SB 125-LEGISLATIVE MEMBERS OF AGDC BOARD  2:07:33 PM CO-CHAIR TALERICO announced that the first order of business would be CS FOR SENATE BILL NO. 125(RES), "An Act adding legislative nonvoting members to the board of directors of the Alaska Gasline Development Corporation." 2:07:54 PM CO-CHAIR NAGEAK moved to adopt the proposed House committee substitute (HCS) for CSSB 125(RES), Version 29-LS1240\G, Nauman, 3/31/16, as the working document. There being no objection, Version G was before the committee. 2:08:25 PM TOM WRIGHT, Staff, Representative Mike Chenault, Alaska State Legislature, referred to Version G, Section 2, page 2, beginning line 4, and noted it adds the qualifications for board members. A small change is found on page 2, line 31, he advised, in that legislative members may not be appointed for a term longer than two years and is at the discretion of the President of the Senate and the Speaker of the House of Representatives. He explained that SB 125 incorporates HB 282. 2:09:30 PM CO-CHAIR TALERICO asked for the documentation he had requested of Mr. Wright. MR. WRIGHT responded that Co-Chair Talerico's staff is in possession of the Concurrent Resolution that the House Resources Standing Committee will have to introduce and serve as a title change in the event the bill is reported from the committee. MR. WRIGHT referred to the 3/30/16 legal memorandum to Representative Mike Chenault from Emily Nauman that was attached to the draft committee substitute. [Mr. Wright began reading paragraph 3, on page 2, and when turning to the next page, turned to the top of page 4 and continued reading. Page 3 was not read.] He paraphrased as follows: The department has fairly consistently opined that a legislator sitting on the executive branch board violates the separation of powers principle. MR. WRIGHT explained the department is the Department of Law. He continued paraphrasing, as follows: In regard to the state bond committee, the department found the State Bond Committee is within the executive branch performing executive functions. Accordingly, membership on the MR. WRIGHT then turned to the top of page 4, [bypassing page 3] and continued paraphrasing, as follows: AGDC [Alaska Gasline Development Corporation], however, is not an advisory council, as described above. Whether or not AGDC would be deciding upon and acting on a matter that is not debatable, there is no question that the corporation will be applying the law. However, it may be possible that a court could take the logic in the abovementioned opinion and apply it to sitting nonvoting legislative board members: the violation of separation of powers doctrine may be resolved in favor of the legislature because the legislators are serving in a nonvoting, essentially advisory capacity. And that position is supported in the bill which in every possible statute reiterates that decisions related to the execution of laws are left only to the voting members of the board. ... It's very possible that a court could find that a nonvoting legislative board member does not exert any special influence simply because of his or her position on the board. ... The only sure resolution is a decision by the Alaska Supreme Court. MR. WRIGHT opined that Ms. Nauman certainly warns that there is a risk involved in placing nonvoting legislative members on the AGDC board, as the board is serving an executive branch function. However, she does not believe the risk is great enough that she'd advise removing the legislative board members from the bill. 2:12:05 PM REPRESENTATIVE JOSEPHSON referred to a legal memorandum from Emily Nauman, dated 12/7/15, and noted that within her summary paragraph there is mention that a separation of powers issue had "likely" been raised, and now she writes it "may" violate separation of powers issues. He questioned why Ms. Nauman changed "likely" to "may." MR. WRIGHT responded that Representative Josephson would have to ask Ms. Nauman why it was changed. He advised that the legal [memorandum] was not requested by Representative Chenault's office and reiterated that it was attached to the draft committee substitute. In most cases, he added, when there is a question of legality in a bill, a legal memorandum is attached and this is Ms. Nauman's latest iteration on this issue. 2:13:01 PM REPRESENTATIVE JOHNSON asked the difference between the AGDC board and the Alaska Seafood Marketing Institute (ASMI) board. MR. WRIGHT answered the ASMI board has legislative members on the board, and he is unaware whether they are non-voting. Frankly, he continued, there is no statutory authority to put them on the board. REPRESENTATIVE JOHNSON noted that a former member of the other body sits on that board, and he said that member brought the issue up to the ASMI board. It was treated as perfectly normal and acceptable and the board enjoys having the legislator there for that perspective. He asked whether the ASMI board is covered under a different body of law or there is some reason why it should stand out over the ADGC board. 