HB 330-DNR: DISCLOSURE OF CONFIDENTIAL INFO  8:13:00 PM CO-CHAIR TARR announced that the final order of business would be HOUSE BILL NO. 330 "An Act authorizing the commissioner of natural resources to disclose confidential information in an investigation or proceeding, including a lease royalty audit, appeal, or request for reconsideration and issue a protective order limiting the persons who have access to the confidential information." [Before the committee was CSHB 330(JUD)] REPRESENTATIVE BIRCH said he did not intend to offer Amendment 1. He related his understanding that Amendment 2 would not be offered, as well. 8:14:13 PM REPRESENTATIVE BIRCH made a motion to adopt Amendment 3, labeled 30-GH2820\D.3, Nauman, 3/12/18, which read as follows [original punctuation provided]: Page 4, line 2: Delete "limiting" Insert "meeting the requirements of (c) or (d) of  this section that limits" Page 4, following line 6: Insert a new bill section to read:  "* Sec. 2. AS 38.05.020 is amended by adding new subsections to read: (c) Unless the protective order meets the requirement of (d) of this section, a protective order issued under (b)(15)(B) of this section must (1) limit access to the protected information to (A) an officer, employee, or agent that is directly involved in conducting or managing the participation of a party in the royalty or net profit audit or appeal; (B) a person reasonably expected to testify or provide sworn evidence on behalf of a party in the royalty or net profit audit or appeal; (C) a person that directly reviews and approves the conduct and management of a party's participation in a royalty or net profit audit or appeal; and (D) a person whose approval is necessary for a party to settle or otherwise resolve a portion or all of the matters or issues related to the royalty or net profit audit or appeal; and (2) prohibit use of the information for a commercial purpose.  (d) Unless the protective order meets the requirements of (c) of this section, a protective order issued under (b)(15)(B) of this section may disclose only information under the terms and conditions agreed to by the party whose information would be disclosed." Renumber the following bill sections accordingly. 8:14:22 PM CO-CHAIR TARR objected for purpose of discussion. REPRESENTATIVE BIRCH explained that Amendment 3 would strictly limit the access of confidential information shared under the protective order to those directly involved in conducting or managing an audit or appeal, to those who will testify or provide sworn evidence and to those whose approval is necessary to settle or resolve an audit or appeal. REPRESENTATIVE BIRCH said DNR's staff has suggested that this is already accomplished under the current language in the bill or has suggested a broader scope of access; however, he would like to insert clarifying language which is essentially language contained within a protective order issued by the court. He said having this language in statute would provide further assurance that confidential information is protected. CO-CHAIR TARR stated that Amendments 3 and 4 will address an issue brought to the committee's attention by the Alaska Oil and Gas Association (AOGA). She related that each amendment offered a different approach. 8:15:43 PM ED KING, Legislative Liaison, Office of the Commissioner, Department of Natural Resources (DNR), said he appreciated the AOGA raising the concerns and the DNR does not object to restrictions on protective orders since they are limited. The bill as currently written provides that the protective orders are limited, he said; however, he understood industry sought additional clarity. He said the DNR would like the language to parallel existing statute. He related the language in AS 43.55.040 accomplishes the same goal and provides that clarifying and restrictive language for tax issues and disclosure of confidential data, which was what Amendment 4 intended to do. CO-CHAIR JOSEPHSON identified Amendment 4 as the amendment labeled D.5. CO-CHAIR TARR reminded members that the committee was considering Amendment 3, labeled D.3. CO-CHAIR JOSEPHSON asked if the language in forthcoming amendment, Amendment 4 would mirror Title 43, which is essentially a protective order for the Department of Revenue. MR. KING answered yes; that the first portion of Amendment 4 is exact language and the remainder is tailored to royalties in the context of DNR. 8:18:12 PM CO-CHAIR JOSEPHSON stated he observed the House Judiciary Committee's previous hearing on this issue. He recalled that Mr. Hurley, Conoco Phillips Alaska, Inc., had expressed concern that if protective orders were not designed right the royalty audits might not be done swiftly and his company or others could suffer because, if they underpaid, the company would incur an 11 percent royalty interest. MR. KING responded that was exactly why the reason for HB 330; that there currently was no process to protect information disclosed under the current statute, AS 38.05.036(f), which gives the DNR the authority to disclose confidential data during a royalty audit. He clarified that the bill currently before the committee does give the department the ability to disclose this information, but because the authority is not expressly stated - the process is not expressed within in the language - when the department encounters a situation in which terms cannot be agreed upon for the release of confidential data, it becomes very difficult for the department to complete the audit. The seven pending audits awaiting the commissioner's approval cannot be resolved because the department cannot disclose the data, he said. He agreed with Co-Chair Josephson that when audits are pending, they accrue 11 percent interest. CO-CHAIR JOSEPHSON clarified that Mr. Hurley did not express complete approval for the bill. MR. KING interjected that Mr. Hurley did speak to his concern. REPRESENTATIVE PARISH said he found the arguments for Amendment 4 compelling but asked how Amendment 3 would be superior to Amendment 4. 