SB 308 - ADMIN ACTION RE LAND/RESOURCES/PROPERTY Co-chair Pearce directed that SB 308 be brought on for discussion and advised of a statewide teleconference link. JIM EASON, Director, Division of Oil and Gas, Dept. of Natural Resources, came before committee, directing attention to February 28, 1994, correspondence from the department which he explained corrects inaccuracies in public comments made at a prior hearing on the bill. He referenced comments indicating that had the department been willing to consider closure of the Cook Inlet fishing corridor, sale 78 litigation would have been avoided. The record is contrary to that comment. Mr. Eason next cited areas of dispute raised by litigants. There is nothing in the record that suggests that exclusion of the corridor would have appeased all objections to the sale. KODIAK WAYNE COLEMAN, director, Regional Citizens Advisory Council for Prince William Sound; and member of the executive committee, RCAC, testified to need for maximum public input. As a main reviewer of oil contingency plans, RCAC has been an active participant in efforts to resolve procedural problems regarding plan review. The organization has great respect for the process of getting industry, local government, agencies and the public together to resolve complex issues. The proposed bill deals with a complex issue that requires additional time for review and consideration. Mr. Coleman next expressed the following specific concerns: 1. That the fiscal implications of the bill have not been fully explored: A. What are the possible costs to the state if it becomes embroiled in a buy-back situation due to provisions of the bill? B. How does the buy-back figure compare to income to the state at the lease sale stage? C. Would there be cost savings if DEC rather than DNR performed consistency reviews? 2. If the possibility of an oil spill is not examined at the lease sale stage, at what stage will environmental and economic costs of the bill be considered? On behalf of the RCAC, Mr. Coleman urged that legal, fiscal, and definitional questions be answered before the legislation is finalized. LINDA FREED, Community Development Director, Kodiak Island Borough; acting borough mayor; and one of three local representatives on the Alaska Coastal Management Planning Working Group, voiced her belief that the proposed bill would have significant negative fiscal impact for both state and local governments. Costs will accrue as the state is required to defend increasing numbers of lawsuits resulting from disposals under the legislation. Ms. Freed next addressed the fiscal impact of "discrete saving" language. As presently written, the language will cost both applicants and the state "more money in the long run." Early, comprehensive consideration of significant issues relating to disposal of state interest in land and resources must be more cost efficient and effective. It is in the best interest of all parties to have an opportunity to resolve conflicts early in the process. Ms. Freed commented favorably upon processes used by the federal government when it offered offshore oil and gas leases in the early 1980s. It is in the state's best interest to emulate that model process. Ms. Freed urged that action on the bill be delayed to provide opportunity for testimony from concerned residents, coastal districts, local governments, state agencies and industry and to allow time for those entities to meet together to strengthen the bill. HOMER PAUL SEATON, Homer Fisherman, next spoke in opposition to the bill. He questioned the accuracy of both testimony and correspondence from DNR regarding sale 78 and advised that much of the public opposition to the sale is due to inclusion of offshore tracts. Mr. Seaton suggested that allowing DNR to determine what is significant and what impacts will be considered is tantamount to elimination of the coastal zone management plan. Mr. Seaton directed attention to Sec. 2(b)(3) and questioned the proposal to limit consideration of impacts to those within the lease sale. Isolation to the lease area does not make biological or economic sense since impact often spreads far beyond the immediate locality. TOBY TYLER voiced opposition to the bill and said that it bypasses citizen input. He explained that when DNR refused to withdraw "the Ninilchik portions of lease 78, the die was cast which led to the lawsuit . . . ." Throughout that process, the voices of local citizens were heard. The present system of checks and balances is working well. Mr. Tyler next advised that some residents filed complaints with the Ombudsman. The Ombudsman identified three allegations wherein DNR failed to uphold present statutes. The proposed legislation appears to bypass citizen involvement. That is unwarranted. Mr. Tyler suggested that the legislature drop the proposed bill and get on with more important issues. The legislature is the balance of power interposed between the administration and the courts. Mr. Tyler urged, on behalf of landowners and fishermen on the "southern Kenai," that the legislature side with the courts and Ombudsman on behalf of Alaska's citizens. ANCHORAGE BECKY GAY, Executive Director, Resource Development Council, spoke in support of changes to Title 38, which she explained would improve efficiency and clarity. She voiced RDC support for an orderly oil and gas leasing program and need to send a clear signal to the judicial branch that the legislature believes that oil and gas leasing and further production is in the best interest of the state. Ms. Gay voiced concern over use of the judicial system to slow down or circumvent an orderly leasing program. The proposed bill would provide clarity and direction to the division of oil and gas and reduce conflicts and confusing language. PETE NELSON, Land Manager, Alaska