2:14:02 PM MR. WRIGHT drew attention to Ms. Nauman's 3/30/16 legal memorandum, page 4, footnote 14, which states in part [original punctuation provided]: There are two nonvoting legislative members on the board of the Knick Arm Bridge and Toll Authority. There are two members of the legislature serving as ex officio nonvoting members of the board of directors of the Alaska Aerospace Corporation. There are two members from the legislature serving on the Alaska Commission on Postsecondary Education. There are two ex officio legislative members serving on the Alaska Health Care Commission. There are two non-voting members, serving ex officio, on the board of the Alaska Criminal Justice Commission. There are two legislators serving as ex officio non-voting members on the Alaska Tourism Marketing Board (which has the authority to "execute a destination tourism marketing campaign."). MR. WRIGHT related that this is not an isolated example. REPRESENTATIVE OLSON quipped that that would probably apply to the legislative alternate members on ASMI's board as well, and so it looks like he is out of a job. MR. WRIGHT said he has no response. 2:15:13 PM REPRESENTATIVE JOSEPHSON asked whether the 3/30/16 memorandum addresses the issue of whether an Alaskan could seek standing to undo the work of a commission or board by alleging there were improper members consistent with the opinion from Assistant Attorney General Jerry Juday. MR. WRIGHT opined that he could not see a reason why a person could not file suit based upon this because anyone can file a lawsuit on anything. As Ms. Nauman's memorandum states, it may take a court decision to clarify this issue. 2:16:30 PM REPRESENTATIVE SEATON referred to the issue of dual offices and the Alaska State Constitutional Article II, Section 5, which states that no legislator may hold any other office or position of profit under the United States or the State. REPRESENTATIVE SEATON noted the position has been that position of profit is one term and office is another. With regard to the constitutional prohibition against holding dual offices, the committee would have to determine that a board member of an executive committee is not an office and case law says that those are offices. The common sense reading is that that is an office, he posited, and legislators are in office, and the constitution specifically prohibits legislators from holding dual offices. Whether that is voting or non-voting, it is not reliant on position of profit as profit modifies position not office. He inquired whether Legislative Legal and Research Services has provided any explanation on how a board member would not be an office. MR. WRIGHT replied no. 2:18:30 PM REPRESENTATIVE TARR moved to adopt Amendment 1, labeled 29- LS1250\P.1, Nauman, 4/1/16, which read: Page 1, line 13: Delete "and" Page 2, line 2, following "senate": Insert "; and (5) one nonvoting member who is a  member of the minority caucus from either the senate  or the house of representatives appointed jointly by  the president of the senate and the speaker of the  house and who serves at the pleasure of the president  of the senate and the speaker of the house REPRESENTATIVE OLSON objected. 2:19:08 PM REPRESENTATIVE TARR explained Amendment 1. She pointed to the unresolved issue of whether placing non-voting legislative members would create a situation where they have undue influence on the proceedings. She explained that the non-voting member would be one member from the minority caucus and it could be from either the House of Representatives or the Senate as it would be a joint appointment. The way the bill is written, one member from the House of Representatives would be appointed by the House of Representatives and one member from the Senate would be appointed by the Senate, and this third member would be a joint appointment between the leaders in their respective bodies. This is important, she pointed out, because since early 2014, Senate Bill 138 has been a work in progress and leadership in the executive branch has changed, and the House of Representatives has the potential to change leadership every two years. Institutional knowledge on the legislative side builds in more stability because there are three legislators there, and it keeps both caucuses engaged which can be helpful in working through the issues, such as during the legislative special session last fall. There are varying opinions on how things should move forward and to the extent the legislature can keep as much communication happening throughout the process, the legislature will be better situated to make decisions and feel that everyone is in the know. 2:21:08 PM REPRESENTATIVE SEATON referred to the Alaska State Constitution, Article III, Section 26, which states [original punctuation provided]: When a board or commission is at the head of a principal department or a regulatory or quasi-judicial agency, its members