8:20:27 PM REPRESENTATIVE BIRCH said he preferred the tighter language of Amendment 3. He stated that the legislature has a duty and responsibility to assure that the state is protecting private information while it conducts its audits. He felt confident Amendment 3 was a better approach. CO-CHAIR TARR related her understanding that in some circumstances the language in Amendment 3 was so restrictive that it would not be possible to resolve the [disclosure of confidential information] issue. She asked for further clarification on language to resolve [the disclosure of confidential information during a royalty audit]. MR. KING responded that circumstances for each company is unique, so the structure of the companies was also unique. The ability to tailor a protective order to meet each company's needs requires a certain flexibility in protective orders. The DNR wanted to address the concern AOGA previously raised, but it also wanted to avoid having language so restrictive that a hypothetical situation might identify a situation in which a protective order could not be issued. MR. KING explained his concern with Amendment 3. He said Amendment 3 has four requirements that must be met in order to issue a protective order without the approval of the company. The department wanted to avoid circumstances that would prevent a protective order from being issued. He related a scenario in which a company had one section that dealt with audits but had approval authority for audits was in another section of the company, so an officer might not be available to provide approval. He offered his belief this raised the concern that other situations might also arise that could prevent a protective order from being issued under Amendment 3. Therefore, the department found the language in Amendment 4 to be superior. REPRESENTATIVE BIRCH stated his support for Amendment 3. 8:22:57 PM CO-CHAIR TARR maintained her objection. A roll call vote was taken. Representative Birch voted in favor of Amendment 3. Representatives Josephson, Tarr, Lincoln, Parish and Drummond voted against it. Therefore, Amendment 3 failed by a vote of 1-5. 8:24:10 PM CO-CHAIR TARR moved to adopt Amendment 4, labeled 30-GH2820\D.5, Nauman, 3/12/18, which read as follows [original punctuation provided]: Page 4, lines 2 - 4: Delete all material and insert: "(B) issue a protective order limiting the  (i) persons who may access the information  to legal counsel, consultants, employees, officers, or  agents of a party; the protective order may only allow  a person to access the information under this sub- subparagraph if it is necessary for the person to know  the information in connection with the royalty or net  profit share audit or appeal; and  (ii) use of the information to matters  related to the royalty or net profit share audit or  appeal;" 8:24:18 PM CO-CHAIR JOSEPHSON objected for the purpose of discussion. CO-CHAIR TARR reiterated her concern this language might be so restrictive that a protective order could not be issued. She stated that Mr. King had a high level of concern that the language in Amendment 3 would restrict the confidential information to only those who had a right to have access to the information, but it was not so restrictive that it would prevent the department from resolving pending royalty audits. MR. KING answered that he could [unequivocally] agree that the language in Amendment [4] explicitly stated that the confidential information could only be used for the purposes related to the royalty or net profit share audit [or appeal] and that the information is limited to matters related to that royalty or net profit share audit [or appeal]. Further, those express terms provide or should provide enough clarity to appease the concerns raised by AOGA. He remarked the department believes that even without Amendment [4], the intent of this bill is not to disclose information to anyone for any purpose other than the reason of the bill; [to resolve the disclosure of confidential information during a royalty audit or appeal]. MR. KING spoke in support of Amendment 4, noting the department was happy with the amendment even though it did not find it really necessary in order to appease the concerns. He offered his belief that it does appease [AOGA's] concerns. CO-CHAIR TARR stated that she appreciated the issue being brought to the committee's attention, so it could be resolved. She appreciated that AOGA wanted to be as careful as possible and she acknowledged the reasons for the caution. She offered further consideration with industry and offered her intention to provide swift action to resolve future issues that may arise. She reiterated her intention was to avoid language being so restrictive that it would not accomplish the goal. 8:26:46 PM REPRESENTATIVE JOSEPHSON withdrew his objection. There being no further objection, Amendment 4 was adopted. 8:27:19 PM CO-CHAIR JOSEPHSON moved to report CSHB 330(JUD), as amended, out of committee with individual recommendations and the accompanying fiscal notes. There being no objection, CSHB 330(RES) was reported out of the House Resources Standing Committee.