Region, Texaco Incorporated, next spoke in support of the bill, saying that the legislation is necessary to solidify statutory intent. Current statutes provide the Dept. of Natural Resources, not the Court System, with responsibility for development of Alaska's natural resources. Texaco believes a full analysis of all issues and concerns regarding oil and gas lease sales, through the best interest finding process, is being conducted in compliance with present statutes and regulations. The scope of review must be defined during the state's administrative review process rather than in the courts. SB 308 will provide certainty and a scope of review where recent court rulings have created uncertainty. STEVE PORTER next testified on behalf of ARCO. He said that the proposed legislation provides an opportunity to define for the director, the public, and the courts, the scope of review for disposal of state lands. Because of continuing controversy over the scope of this review, the legislature must provide much needed direction. Mr. Porter voiced support for inclusion of areas specifically identified by the legislature, areas identified by the director (through review of available information), and all public comments. The director must seriously consider all public comments and respond in writing to their relevance. The proposed legislation represents the department's attempt to reduce the scope of review to writing. Mr. Porter suggested that members of the public agree with above-expressed concepts but do not agree with the way the department has expressed the concepts in writing. He pointed to department willingness to effect changes in the bill to clarify misunderstood language. Mr. Porter recommended that those opposed to the bill explain their concern and identify specific language giving rise to that concern. JERRY BOOTH, Vice President of Energy and Minerals, Cook Inlet Region, Inc., next testified. He explained that CIRI is one of the largest private landowners in Alaska with a land base of 924,000 acres of subsurface estate and 1.6 million acres of surface estate. Mr. Booth voiced support for SB 308 and its intent to provide certainty to the scope of review and the best interest finding process. Current statutes and regulations are intended to provide for full analysis of all issues. However, recent court rulings have created uncertainty. The state, rather than the courts, should establish resource development policy. All public comments should be part of the scope of review. Thorough analysis of all valid, reasonably foreseeable, nonspeculative information and data should be foremost, in the process, to determine best interest findings. There are ample opportunities for public and legislative input into issues and concerns surrounding state lease sales. The Commission should have ample discretion to ensure that projects are in the state's best interest and consistent with the Alaska Coastal Management Program. MAUREEN McCREA, resident of Anchorage, next testified in opposition to CSSB 308 (Res). She voiced her understanding that the bill proposes to resolve problems recently experienced by DNR when conducting offshore oil and gas lease sales and issuing permits for mineral prospecting. She then offered the following recommendations: 1. That the Senate Finance Committee retain jurisdiction until proper language resolving current problems is developed. 2. That the bill be referred to the Senate Judiciary Committee. Judiciary review would allow for detection of unintended consequences of the legislation, i.e.: A. Application to resources other than oil and gas. B. Impact on federal consistency issues. Ms. McCrea voiced concern that jeopardizing state ability to review federal actions for consistency would be a high price to pay for the proposed legislation. Alaska fought hard to gain influence over the federal leasing program. Residents should know if that right might be diminished by proposed statutory changes. Ms. McCrea suggested that response to the proposed legislation is reminiscent of response to the federal offshore program. While narrowing state and public review to influence lease sale decisions worked in the short term, it had negative results in the long term. Major, potential offshore deposits off the California coast are now unavailable, and leases in Bristol Bay await funds to buy them back. The current focus at the federal level is to listen to states, coastal districts, and residents to create effective mechanisms for working together. That approach is recommended to DNR. MARILYN CROCKETT, Assistant Executive Director, Alaska Oil and Gas Association, voiced support for full analysis of all issues and concerns for the best interest finding for each lease sale. Current statutes and regulations are designed to ensure that. However, uncertainty created by recent court rulings gives rise to need for the proposed legislation. AOGA supports certainty in the process so that DNR's scope of review may be defined during the administrative review process rather than by the courts. Ms. Crockett suggested that the scope of review for the best interest finding cover three things: 1. From information available to the director, the director should determine those issues that should be addressed during the review. 