shall be appointed by the governor, subject to confirmation by a majority of the members of the legislature in joint session, and may be removed as provided by law. They shall be citizens of the United States. The board or commission may appoint a principal executive officer when authorized by law, but the appointment shall be subject to the approval of the governor. REPRESENTATIVE SEATON pointed out that the constitution gives appointment power to the governor, subject to confirmation, which is exactly as has been done with the ADGC board. He said his problem with this amendment is that now the committee is interjecting two other people, and is making appointments other than the governor that are not confirmed by the legislature to these offices. 2:22:43 PM REPRESENTATIVE TARR further explained that there is conflicting information on whether these appointments can be considered appropriate. The issue is unresolved yet, she said, and she finds comfort that this practice has been in use for quite some time and she has not seen it objected to in other areas. She said she has attended almost every ASMI board meeting as a non- voting member since joining the legislature and does not believe she has had undue influence on the process or decisions it made. After the special session she committed to try and attend as many of the AGDC board meetings, which was a challenge among her other responsibilities. The legislators stepping up acknowledge they will make time in their schedule to be a full participant. Also, she extended, there is value in keeping the legislature engaged in the process of what could be the most important capital project the state has ever seen. 2:24:26 PM REPRESENTATIVE OLSON removed his objection to Amendment 1. There being no further objection, Amendment 1 was adopted. CO-CHAIR TALERICO opened public testimony. 2:25:19 PM MERRICK PEIRCE testified that SB 125 is unconstitutional and in the event it were constitutional the legislature's track record on the gasline has been consistently wrong, and is in contempt of the mandate Alaskans issued when they voted to create the Alaska Natural Gas Development Authority (ANGDA). He remarked that legal opinions on the separation of power issue are clear. He referred to a March 20, Department of Law memorandum and paraphrased as follows: The appointment of two legislators to the board of directors of a public corporation, the executive branch of state government, is unlawful for two separate reasons. First, the appointments would contravene the prohibition against dual office holding set out in Section 5, Article II, of the Alaska Constitution. Second, the appointments would violate the separation of powers doctrine. Of course the same legal issue applies to House Bill 357, and legislators serving on the Board of Regents. MR. PEIRCE explained that in 1980, Alaska voters rejected a constitutional amendment that would have allowed legislators more authority over, and maybe even involvement with, the Alaska Housing Finance Corporation Board. Several years ago, he recalled, Gene Therriault and Nancy Dahlstrom left the legislature to take jobs in the Parnell Administration, and subsequently were both found to be in violation of Article II, Section 5, and had to resign their jobs because they didn't sit out the required one year. In the event a legislator has a burning desire to serve on the ADGC board there is a legal path such that the legislator must first resign his/her legislative seat and after one year ask the governor to consider appointing them to the ADGC board. Beyond the legal issues, he related, a few years ago Governor Frank Murkowski and Harry Noah brought to the public's attention how the legislature wasted over $1 billion in various pipeline schemes. He referred to Governor Frank Murkowski's 9/20/13 written examples, and paraphrased as follows: $557 million has been expended in the last nine years on consultant fees and reports. In the last session the legislature authorized $355 million for the in- state bullet line on top of the $72 million from former years. 2:27:35 PM MR. PEIRCE commented that, of course, it was a failure because that project never made any economic sense. MR. PEIRCE continued paraphrasing Governor Frank Murkowski's 9/20/13 written examples, as follows: The legislature committed $332 million in grants and loans to the North Slope gas to truck North Slope gas to Fairbanks ... We still have the obligation to pay $500 million to TransCanada of which $260 million has been paid and an additional $240 million is still owed. MR. PEIRCE stated that by Governor Murkowski's tabulation the legislature has spent over $1 billion and has nothing to show for it. 2:28:06 PM MR. PEIRCE related that the most recent significant gasline involvement by the legislature was Senate Bill 138, and there are two significant failures with that policy. The pipeline routing has not proven to be constitutional because of the routing to Nikiski that likely results