HOUSE BILL 315 "An Act relating to the financing of technological developments by public corporations of the state; and relating to the financing of the Kodiak launch complex, the Fairbanks satellite ground station space park, and a low-rank coal water fuel technology project." ARLISS STURGULEWSKI, (TESTIFIED VIA TELECONFERENCE), INTERIM EXECUTIVE DIRECTOR, ALASKA SCIENCE & TECHNOLOGY FOUNDATION, ANCHORAGE, provided Committee members with a memorandum dated 4/26/95 regarding the "Budget Information Requested". [Attachment #1]. She offered to answer questions from the Committee. Representative Navarre questioned how the interest of the fund would be protected. Representative Brown referenced Section #6 and asked if award money would result from the interest of the foundation or from the principle. Ms. Sturgulewski explained that the coal water fuel proposal would be phased over a three year period originating from a grant line. If Phase 2 of the project is accepted, the first payment would be made this fiscal year. Ms. Sturgulewski referenced Attachment #1, pointing out that the analysis would remove the University Agriculture Station and the Aerospace Development Corporation. Representative Brown questioned why the earnings listed on Attachment #1 were greater without the inclusion of coal. Ms. Sturgulewski indicated that those earning would amount to $7.2 million dollars. Discussion followed between Representative Brown and Ms. Sturgulewski regarding the estimated earning reserve payments. Representative Navarre recommended removing the agriculture component and then focusing the availability of that grant money to other projects. Representative Martin thought that Business and Industrial Development Corporations and Organizations (BIDCO) made a commitment to support the Alaska Science and Technology Foundation. Ms. Sturgulewski responded that a BIDCO package has been submitted. The return should be available on May 15th, 1995. Representative Martin asked how many projects would be eliminated with the advance of aerospace. Senator Sturgulewski replied that aerospace would move forward only if appropriate funding was available. She emphasized that this was not an appropriation bill. Representative Martin stressed his concerns with future complications resulting 3 from the legislation. Ms. Sturgulewski responded that the foundation currently handles many small grants and that the board of directors will continue to serve the needs of the small grant community. Ms. Sturgulewski explained that the cold water fuels and royalties plan bids should arrive soon. The repayments for the Science and Tech Foundation and the Department of Education will come from royalties received on commercial sales and from licensing of that technology. Repayments will then become a portion of the negotiation, which must begin in order that Phase 2 can start. Representative Brown asked if satellite facilities are commercially viable. Ms. Sturgulewski stated that there are private interests from business and that it is anticipated that the operation would allow for significant private sector information. She added that the investment of the project is under review from Alaska Industrial Development Export Authority (AIDEA). Representative Brown questioned if that was the normal sequence of events in obtaining AIDEA bonding. H. PAT LADNER, EXECUTIVE DIRECTOR, ALASKA AEROSPACE DEVELOPMENT CORPORATION (AADC), ANCHORAGE, explained that was an appropriate procedure and noted that the proposed legislation would provide Alaska the opportunity to enter into a new industry without placing money at risk. Representative Martin MOVED to adopt Amendment #1. Representative Mulder OBJECTED. Representative Martin stressed that free enterprise should "pay" their own way. Representative Kelly advised that the legislation would be for the benefit of the entire State, agreeing that the 50% application would not be appropriate. Representative Therriault stated that fees would be paid for by the debt service, and noted that the enterprise would be responsible for more than 50%. Representative Mulder added that there would be a financial return through AIDEA and said that this would be a good project. Representative Martin emphasized that the Kodiak launch complex, the Fairbanks satellite ground space park and the low rank coal water fuel technology should be able to accumulate the remaining funds through a private match. Ms. Sturgulewski responded to Representative Brown's questioned regarding the coal water fuel project stating that the major amount of money would be received from the U.S. Department of Energy and would not be private funds. 4 The Alaska Science & Technology Foundation will contribute $3.7 million dollars and the Department of Energy will contribute $17 million dollars for the demonstration of the project. She pointed out that the language of the amendment would make receiving that contribution difficult. Representative Brown referenced a letter from Mr. Snell at AIDEA dated 3/7/95 explaining the anticipated $10.2 million to be received from the federal government and $8 million to be received from the consortium members in order to begin Phase 2. The intention would be for the $4 million state dollars to be spent up-front in order to provide the preliminary study before the other participants provide their money. Ms. Sturgulewski stated that all phases are being worked on together, while indicating that her agency has clarified that the pay back project would need to occur in the first three years. Ms. Sturgulewski stated that Phase 1 has been completed. Phase 2 has not been entered into yet. Representative Brown advised that Representative Martin's amendment would not conflict with the foundation's intention. Ms. Sturgulewski disagreed stating that it would conflict with the amount of money originating from the grant and the Department of Energy. Representative Brown asked if the legislation would affect the Healy Claim Coal Project. Ms. Sturgulewski remarked that the legislation would affect the tide waters demonstration project on the beach. There are a number of ownerships involved with the coal fields and she added, that group was interested and would be participating in the project. A roll call was taken on the MOTION. IN FAVOR: Brown, Martin OPPOSED: Grussendorf, Kelly, Kohring, Mulder, Navarre, Therriault, Hanley, Foster Representative Parnell was not present for the vote. The MOTION FAILED (2-8). Representative Navarre explained Amendment #2. [Attachment of Alaska to participate in the challenger learning center feasibility study. This study would provide a computer program and would establish a learning center addressing interests in space industry technology. He pointed out that Kenai had been listed because the Mayor of Kenai offered to donate the land for that purpose. He agreed that Anchorage would be a more accessible area. 5 Co-Chair Hanley asked if there was a cost associated with the feasibility study. Representative Navarre commented that a cost had not yet been established although he recommended providing a cap limit to those costs. Mr. Ladner elaborated that he had spoken to AIDEA regarding the feasibility study and that a capital budget submission has been completed between Alaska Aerospace and AIDEA. (Tape Change, HFC 95-100, Side 1). Ms. Ladner reiterated that this would be a good program resulting in positive impacts on children who use the center in the math and science areas. Mr. Ladner noted that he supported Amendment #2. He added that the cost to engage in the proposal would be $700 thousand dollars and would be an on-going cost. Representative Mulder asked the cost to provide the feasibility study. Mr. Ladner replied that it had not yet been submitted and that to date determining those costs had been an explorative exercise of the corporation. Co-Chair Hanley suggested including a regional consideration on the amendment. Representative Navarre agreed to amending the amendment to include "other locations". Representative Navarre recommended changing the language in the lower section of the bill deleting "one-quarter" and inserting "one-half". Representative Navarre amended the amendment to Line 17, changing the language to read "(1) one-half by the Alaska Aerospace Development Corporation and AIDEA". Co-Chair Hanley added a "friendly" amendment to the amendment by deleting the language on Line 15 "Kenai and". Representative Navarre MOVED to adopt the amended Amendment Representative Mulder MOVED to report CS HB 315 (FIN) out of Committee with individual recommendations and with the accompanying fiscal note. Representative Martin OBJECTED. A roll call was taken on the MOTION. IN FAVOR: Grussendorf, Kelly, Kohring, Mulder, Navarre, Parnell, Therriault, Foster, Hanley OPPOSED: Martin Representative Brown was not present for the vote. The MOTION PASSED (9-1). 6 CS HB 315 (FIN) was reported out of Committee with "individual recommendations" and with a zero fiscal note by the Department of Commerce and Economic Development dated 4/20/95.