2. All public comments should be considered in determining what the scope of the review should be. 3. The legislature has determined that items listed in AS 38.05.035(g) should be part of the scope of review. If the director, the public, and the legislature do not consider an issue to be of sufficient concern, the courts should not be allowed to decide it should have been covered in the best interest findings. JON ISAACS, Jon Isaacs and Associates, planning consultant, next testified. He explained that he is working with a group of districts evaluating proposed legislation. The group takes the position that there is no process better than coastal management for bringing everyone to the table to resolve concerns and to proceed with the best possible development. It gives municipalities a guarantee that the state and federal governments will treat them as equals and take their positions seriously. Coastal areas recognize the importance of oil and gas lease sales to the state and the local economy. Mr. Isaacs concurred that the recent court decision on lease sale 78 created a problem for the department in regard to best interest findings and coastal management determinations. Questions which must be resolved relate to: 1. What is a reasonable scope of analysis for a best interest finding? 2. What levels of analysis are applied to disposal of interest and to subsequent phases of development? 3. How should multiphased projects be addressed under the coastal consistency determination? Mr. Isaacs voiced appreciation for amendments incorporated within CSSB 308 (Res) but said that the proposed bill is not yet an acceptable solution. He spoke to ongoing efforts to work with the department and the hope that language could be developed to reduce problems faced by the state without creating new problems for others. Mr. Isaacs stressed need to refrain from rushing amendments to the table and repeating the "inadequate public involvement problems that have plagued this legislation to date." NANCY WAINWRIGHT, Attorney at Law, next testified, advising that for the past fifteen years her practice has been in state and federal coastal zone management. She noted that she could not address all the legal problems presented by the proposed bill in the teleconference time allotted. She voiced support for a working group to address problem areas. Ms. Wainwright then confined her remarks to two issues: 1. Buy backs. The proposed bill will increase the likelihood of state buy backs of leases because it is not fair to sell property for a particular purpose and then later tell the purchaser that he or she cannot "do anything with it." As an example, Ms. Wainwright pointed to lease sale 78 as well as past sales in Bristol Bay. 2. Public Process. Ms. Wainwright stressed that "This is the only publically driven phase of the lease process." The state is in control at this point. Following sale, the lessee drives the process and restrictions on the public's right to know develop. The department and the lessee are in privity of contract and have a special financial relationship whereby they meet without public presence to develop plans. End, SFC-94, #20, Side 1 Begin, SFC-94, #20, Side 2 Ms. Wainwright attested to past challenge to federal OCS leasing because of lack of consideration of effects at the lease sale stage. She then stressed that if consistency review is to have any meaning, it must be applied at the lease sale stage, when key decisions affecting use of coastal resources are made. Alaska and other states challenging federal leasing have prevailed, and Congress now requires that all impacts: direct, indirect, cumulative, and secondary be considered at the lease sale stage. Ms. Wainwright noted that the federal government must approve the proposed change to the ACMP. She then raised questions concerning what the Clinton administration might do when required to certify the change. After being sued by the state over the scope of review of OCS lease sales, the federal government will, in effect, be asked to confirm that Alaska does not have to perform that same analysis for state sales. If Alaska loses its federal CZMA certification, it loses the federal money from the program as well as a say in wetlands permits, clean water act permits, OCS leasing, and ANWR. It would not be wise to sacrifice that authority. The costs of the proposed bill are too great to rush it through. DARCY RICHARDS, Program Director, Aleutians West Coastal Resource Service Area, next testified. She said that the consensus building review process under ACMP is a most effective means of having a local voice in resolving resource-use conflicts. The proposed bill would limit that local voice by giving greater discretion to DNR. Ms. Richards urged that adequate time be provided to bring industry, agencies, local districts, and the public together to work out acceptable solutions. Time spent now will reduce the chance of costly litigation or buy-backs later. CORDOVA DORN HAWXHURST next spoke from Cordova. She voiced her belief that the focus of the division of oil and gas appears to be exclusively on short-term opportunities for oil and gas development. Legislative focus should be on short and long-term ramifications of development on all competing resources. The proposed bill appears to remove legislative responsibility to balance competing industry groups. Ms. Hawxhurst questioned the ramifications of favoring oil to complete exclusion of tourism, fishing, mining, and other industries. She cautioned against putting all of the state's economic hopes "in one basket." The proposed bill addresses a symptom of a problem rather than the problem itself. The real problem is DNR's inability or unwillingness to consider the probable cumulative impact of all anticipated activities for each project. In her concluding remarks, Ms. Hawxhurst urged that the legislature retain its responsibility for balanced resource management. JOHN BOCCI next testified before committee. He suggested that under the proposed bill, DNR appears to lessen the risk for the developer while increasing the state's own risk of financial liability due to potential lawsuits from bad judgment by state employees. The legislation omits the financial risk of other resource users in areas adjoining potential lease sales. Mr. Bocci attested to impact of