in a reduced netback for a more expensive project. It also violates federal law and federal law does have supremacy, such that any gasline routing not resulting in the maximum netback to Alaska violates Article VIII. When considering that the proposed project to Nikiski is a longer more expensive routing than the one to Valdez, the more expensive the project, the less netback to Alaska. There are potentially 200 trillion cubic feet (Tcf) of North Slope gas, and if the project in Nikiski conservatively results in a $0.25 million British thermal unit (MMBtu) higher cost, the loss to Alaska over the life of the project will result in tens of billions of lost revenue to Alaska and that is unconstitutional, he remarked. Further, he added, the route to Nikiski is also not consistent with federal law under the National Environmental Policy Act of 1969 (NEPA). Under previous gasline work and environmental impact statement (EIS) work as completed by the private sector, such as Yukon Pacific, the route to Valdez was found to be superior after completing the federally required alternative analysis. A fact that has been ignored by the legislature, as well as significant harm that results to Fairbanks from a pipeline routing that bypasses that community. By comparison, Governor Bill Walker has been consistently correct in advocating for a gasline to tidewater for liquefied natural gas (LNG) export, and it does not help to have the legislature to try to unconstitutionally inject itself into the executive branch functions. He acknowledged the legislature has a lot to deal with right now with issues clearly within the legislative branch functions, such as a $4 billion deficit, and the legislature has great difficulty adjourning within 90 days as the voters asked. 2:30:03 PM REPRESENTATIVE JOSEPHSON noted that Mr. Pierce mentioned a 3/20/16 opinion and asked whether he meant a 3/30/16 opinion. MR. PEIRCE replied that it is a 3/20/16, Department of Law memorandum addressed to Darwin Peterson, from Jerry Juday, Assistant Attorney General of Labor and State Affairs Section. REPRESENTATIVE JOSEPHSON advised he does have that opinion. 2:30:47 PM CO-CHAIR TALERICO closed public testimony after ascertaining no one further wished to testify. 2:31:00 PM REPRESENTATIVE JOSEPHSON, relative to the Alaska Gasline Development Corporation board, expressed that this is an expression of legislative concern regarding the turnover on the board, the direction of the board's work, and what it does vis a vis the Department of Natural Resources, the Alaska LNG Project team, and the legislature's "gas team." He related he shares the concerns of a lack of expertise and lack of continuity; however, he will oppose this bill because it raises oath questions. Representative Josephson pointed to Ms. Nauman's 12/7/15 and 3/30/16 memorandums and noted they are decidedly different. He paraphrased from page 3 of Ms. Nauman's original memorandum, saying: Effectively you haven't presented me with a question of non-voting members that may result in a different result. REPRESENTATIVE JOSEPHSON then pointed to page 1 of the 12/7/15 memorandum and expressed concern that Ms. Nauman discusses whether profit modifies position, and she appears to take a different read on that. Representative Josephson paraphrased as follows: Service in any office is prohibited -- in any office is prohibited regardless of whether the legislator receives compensation for that service. 2:32:58 PM REPRESENTATIVE JOSEPHSON surmised that Ms. Nauman reads it as more of a prohibition. He offered concern with Ms. Nauman's 3/30/16 memorandum and paraphrased it as follows: Legislative members are, however, allowed into ... under the bill as amended, the committee substitute Version P, would be allowed into executive sessions. REPRESENTATIVE JOSEPHSON related that he tried to imagine being in a House Finance Committee room with just legislators and staff, and the legislators allowing executive branch officials to sit in on an executive session. REPRESENTATIVE JOSEPHSON noted that this happens in other commissions and bodies. He said he reviewed Jerry Juday's 3/20/16 opinion together with Ms. Nauman's 12/7/15 opinion, and observed Ms. Nauman's uncertainty within her 3/30/16 opinion. He pointed out that he has particular concerns regarding the comments made by Representative Seaton, and opined that even though ADGC could benefit from the wisdom of members from both bodies, he has concerns about whether this is proper. 