to contain perimeters on how the money would be expended. Mr. Carter responded the intent is that the seven-member board would create perimeters regarding what is deemed worthy of the grants this legislation would also provide. He suggested accounting methods would be established. He noted that if the legislature wanted allocation restrictions in statute, the sponsor would be willing to amend the legislation to reflect these. Senator Austerman reminded that the Committee has recently passed a fast track supplemental appropriation for FY 01 granting $1.5 million to Arctic Power to promote oil and gas development. He asked if the $2.6 million proposed for distribution in this legislation could be entirely allocated to Arctic Power if that was the board's desire. Mr. Carter affirmed it could if that were the board's desire. He qualified that this is not the intention, but that it is possible. He assumed that the board would require a follow-up accounting of how the money was spent. Senator Hoffman asked if the board could award grants to non-profit organizations that would support or oppose initiatives for constitutional amendments or candidates for public office. Mr. Carter responded that the issue of supporting candidates had not been considered. He noted it is not the intended use for the grants to promote one candidate over another, but that the intent is to provide a "balanced message." He shared, "We feel that we are lacking in that regard today where we have what seems to be a ever-expanding amount of money coming in to environmental organizations from Lower 48 groups. They are unfamiliar with issues in Alaska. We think that they skew the message." Senator Hoffman asked why the seafood industry is not represented as a member of this board. He stressed that the seafood industry is one of the largest industries in the state. He listed by-catch, interception, trans-boundary issues and other pertinent issues. Mr. Carter assured there was no intent to "cast disparage" to the seafood industry, only that it would be redundant given the existence of ASMI. He suggested that the legislature could instead appropriate general funds directly to ASMI, in addition, or in place of, the revenues generated from industry taxation. He noted that the tourism industry was excluded for similar reasons and emphasized that all these industries are important to Alaska's economy. Senator Austerman assumed the timber industry is omitted for the same reasons. Mr. Carter informed that the timber industry is included in the board make-up. Senator Austerman understood the proposed $2.6 million in royalties is otherwise deposited into the general fund. Mr. Carter affirmed this is not new revenue, but rather taken from the general fund and used as an investment. AT EASE 7:05 PM / 7:09 PM The Committee next took public testimony. SFC 01 # 54, Side B 07:09 PM HUGH BROWN, Alaska Conservation Voters, testified that he saw the bill as an investment in Alaska, which he agreed is required by the constitution, but noted he shared Senator Austerman's concerns with the vagueness of the legislation. Mr. Brown stressed the need for "a balanced message to all segments of the community." He proposed amending the bill to insert direction to the board that the message the board sends is developed by a diverse group of people, including minorities, women, those representing non-profit organizations and local advocates. He indicated that the recipients of the grants should also be diversified. He stressed that many are unaware that timber and mining are resources and that this should be conveyed through the board's action. He spoke of the importance of educating youth to the importance of science and math. He understood this would increase the cost and suggested an increased fiscal note. SUSAN SCHRADER, Alaska Conservation Voters, testified in Juneau to read a statement into the record as follows. Alaska Conservation Alliance and Alaska Conservation Voters are sister nonprofit organizations dedicated to protecting Alaska's environment through public education and advocacy. Our 44 member organizations and businesses represent over 35,000 registered Alaskan voters, who, as most Alaskans, work hard to support their families. Conservationists throughout the state are committed to maintaining a healthy economy for the benefits it provides all Alaskans. We agree with Senator Torgerson, the bill's sponsor, that we can promote responsible development of our resources while protecting the environment. And we believe resource development industries can prosper and meet shareholders' expectations while complying with state and federal environmental laws. The concept of the state using general funds for grants to non-profits to promote for-profit industries, many of whom are huge, trans-national corporations that employ significant numbers of nonresidents, is nonsensical. We believe most Alaskans will not endorse the idea of taking state revenues that could go to improving education, social services, road maintenance, or any number of other significant needs and using those monies to do the promotion and advertising work that the resource industry can easily accomplish themselves. Instead, we would encourage the legislature to fully fund the outreach activities of existing state agencies and programs that facilitate responsible resource development, such as the Division of Community and Business Development at DCED. Further, we would encourage resource industries and businesses to enhance their financial support of local and regional economic development councils and similar organizations. The large corporations doing the business of extracting Alaska's resources are clearly able to contribute to the promotion of development that will benefit the smaller players in our state economy. The mining industry in Alaska was valued at $1.12 billion in 1999, while 30.7% of their workforce in Alaska was non- resident. Should Alaskan families be helping to pay this industry's advertising and marketing bill? Should the legislature be diverting public funds to trade organizations that should be funded by the private sector? Alaska Conservation Voters urges legislators to oppose SB 136. CAROL CARROLL, Director, Division of Support Services, Department of Natural Resources, testified in Juneau to address the fiscal note. She stated that $2.6 million would be relocated from the general fund to the resource development fund for this program. She noted that most of this revenue would be generated from oil and gas royalties paid to the state. Ms. Carroll expressed that there would be a cost to operate the program and that the department attempted to be "reasonable" in assessing these. She shared that it is assumed that the board would request an Executive Director and an Administrative Assistant to assist in the grant activities and board operations. She stressed the detail required in this work, which the board would depend upon when making its decisions. She then noted indirect costs to the department, pointing out that no new positions would be added for accounting personnel. She stated that the impact on the department would depend upon the number of grants the board issues. Ms. Carroll told the Committee that the department supports the legislation. Senator Leman opined that administering this program would not require an Administrative Assistant and an Executive Director. He suggested that existing staff should be instructed to undertake these duties. He was concerned with incremental increases to government. Ms. Carroll understood, but stressed that the department has been operating for several years under the "do more with less" theory. She stated that there is insufficient existing staff to undertake additional duties. She admitted that the board could decide to forgo the Executive Director position, but that staff would be required to do the administrative tasks. She noted that other expenses such as office space leasing, computer maintenance and supplies have not been placed in the fiscal note and would be absorbed in the department's existing operating budget. Senator Leman countered that it is "not that big of a deal" to administer grant funds. He stated his frustration by the "continuing creep" of new positions and new expenditures. Senator Austerman spoke to basic concerns he had with the legislation. He cited language on page 3 of the bill regarding promotions, marketing, research, advertising, education, establishing and operating a system for responding to inquiries, publishing and distributing information, and establishing and maintaining Internet sites. He understood the desire for promotion of resources to ensure the greatest value, but noted other industries that provide matching funds like tourism and still others, such as the seafood industry, that has no general funds and must provide for these costs itself. He wanted to consider whether the minerals industry should be required to contribute matching funds. Co-Chair Kelly noted other questions that were raised at this hearing. He expressed that these funds should not be utilized for a political candidate and he did not think they could be used to campaign for or against a ballot initiative due to other statutory provisions. Mr. Carter noted that he had researched the matter and learned that because these are state grants, they are subject to the state accounting process, including an audit trail. He added that the funds could not go to political candidates or initiatives because no state funds are allowed for these election purposes. Co-Chair Kelly asked Co-Chair Donley if this was correct. Co-Chair Donley did not know if there was a prohibition on using state funds for ballot initiatives. Co-Chair Kelly requested the sponsor to meet with Senator Austerman to address his concerns. The bill was HELD in Committee.