the proposed bill upon municipalities and local residents whose rights to participate and raise fiscal concerns are side- stepped. He suggested that the courts are, perhaps, attempting to send a message to DNR. The federal government appears to be able to work within certain parameters, yet the state does not appear able to do so. Mr. Bocci suggested that if the department devoted as much time and effort to "homework on lease sales" as it has to promoting the proposed legislation, the present hearing might not be necessary. Mr. Bocci asked what guarantee would be made to the public that it will be listened to after a project has been started. Actions such as those in the proposed bill leave public recourse through the courts alone. He suggested that current problems be identified and worked on rather than circumvented by changing the law. In his concluding remarks, Mr. Bocci asked if lease sale 79 would be exempt from the proposed legislation. He suggested that the department is attempting to pass the bill before "79 commences." RIKI OTT next testified in opposition to the bill on behalf of the United Fishermen of Alaska. She said that the legislation allows DNR to ignore resource-use conflicts, transportation issues, and environmental issues during the initial administrative review prior to disposal of land. The bill is fiscally irresponsible. Multiphased projects will cost the state because state and industry investments in a project will bias DNR's analysis of later project stages in favor of completion. Since buy-back of land, once disposed, is not a fiscally realistic option, the legislation will favor development regardless of cost to competing resource users. Ms. Ott suggested that Mr. Eason misrepresented the fiscal impact of the bill. She then highlighted three scenarios comparing the financial risk of initial versus multiphased development. She stressed that multiphasing introduces a new element of risk because it increases the likelihood of erroneous land disposal. This financial risk should not be borne by the state or the public. Ms Ott characterized as untrue statements to the effect that the proposed bill poses no additional risk to the state. The bill does not address the additional risks to the state. UFA strongly believes that the state should be required to conduct a thorough best interest finding prior to a land disposal in every case in which the necessary information is available to the state at the time of initial administrative review. Multiphased developments are not in the public's best interest. Because the proposed bill would institutionalize multiphased development, it does not protect the public. Ms. Ott stressed the importance of the bill's impact on the public review process, saying that "Timing is everything." The proposed legislation takes away full public input at the beginning of the lease sale or land disposal process. That is a critical point. At the lease sale stage, DNR functions as a public agency. It controls the conflict resolution process with minimal bias because it does not, at that point, have a vested interest in the project. After disposal, the state and lessee work closely together through contractual and financial obligations to which the public is not privy. Public input at later stages does not carry the same weight it would at the initial review stage. Ms. Ott took exception to comments by Mr. Eason that the proposed bill does not limit the scope of issues addressed during review. She then directed attention to page 2, line 9, and noted use of the word "may." She suggested that in order to ensure that the full spectrum of effects will be covered during review, "may" should be changed to "shall." Further, while the word "significant" has been substituted for "nonspeculative," there is no definition for either "significant" or "direct." It is impossible to determine if the original intent of the word "nonspeculative"--to severely limit the scope of issues raised--has changed. In her concluding remarks, Ms. Ott said that Mr. Eason misrepresented the ramifications of the bill to the state and the public. That is a serious breach of public trust. The proposed bill represents a radical shift in public policy. As such, it is both unnecessary and undesirable. Ms. Ott urged review by state attorneys and a working group to determine whether current law "needs fixing." She further requested that the legislation be referred to the Senate Judiciary Committee in order to deal with issues of constitutionality, conformity with the Coastal Zone Management Act, just compensation, and potential state liability for buy-backs. DILLINGHAM SUSAN FLENSBURG next testified, saying that she works with the Bristol Bay CRSA Coastal Management Program. She voiced support for slowing "things down" and sorting out the issues. She further indicated support for a working group and retention of the bill until issues of concern are resolved. Ms. Flensburg noted need for referral of the bill to Senate Judiciary Committee. Senator Kerttula said that Senate Finance has long been the committee of last resort. Often, issues cannot be clearly separated from financial ramifications. Finance often becomes involved in judicial, financial, and resource issues in great depth. A Finance sub-committee often has more responsibility and exerts more influence on legislation than a standing committee. It is thus not unusual for legislation to end up in Finance for ultimate decision making and rewrite. ANNOUNCEMENT Co-chair Pearce announced that teleconference testimony on SB 308 would be continued Wednesday morning. She requested that those wishing to testify speak specifically to language that needs to be revised and make proposed language and amendments available. ADJOURNMENT The meeting was adjourned at approximately 10:25 a.m.