2:34:52 PM REPRESENTATIVE SEATON stated he opposes the bill due to the issue of dual office holding precluded by the Alaska State Constitution, and that the appointment powers are granted to the governor and not to other entities to make those appointments to executive bodies that have regulatory responsibility. He related he has reviewed the information and in a common sense manner concluded that this would create an unconstitutional action. He further related that he took an oath of office to support and defend the Alaska State Constitution, and as a member of a separate branch of government he cannot pass that off to have another branch of government to decide whether he is correct or wrong because he has to make that decision on his actions. That, he pointed out, would be saying he would have this action [pass out of committee] even though he believes it is unconstitutional and rather to have the courts decide whether he was right or wrong, in which case he may as well have not taken his oath. For those reasons he will vote against the bill and the issue of executive sessions especially if one signed an executive confidentiality form and was not able to share information with other legislators. 2:37:09 PM REPRESENTATIVE TARR clarified that she would not be comfortable with doing something that was clearly described through the legal opinions as being unconstitutional. The challenging issue here is that they have given the committee more grey area than definitive answers. Following this bill, she commented, she will look into other examples. She noted a task force was formed last year in an effort to pass "Erin's Law" and "Bree's Law" that went through the same conversations with Legislative Legal and Research Services regarding the separation of powers. Similar to the two memorandums, the ex officio non-voting members are a way it can be accomplished in a constitutional fashion. She related that she takes her oath seriously and will continue researching the issue, if she is wrong she will vote accordingly. Although, at this time, given the information she has, she will continue to move it through the process, she said. 2:38:33 PM REPRESENTATIVE JOHNSON recalled conversations about local hire being unconstitutional and yet the legislature decided that if it is going to fight on constitutional grounds that is a good place to fight. Therefore, the legislature picks its constitutional fights sometimes with the grey areas. He said he is comfortable with this, and that it is a constitutional ground he would like to fight on because the legislature needs input not only on this board but other boards previously mentioned. He said he supports the bill. 2:39:13 PM REPRESENTATIVE OLSON commented that at least one to four times a year all of the bills that will either be a personal bill, House Labor and Commerce Standing Committee bill, or before the House Labor and Commerce Standing Committee, that has a legal opinion that it may be unconstitutional. Going back 12 years, he could not recall any of the bills going any farther than the first letter out of Legislative Legal and Research Services, he said. REPRESENTATIVE HERRON referred to Ms. Nauman's memorandum and a footnote listing other authorities, corporations, commissions, and boards wherein there are non-voting members, and opined that it is either "we can or we can't." He remarked he would like the bill to move forward due to these other authorities, corporations, commissions, and boards, because the legislature has been doing this for a long time. He commented that possibly the legislature should not be doing it on those either. 2:40:44 PM CO-CHAIR TALERICO stated he also took an oath of office and that he has been in both voting and non-voting seats. He maintained that non-voting members do not have horse power when decisions are made because they will not be part of the record of decision, which is a driver in these types of decisions because the non-voting member does not have decision-making ability. This, he said, makes him comfortable. 2:41:46 PM REPRESENTATIVE CHENAULT pointed out that the bill may be unconstitutional or constitutional, and each member has his/her own opinion on that. He said the legislation stiffens up the requirements for the ADGC board members which is as important as any other part of the bill because the state and ADGC want the smartest and brightest people as board members. He related that that issue passed in Senate Bill 138, and that is what he would like to continue. This legislation does put requirements on the members of the board to have the smartest and brightest people representing the State of Alaska on the ADGC board. He pointed out that there is no disrespect to the folks currently on the board who bring the right values to the board. 2:43:14 PM CO-CHAIR NAGEAK moved to report HCS CSSB 125(RES), Version 29- LS1250\G, Nauman, 3/31/16, as amended, out of committee with individual recommendations and the accompanying fiscal notes. REPRESENTATIVE SEATON objected. 2:43:50 PM A roll call vote was taken. Representatives Chenault, Johnson, Olson, Tarr, Herron, Talerico, and Nageak voted in favor of reporting HCS CSSB 125(RES), Version 29-LS1250\G, Nauman, 3/31/16, as amended, out of committee with individual recommendations and the accompanying fiscal notes. Representatives Seaton and Josephson voted against it. Therefore, HCS CSSB 125(RES) was reported from the House Resources Standing Committee by a vote of 7-2.